Competitive Benefits of Direct Access

• Direct access would eliminate the large mark-ups that COMSAT can charge over the INTELSAT Utilization Charge ("IUC"), even for services provided over carrier-owned earth stations (for which COMSAT provides no facilities).
• FCC data shows that COMSAT's mark-ups over the IUC average 68 percent overall and over 100 percent for voice services. In 1995, COMSAT raised some monthly rates by over 500 percent (even though INTELSAT prices did not rise), in order to force customers to commit to long-term contracts.
• The Satellite Users Coalition estimates that direct access would lead to consumer savings of more than $1 billion over ten years.
• COMSAT refuses to make some INTELSAT services available to U.S. customers. For example, COMSAT will not sell preemptible leases (i.e., leases of satellite capacity that can be displaced by higher-priority services), forcing customers to buy more expensive non-preemptible leases that they often do not need.
• COMSAT's rates place U.S. carriers at a competitive disadvantage compared with foreign carriers that can obtain INTELSAT services at the IUC.
• COMSAT's monopoly is leading U.S. customers to route INTELSAT calls through foreign Signatories. This routing is inefficient and diverts investment and jobs away from the United States.

Fresh Look and Portability of Capacity
S. 376 should give the FCC authority, in implementing direct access, to provide for fresh look and portability of INTELSAT capacity.

Fresh Look. Upon implementation of direct access, there should be a reasonable period (six months would be appropriate) 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 (which can extend for up to 15 years). The FCC has applied fresh look in several previous cases. Without a "fresh look" period, many carriers (and their customers) will not enjoy the benefits of direct access, because they will remain bound by contractual obligations imposed by COMSAT when it was the monopoly provider of INTELSAT services.

Portability. COMSAT has long term contracts with INTELSAT that give it control over nearly all INTELSAT satellite capacity available for providing service to the United States. Portability of INTELSAT capacity would ensure that sufficient capacity is available when a COMSAT customer chooses to purchase INTELSAT services directly from INTELSAT or a carrier other than COMSAT, by requiring COMSAT to relinquish the INTELSAT capacity it uses for that customer. Without portability, COMSAT will be able to limit the benefits of direct access by locking up INTELSAT capacity.

DRAFT USER AMENDMENTS TO SENATE BILL ON DIRECT ACCESS, FRESH LOOK AND SPACE SEGMENT PORTABILITY

Amend Section 3 as follows:

"(9) Institution of direct access will dramatically increase competition in the U.S. market for international satellite services."

Delete Sections 3(3) and 3(10).

Amend Section 603(a) as follows:

''SEC. 603. RESTRICTIONS PENDING PRIVATIZATION.

''(a) INTELSAT AND INMARSAT ACCESS TO UNITED STATES MARKET.-The Commission shall take such actions as necessary -

(1) no later than January 1, 2000, to permit providers or users of telecommunications services to obtain direct access to INTELSAT telecommunications services through purchases of space segment capacity from, and investment in, INTELSAT as follows:

(A) for existing capacity currently under contract with, or tariff commitment to, Comsat, as such contract or commitment expires, without renewal thereof, or existing capacity that falls within the renegotiation provisions of section 622; (B) for all other capacity, and renewals of capacity not covered by (1)(A) above, if the Commission determines that INTELSAT does not have or has waived any privileges or immunities or other competitive advantages the type accorded INTELSAT and its signatories through the terms and operation of the INTELSAT Agreement and associated Headquarters Agreement.

(2) to permit providers or users of telecommunications services to obtain direct access to Inmarsat telecommunications services through purchases of space segment capacity from, and investment in, Inmarsat if the Commission determines that Inmarsat does not have or has waived any privileges or immunities or other competitive advantages of the type accorded Inmarsat and its signatories through the terms and operation of the Inmarsat Agreement.

Amend Section 622 as follows:

''SEC 622. TERMINATION OF MONOPOLY STATUS.

(a) RENEGOTIATION OF MONOPOLY CONTRACTS - The Commission shall, beginning January 1, 2000, permit users or providers of telecommunications services that previously entered into contracts or under a tariff commitment with Comsat to have an opportunity, at their discretion, for a reasonable period of time, to renegotiate or terminate those contracts or commitments on rates, terms, and conditions or other provisions, notwithstanding any term or volume commitments or early terminations charges in any such contracts or tariff commitments with Comsat.

(b) COMMISSION AUTHORITY TO ORDER RENEGOTIATION ‚ Nothing in this title shall be construed to limit the authority of the Commission to permit users or providers of telecommunications services that previously entered into contracts or under a tariff commitment with Comsat to have an opportunity, at their discretion, to renegotiate or terminate these contracts or commitments on rates, terms, and conditions or other provisions, notwithstanding any term or volume commitments or early termination charges in any such contracts with Comsat.

(c) PROVISIONS CONTRARY TO THE PUBLIC INTEREST ‚ Whenever the Commission permits users or providers of telecommunications services to renegotiate or terminate contracts or commitments as described in this section, the Commission may provide that any provision of any such contract with Comsat that restricts the ability of such users or providers to modify the existing contracts or enter into new contracts with any other space segment provider (including but not limited to any term or volume commitments or early termination charges) or places such users or providers at a disadvantage in comparison with other users or providers that entered into contracts with Comsat or other space segment providers shall be null, void and unenforceable.

Add a new Section as follows:

"SEC. 623. PORTABILITY OF SPACE SEGMENT CAPACITY.

If any user or provider of telecommunications services chooses to deal directly with INTELSAT pursuant to section 603 or terminate a contract or tariff commitment with Comsat pursuant to section 622, the user or provider shall be permitted to use under the new INTELSAT contract or tariff commitment the same INTELSAT space segment capacity that it had been using pursuant to any previous arrangement with Comsat. Comsat shall not prevent, hinder, or otherwise oppose the portability of such capacity.

Amend Section 5 as follows:

SEC. 5. REPEAL OF OWNERSHIP AND STRUCTURAL PROVISIONS.

Effective as of the date the Commission permits direct access to the INTELSAT space segment, the following provisions of the Communications Satellite Act of 1962 (47 U.S.C. 701 et seq.) shall cease to be effective: