Letter to the President of the Senate and to the Speaker of the House Transmitting a Communications Satellite Bill.

Dear Mr.__________:

This nation's space program has introduced a new dimension to progress. An increasing flow of peaceful benefits, both national and international, is materializing from our efforts to probe this new frontier. One of the most practical examples of our growing space competence is in the field of communications. Our intensive research and development in the field of communications satellites have brought us to the point where we are now certain of the technical feasibility of transmitting messages to any part of the world by directing them to satellites for relay. This will provide an alternative means to existing transoceanic cable and microwave radio systems, and, even more importantly, will permit ready communication among distant corners of the world. The proposed legislation which I am transmitting with this letter will enable us to translate this communications competence into actual performance. It is, therefore, a measure of immense long-range importance.

This bill provides for the establishment, ownership, operation, and regulation of a commercial communications satellite system in accordance with the principles set forth in my statement of guidelines issued last July 24. In my judgment, a new Communications Satellite Act is required to provide an appropriate mechanism for dealing effectively with this subject--a subject which, by nature, is essentially private enterprise in character but of vital importance to both our. national and international interests and policies.

Among the policy objectives pursued in the preparation of this measure have been the assurance of global coverage; cooperation with other countries; expeditious development of an operational system; the provision of service to economically less developed countries as well as industrialized countries; efficient and economical use of the frequency spectrum; nondiscriminatory access to the system by authorized users; maximum competition in the acquisition of equipment and services utilized by the system; and the strengthening of competition in the communications industry.

Within this policy framework, particular attention has been given to the question of the ownership of the entity that will operate this system. Throughout our history this country's national communication systems have been privately owned and operated, subject to governmental regulation of rates and service. In the case of the communications satellite operation, our studies have convinced us that the national objectives outlined above can best be achieved in the framework of a privately owned corporation, properly chartered by the Congress. The attached bill authorizes the establishment of such a corporation, financed through the sale of stock to the public.

But a further question presented was whether the ownership should be limited to American companies currently operating in the international communications field, or be open to the public at large. The only argument advanced for the narrowly based ownership which I found to have some merit was the contention that an investment in this corporation could in this way be treated as the acquisition of additional facilities, and thus as part of the existing rate base, of those participating companies already in the business, thereby permitting the rate of return to be spread over a very broad base and resulting in lower service fees. Otherwise, it was reasoned, the expected unprofitable early years of the new corporation could well compel unduly high charges for the satellite services to provide investors a reasonable return.

While this is an important consideration, it must also be realized that such a system is by nature a government-created monopoly-and that we cannot in good conscience limit its ownership to a few existing companies and exclude automatically all other potential investors who have equal rights to own a part of this Federally-developed enterprise. To meet all of these objectives, the following arrangement was devised and incorporated in the draft bill: The common stock of the corporation will be in two classes. Holders of Class A stock, open to the public, will have voting rights and will earn dividends. Class B stock, which may be purchased only by approved communication carriers, will not confer voting rights nor will it pay dividends; the amount of investment, however, will be included in the individual companies' rate base for other international communications services.

No investor would be permitted to own more than 15 percent of the total amount ($1 billion) of the authorized Class A stock nor more than 25 percent of the Class A stock outstanding at any particular time, thereby preventing domination of the corporation by a single stockholder. There is, however, no limitation on the amount of Class B stock or securities which may be owned by any one investor. Further protection against undue domination by any one stockholder is the limitation that any individual stockholder or trustee may vote for only two out of the nine to thirteen members of the corporation's board of directors.

Purposes and powers of the new corporation would include: furnishing for hire channels of communication to authorized users, including the United States Government; acquiring and owning satellites, ground terminals, and other facilities necessary for the system's operation, management, and interconnection with terrestrial communications systems; conducting or contracting for research and development; and purchasing satellite launching and related services from the U.S. Government.

Adequate authority and responsibility is reserved for the President to ensure that the policies and objectives of the Act are carried out effectively. The draft legislation does not interfere with or limit the existing prerogatives of any government agency; but because of the existing overlapping of responsibilities and interests, it seeks to define and identify these responsibilities and expressly assign them in an orderly fashion. In coordinating the efforts of the various departments and agencies, I expect to rely heavily on the Director of Telecommunications Management, a new post to be established in the Office of Emergency Planning to assist in planning for and managing the telecommunications resources of the United States.¹ In addition, I will look to the National Aeronautics and Space Council for assistance in coordinating this new communications satellite program with other aspects of our space efforts.

¹ The position of Director of Telecommunications Management was established February 16, 1962, by Executive Order 10995 (27 F.R. 1519).

It is my firm conviction that the enactment of this legislation and the actual operation of such a system would provide a dramatic demonstration of our leadership in this area of space activity, our intention to share the benefits of space for peaceful use, and the ability of this nation and its economic and political system to keep pace with a changing and complex world. The direct benefits-economic, educational, and political--of this improved world-wide communication will be invaluable. For these reasons I urge the Congress to give prompt and favorable attention to the enclosed bill.

Sincerely,

JOHN F. KENNEDY