The headline on a story about international rates of Communications Satellite Corp., also in Saturday's editions, was erroneous. The company has not been ordered to make refunds, as the headline stated. Rather, as the story reported, a court decision on Friday could lead to future refunds - depending on action by the Federal Communications Commission, to which the rate case involved was returned. In addition, several paragraphs of the story were inadvertently deleted - which had the effect of distorting the overall ruling. The court upheld the FCC's sole power to determine Comsat's rate structure and dismissed Comsat's claims that it should be permitted to make up through current charges some losses incurred in its early years. On two other points, however, the court said the FCC must reconsider its decision. Specifically called into question by the court were the FCC's choice of interest rates applied during construction, and for compensation of some start-up costs - key factors in determining the rate base - and in requiring amortization of laboratory investments out of the rate base over a five-year period. Involved in the interest rate dispute is the FCC's finding that Comsat might raise money by selling bonds (which the company never has done), with an interest cost structure far different from lending at commercial banks or institutional lenders. On the other matter, the court decided that the FCC was ruling out investment in labs and technology as part of the rate base mainly because the FCC faced problems in accounting for such outlays. That is "an inadequate response," the court ruled.
Communications Satellite Corp. apparently will have to make some refunds to internationl customers and face the prospects of reduced profitability on overseas services, under a decision yesterday by the the U.S. Court of Appeals here.
Ruling in a case that began before the Federal Communications Commission in 1965, the court yesterday upheld that agency's sole authority to determine the factors to be included in a rate base - the total investment in plant and equipment of a regulated company upon which a profit may be earned.
At the same time, a decision for the court by Circuit Judge George E. MacKinnon ordered the FCC to revise certain formulas used to determine how much money Comsat may earn on the approved rate base.
The result could be a future decision by the FCC for Comsat to charge rates lower than the company has proposed for international communications - but the rate reduction apparently would not be so sharp as the regualtory agency finally ordered in December 1975.
Involved are millions of dollars of revenues and profits for Comsat, established by Congress as a private firm in 1962 and given the responsibility of establishing a global satellite communications system in cooperation with other nations. Comsat officers declined to comment yesterday on the court order.
In its 1975 decision, the FCC determined that Comsat was charging to much for the overseas business and ordered rates reduced. Comsat appealed that decision to the Court Appeals.
Pending the court decision, the FCC ordered Comsat in mid-1976 to establish an escrow account into which revenues over and above that allowed by the agency's decision would be kept for a potential refund. For the second half of the year. Comsat set aside $30.2 million in that account.
As a result, Comsat's profits last year dipped to $38.3 million ($3.83 a share) compared with $46.2 million ($4.62) in 1975 as operating revenues rose by $11 million to $154 million.
Money set aside in teh escrow account for possible refunds to customers totaled $68.4 million as of June 30 but the FCC announced recently that the total may be some $12 million short of the potential refunds, assuming the court would uphold the agency's decision.
In the 1975 decision on international services rates, the FCC said it would permit Comsat to earn a profit of 10.8 per cent compared with 15 per cent sought by the company.
Although Comsat officers were silent yesterday on the new court decision, they have warned repeatedly in the past tht the FCC's oreder would not permit a "reasonable" rate of return and that the agency was denying Comsat the ability to recover a deficiency of profits during its initial years.
Comsat has declined to forecast the financial impact of the lower rates but the company did state previously that if the FCC order had been in effect during all of 1975, revenues would have been $89 million instead of $143 million and profits would have been $16 million instead of $46 million.
Future international growth would be hampered by the FCC action, despite expansion of other operations, Comsat has argued. And, earlier this year, chairman Joseph H. McConnell said a decision is increasing the firm's dividend rate would not be made until the court decision is in. Comsat's payout has been unchanged at 25 cents a share quarterly for more than three years.
In its order yesterday, the court dismissed Comsat's argument that it should be allowed to recover "deficiencies" of profits from its startup years. The idea the current customers should make up for past losses has met with "almost uniform rejection across more than half a century of Supreme Court precedent," Judge Mackinnon wrote.