Communications Satellite Corp. and representatives of the Federal Communications Commission have reached a tentative agreement that could end a major dispute over the company's international rates.
As part of the proposed settlement, announced last night by Washington firm, Comsat would agree to a 48 percent slash in charges for use of international satellite facilities.
Comsat's earnings for 1977 would be reduced by about $2.6 million under the proposed agreement - a figure far below a $12.5 million reduction in profits that could have resulted without the compromise.
The agreement revealed yesterday came after two years of bitter controversy and litigation and several weeks of negotiations between Comsat's lawyers and officials of the FCC's Common Carrier Bureau and general counsel's office.
At issue are rates charged to large communications carriers who buy satellite facilities through an international system, for which 15-year-old Comsat is the U.S. representative.
In December 1975, the FCC concluded a study of international rates charged by Comsat. The agency disallowed more than half the investment base on which the company proposed to structure its rates, by refusing to permit Comsat to recover deficiencies in rate of return during its initial years of operation.
The FCC also limited Comsat to a rate of profitability on the reduced investment base of 10.8 percent. Citing a sharp reduction in revenues and profits that would result from the FCC decision, Comsat sued the agency. Comsat argued that it should be able to recover a return for its initial start-up costs.
Last October, the U.S. Court of Appeals upheld the FCC in many respects, including the decision on recovering a return for the start-up period. But the court also ruled in Comsat's favor on some issues, adding certain items to the firm's rate base.The case then went back to the FCC.
For 20 months, meanwhile, Comsat has been setting aside funds in an escrow account - the difference between previous rates and the lower ones ordered by the FCC - for potential refund. As of Dec. 31, $92.2 million plus $3.5 million of interest was in escrow.
The proposed agreement, subject to approval by the full FCC and Comsat's board, includes the following items:
New international rates would be in accord with the 1975 decision, resulting in rates 48 percent below what they would have been had the 1975 tariffs remained.
Comsat may include 75 percent of its investment in laboratories in its rate base (the FCC had excluded this), its permitted rate of profit on equity will be 12.2 percent (vs. 11.3 percent), and when Comsat incurs debt equal to 45 percent of its rate base, the allowed return will be 13.2 percent to reflect greater risk of debt.
Comsat will relinquish all claims to the escrow account. The FCC will decide how the money is to be refunded to the international carriers, and whether such firms will be ordered to pass along such refunds to customers (the carriers have said the FCC cannot do this. Comsat will add $5.2 million to escrow for the Sept. 9-Dec, 31 period of last year.
The FCC will consider the proposed settlement after public notice and an opportunity for comment. Final agency approval is not expected until late March, at the earliest, Comsat said last night.