Shares in Space

Within the next decade, an earth-girdling satellite system will relay telephone and TV signals to the remotest corners of the world. Both in Congress and the communications industry the burning question is: Who will own the satellites? Rising to champion private industry, Oklahoma's Democratic Senator Robert S. Kerr has introduced a bill that would give ownership to a consortium of established U.S. communications companies, presumably led by such titans as A.T. & T. and RCA. In the House, New York Democrat William Fitts Ryan has introduced a bill calling for the creation of a TVA in space.

Last week, ending a long debate within the Administration, President Kennedy produced his own middle-road proposal. The President's plan endorsed the principle of private ownership but suggested a form of private ownership that would be restricted and somewhat unrewarding.

White House Watchdog. Under the Kennedy plan, Congress would authorize the creation of a privately owned company--called the Communications Satellite Corp.--which would be financed through public sale of securities. Its activities would be overseen by a committee of Government watchdogs reporting directly to the President.

The company would count on raising most of its capital through a $1 billion issue of class A common stock, which would be sold through normal brokerage channels and be open to the general public at a price of not less than $1,000 per share--a provision intended to discourage speculation by small investors. Class A shareholders would have the right to vote and to receive dividends. To protect the new corporation from domination by any single company, Kennedy suggested that no shareholder should own more than 15% of the voting shares or cast ballots for more than two of the anticipated nine to 13 directors.

Kennedy's only concession to the communications companies was the proposal to create a second issue of common stock--class B--which would be sold only to FCC-approved communications companies. Class B stock would carry neither voting rights nor dividends, but the companies would be able to treat the cost of the shares as capital investments, thus increasing the base upon which their rates to customers is calculated.

Risks & Rewards. Assuming that Congress accepts the President's plan, the new company is not expected to turn a profit for at least ten years. Aside from the heavy costs of establishing ground facilities and hiring a large staff, the new company would have to buy at least 43 communication satellites at an estimated $1,500,000 apiece and pay the government about $6,000,000 for each launching. And even after the satellite system is in orbit, the Government is likely to keep the company's profits lean by insisting on periodic reductions in rates.

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