Billion dollar technology: The origins of communications satellite technology (1945--1965)
In the almost 40 years since the launch of Sputnik, communications satellite technology remains the only truly commercial space technology. In 1959, with net sales of over $7 billion, AT\&T was in a better position to fund communications satellite research and development than NASA, whose entire budget was only a few hundred million dollars. In spite of the obvious profitability of this technology, conventional wisdom maintains that this technology was developed by the government because industry was unwilling or unable to face the high costs and high risks associated with communications satellite research and development.
Between the launch of Sputnik and the launch of the first commercial communications satellite, Early Bird, in 1965, three programs demonstrated experimental civilian communications satellites: Telstar, Relay, and Syncom. Telstar was completely funded by AT&T. Syncom was funded from early 1959 through mid-1961 by Hughes. Only Relay was completely funded by NASA.
A combination of Cold War politics (the Gagarin flight and the Bay of Pigs), anti-trust issues, and NASA's desire to dominate space technology led government to intervene in 1961. The results of this intervention were the creation of COMSAT (a new monopoly to replace the AT&T monopoly) and the demonstration of the superior Hughes Syncom design. Rather than policy for technology, this was technology for policy.
Both Hughes and AT&T spent significant amounts of their own money developing communications satellites. AT&T, the larger company, with more technical and financial resources, was stopped in its tracks twice: the first time (1960), when NASA refused to launch an AT&T satellite; the second time, more permanently, when Congress passed the Communications Satellite Act of 1962, giving a satellite communications monopoly to COMSAT. Hughes had a better idea, but was unable to sell it commercially. Almost by accident, Hughes was given a sole source contract for Syncom after additional funds were made available in May 1961. COMSAT was reluctant to commit itself to geosynchronous orbit until after the launch of the NASA/Hughes Syncom satellites and the COMSAT/Hughes Early Bird satellite. Since that time, Hughes has dominated the commercial communications satellite market.
0509: Economic history
0337: American history