Launching the Satellite Business

Probably no other company has ever been publicly touted by the President of the U.S.--particularly just as it was about to put its stock on sale. Yet that is just what happened last week to the Communications Satellite Corp., and there was little that the vigilant Securities and Exchange Commission could do about it. In a special report to Congress, President Johnson praised the company's "competent staff," discussed its prospects, and declared that the firm was "moving ahead" well.

If the situation was unusual, so is the firm that Johnson spoke of. It has little money, only 53 employees, and an ivy-covered mansion in Washington for its headquarters--where its president's office is the master bedroom. Comsat is unique in more important respects: it is a privately owned, Governmentsheltered monopoly that hopes to become a billion-dollar corporation. Its aim: to girdle the world with communications satellites capable of relaying telephone, telegraph, TV and facsimile signals between practically any two points on earth.

Tortured Compromise. Ever since Congress approved Comsat's formation in 1962, after a bitter battle between the champions of Government ownership and private-business control, the corporation has spent most of its time laying the groundwork for action. Last week that action began on several fronts.

In Washington, six big U.S. firms submitted proposals for four possible satellite designs for Comsat to choose from. The six: A.T. & T. and RCA acting jointly, I.T. & T. and Thompson Ramo Wooldridge, Hughes Aircraft, and Ford's Philco subsidiary. In Rome at a meeting with top Comsat officers, skeptical European officials were finally convinced that the company was moving ahead so rapidly that they should work along with it--or see the U.S. monopolize space communications. In about two months, Comsat will put $200 million worth of its stock on sale; with the capital it raises, it will start experiments that it hopes will result in a working relay link with Europe by the summer of 1965, and with the rest of the world soon after that.

Comsat is a somewhat tortured compromise between private and Government interests. Half of its stock, which will start out at $100 per share, will be sold to "common carriers," varying from giant A.T. & T. to the Rochester Telephone Co., the rest to the public. The 15-man board will consist of six members from the communications companies, six from the public, and three named by the President. Comsat will be run by its $125,000-a-year chairman and chief executive officer, Leo D. Welch, 65, former Jersey Standard chairman, and its $80,000-a-year president, Dr. Joseph V. Charyk, 43, a brilliant physicist and former Air Force under secretary.

What to Orbit? The first task of Comsat's directors will be to decide whether to use a system of medium-level satellites--such as A.T. & T.'s Telstar and

RCA's Relay, which orbit between 6,000 and 12,000 miles up--or of high-level satellites like Hughes Aircraft's Syncom, which goes as high as 22,300 miles. Medium-level satellites are simpler in design and easier to orbit, but, at their altitude, come within range of a pair of ground stations for only a short period; thus, it would take dozens of such satellites ringing the earth to guarantee continuous message service everywhere at once. Syncoms are synchronized to orbit at the speed of the earth's rotation, so that one satellite remains over the same spot on the globe. They are tricky to orbit and their great height causes delays in the messages, but it would take only three to blanket the world.

Despite the President's endorsement, Wall Street's smart-money men are wary of investing in Comsat. For all its promise, they wonder whether the development and operating costs of the system will become so astronomical that they will eat up any chance of profit. "A pie in the sky, that's what we've got," says Senior Partner Armand Erpf of Carl M. Loeb, Rhoades & Co. Yet, with such immense prestige and glamour tied to Comsat, not even the cynics believe that the corporation will have the least bit of trouble finding takers when it puts its shares on the market.

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