Fifteen years ago this morning, a certificate of incorporation for a new private firm was issued by the D.C. government. The company had an unusual mandate from Congress: to represent the United States in establishing a worldwide communications satellite system.
Communications Satellite Corp., a New York Stock Exchange-listed firm formed under terms of the Communications Satellite Act, has achieved its initial goal and more - with an international system in place that is far more extensive than could have been imagined in the early 1960s.
"Comsat has turned out to be reasonably successful," says company president and chief executive Joseph V. Charyk, in a characteristic understatement.
From its first months, when Comsat had a $5 million line of credit with commerical banks and a temporary headquarters at the Northwest Washington estate of Tregaron, the company has become a major international business and a pioneer in communications research with about 1,400 employes and revenues of $45 million a quarter.
The centerpiece of Comsat's business is a unique example of worldwide cooperation. Comsat and agencies from 10 other nations formed the International Telecommunications Satellite Organization (Intelsat) in 1964, to operate a global satellite system open to all users.
Remember the Early Bird? That was Intelsat's first venture in the new era of communications, a satellite launched in 1965. It made possible, for the first time, live transatlantic television and doubled cross-ocean communications capacity instantaneously.
Today, some 120 nations or territories have access to the Intelsat system, which is owned by Comsat and more than a hundred countries. A global network of satellites provides more than 35,000 two-way telephone circuits, carrying two-thirds of all transoceanic communications. Systemwide growth is running at between 15 percent and 20 percent a year.
One satellite alone may carry 6,000 telephone calls plus television signals. The latter made possible the international diplomatic news coverage provided to American audiences by the major networks during the historic visits to Jerusalem and Cairo of Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin.
Comsat represents this country in Intelsat and is the largest investor. It owns about 27 percent of the system in which the total investment is $420 million. Comsat also operates six U.S. earth stations that are part of the network and provides management for Intelsat launches and operations under a contract, from its headquarters at L'Enfant Plaza and research complex in Montgomery County.
Customers of Comsat are not individual telephone users or companies sending data or teletype messages on their own. International telecommunications firms buy time on the satellites from Intelsat to provide transoceanic services for their customers.
But individual and business customers have benefitted from improved technology and reduced cost. Prior to Early Bird, a London-New York telephone call cost $12 compared with $5 or less today.
Comsat also has a subsidiary, Comsat General Corp., which is providing maritime communications services in the Atlantic, Pacific and Indian Ocean regions, and domestic satellite capacity sold to U.S. telephone companies for long-distance messages. Satellite Business Systems is a partnership of Comsat, International Business Machines Corp. and Aetna Life & Casualty, which plans by 1981 to provide private data services by new satellites.
Currently embroiled in a bitter confrontation with the Federal Communications Commission over rates charged for international services, Charyk and his colleagues are moving their company into new lines of business. This year they plan to explore the impact of even more revolutionary changes in technology on their operations.
"I see radical changes ahead," Charyk added. He said his company may acquire businesses engaged in new communications technology and may manufacture new equipment on a limited basis, as part of a corporate goal to be "an important factor" in the business.
All voice, data and television communication in the future will be digital - literally in numbers - Charyk forecast. "We will have to handle an enormous volume of traffic," scrambling the digital data for customer information security. Devices will be needed for customer use in placing and receiving messages, including those sent over optical fibers as well as satellites, Charyk said.
To enter new lines of business, Comsat is restructuring its financial base in line with FCC policy encouraging a mixture of debt and equity in capital resources.
Comsat recently purchased 2 million of 10 million outstanding common shares through a tender offer, making such stock available for future acquisitions. Comsat officers expect a substantial amount of debt in their future account books, because the FCC's policy on rates assumes there will be outstanding stock and debt.
But Charyk emphasized that the company won't go out and borrow unneeded funds now just to begin building up debt. Rather, he said, borrowings will be arranged in the future to help finance the Comsat expansion.
Despite this emphasis on long-term planning, much of Charyk's time for the rest of this month will be devoted to the FCC controversy.
In 1975, the FCC ruled that Comsat should be restricted to a lower rate of profit on its investment. The agency also reduced the base of investment on which Comsat had built its rates.
Comsat appealed the decision in court, but has been setting aside funds in an escrow account to make future refunds, if lower rates ultimately are upheld. A federal appeals court upheld part of the FCC order last year, and the FCC also said Comsat's escrow account was not large enough.
Recently, the FCC stayed a requirement that Comsat make an additional payment of $25 million to the escrow account for 1977, which would reduce Comsat profits by $1.25 a share.
Charyk revealed that Comsat and FCC lawyers currently are negotiating over the controversy. Hoping for a resolution before the company complies its annual earnings report later this month.
Whatever the outcome of the escrow controversy, Comsat still will be at odds with the FCC over the base of investment on which it shold be permitted to earn profits. The case most likely will end up before the Supreme Court.
The issues involved, Charyk said, are of "a Constitutional dimension." The basic question is, "What's fair to the stockholders of this company?" he added.
Charyk also raised a question about ultimate beneficiaries of potential refunds. Would the refunds simply be added to the revenues of such giants as American Telephone & Telegraph or would their customers - the real users - get reductions in charge to reflect the FCC decision?