National Telecommunications and Information Administration s1
National Telecommunications and Information Administration
May 13, 1999
Page 2
May 13, 1999
Via Hand Delivery
Milton Brown
National Telecommunications and Information Administration
U.S. Department of Commerce
Room 4713
14th and Constitution Avenue, NW
Washington D.C. 20230
Re: Market for Satellite Communications and the Role of the Intergovernmental Satellite Organizations, NTIA Docket No. 990405086-9086-01
Dear Mr. Brown:
AT&T Corp., MCI WorldCom, Inc., and Sprint Communications Company L.P. (collectively the "Satellite Users Coalition") submit this letter in response to the request of the National Telecommunications and Information Administration for comment on “the advantages, in terms of immunities, market access or otherwise, in the countries or regions served by INTELSAT …, the reasons for such advantages, and an assessment of progress toward fulfilling a pro-competitive privatization of those organizations.”[1] We also attach testimony that the Satellite Users Coalition recently submitted to the Senate Commerce Committee on INTELSAT privatization and direct access to the INTELSAT system.
INTELSAT Privatization. The Satellite Users Coalition strongly supports a pro-competitive privatization of INTELSAT that eliminates INTELSAT’s existing privileges and immunities and restructures it to operate like an ordinary private company. Privatization should be carried out in a way that ensures maximum competition in the satellite services market and provides consumers the benefits of better service, lower prices, improved efficiency, and new products. Although the Satellite Users Coalition believes that a pro-competitive INTELSAT privatization can and will occur, the process may take several years to complete. In the meantime, direct access, together with “fresh look” and portability of INTELSAT capacity, can bring immediate competitive benefits to the international satellite services market.
Direct Access. Direct access means the ability of customers that are not Signatories of INTELSAT to purchase services directly from INTELSAT. Since INTELSAT began to allow direct access in 1992, at least ninety-four countries have authorized Level 3 direct access (i.e., purchase of space segment capacity directly from INTELSAT) and/or Level 4 direct access (i.e., direct investment in the INTELSAT system). However, the United States, which is usually a leader in introducing telecommunications competition, has allowed COMSAT Corporation (“COMSAT”) to retain a de facto monopoly on access to INTELSAT – the only U.S. telecommunications monopoly not addressed by the Telecommunications Act of 1996. The United States is also one of only four countries that reserved exclusive access to INTELSAT in the WTO Basic Telecommunications Agreement (one of which, Brazil, has since implemented direct access). Meanwhile, COMSAT itself takes advantage of direct access to INTELSAT through affiliates in other countries, including the United Kingdom and Brazil.
Benefits of Direct Access. Direct access to INTELSAT will provide significant competitive benefits. First, and most important, it will eliminate or substantially reduce the large mark-ups (averaging over 100 percent for voice services) that COMSAT adds to the INTELSAT Utilization Charge (“IUC”). These mark-ups apply even where carriers (including those in the Satellite Users Coalition) use their own INTELSAT earth stations, and COMSAT provides no facilities. The Satellite Users Coalition has estimated that consumer benefits from introducing competition to the market for INTELSAT services would total more than $1 billion over ten years. Second, direct access would make available INTELSAT services that COMSAT now refuses to sell. For example, COMSAT does not sell preemptible leases (i.e., leases of satellite capacity that can be displaced by higher-priority service), forcing customers to buy more expensive non-preemptible leases that they frequently do not need. Third, direct access would help to level the playing field between U.S. carriers and their foreign competitors, many of whom can already purchase INTELSAT services at or near the IUC. Fourth, direct access would increase investment and jobs in the United States by providing an incentive for U.S. carriers to build future INTELSAT earth stations here at home rather than abroad.
“Fresh Look”. “Fresh look” is a policy that allows renegotiation of contracts and other arrangements where: (1) an area subject to monopoly is opened to competition and (2) pre-existing contracts or arrangements would prevent customers from obtaining the benefits of the changed circumstances. In the case of direct access, a reasonable period should be provided during which COMSAT customers can, without penalty, take a “fresh look” by choosing another provider or renegotiating long-term contracts or tariff arrangements with COMSAT (some of which extend for 15 years). Customers chose to enter into long-term contracts with COMSAT due to the substantial and non-cost-based pricing differential between short-term and long-term contracts. Without a “fresh look” period, the benefits of direct access will be frustrated, because COMSAT customers will remain bound to long-term commitments gained by COMSAT through its monopoly.
Portability of INTELSAT Capacity. COMSAT has long-term contracts with INTELSAT that give it control over nearly all of INTELSAT capacity available for providing service in the United States. Capacity portability would ensure that direct access customers have sufficient space segment capacity to provide INTELSAT services, by requiring COMSAT to relinquish INTELSAT capacity when a COMSAT customer chooses to purchase INTELSAT services directly from INTELSAT or a carrier other than COMSAT. Without portability, COMSAT will be able to limit the benefits of direct access by locking up INTELSAT capacity and to maintain a de facto monopoly in the U.S. market for INTELSAT services.
In conclusion, the Satellite Users Coalition supports a timely and pro-competitive privatization of INTELSAT. The INTELSAT privatization process is well underway, but the details could delay privatization for several years. Meanwhile, it is imperative that competition be enhanced by implementing direct access to INTELSAT, accompanied by “fresh look” and portability of INTELSAT capacity. Together, these measures will bring major competitive benefits to the U.S. market for INTELSAT services.
Respectfully submitted,
______
Teresa Marrero
AT&T Corp.
295 N. Maple Avenue
Basking Ridge, NJ 07920
(908) 221-5816
______
Robert S. Koppel
Jennifer A. Manner
MCI WorldCom, Inc.
1133 19th Street, N.W.
Washington, D.C. 20036
(202) 736-6051
______
James W. Hedlund
Sprint Communications Company L.P.
1850 M Street, N.W., 11th Floor
Washington, DC 20036
(202) 828-7413
Attachment
[1] Market for Satellite Communications and the Role of Intergovernmental Satellite Organizations, 64 Fed. Reg. 17,625 (Apr. 12, 1999).