**Before the**

**UNITED STATES DEPARTMENT OF COMMERCE**

**National Telecommunications and Information Administration**

**Washington, DC 20230**

In the Matter of )

)

Market for Satellite Communications ) Docket No. 990405086-9086-01

and the Role of Intergovernmental ) RIN 0660-ZA08

Satellite Organizations )

**COMMENTS OF PANAMSAT CORPORATION**

> Henry Goldberg
>
> Joseph A. Godles
>
> Mary J. Dent
>
> GOLDBERG, GODLES, WIENER & WRIGHT
>
> 1229 Nineteenth Street, NW
>
> Washington, DC 20036
>
> \(202\) 429-4900

May 12, 1999

**TABLE OF CONTENTS**

[Background 1]{.smallcaps}

[Discussion 4]{.smallcaps}

[I. Intelsat Continues to Enjoy Privileges And Immunities That Give It
Unfair Advantages Vis-A-Vis Its Competitors. 4]{.smallcaps}

> [A. Intelsat's Legal Immunities 4]{.smallcaps}
>
> [B. Intelsat's Preferential Market Access. 7]{.smallcaps}
>
> [1. Comprehensive Market Access Restrictions 7]{.smallcaps}
>
> [2. Switched Voice and Private Line Market Access Restrictions.
> 9]{.smallcaps}
>
> [3. Full-Time and Occasional-Use Market Access Restrictions
> 11]{.smallcaps}
>
> [4. Internet Bottleneck 13]{.smallcaps}
>
> [5. The "Spillover" Effect 14]{.smallcaps}
>
> [C. Intelsat's Other Privileges. 14]{.smallcaps}
>
> [D. Intelsat's Privileges and Immunities Shield It From Competitive
> Forces And Prevent Fair Competition 16]{.smallcaps}

[II. Current Inequities Arise From Intelsat's Historically Privileged
Status, Its Unique Structure, And Its Signatories' Self-Interest
17]{.smallcaps}

[III. To Date, Only Limited Progress Has Been Made In Fulfilling The
Policy Objectives Of Section 5 Of The 1998 Act 20]{.smallcaps}

> [A. The Intelsat Privatization Process. 21]{.smallcaps}
>
> [B. Implementation of Section 5 of the 1998 Act 22]{.smallcaps}
>
> [C. Implementation of the WTO Agreement 22]{.smallcaps}
>
> [D. Inter-Modal Competition 25]{.smallcaps}

[Conclusion 27]{.smallcaps}

**Before the**

**UNITED STATES DEPARTMENT OF COMMERCE**

**National Telecommunications and Information Administration**

**Washington, DC 20230**

In the Matter of )

)

Market for Satellite Communications ) Docket No. 990405086-9086-01

and the Role of Intergovernmental ) RIN 0660-ZA08

Satellite Organizations )

**COMMENTS OF PANAMSAT CORPORATION**

PanAmSat Corporation ("PanAmSat"), by its attorneys, hereby responds to
the notice and request for comments in the above-referenced
proceeding.[^1]

**[[Background]{.underline}]{.smallcaps}**

INTELSAT is a treaty-based global communications satellite cooperative
with 143 member countries. It was formed in the early 1960s to enhance
global communications and to spread the risks of creating a global
satellite system across telephone operating companies from many
countries.[^2]

Intelsat operates the most extensive international satellite system in
the world. Its in-orbit fleet includes 19 international satellites,
incorporating approximately 745 international transponders and employing
19 prime orbital locations. Intelsat also is in the process of
constructing an additional 5 satellites.

The size of Intelsat's in-orbit international fleet far surpasses that
of any of its private competitors. PanAmSat, for example, currently has
9 in-orbit international satellites,[^3] and Intelsat's other
competitors have substantially less capacity: Columbia Communications
Corporation operates 3 in-orbit international satellites; Orion Network
Systems operates a single in-orbit international satellites, and GE
American Communications, Inc. operates no dedicated international
satellites but, rather, provides international services only to a
limited extent over its U.S. domestic satellite system.

At the time of Intelsat's formation, policymakers believed that only an
intergovernmental organization would be capable of constructing and
operating a global satellite system. Intelsat's structure reflects this
now-outmoded belief. Intelsat is governed by \""Parties" --- its
national government members --- and owned and managed by "Signatories"
--- entities designated by the Parties to participate in Intelsat's
commercial operations. Intelsat's Signatories hold ownership interests
in varying degrees, are the distributors of Intelsat's services in their
own countries, and assist with the operation and management of the
Intelsat system.

The vast majority of Intelsat's Signatories are government-owned
monopolies.[^4] As of 1996, approximately 94% of Intelsat's member
Signatories had some percentage of government ownership, and 83% were
100 percent government owned and operated.[^5] Although the trend toward
privatization slowly is beginning to reduce the extent to which
Signatories are government owned, government ownership of Signatories
remains pervasive. As of 1998, for example, more than 54% of Intelsat
was owned by Signatories that, in turn, were majority-owned by their
respective governments, and only ten of Intelsat's 142 Signatories were
not owned, at least in part, by their respective government.[^6]

Many of Intelsat's Signatories also are Post Telephone and Telegraph
authorities ("PTTs"), national telecommunications providers, often owned
primarily or exclusively by the government, who dominate their national
markets, controlling all or much of their country's telecommunications
traffic.[^7] As the owner and operator of their national telephone
system and much of their domestic telecommunications infrastructure,
they also control access to these bottleneck facilities. In addition,
they (or a related government agency) often makes decisions on market
access, deciding whether and, if so, under what conditions and to what
extent, a competitive satellite system will be allowed to provide
service in their home market.[^8] Intelsat's structure thus creates a
situation in which many of its Signatories have both the ability and the
incentive to discriminate against Intelsat's private competitors.[^9]
This discrimination has a spillover effect in other markets, because
customers prefer providers that are capable of serving all of their
destination markets.

Accordingly, a level competitive playing field can be created only by
fundamentally restructuring Intelsat. Congress, in 1998, took steps to
mitigate the anticompetitive effects of Intelsat's current status. In
Section 5 of the International Anti-Bribery and Fair Competition Act of
1998 (the "Act"), Congress restricted Intelsat's ability to take unfair
advantage of its status as an intergovernmental organization.

Congress's action involved three elements. First, Congress placed
Intelsat within the reach of the Foreign Corrupt Practices Act, making
it unlawful for U.S. persons to bribe officials of Intelsat so long as
it remains an intergovernmental organization.[^10] Second, Congress
immediately eliminated all privileges and immunities from suit or legal
process under U.S. law enjoyed by Intelsat, its officials and employees,
and its records, relating to its commercial activities in the United
States, except as required by international agreements to which the
United States is a party.[^11] Finally, Congress directed the President
expeditiously to take all appropriate actions necessary to eliminate or
reduce substantially all of Intelsat's remaining privileges and
immunities.[^12]

In order to monitor progress in achieving the Act's pro-competitive
aims, Congress directed the Department of Commerce to submit, on July 1
of this year and each of the next five years, a report addressing, among
other things, the "advantages, in terms of immunities, market access, or
otherwise, in the countries or regions served by \[Intelsat\], the
reason for such advantages, and an assessment of progress toward
fulfilling the policy described in \[Section 5 of the Act\]."[^13] The
Department of Commerce issued this notice and request for comments in
order to assist it in preparing its 1999 report.

**[[Discussion]{.underline}]{.smallcaps}**

I. Intelsat Continues to Enjoy Privileges And Immunities That Give It
Unfair Advantages Vis-A-Vis Its Competitors.

**A. [Intelsat's Legal Immunities]{.underline}.**

As a result of Intelsat's unique status as a treaty-based
intergovernmental organization, it is the beneficiary of a broad array
of legal immunities. Specifically, and subject to the changes that
Congress mandated in the Act last year, Intelsat enjoys:

> • **Immunity from suit.** Intelsat in its official activities and, in
> the United States, Comsat in its Signatory role,[^14] generally have
> been considered immune from suit, including private or public
> prosecution on antitrust charges as well as suits based on tort or
> contract claims. Shielded by this immunity, Intelsat and Comsat may
> engage in a broad array of unilateral or coordinated anticompetitive
> business and commercial activities, such as tortious interference with
> contractual relations, trade libel, exclusive dealing, restraints of
> trade and other unfair trade practices.[^15] The FCC has concluded
> that this immunity gives Intelsat and Comsat "a clear advantage over
> competitors" and "is inconsistent with fair and competitive
> telecommunications markets and regulating in the public
> interest."[^16]
>
> • **Immunity from taxation.** Intelsat is exempt from paying taxes on
> revenues. In addition, it is exempt from paying both import duties and
> taxes and communications and property taxes. This immunity long has
> given Intelsat a competitive advantage by effectively increasing its
> return on invested capital.
>
> Recent developments are compounding the inequity arising from
> Intelsat's tax immunity. For example, while most transponder lease
> contracts place responsibility for paying local taxes on the customer,
> certain countries have begun to tax transponder lease income directly.
> Because Intelsat is exempt from paying property, revenue, and income
> taxes, it has avoided this tax liability. This inequity directly
> affects the ability of separate satellite system operators to compete
> with Intelsat on a per-transponder price basis.
>
> In addition, China recently has subjected foreign satellite service
> providers to payment of a seven percent withholding tax on the lease
> of space segment capacity sold to Chinese entities, including
> governmental agencies, even if the capacity is not utilized within
> China. Intelsat, however, is not subject to this tax, nor is its
> signatory.
>
> • **Immunity from regulatory oversight.** Intelsat traditionally has
> been treated as if it is exempt from national regulatory oversight,
> although it is questionable to what extent the international
> agreements creating Intelsat actually intended to confer upon Intelsat
> this form of immunity.
>
> Intelsat's immunity from regulatory oversight has enabled it to avoid
> the costs and delays associated with regulation, as well as the
> constraints imposed by regulatory bodies. Its competitors, however,
> are fully subject to regulatory costs, delays, and restrictions. In
> the United States, for example, separate satellite system operators
> such as PanAmSat must pay annual regulatory fees, proposed to be
> \$130,225 per operational satellite in 1999 (which would make PanAmSat
> liable for annual fees approaching \$2.5 million). Separate system
> operators also must pay attorneys' fees to prepare and prosecute their
> applications; must await the opening of FCC "processing rounds"; must
> defend their applications against petitions to deny; must await FCC
> licensing decisions; must compete with other U.S. applicants for
> available spectrum and orbital locations; must comply with a host of
> technical requirements governing the design and operation of their
> satellites; must demonstrate their financial and other qualifications
> prior to receiving a license; must abide by the FCC's policy of
> limiting applicants to two orbital locations per frequency band per
> region unless in-orbit satellites have been filled; and must satisfy
> construction milestones.
>
> Intelsat/Comsat, in contrast, remains free from these costs and
> burdens. The FCC recently concluded that Intelsat's freedom from
> regulatory oversight has given it "a significant competitive advantage
> in obtaining spectrum and orbital locations."[^17]
>
> Intelsat's exemptions inure to the benefit of Comsat, which the FCC
> also has exempted from annual regulatory fees. Comsat's status as an
> Intelsat Signatory, moreover, have shielded major portions of Comsat's
> rate base from regulatory review because of the FCC's reluctance to
> "pierce the \[Intelsat\] veil."
>
> • **Archival and testimonial immunity.** This immunity protects
> Intelsat from being compelled to provide documents or the testimony of
> its employees. The immunity goes hand-in-hand with Intelsat's immunity
> from suit, protecting Intelsat from having to disclose information to
> a court or regulatory body, even information dealing with a patently
> anti-competitive action.
>
> • **Immunity of assets.** This immunity prevents courts from enforcing
> monetary judgments against Intelsat.

Each of these immunities erects a shield between Intelsat and the
competitive forces that govern separate satellite system operators.
Until Intelsat no longer enjoys these immunities with respect to its
commercial activities, free and fair competition in the international
satellite marketplace will not be possible.

**B. [Intelsat's Preferential Market Access.]{.underline}**

Intelsat's competitors continue to face limitations on market access
from which Intelsat is free. The specific types of limitations imposed
on competitive carriers cover a wide spectrum, from laws that prohibit
competitive carriers from providing service to restrictions that make it
prohibitively expensive to use these carriers' services. For example,
local law or regulation may require that customers use the monopoly PTT
(frequently also the Intelsat Signatory) to obtain transponder capacity
on PanAmSat satellites or to gain access to earth stations that will
communicate with PanAmSat satellites.

It would not be possible to chronicle the myriad legal, regulatory,
economic and operational barriers that foreign governments (often
operating through or in concert with Intelsat's Signatories) have
erected in order to deny or restrict competitive carriers' market
access. The following sections, however, describe typical market access
restrictions that PanAmSat has experienced and discuss the ways in which
these restrictions adversely have affected PanAmSat's ability to compete
on a equal basis with Intelsat.

**1. Comprehensive Market Access Restrictions.**

A large number of countries have erected barriers that effectively deny
a competitive satellite operator fair access to a national market.
Intelsat typically is exempt from these requirements, whether under the
guise of "grandfathering," as the only pre-existing satellite operator,
or based on its treaty status.

In particular, countries that seek to deny competitive operators' entry
often create cumbersome regulatory prerequisites to serving the market.
This delays the competitor's entry into the market and can raise the its
costs sufficiently to render it uncompetitive. Several key markets
require prior licensing or authorization of the satellite operator or of
the individual spacecraft or designation of a space-segment
representative or vendor. Such regulatory approvals can be costly and
time-consuming, creating uncertainty for customers and delays in service
that Intelsat does not have to face. Examples include the following:

> • **Satellite authorizations:** Argentina, Brazil, and Guatemala
> require satellite operators other than Intelsat to obtain regulatory
> approval for each individual satellite to be accessed from their
> national territory. While Intelsat satellites have been operating for
> years in all three countries, Intelsat never has been required to seek
> or obtain such authorizations.
>
> • **Intelsat as "national capacity":** In Brazil, all non-Brazilian
> satellite service providers must apply for permission to provide
> service directly to licensed Brazilian customers, and in addition must
> establish a local Brazilian representative office. Under Brazilian
> law, however, Intelsat space segment is considered to be Brazilian
> space segment. As a result, Intelsat is not required to comply with
> these requirements.
>
> • **Space segment provider licenses:** In Pakistan, Colombia,
> Nicaragua, Ecuador, Honduras, and Paraguay, a satellite system
> operator must obtain a license from the national telecommunications
> regulator in order to provide private satellite communications
> services. In order to obtain this license, the operator often must pay
> a substantial fee to the regulator. Intelsat has not been required to
> obtain such licenses in any of the countries listed.
>
> • **Prior consent:** While India's New Telecommunications Policy of
> March 1999 specifically allows licensed communications companies to
> access non-Indian satellites, it also requires the prior consent of
> India's Department of Space ("DOS"), the owner and operator of the
> Insat domestic satellite system. The criteria for DOS approval, as
> well as the applicable procedures and application times, all are
> unspecified and untested. Use of Intelsat satellites requires no such
> special approvals or consent.

In addition, countries have been known effectively to exclude
competition by imposing unreasonable access charges, licensing fees, or
other taxes on the use of domestic facilities by private satellite
operators.[^18]

> **2. Switched Voice and Private Line Market Access Restrictions.**

Many countries deny access to specific portions of that market. The most
severe access restrictions exist with respect to switched voice
services. This is the market of primary concern to the PTTs, because it
is the closest to their core business.[^19]

As the FCC recently concluded --- and as PanAmSat has seen first-hand
--- "\[l\]egal barriers to entry in many countries make it difficult for
a U.S. authorized carrier to offer switched voice service in a foreign
market."[^20] For example, while PanAmSat provides full-time video
services in at least 129 countries (67.3%), it provides PSTN services in
only 8 countries (4.1%). In many regions of the world, the exclusion is
complete: for example, PanAmSat provides no PSTN services in five out of
ten global regions (Western Europe, Eastern Europe, North America,
Central and South Asia, and the Middle East), and it provides PSTN
service to only one country in each of three of the five remaining
regions (Central America, the Far East and Pacific Rim, and Africa).
Other competitive carriers provide switched voice services only
minimally or not at all.[^21] Overall, as of 1998, telephony traffic
accounted for half of Intelsat's traffic but only 1% of PanAmSat's
traffic.[^22]

Market entry barriers in the switched voice market are most common in
the so-called "thin route" countries --- *i.e.*, countries that are not
linked to the United States by undersea cable.[^23] Most thin-route
countries did not make any commitments under the WTO Agreement.[^24]

The tools used to deny meaningful market access in the switched voice
services/private line market include the following:

> • **Exclusive dealing:** When a monopoly PTT obtains its capacity
> exclusively from Intelsat, PanAmSat effectively is precluded from
> serving the country's PSTN market.
>
> • **Denial of operating authority and landing rights:** In some
> countries, regulators continue to deny separate satellite system
> operators the authority to provide service, including the authority to
> transmit and receive from an earth station within the country
> (generally referred to as landing rights). As the FCC recently stated,
> the denial of operating authority and landing rights to separate U.S.
> satellite service providers "remains a significant legal barrier to
> entry."[^25]
>
> • **Interconnection denials and restrictions:** In many countries, the
> PTT/Intelsat Signatory controls access to the nation's telephone
> network. In addition, often countries require international
> telecommunications services --- both public switched and private line
> --- to be routed through the PTT, preventing separate satellite
> systems from serving end users directly. Moreover, when
> interconnection agreements with the PTT are delayed, denied, or made
> subject to unreasonable terms, PanAmSat effectively is excluded from
> the telecommunications market.[^26] In Thailand, for example, under a
> monopoly that will continue until 2006 under that country's WTO
> commitment, all international telecommunications traffic must be
> routed through The Communications Authority of Thailand. China Telecom
> has a similar monopoly in its home market. The Communications
> Authority of Thailand and China Telecom are the Intelsat Signatories
> in their respective countries.
>
> • **Earth station restrictions:** Historically, foreign
> administrations effectively have denied competitive carriers market
> access by imposing unreasonable restrictions on the ability of the
> separate system operator or its customers to construct and operate
> necessary earth station facilities. These types of restrictions have
> included "Intelsat-only" policies for earth station authorizations
> (*i.e.*, authorizing earth stations only if they serve Intelsat
> satellites), the assessment of prohibitively high tariffs on the
> smaller earth stations often used by private satellite systems, the
> denial of authority to use an existing earth station facility with a
> non-Intelsat satellite (thereby forcing the end user to construct a
> new facility in order to use a non-Intelsat satellite), or
> restrictions on the number or location of earth stations that a
> competitive carrier or its customers may construct and operate.[^27]
>
> **3. Full-Time and Occasional-Use Market Access Restrictions.**

PanAmSat's greatest success has been in the full time video distribution
market, the one market in which few or no regulatory approvals are
required and, as a result, Intelsat's Signatories have not been able to
erect artificial and anticompetitive barriers to entry. Currently,
PanAmSat provides full-time video C-band services in 129 countries and
full-time video Ku-band services in 43 countries. Yet where Intelsat's
Signatories have had a means for excluding PanAmSat, delaying its entry,
or restricting the range of services it can provide, many have done so.

For example, in many markets PanAmSat has been prevented from providing
occasional use video services. Occasional use video services generally
are used in connection with fast-breaking news stories and sports and
entertainment events. As a result, in order to provide occasional video
services, PanAmSat must obtain broad landing rights that permit
transmissions from any of a large number of locations on a flexible
basis. When these rights are not granted --- for example, when authority
to transmit is withheld, when PanAmSat is not allowed to construct
adequate earth station facilities, or when the number of locations from
which transmissions are permitted is restricted --- PanAmSat is locked
out of the market.

The FCC repeatedly has concluded that Intelsat's Signatories do, in
fact, restrict market access to the occasional-use video market. In the
Comsat Non-Dominant [Report and Order]{.underline}, for example, the
Commission confirmed that regulatory barriers currently prevent PanAmSat
from providing occasional use video service in many locations[^28] and
recognized that the lack of landing rights is a market entry barrier
that effectively restricts the mobility of a user of occasional-use
video service and denies even sophisticated users an alternative to the
Intelsat system.[^29]

The net result of market access restrictions in the occasional-use video
services market is clear. PanAmSat currently provides full duplex
occasional-use services in only 54 countries, less than half of all
countries, and approximately 30% fewer countries than PanAmSat serves
with full-time video services. As of 1998, PanAmSat's non-Intelsat
competitors provided this service in only 24 and 4 countries (Orion and
Columbia, respectively).[^30]

Even in the market for full-time video services, PanAmSat and other
separate system operators have been marginalized by some regulatory
bodies. Most commonly, this has been achieved by permitting PanAmSat to
provide receive-only, but not transmit-receive, video services.
Receive-only services pose a minimal threat to the local monopoly PTT,
because the authorized facilities are incapable of transmitting to the
satellite, the authorized services lie outside the PTT's core market,
and the rates charged and services provides for these services are
fundamentally different from --- and, therefore, cannot be used to
establish a benchmark against --- the PTT's telephony offerings.[^31]

From PanAmSat's perspective a receive-only authorization severely limits
its potential customer and service base. Granting PanAmSat access to the
receive-only market thus is a far cry from granting it true access to
the full-time video services market.

**4. Internet Bottleneck.**

In many countries, multiple Internet Service Providers ("ISPs") have
been licensed to introduce Internet service quickly to eager
subscribers. Facilities-based competition, however, often lags behind
the ISP services-based competition. In an effort to protect their
national telecommunications operator from uncertain competition, many
countries have laws requiring ISPs to use the facilities of the national
operator for their link to the Internet. Often these facilities are in a
deteriorated condition and, if the country in question is a party to
Intelsat, the link to the U.S. backbone the ISPs are encouraged to
utilize is almost always provided by Intelsat. This situation creates a
*de facto* monopoly for Intelsat in dozens of countries for the most
dynamic part of the satellite services market. Countries in which
PanAmSat has faced this structure include:

  ------------------------ ------------------------ ----------------------
  Algeria                  Bahrain                  Jordan

  Morocco                  Oman                     Saudi Arabia

  China                    Angola                   Benin

  Botswana                 Burkina Faso             Cameroon

  Chad                     Cote d'Ivoire            Djibouti

  Equatorial Guinea        Ethiopia                 Kenya

  Mali                     Nigeria                  Rwanda
  ------------------------ ------------------------ ----------------------

**5. The "Spillover" Effect.**

The previous sections discuss the barriers that have been erected by
individual countries to deny, defer, or restrict the ability of
Intelsat's competitors to compete. It should be noted, however, that
these individual barriers have a cumulative effect that is far greater
than the sum of their individual effects.

Entry barriers in any single market have a spillover effect in other
markets. Switched voice and private line customers, for example, simply
will not choose satellite providers that cannot deliver a complete
solution. Either a satellite provider has access to all of the countries
that a customer requires, or the customer goes elsewhere. Occasional use
video customers, similarly, prefer to obtain capacity from a carrier
that has a large "warehouse" of available transponders, an extensive
terrestrial network, and an entitlement to serve all markets. Intelsat's
competitors thus are placed at a competitive disadvantage in all markets
when they are denied access to even some markets.[^32]

**C.** **Intelsat's Other Privileges.**

While Intelsat's legal immunities and preferential market access are
profoundly important, they alone do not describe the full range of
privileges that preference Intelsat *vis-a-vis* its competitors.

In a recent decision, the FCC found that satellite system operators must
overcome a host of entry barriers, unrelated and in addition to market
access barriers, in order successfully to provide service to a market.
These include:

> • economic barriers, such as obtaining access to financing in a
> capital intensive telecommunications industry;
>
> • technical barriers, such as certain technologies not being ready to
> be widely used for particular services; and
>
> • operational barriers, such as obtaining and retaining personnel with
> necessary technical and business skills necessary to operate as a
> telecommunications vendor.[^33]

Moreover, a satellite system operator must have access to the necessary
facilities, "know how," and operational infrastructure such as sales,
marketing, customer service, billing and network management, as well as
brand name recognition, a reputation for providing high quality and
reliable service, and existing customer relationships, or the financial
resources to obtain these intangible assets.[^34]

In each of these areas, Intelsat has been endowed with unique and highly
preferential rights. While its competitors must obtain financing through
the capital markets, Intelsat has an absolute right to draw upon the
financial resources of its Signatories,[^35] who include not only
government-owned PTTs but also some of the world's largest
telecommunications companies. While its competitors must build global
telecommunications networks on their own, Intelsat and each of its
Signatories has access to the world's largest international satellite
system, serving virtually every market in the world, and to an installed
base of thousands of earth stations that communicate with those
satellites.[^36]

Intelsat also has the unique advantage of requiring that its competitors
demonstrate, in the context of consultations pursuant to Article XIV of
the Intelsat Agreement, that their satellites will not cause technical
harm to the Intelsat system. Intelsat can use this requirement to
advance its competitive ends.[^37]

> **D. Intelsat's Privileges and Immunities Shield It From Competitive
> Forces And Prevent Fair Competition.**

Economic studies confirm what PanAmSat has seen firsthand: Intelsat's
privileges and immunities confer upon it anticompetitive advantages,
continue to shield it from marketplace forces, and undermine the effort
to introduce competition into telecommunications markets.

For example, an economic study prepared by Dr. Leonard Waverman, head of
European operations of Law and Economics Consulting Group and visiting
professor at London Business School, used four empirical tests and
engaged in a detailed analysis of almost a decade's worth of relevant
statistics regarding investment in Intelsat, Intelsat's operating
margins, and Comsat's market valuation. Dr. Waverman found that:

> • Intelsat's margin (revenue minus operating costs) does not change
> over time, as it would in a competitive market;
>
> • Signatories' use of Intelsat does not change over time, as it would
> in a competitive market as competitive satellite facilities are
> introduced; and
>
> • The market value of Intelsat's largest Signatory (Comsat) is
> unaffected by the development of competition. In a competitive market,
> Comsat's market value would vary over time to reflect its actual and
> predicted ability to outperform its competitors. In the market that
> exists, it does not.[^38]

Similarly, a study prepared by Drs. Bruce Owen and Henry McFarland of
Economists Inc. concluded that Intelsat Signatories have significant
incentives to favor Intelsat over separate systems, which stem directly
from the PTTs' desire to protect their domestic monopolies from
competition. Moreover, the study concluded, the behavior of PTTs is
consistent with those incentives: Intelsat's Signatory PTTs rarely, if
ever, deal with independent satellite systems.[^39]

II\. Current Inequities Arise From Intelsat's Historically Privileged
Status, Its Unique Structure, And Its Signatories' Self-Interest.

There are two core reasons why Intelsat continues to enjoy such a broad
array of anticompetitive legal immunities, preferential market access
rights, and other privileges. First, inertia works to preserve the
*status quo* and, thereby, to protect Intelsat's privileged status.
Second, the existing regime serves the interests of Intelsat's powerful
Signatories, who generally have the power to prevent or, at least,
dramatically slow the pace of change.

First, there is inertia**.** Legal rights, once granted, often survive
even when the circumstances that gave rise to them have changed.
Similarly, business relationships and loyalties formed in one era often
respond slowly, or not at all, to changes in the competitive landscape.

Several factors make inertia a uniquely powerful force in Intelsat's
case. With respect to Intelsat's *de jure* privileges and immunities,
reform can come only when each of the following occurs: (i) Intelsat's
members agree upon a privatization plan; (ii) Intelsat's members amend
the legal documents conferring upon Intelsat and its Signatories their
treaty-based privileges and immunities; and (iii) each of Intelsat's
member countries implements these changes as a matter of domestic law.
Even then, reform may or may not be effective depending on the extent to
which Intelsat, its Signatories, and its member countries continue to
shield Intelsat from the legal, regulatory, and market forces that
govern its competitors.

Inertia also exerts a uniquely powerful force with respect to Intelsat's
*de facto* privileges. The PTTs who generally are also Intelsat
Signatories still are largely government-owned. Because they are free
from the pressures that face a profit-maximizing firm, they can continue
to utilize Intelsat even when a functioning market would lead them to
switch to one of Intelsat's competitors. Moreover, Intelsat is not an
ordinary service provider, and its PTT owners are not ordinary
customers. The PTTs are part-owners of Intelsat, they all are members of
the same "club." Each of these factors has cemented the PTTs' loyalty to
Intelsat.[^40] Finally, for most of its history Intelsat has enjoyed a
monopoly in the international satellite services marketplace, and,
particularly, in the market for PSTN services.[^41] Intelsat's PTT
customers therefore generally have had relationships with Intelsat, and
Intelsat alone, since the dawn of satellite communications.

Yet far more than inertia is responsible for the slow pace at which
Intelsat's privileges and immunities are being peeled away. The existing
regime also survives because it serves the economic interests of
Intelsat's Signatories, who generally have the means to preserve
Intelsat's privileged status.[^42]

The PTTs have a variety of economic reasons for favoring Intelsat and
for using their power --- or the power of related government entities
--- to constrain the activities of Intelsat's competitors.[^43]

> • Intelsat Signatories earn a return on their investment in the
> Intelsat system. A PTT/Signatory therefore has an incentive to promote
> use of the Intelsat system and, thereby, maximize its return.[^44]
>
> • A PTT that is using the Intelsat system already has the earth
> station and other facilities necessary to use that system. In order to
> use a separate satellite system, however, the PTT would have to spend
> millions of dollars to construct new satellite antennas and associated
> equipment.[^45] Unless the separate system operator prices its
> services low enough to compensate the PTT for this added investment,
> the PTT will have an incentive to continue to route its traffic
> exclusively over the Intelsat system. This is particularly a problem
> in smaller markets, where traffic levels are lower and, hence,
> potential cost savings from using a separate satellite system are more
> limited.
>
> • Separate satellite systems deal directly with end-users whenever
> possible. Intelsat, in contrast, generally deals with end users only
> indirectly, through the PTTs.[^46] A shift from Intelsat to separate
> systems thus threatens a PTT's monopoly position in its home market.
>
> • An independent satellite system's facilities may be used to bypass a
> PTT's facilities. Thus, not only can a separate satellite system take
> from the PTT revenues associated with use of the Intelsat space
> segment, it also can take from the PTT revenues associated with use of
> the PTT's own terrestrial facilities.
>
> • An independent satellite system's activities may enable customers to
> establish a benchmark that exposes the PTT's monopoly power and
> excessive prices. This, in turn, may lead customers to push for lower
> rates and, perhaps, even to press for structural reform that would end
> the PTT's monopoly.
>
> • Once an independent satellite system is established in a country,
> both the independent system and the PTT's customers have incentives to
> lobby the local authorities to expand the range of services subject to
> competition. Intelsat, in contrast, will not lobby against the
> interests of its Signatories.

Even government-owned entities generally oppose changes that diminish
their power and reduce the resources available to them. It, therefore,
is not surprising that Intelsat's Signatories generally have worked
assiduously to slow the privatization process and to restrict separate
systems' markets access.

Intelsat's Signatories not only have the incentive to preserve
Intelsat's privileged status, they also have the means to do so. As
discussed above, they or a related government agency often make
decisions on market access, including spectrum allocations, facilities
licensing, and PSTN interconnection. Hence, they (or related entities)
have the power to decide, as a matter of law, who will be allowed to
carry traffic. They also originate and terminate, often on a monopoly
basis, a large share of all international telecommunications
traffic.[^47] Hence, they also have the power to decide, as a matter of
fact, who will be chosen to carry traffic. Finally, due to their
immunities, they have been able to engage in individual or concerted
anticompetitive conduct --- including, as PanAmSat has proven, a
collective boycott of a separate system --- without fear of prosecution
or civil suit.[^48]

III\. To Date, Only Limited Progress Has Been Made In Fulfilling The
Policy Objectives Of Section 5 Of The 1998 Act.

Together, Intelsat's legal immunities, unique and ubiquitous market
access, and other privileges have given it unparalleled --- and
unwarranted --- market power *vis-a-vis* its competitors. As the FCC
concluded in 1996, "Only Intelsat has achieved a level of market access
that is at all comparable to that achieved by the major
telecommunications carriers, and indeed, Intelsat will be the dominant
system on nearly all routes for some time to come."[^49] Since that
time, little has changed.

**A. [The Intelsat Privatization Process.]{.underline}**

The 1998 Act recognizes the need for a pro-competitive privatization of
Intelsat: *i.e.*, a privatization that is consistent with the United
States policy of obtaining full competition to Intelsat and its
successors and nondiscriminatory market access for satellite
services.[^50] Competition will be able to flourish only after such a
privatization has been completed and Intelsat competes without its
privileged status.

Yet Intelsat has made little, if any, meaningful progress toward such a
privatization since the Act was passed. At the Intelsat Board's most
recent meeting, held in March, the Board instructed Intelsat's
management to continue analyzing possible restructuring plans and
developing business plans on different privatization options. The Board
rejected out of hand, however, splitting Intelsat into multiple
affiliates or successors, the one option that would assure a
pro-competitive privatization. Similarly, at Intelsat's meeting of
Signatories in April, the Signatories called for further study and
rejected the multiple affiliates or successor option.

If Intelsat proceeds in accordance with its current schedule,
consideration of a concrete restructuring proposal by Intelsat's
Assembly of Parties will come no earlier than 2000, implementation of
any restructuring likely will not occur for at least several years, and
the result still will not be pro-competitive.[^51] Intelsat's actions
continue to indicate that its goal in restructuring is to shake off
institutional and bureaucratic constraints but retain its market
advantages.

While Intelsat's privatization deliberations continue, future
competition is foreclosed as Intelsat uses its present privileged
position to secure a dominant role in new ventures, services, and
satellites/orbital slots pending privatization. Indeed, at the April
Signatories' meeting there was a sharp contrast between the immediacy of
the decisions taken regarding privatization and those taken on
pre-privatization expansion: while the former endorsed further study,
the latter directed Intelsat's management actually to implement more
flexible business practices to enhance Intelsat's competitive status in
the immediate term.[^52]

**B. [Implementation of Section 5 of the 1998 Act.]{.underline}**

As noted above, Section 5(c) of the 1998 Act terminated, as of May 1,
1999, Intelsat's immunity from suit or legal process with in the United
States with respect to its commercial activities. Despite Congress's
clear desire immediately to begin changing the *status quo*, the FCC has
not yet seized upon its authority and begun to regulate Intelsat
similarly to its private competitors.[^53]

Similarly, while Section 5(d) of the 1998 Act directed the President
expeditiously to take all appropriate actions necessary to eliminate or
reduce substantially all of Intelsat's remaining privileges and
immunities, PanAmSat is not aware of any actions that have been taken to
date by the Executive Branch to achieve this objective.

**C. [Implementation of the WTO Agreement.]{.underline}**

It is important to note that only comprehensive reform of Intelsat can
remedy the current system and make possible free and fair competition in
the international satellite services market. Other market-opening
mechanisms --- in particular, the WTO Agreement on Basic
Telecommunications (the "WTO Agreement") --- are important but cannot,
alone, remedy the competitive problems created by Intelsat's privileged
status.

As a threshold matter, not all countries belong to the WTO. The Russian
Federation and the Peoples' Republic of China, for example, are not
members of the WTO and, together, account for approximately 14 percent
of the world's telecommunications services revenues.[^54]

In addition, the WTO Agreement does not address all relevant satellite
service providers and applications. In particular, it expressly excludes
Intelsat, leaving the PTTs free to have sole source arrangements with
Intelsat for their international fixed satellite requirements. The WTO
Agreement also does not reach the market for direct-to-home ("DTH")
satellite services, which is a critical market for competitive satellite
systems.

Moreover, numerous important WTO member countries limited significantly
the extent to which they would open their markets to services --- in
particular, satellite services --- that nominally are covered by the WTO
Agreement. Of the WTO's 120 member countries, only 69 made market access
commitments for telecommunications services under the Basic Telecom
Agreement. Of these, only 42 guaranteed market access for domestic and
international satellite services and facilities, with an additional six
countries guaranteeing access for selected services only. The remainder
made no market access commitments for satellite-delivered services.

Notably, the countries in which Intelsat has the greatest market power
often are those in which it has been most difficult to gain market
access and in which the abuse of monopoly power appears to be
particularly severe. For example, the Owen/McFarland study found that
"thin route" countries (those not served by a fiber optic cable) often
are ones in which the United States has had the least success in opening
up markets through the WTO and in which the PTTs charge extremely high
prices (with markups of 1100%) and provide extremely poor service (with
waiting times of several years for telephone service).[^55] The vast
majority of developing countries made no WTO market access commitments
whatsoever.

The limitations of the WTO Agreement are even more clearly recognizable
if one examines the prognosis for meaningful regulatory reform. Only 65
of Intelsat's 139 Signatories committed to implementing the WTO
Agreement's Reference Paper on Regulatory Principles. The Reference
Paper is significant because it commits countries to establish
independent regulatory bodies, guarantees that foreign companies will be
able to interconnect with networks in foreign countries at fair prices,
forbids anticompetitive practices such as cross-subsidization, and
mandates transparency of government regulations and licensing for basic
telecommunications services.

Experience confirms that meaningful regulatory reform will be elusive.
Since the WTO Agreement was signed, many countries have separated the
regulatory and operational functions of the traditional PTT and
established "independent" telecommunications regulatory authorities.
However, the regulatory body and the PTT/Intelsat Signatory often have
been made part of a single governmental body (such as a Ministry of
Communications), relying on the same staff expertise for advice and
decisionmaking. This pattern can be found among the following countries:

  ------------------------ ----------------------- ----------------------
  Burkina Faso             Cape Verde              Cent. African Rep.

  Chad                     Dem. Rep. of Congo      Equatorial Guinea

  Ethiopia                 Gabon                   Guinea

  Kenya                    Madagascar              Malawi

  Mali                     Mauritania              Mauritius

  Mozambique               Niger                   Nigeria

  Rwanda                   Senegal                 Somalia

  Tanzania                 Togo                    Uganda

  Zimbabwe                 Bulgaria                Cyprus

  Czech Republic           Finland                 Germany

  Greece                   Hungary                 Iceland

  Italy                    Poland                  Portugal

  Romania                  Russia                  Bhutan

  China                    Fiji                    Malaysia

  Papua New Guinea         Thailand                Vietnam

  Algeria                  Bahrain                 Israel

  Kuwait                   Lebanon                 Morocco

  Oman                     Saudi Arabia            
  ------------------------ ----------------------- ----------------------

Placing the regulatory entity and the PTT/Intelsat Signatory within a
single governmental body has undermined the alleged independence of the
regulatory body. In PanAmSat's experience, the regulatory entity, wary
of harming its sister agency, usually sides with the national carrier
(and Intelsat Signatory) in any disputes with private companies. In
addition, in PanAmSat's experience, the ongoing relationship between the
regulatory body and the PTT/Intelsat Signatory often gives the allegedly
independent regulatory body the ability and predisposition to influence
end users' choices of satellite facilities provider. The bias in favor
of the national PTT is all the more apparent if the competing company is
foreign.

Even where countries have made a meaningful commitment under the WTO
Agreement to legal and regulatory reform, performance is not guaranteed.
If countries do not live up to their WTO commitments, the only remedy
available to aggrieved parties is a long, difficult, and unpredictable
enforcement process.

**D. [Inter-Modal Competition.]{.underline}**

Just as the WTO Agreement cannot substitute for Intelsat restructuring,
inter-modal (cable versus satellite) competition cannot substitute for
fair competition in the satellite services market.

While it is true that, in recent years, fiber optic cables have carried
an increasingly large share of this traffic, this cannot be equated to
an opening of the telephony market to competition.[^56] The fiber optic
cables used for international telephony generally are owned in part by
the PTTs, who typically also are Intelsat Signatories.[^57] Moreover,
these cables generally operate in the same manner as Intelsat: that is,
the cable operator sells services to the PTTs, who in turn provide
services to end users, rather than providing capacity directly to end
users. Finally, fiber facilities cannot be used to bypass the PTT's
local infrastructure, and fiber rates cannot be used to establish
benchmarks for assessing PTT rates.

Perhaps most importantly, the creation of inter-modal competition does
nothing to remedy Intelsat's privileged status in markets in which cable
is not a substitute for satellite, or to create meaningful, fair
competitive opportunities for separate satellite system operators. For
example, "\[c\]able generally is not cost-effective or suitable for
video transmissions from one point to multiple locations, as is required
for full-time and occasional-use video services."[^58]

**[[Conclusion]{.underline}]{.smallcaps}**

For a host of reasons, including privileges and immunities and *de
facto* and *de jure* barriers to entry, Intelsat and its Signatories
have at an advantage in the marketplace
*[vis]{.underline}-[a]{.underline}-[vis]{.underline}* privately-owned
satellite systems. Full competition will not be possible until
Intelsat's advantages are eliminated.

Respectfully submitted,

PANAMSAT CORPORATION

[/s/ Henry Goldberg]{.underline}

Henry Goldberg

Joseph A. Godles

Mary J. Dent

GOLDBERG, GODLES, WIENER & WRIGHT

1229 Nineteenth Street, NW

Washington, DC 20036

\(202\) 429-4900

[Its Attorneys]{.underline}

May 12, 1999

[^1]: Department of Commerce, National Telecommunications and
    Information Administration, *Market for Satellite Communications and
    the Role of Intergovernmental Satellite Organizations*, [Notice and
    Request for Comments]{.underline}, Docket No. 990405086-9086-01, RIN
    0660-ZA08, 64 Fed. Reg. 17625 (April 12, 1999).

[^2]: [See]{.underline} Agreement Establishing Interim Arrangements for
    a Global Commercial Communications Satellite System, 15 U.S.T. 1705
    (Aug. 20, 1964).

[^3]: In the Atlantic Ocean Region, Intelsat operates 10 international
    satellites and PanAmSat operates 5. In the Indian Ocean Region,
    Intelsat operates 6 international satellites and PanAmSat operates
    2. And in the Pacific Ocean Region, Intelsat outnumbers PanAmSat
    three international satellites to two.

[^4]: [See]{.underline} Leonard Waverman, [An Analysis of the Concept of
    Universal Service as Applied to Intelsat]{.underline}, at 3 (Apr.
    1997).

[^5]: [See]{.underline} [Restructuring of International Satellite
    Organizations]{.underline}, Hearing Before the Subcommittee on
    Telecommunications and Finance of the House Committee on Commerce,
    104th Cong., 2d Sess. 25 (1996) (statement of Hon. Donald H. Gips).

[^6]: Owen/McFarland Study, *infra* n.39, at 4.

[^7]: The FCC released a list last week of 192 countries having
    "dominant operators." Public Notice, DA 88-809 (May 6, 1999). The
    dominant operators listed for 150 of those countries also are
    Intelsat signatories.

[^8]: A 1996 General Accounting Office report, relying on FCC data,
    found that for 71 percent of Intelsat's members, the Signatory is
    also the regulatory authority making decisions on licensing,
    spectrum allocation, and market access, and that for another 14
    percent, the Signatory was related to the regulatory authority.
    General Accounting Office, "Competition Issues in International
    Satellite Communications," GAO/RCED-97-1, at 45 (Oct. 1996) ("1996
    GAO Report"). Even when the Intelsat Signatory is not also the
    domestic regulatory body, that body is involved in Intelsat as a
    Party and, thus, has the incentive and power to promote use of the
    Intelsat system.

[^9]: The FCC, for example, recently concluded that "in some cases,
    Intelsat Signatories are the spectrum licensing authorities and
    monopoly providers of satellite services in their home markets, so
    they have an incentive to minimize the spectrum licenses that they
    issue to independent satellite systems seeking to compete in their
    markets." *Comsat Petition for Forbearance from Dominant Carrier
    Regulation and for Reclassification as a Non-Dominant Carrier*,
    [Order and Notice of Proposed Rulemaking]{.underline}, 13 FCC Rcd
    14083, ¶ 52 (1998) ("[Comsat Non-Dominant Order]{.underline}"); [see
    also]{.underline} Owen/McFarland Study, *infra* n.39, at 8-9.

[^10]: International Anti-Bribery and Fair Competition Act of 1998, Pub.
    L. No. 105-366,112 Stat. 3302, Section 5(b) (1998) (providing that
    Intelsat shall be treated as public international organizations for
    purposes of section 30A of the Securities Exchange Act of 1934, 15
    U.S.C. 78dd-1, and sections 104 and 104A of the Foreign Corrupt
    Practices Act of 1977, 15 U.S.C. 78dd-2, until the President
    certifies to Congress that it has achieved a pro-competitive
    privatization --- *i.e.*, a privatization that the President
    determines to be consistent with the United States policy of
    obtaining full and open competition to Intelsat or its successors,
    and nondiscriminatory market access, in the provision of satellite
    services).

[^11]: [Id.]{.underline}, Section 5(c) (effective May 1, 1999).

[^12]: [Id.]{.underline}, Section 5(d).

[^13]: [Id.]{.underline}, Section 6(a)(7).

[^14]: [See]{.underline} *Alpha Lyracom v. Communications Satellite
    Corporation*, 946 F.2d 168, 174 (2d Cir. 1991).

[^15]: [See]{.underline} [Comsat Non-Dominant Order]{.underline} at ¶
    161.

[^16]: [Comsat Non-Dominant Order]{.underline} at ¶¶ 160, 161.

[^17]: [Comsat Non-Dominant Order]{.underline} at ¶ 92.

[^18]: [See]{.underline} [Comsat Non-Dominant Order]{.underline} at ¶
    51.

[^19]: Owen/McFarland Study, *infra* n.39, at 10.

[^20]: [Comsat Non-Dominant Order]{.underline} at ¶ 82; [see
    also]{.underline} [id.]{.underline} at ¶ 59 ("\[f\]or many
    point-to-point markets ...satellite operators still face legal and
    regulatory entry barriers.").

[^21]: [See]{.underline} [Comsat Non-Dominant Order]{.underline} at ¶
    58.

[^22]: Owen/McFarland Study, *infra* n.39, at 10-11.

[^23]: [See]{.underline} [Comsat Non-Dominant Order]{.underline} at ¶ 28
    (in many thin route countries, legal barriers to entry exist for
    U.S. cable and satellite carriers), ¶ 121 (in most cases, PanAmSat's
    access to thin route market countries is limited to one-way,
    receive-only service, without uplink capability), ¶ 121 (although
    the footprints of separate system satellites cover most or all thin
    route countries, WorldCom has stated that it was able to use
    Intelsat's competitors to provide switched voice and private line
    service in only two such countries).

[^24]: [Comsat Non-Dominant Order]{.underline} at ¶ 129. The importance
    of the 63 thin route markets cannot be discounted. They represent 44
    percent of Intelsat's 142 member countries; account for one-third of
    the world's population; and are responsible for approximately 10
    percent of the total international traffic to and from the United
    States, 20 percent of Comsat's Intelsat traffic, and seven percent
    of AT&T's total international switched traffic. [See]{.underline}
    [Comsat Non-Dominant Order]{.underline} at ¶¶ 128, 129, 154.
    Moreover, they represent economically and competitively significant
    markets for U.S. separate satellite systems.

[^25]: [Comsat Non-Dominant Order]{.underline} at ¶ 82.

[^26]: [See]{.underline} [Comsat Non-Dominant Order]{.underline} at ¶ 82
    ("Historically, the most significant entry barrier in international
    telecommunications has been obtaining an operating agreement with
    the monopoly telecommunications service provider before providing
    service to a particular country.).

[^27]: The use of these market-access restricting techniques was
    chronicled as early as 1996 by the General Accounting Office.
    [See]{.underline} 1996 GAO Report at 30.

[^28]: [Comsat Non-Dominant Order]{.underline} at ¶ 65; [see
    also]{.underline} [id]{.underline} at ¶ 110 (the record in this
    proceeding "demonstrates that there are market entry barriers and
    challenges in providing occasional-use video service to many
    countries"), ¶ 113 (with regard to many of the countries not served
    by competing U.S. separate satellite systems in 1997, we understand
    that market entry barriers may have prevented the systems from
    uplinking video from many of these countries and thus precluded
    their ability to provide occasional-use video services).

[^29]: [Comsat Non-Dominant Order]{.underline} at ¶ 106.

[^30]: [Comsat Non-Dominant Order]{.underline} at ¶ 110. As of 1998, GE
    Americom provided no occasional-use video service. [Id.]{.underline}

[^31]: Owen/McFarland Study, *infra* n.39, at 10.

[^32]: [See]{.underline} [Comsat Non-Dominant Order]{.underline} at ¶
    112 (global connectivity gives Intelsat and its Signatories a
    marketing advantage over separate system operators).

[^33]: [Comsat Non-Dominant Order]{.underline} at ¶ 52.

[^34]: [Comsat Non-Dominant Order]{.underline} at ¶ 53.

[^35]: [See]{.underline} Agreement Relating to the International
    Telecommunications Satellite Organization "Intelsat," 23 U.S.T.
    3813, T.I.A.S. No. 7532, Article V(c) (Aug. 20, 1971).

[^36]: The FCC has recognized that the installed base of thousands of
    earth stations communicating with Intelsat satellites "gives
    Intelsat a strong competitive advantage over competitors." *Comsat
    Petition for Partial Relief from the Current Regulatory Treatment of
    Comsat World Systems' Switched Voice, Private Line, and Video and
    Audio Services*, 11 FCC Rcd 9622, 9635 (1996).

[^37]: [See]{.underline} *Columbia Communications Corporation*, DA
    96-703 (May 6, 1996).

[^38]: The full text of this study was filed in *Comsat Corporation
    Petition for Reclassification as a Non-Dominant Carrier*, FCC File
    No. 60-SAT-ISP-97, Attachment A to Supplemental Comments of PanAmSat
    Corporation (filed Feb. 24, 1998).

[^39]: The full text of this study was filed in *Comsat Corporation
    Petition for Reclassification as a Non-Dominant Carrier*, FCC File
    No. 60-SAT-ISP-97, Attachment B to Supplemental Comments of PanAmSat
    Corporation (filed Feb. 24, 1998) (the "Owen/McFarland Study").

[^40]: [See]{.underline} *id.* at 4.

[^41]: The organization that became Intelsat was created in 1964.
    Agreement Establishing Interim Arrangements for a Global Commercial
    Communications Satellite System, 15 U.S.T. 1705 (Aug. 20, 1964). The
    first separate international satellite system was not authorized to
    provide service until 1986, more than 20 years later. *Establishment
    of Satellite Systems Providing International Communications*,
    [Report and Order]{.underline}, 101 FCC 2d 1046 (1985),
    [recon.]{.underline}, 61 Rad. Reg. 2d 649 (1986). Even after they
    were authorized, separate systems operated under a host of
    constraints --- including requirements for technical and economic
    consultations with Intelsat, limitations on the number of PSTN
    circuits that could be carried over these systems, and limitations
    on these systems' ability to serve the occasional-use video
    market--- until quite recently. [See]{.underline} *Permissible
    Services of U.S. Licensed International Communications Satellite
    Systems Separate from the International Telecommunications Satellite
    Organization (Intelsat),* [Order]{.underline}, 7 FCC Rcd 2313
    (1992); *Permissible Services of U.S. Licensed International
    Communications Satellite Systems Separate from the International
    Telecommunications Satellite Organization (Intelsat),*
    [Order]{.underline}, 9 FCC Rcd 347 (1994); *Establishment of
    Satellite Systems Providing International Communications*, 1 FCC Rcd
    439 (1986).

[^42]: [See]{.underline} Owen/McFarland Study, *supra* n.39, *passim*.

[^43]: [See]{.underline} *id.* at 6-7.

[^44]: [See]{.underline}, [e.g.]{.underline}, [Comsat Non-Dominant
    Order]{.underline} at ¶ 124 ("Foreign Intelsat Signatories clearly
    have an interest in maintaining satellite traffic on Intelsat
    facilities so that they can continue to earn a return on their
    investment in the Intelsat system, and the related ground segment
    infrastructure required to communicate with Intelsat satellites.");
    Reply Declaration of Professor Leonard Waverman, Attachment A to
    Reply of PanAmSat Corporation, File No. 60-SAT-ISP-97 (filed July
    25, 1997) ("the monopoly PTTs/Signatories have an incentive to favor
    the Intelsat system, of which they are part owners, over other
    satellite systems....).

[^45]: In its comments in the Comsat Non-Dominant proceeding, AT&T
    estimated these costs at \$7 million.

[^46]: Even in countries permitting direct access, Signatories still
    account for the bulk of Intelsat's business, and Intelsat does not
    solicit end users or provide end-to-end services. Owen/McFarland
    Study, *supra* n.39, at 6.

[^47]: Owen/McFarland Study, *supra* n.39, at ii, 8.

[^48]: [See]{.underline} *In re Hughes Communications, Inc., et al.*,
    File Nos. 2-SAT-AL-97(11) et al., Opposition of PanAmSat Licensee
    Corp. at Attachment C (filed Dec. 12, 1996) (an Intelsat resolution
    to boycott PanAmSat was excluded from evidence in PanAmSat's
    antitrust lawsuit against Comsat on grounds of Comsat's immunity).

[^49]: *In re Amendment of the Commission's Regulatory Policies to Allow
    Non-U.S.-Licensed Space Stations to Provide Domestic and
    International Satellite Service in the United States*, [Notice of
    Proposed Rulemaking]{.underline}, 11 FCC Rcd 18178, ¶ 29 (1996).

[^50]: 1998 Act, *supra* n.10, Section 5(a)(2).

[^51]: Intelsat's Assembly of Parties is comprised of its member
    governments, and is responsible for making policy decisions relating
    to Intelsat. Consideration of a privatization proposal by the
    Assembly is thus a far cry from actual privatization.

[^52]: "Intelsat Owners Endorse Move Towards Full Privatization,"
    Intelsat Press Release (April 15, 1999); [see also]{.underline}
    "Intelsat Board Moves Forward With Restructuring, Intelsat Press
    Release (March 19, 1999) (stating Intelsat's intention, throughout
    the privatization process, is to ensure Intelsat's long-term
    competitiveness).

[^53]: Application of Comsat Corp. for Authority to Participate in the
    Procurement of Facilities of the ICO Global Communications Limited
    System, FCC 99-21, at ¶ 71 (Feb. 25, 1999).

[^54]: [Comsat Non-Dominant Order]{.underline} at n.178.

[^55]: Owen/McFarland Study, *supra* n.39, at 17. Of the 41 thin route
    countries, only 31 are in the WTO, only 4 have made commitments to
    increase market access in telecommunications, and only 2 have made
    commitments to allow full market access in satellite services.

[^56]: [See]{.underline} Owen/McFarland Study, *supra* n.39, at 11.

[^57]: 1996 GAO Report at 38.

[^58]: [Comsat Non-Dominant Order]{.underline} at ¶ 48.