# Before the

# Federal Communications Commission

# Washington, D.C. 20554

In the Matter of )

)

Availability of INTELSAT Space Segment )

Capacity to Users and Service Providers Seeking ) IB Docket No. 00-91

To Access INTELSAT Directly )

)

**REPORT AND ORDER**

Adopted: September 13, 2000 Released: September 19, 2000

By the Commission:

**I. INTRODUCTION**

1 This Order is issued pursuant to Section 641 of the Communications
Satellite Act of 1962 (Satellite Act), as amended by the Open-Market
Reorganization for the Betterment of International Telecommunications
Act (ORBIT Act).[^1] The ORBIT Act is intended to promote a fully
competitive global market for satellite communications services by fully
privatizing the International Telecommunications Satellite Organization
(INTELSAT) and the International Mobile Satellite Organization
(Inmarsat). To further that goal, the ORBIT Act permits direct access to
users or providers of telecommunications services to obtain \"Level 3\"
direct access from INTELSAT.[^2] Level 3 direct access permits
non-Signatory users and service providers to enter into contractual
agreements with INTELSAT for space segment capacity at the same rates
that INTELSAT charges its Signatories.[^3] The ORBIT Act directs the
Commission to determine whether \"users or providers of
telecommunications services have sufficient opportunity to access
INTELSAT space segment capacity directly from INTELSAT to meet their
service or capacity requirements.\"[^4] The ORBIT Act also requires the
Commission to take \"appropriate action to facilitate such direct
access\" if sufficient opportunity to access INTELSAT capacity does not
exist.[^5]

**II. BACKGROUND**

**A. Level 3 Direct Access**

2 Level 3 direct access permits non-Signatory users and service
providers to enter into contractual agreements with INTELSAT for space
segment capacity at the same rates that INTELSAT charges its
Signatories.[^6] INTELSAT is a 143-member intergovernmental cooperative
that operates 17 satellites providing telecommunications services to
over 99 percent of the world population.[^7] As the U.S. Signatory to
INTELSAT under the Satellite Act, Comsat is the U.S. investor and
participant in INTELSAT commercial decisions. Comsat was the only
company permitted to access INTELSAT satellites and distribute its
services in the United States until 1999, when the Commission permitted
users and service providers to obtain Level 3 direct access to INTELSAT
space segment capacity.[^8]

**B. Requirements of ORBIT Act**

3 The ORBIT Act provides for users and service providers in the United
States to obtain Level 3 direct access to INTELSAT. Section 641(b)
provides:

> \(b\) RULEMAKING \-- Within 180 days after the date of enactment of
> this title, the Commission shall complete a rulemaking, with notice
> and opportunity for submission of comment by interested persons, to
> determine if users or providers of telecommunications services have
> sufficient opportunity to access INTELSAT space segment capacity
> directly from INTELSAT to meet their service or capacity requirements.
> If the Commission determines that such opportunity to access does not
> exist, the Commission shall take appropriate action to facilitate such
> direct access pursuant to its authority under this Act and the
> Communications Act of 1934. The Commission shall take such steps as
> may be necessary to prevent the circumvention of the intent of this
> section.

Further, Section 641(c) provides:

> \(c\) CONTRACT PRESERVATION \-- Nothing in this section shall be
> construed to permit the abrogation or modification of any
> contract.[^9]

**C. Procedural Background**

4 We issued a Notice of Proposed Rulemaking on May 24, 2000, to carry
out the requirements of Section 641(b). In the *Notice*, we directed
Comsat to provide data on the extent of INTELSAT capacity availability,
and invited users and service providers to discuss their service and
capacity requirements, in order to determine whether users and service
providers have \"sufficient opportunity\" to access INTELSAT directly.
We also solicited comment on what \"appropriate actions\" we could or
should take if we determine that users and service providers do not have
\"sufficient opportunity\" to access INTELSAT directly. Finally, we
noted that INTELSAT was in the process of privatization, and invited
comment on what effect, if any, that privatization might have on our
analysis in this rulemaking proceeding.

5 The *Notice* required Comsat to submit information on available
uncommitted capacity and capacity subject to Comsat reservations on each
of 13 existing and seven planned INTELSAT satellites capable of
accessing all or part of the continental United States (CONUS).[^10] The
*Notice* stated that, if Comsat regards some of this committed capacity
information as commercially sensitive, the Commission would consider a
request for confidential treatment.[^11] On June 23, 2000, Comsat filed
its comments, and requested confidential treatment of its capacity
information. On July 5, 2000, the International Bureau (Bureau) required
Comsat to provide capacity information to interested parties pursuant to
a protective order.[^12] The *Comsat Confidentiality Order* also
extended the deadline for filing replies from July 6 to July 19, 2000,
and the deadline for filing responses to reply comments from July 11 to
July 24, 2000.[^13]

6 Five parties filed comments, three filed replies, and two filed
responses to replies.[^14] ATC, Cable & Wireless, and, together in a
joint filing, Sprint and WorldCom (Sprint/WorldCom) argue that they do
not have \"sufficient opportunity\" for direct access because Comsat
controls too much of INTELSAT\'s U.S.-accessible capacity. They
recommend a variety of regulatory solutions to require Comsat to allow
some of its capacity to become available for direct access.
Alternatively, Comsat and Lockheed Martin maintain that there is
sufficient opportunity for direct access because a number of direct
access orders have been filled in the past. They also contend that the
Commission has no basis for concluding that there is insufficient
opportunity for direct access because Comsat is not \"warehousing\" the
INTELSAT capacity it controls, and because any unfilled direct access
orders are the result of short-term INTELSAT capacity shortages rather
than anticompetitive behavior by Comsat. They contend that short-term
capacity shortages will be resolved by introduction of new planned
capacity in the future. Finally, they recommend a commercial solution
rather than a regulatory solution to any problems, and assert that the
ORBIT Act precludes certain regulatory solutions from Commission
consideration.

7 For the reasons discussed below, we find that users and service
providers do not have \"sufficient opportunity\" for direct access \"to
meet their service or capacity requirements.\" To facilitate
opportunities for direct access, we will require Comsat and direct
access customers to negotiate in good faith to find commercial
solutions. Although we conclude that such commercial solutions
constitute appropriate action to facilitate direct access at this time,
we will consider other \"appropriate action\" if we find that commercial
solutions do not create a sufficient opportunity for direct access users
and service providers to meet their service or capacity requirements.

**III. SUFFICIENT OPPORTUNITY FOR DIRECT ACCESS**

8 We discuss below the factors we take into account in determining what
direct access \"opportunity\" is \"sufficient\" within the meaning of
the ORBIT Act. We assess the availability of capacity to direct access
users on the 13 existing and seven planned INTELSAT satellites with
CONUS or partial CONUS coverage. We determine whether INTELSAT\'s
capacity reservation policies disadvantage U.S. users and service
providers seeking direct access. We also discuss INTELSAT\'s
post-privatization distribution arrangements, and issues related to the
need to \"match\" U.S. half-circuits with the half-circuits of foreign
correspondents. Finally, we determine whether users and service
providers have \"sufficient opportunity\" for direct access.

**A. Factors Underlying \"Sufficient Opportunity\" Determination**

9 In our *Notice*, we requested comment on the factors we should
consider to determine what direct access \"opportunity\" is
\"sufficient\" within the meaning of the ORBIT Act.[^15] In particular,
we directed Comsat to provide detailed information on the committed and
uncommitted capacity on existing and future INTELSAT satellites that
could be accessed from the United States.[^16] We also noted that,
\"\[i\]n considering whether \'sufficient opportunity\' exists, we must
also take into account how current distribution arrangements for
INTELSAT impact the availability of current and planned capacity to U.S.
users and service providers.\"[^17]

10 Sprint/WorldCom and ATC assert that there would be insufficient
opportunity for direct access if Comsat has reserved an excessive amount
of INTELSAT capacity for its own use, thereby leaving too little
INTELSAT capacity available for direct access.[^18] They also assert
that current INTELSAT procedures inhibit the ability of direct access
users to obtain capacity.[^19] Comsat maintains that it has not reserved
an excessive amount of INTELSAT capacity because it uses almost all the
capacity it has purchased from INTELSAT to provide service to its
customers.[^20] Comsat also maintains that it has no incentive to pay
for INTELSAT capacity or reservations on INTELSAT capacity without the
prospect of timely cost recovery through resale to a customer.[^21]

11 Comsat also argues that the Commission should use a \"rule of
reason\" when determining whether there is sufficient opportunity for
direct access. According to Comsat, a \"rule of reason\" requires Comsat
only to make a reasonable effort to make direct access available,
subject to capacity availability.[^22] Lockheed Martin maintains that
this proceeding should be limited to determining whether there is
sufficient INTELSAT capacity available to meet actual customer
requirements.[^23] Lockheed Martin argues further that we should
conclude that there is sufficient opportunity unless (1) Comsat is
holding capacity that is unique to the needs of a user or service
provider\'s requirements, (2) Comsat has not negotiated in good faith,
and (3) Comsat is holding INTELSAT capacity for the purpose of extending
its prior exclusive access rather than meeting current or anticipated
service requests.[^24] Sprint/WorldCom replies that it is not relevant
whether direct access in unavailable due to INTELSAT capacity
constraints rather than Comsat misconduct, because the ORBIT Act
requires the Commission to take \"appropriate action\" regardless of the
reasons for the lack of direct access opportunities.[^25]

12 We conclude that we should consider two factors in determining
whether direct access users have \"sufficient opportunity.\" The first
is how much capacity exists on the INTELSAT satellite systems that could
be used to provide service to and from the United States. We would
conclude that U.S. users and service providers do not have sufficient
opportunity for direct access if the INTELSAT system does not have
enough capacity to satisfy all users\' capacity requirements. The second
is whether and to what extent INTELSAT\'s distribution arrangements may
preclude users and service providers from having reasonable access to
whatever INTELSAT capacity is available. We tentatively concluded in the
*Notice* that those distribution arrangements might place direct access
users seeking satellite capacity at a disadvantage to the extent that
those distribution arrangements \"tie up\" that capacity.[^26]

13 We find that the issue of whether Comsat is \"warehousing\" INTELSAT
capacity is not wholly relevant to our determination of whether
\"sufficient opportunity\" exists. We disagree with Comsat and Lockheed
Martin that the Act requires us to assess Comsat\'s intent or conduct in
holding space segment.[^27] We interpret the \"sufficient opportunity\"
determination required by Section 641(b) to be a fairly narrow factual
inquiry. Whether Comsat is warehousing INTELSAT capacity may be relevant
to determining what \"appropriate action\" would be required under
Section 641(b). If Congress intended us to consider Comsat\'s \"state of
mind,\" for example, Section 641(b) presumably would have required us to
determine whether Comsat had acted reasonably, or negotiated in good
faith. Section 641(b), however, does not include any language of this
nature. Rather, Section 641(b) directs us to determine only whether
users and service providers have \"sufficient opportunity\" for direct
access.

14 In assessing capacity availability, we do not interpret Section 641
to require Comsat or INTELSAT to launch new satellites to create more
capacity and more opportunities for direct access. Comsat\'s arguments
regarding a \"rule of reason\" analysis seem misplaced. The \"rule of
reason\" is an antitrust law concept, under which a business arrangement
is not *per se* prohibited by the Sherman Act, but rather reviewed to
determine whether the arrangement is likely to have an anticompetitive
effect.[^28] This proceeding is focused on fulfilling our Congressional
mandate in Section 641, not whether any commercial conduct by Comsat
violates any antitrust law.

15 We conclude that direct access customers would not have \"sufficient
opportunity\" for direct access if (1) there is insufficient capacity
available on INTELSAT satellites to reasonably satisfy U.S. direct
access users\' needs, or (2) if INTELSAT distribution arrangements allow
Comsat to limit unreasonably the INTELSAT capacity that would otherwise
be available to U.S. direct access users. We address both these factors
below. We consider whether Comsat has warehoused capacity or acted in
bad faith only in determining whether regulatory action may be
\"appropriate\" should we determine that there not be \"sufficient
opportunity.\"

**B. Availability of INTELSAT Capacity**

16 The Commission directed Comsat to obtain information from INTELSAT on
the availability of INTELSAT space segment capacity. The Commission also
required Comsat to provide information on INTELSAT\'s \"uncommitted\"
capacity, *i.e.*, capacity not subject to \"Guaranteed Reservations\"
(GRs) or \"First Refusal Reservations\" (FRRs). A GR sets aside certain
capacity, and ensures the customer that its capacity will be available
at the start date for service.[^29] An FRR also sets capacity aside for
a customer, but requires the customer to upgrade to a guarantee
reservation, switch to other capacity, or relinquish its \"first
refusal\" if another customer seeks access to that capacity.[^30] All
in-service long-term leases are considered as \"automatic\" FRRs for
purposes of lease renewal, and current leaseholders may upgrade their
reservations to GRs at any time.[^31] The *Notice* required Comsat to
submit information on available uncommitted capacity on each of the 13
existing and seven planned INTELSAT satellites with CONUS or partial
CONUS coverage.[^32]

17 The *Notice* also directed Comsat to identify, for each of the 13
existing and seven planned INTELSAT satellites listed in Appendix B of
this Order, the capacity that Comsat (1) now has in service; (2) holds
but does not have in service; (3) holds under a GR; and (4) holds under
an FRR.[^33] The *Notice* also required Comsat to identify capacity on
future satellites intended to satisfy existing long-term contracts.[^34]
In addition, Comsat was required to explain the extent to which it
reserves capacity in anticipation of renewal of existing long-term
contracts.[^35] Finally, we requested Comsat to identify capacity on
future satellites for which it has no explicit customer
requirements.[^36] We tentatively concluded that, to the extent that
capacity is tied up by GRs or FRRs, new direct access users are at a
disadvantage in obtaining capacity.[^37]

18 Our findings are displayed in the tables in Appendix C to this Order.
Based on the information Comsat provided in its confidential appendices,
as supplemented by subsequent letters in response to Commission
inquiries, we find that INTELSAT\'s satellites currently provide about
257 transponder units[^38] of capacity accessible from the United
States. Comsat has contracted for or has reserved about 59 percent of
that capacity, 153 transponder units. U.S. direct access users now have
about 4 percent of INTELSAT\'s U.S.-accessible capacity, 10 transponder
units.[^39] About 25 percent of INTELSAT\'s current U.S.-accessible
capacity, 64 transponder units, is uncommitted. This currently
uncommitted capacity is, however, spread over the 13 satellites
accessible from the United States, and the capacity on each of those
satellites is further fragmented.[^40] A small but significant portion
of this capacity, twelve 36-MHz-equivalents, are on satellites not
identified by the commenters in this proceeding as key to satisfying
their needs.[^41] Furthermore, it appears that only four INTELSAT
satellites in the Atlantic Ocean Region, and two in the Pacific Ocean
Region, are used to meet the primary needs of telephony providers
operating with existing foreign correspondents.[^42] Those six INTELSAT
satellites have a total of 42 transponder units available for direct
access. Comsat recognizes the current shortage of capacity, stating that
over 80 percent of existing INTELSAT capacity that could be accessible
from the United States is in use, with some of the systems\' most
desirable connectivities already in use by customers.[^43] It states
that, of the remaining 20 percent, only 8 percent are subject to high
demand from a customer requirements perspective.[^44]

19 INTELSAT\'s U.S.-accessible capacity will likely increase from 257
transponder units to approximately 430 transponder units by 2003, based
on INTELSAT\'s current deployment plan.[^45] For several reasons,
however, the record in this proceeding cannot support any conclusions on
whether this projected growth is likely to generate sufficient
opportunity for direct access. Given other demand for use of the
transponders by foreign Signatories, we have no reason to believe that
all of that new INTELSAT capacity not contracted for by Comsat would
become available for U.S. direct access users.[^46] Moreover, even if
the remainder of the transponders were available to direct access users
within the next three years, it is unclear on the basis of this record
the extent to which these transponders will be on satellites at orbital
locations that will be useful to U.S. direct access users in providing
services to their customers. In addition, even if we could conclude at
this time that direct access users will have sufficient opportunities
for direct access by the end of 2003, we might still conclude that some
\"appropriate action\" is warranted under Section 641(b) because
sufficient opportunities for direct access do not appear to exist at the
current time. To the extent that there is insufficient opportunity for
direct access today, U.S. customers in the satellite services market do
not receive the full benefits of competition that might otherwise be
generated by direct access. Furthermore, U.S. common carriers that must
compete with current INTELSAT Signatories in the global
telecommunications market will continue to be competitively
disadvantaged in terms of INTELSAT rates and services.[^47] The
opportunity costs resulting from allowing such a situation to continue
for three years could be substantial.[^48]

20 Comsat asserts that INTELSAT\'s capacity will increase by about 45
percent between 2000 and 2003, as a result of the launch of new
satellites and the redeployment of existing satellites.[^49]
Sprint/WorldCom responds that the projected 45 percent increase in
capacity will do no more than keep up with projected demand growth.[^50]
The Commission staff requested Comsat to explain the basis for this 45
percent increase estimate in more detail.[^51] Based on Comsat\'s
response to that request,[^52] it appears that Comsat\'s projection
includes satellite capacity, at least some portion of which, cannot be
used to provide service to the United States.[^53] We also conclude that
some of the capacity included in Comsat\'s projections will be used by
foreign Signatories or owners to provide service to Central or South
America, Europe, or Africa rather than the United States.[^54] Even if
we were to rely on Comsat\'s latest calculations, however, we note that
over half of Comsat\'s projected increase is limited to three orbital
locations, two of which are now unused, and the other of which is
currently served by an inclined orbit satellite.[^55] The *Notice* did
not direct Comsat to provide any information on the uncommitted capacity
that will be placed at these two vacant orbital locations. We assume
that 40 to 60 percent of those satellites\' capacity will be accessible
from the United States.[^56] Furthermore, of the 45 percent increase
Comsat anticipates, about 36 percent is in the Atlantic Ocean
Region.[^57] Sprint/WorldCom reports that INTELSAT capacity shortages
are least severe in the portion of the Atlantic Ocean Region composed of
routes between the United States and Western Europe.[^58]

21 In sum, existing INTELSAT capacity availability to U.S. direct access
users is limited. There will be increases in capacity in the near term,
but it is unclear whether much of that increased capacity will be on
satellites useful to U.S. direct access users from a customer
requirements standpoint. In any case, the availability of future
capacity cannot by itself create sufficient opportunities for direct
access now.

**C. Effect of INTELSAT Distribution Policies on Capacity Availability**

22 According to Comsat, INTELSAT provides capacity in two ways, \"bulk
capacity\" and \"standardized circuits.\"[^59] Although the
classifications \"bulk capacity\" and \"standardized circuits\" are
useful in understanding the types of services Comsat provides with the
capacity it obtains from INTELSAT, they are not helpful in assessing the
INTELSAT capacity available for direct access. This is because the
INTELSAT reservation policy is applicable only to Bulk Capacity, not
Standardized Circuits.[^60] Both Bulk Capacity and Standardized
Circuits, however, are subject to a long-term commitment program that
provides for discounts of up to 15 percent for commitments of up to 15
years.[^61] Comsat states that about 30 percent of Comsat space segment
capacity is in the form of Standardized Circuits, which are not reserved
on an individual basis, but are assigned to particular frequencies and
transponder units on certain INTELSAT satellites earmarked for public
switched satellite service.[^62]

23 We expect the capacity amounts purchased as Standardized Circuits to
remain fairly stable over the next three years because Comsat states in
its *August 9 Letter* that its long-term contracts on bandwidths
equivalent to only about 11.5 transponder units are scheduled to expire
over the next three years, and Comsat states further that it is likely
to renew some of those contracts.[^63] In addition, the data in
Comsat\'s confidential appendices show that about 29 of the transponder
units Comsat has purchased are subject to some kind of reservation.
Thus, three years from now, the capacity Comsat will have under contract
will be roughly 170 transponder units.

24 As a result of Comsat\'s long-term contracts, and of reservations of
capacity on INTELSAT\'s planned satellites, INTELSAT Signatories,
including Comsat, will continue to have long-term control of a
substantial fraction of INTELSAT\'s U.S.-accessible capacity. Comsat
notes that it has renewal rights in all its long-term contracts.[^64]
Furthermore, INTELSAT\'s Tariff Manual does not place any restrictions
on the number of times Signatories can renew their contracts.[^65] In
addition, U.S.-accessible capacity subject to a long-term lease is
subject to the INTELSAT Tariff Manual, which gives long-term
leaseholders an \"automatic\" FRR.[^66]

25 None of the arguments raised by Comsat or Lockheed Martin compel us
to reach a different result. For example, Comsat maintains that it has
not exercised its automatic FRR or renewed contracts merely to limit
opportunities for direct access. [^67] We cannot conclude that INTELSAT
capacity currently subject to a Comsat long-term contract or lease will
necessarily become available for direct access in the future merely
because Comsat has not exercised those rights to prevent direct access
in the past. Comsat also argues that its FRRs cannot \"tie up\" INTELSAT
capacity in any case because direct access customers can challenge for
that capacity.[^68] Under the INTELSAT Tariff Manual, however, Comsat
may convert an FRR to a GR in response to a challenge; Comsat is not
required to relinquish that capacity.[^69] Finally, Comsat observes that
direct access users can take advantage of INTELSAT\'s reservation policy
on a going-forward basis.[^70] Comsat\'s point is persuasive only up to
a point, because direct access users can use the reservation policy only
to the extent that capacity is available for direct access.

**D. Matching**

26 The *Notice* requested comment on whether Comsat holds or has
reservations for capacity that is the only capacity useful to the user
or service provider.[^71] Users and service providers were asked to
explain why only capacity held by Comsat is sufficient to meet their
needs.[^72] The Commission specifically sought examples of cases in
which a user or service provider requires specific capacity because
nothing else would \"match\" with the capacity held by its foreign
correspondent.[^73] The *Notice* further explained that, in order to
assess capacity availability, the Commission must determine the amount
of uncommitted capacity, and whether that capacity can be matched with
the user\'s or service provider\'s foreign correspondent.[^74] The
Commission also requested cases in which a user\'s or service
provider\'s earth stations can access only a particular satellite.[^75]

27 Sprint/WorldCom asserts that only 12 percent of its direct access
orders have been filled, when measured on a capacity basis.
Sprint/WorldCom maintains further that 46 percent of its orders have not
been filled because of lack of capacity, and 43 percent of its direct
access orders have not been filled due to the absence of a foreign
capacity match.[^76] Sprint/WorldCom notes that a carrier buying the
U.S. half of an INTELSAT circuit must obtain a \"match\" from a foreign
carrier buying the other half-circuit, and INTELSAT will not make
capacity available until such a match is confirmed.[^77] Sprint/WorldCom
asserts that foreign carriers are often confused by this \"matching\"
requirement, and often fear that they are risking the loss of scarce
existing capacity.[^78] According to Sprint/WorldCom, INTELSAT could
eliminate the need to find foreign matches by treating the foreign
half-circuit as a frequency change rather than a capacity match.[^79]
Sprint/WorldCom claims further that INTELSAT proposed the frequency
change approach to WorldCom on January 3, 2000, but withdrew the offer
three hours later. Sprint/WorldCom attributes this to pressure from
Comsat.[^80] Sprint/WorldCom explains further that the frequency change
approach would facilitate direct access when (1) INTELSAT capacity is
available and Comsat has not contracted for that capacity; (2) Comsat\'s
contract is about to expire; or (3) Comsat has a standardized circuit
contract with INTELSAT, which allows INTELSAT to move Comsat to a
different circuit.[^81]

28 Comsat asserts that this \"frequency change\" proposal would require
Comsat to pay INTELSAT for the full term of its lease, even though it
might be relocated to less valuable circuits or frequencies.[^82] Comsat
and Lockheed Martin note that many direct access orders have been
filled.[^83] Comsat accuses WorldCom of placing direct access orders for
frequencies that it knew were already subject to Comsat contract, in
order to generate a large number of service order denials and create a
misleading picture of opportunities for direct access.[^84] Comsat
claims that INTELSAT sometimes denies Comsat\'s requests for capacity.
Comsat claims further that, when measured on a capacity basis, INTELSAT
has denied more Comsat requests for capacity than WorldCom requests for
capacity.[^85]

29 The Commission staff requested that Comsat discuss the procedures
available to a U.S. direct access user to match non-Comsat half-circuits
with the half-circuits of its foreign correspondent. In particular, we
asked Comsat whether this is possible where Comsat leases the entire
transponder, and whether the foreign correspondent must obtain new
capacity to match the U.S. carrier\'s non-Comsat capacity.[^86] Comsat
explains that the U.S. carrier could use \"existing ordering
procedures\" to request a foreign correspondent to match the U.S.
carrier\'s new capacity order. If the foreign correspondent agrees to
match the new order, it must (1) advise INTELSAT that it wishes to
cancel its existing matched service, (2) formally advise INTELSAT of its
desire to match the new service, and (3) submit a service order to
INTELSAT setting forth the new correspondent relationship between the
U.S. carrier and the foreign correspondent.[^87] Comsat also maintains
that INTELSAT needs such joint service orders to manage its capacity
supply and provide operational support.[^88]

30 We do not need to reach the issue of whether Comsat \"pressured\"
INTELSAT into withdrawing its \"frequency change\" proposal, or whether
it would be reasonable for Comsat to apply such pressure. We believe,
however, that where U.S. direct access users are able to obtain
non-Comsat capacity to operate with their foreign correspondents, they
should not be denied direct access because of unnecessary procedural
difficulties. INTELSAT clearly must manage its capacity supply and
provide operational support. We direct the International Bureau to
consult with INTELSAT to explore ways of resolving the type of
procedural difficulties described by commenters in this proceeding.

**E. Effect of INTELSAT Privatization**

31 The *Notice* observed that INTELSAT is undergoing privatization.[^89]
Based on INTELSAT\'s statements of principles governing its
privatization, we stated that we expect U.S. service providers seeking
access to INTELSAT capacity to have the same distribution rights and
opportunities as former INTELSAT signatories.[^90] We also stated that
U.S. users who choose not to become INTELSAT distributors should be able
to take service directly from INTELSAT.[^91] The *Notice* asked for
comment on these expectations, and how distribution arrangements that do
or do not meet these expectations might affect opportunities for Level 3
direct access.[^92]

32 Cable & Wireless notes that INTELSAT has shortened the lead time
allowed for GRs and FRRs, and argues that INTELSAT\'s post-privatization
distribution will not limit INTELSAT\'s flexibility in negotiating other
agreements with customers.[^93] Similarly, Comsat states that
INTELSAT\'s current distribution arrangements will cease to be effective
after privatization, and that INTELSAT has committed to enter into new
direct access service agreements on an independent, transparent, and
non-discriminatory basis.[^94] Sprint/WorldCom plans to comment in
greater detail after INTELSAT has disclosed its proposed
post-privatization corporate structure and rules of operation.[^95]

33 We are encouraged by INTELSAT\'s commitment to competition and
transparency. We agree with Lockheed Martin that a privatized INTELSAT
should be free to manage itself and make decisions based on its view of
the market and under its fiduciary responsibilities to its
shareholders.[^96] In fact, we indicated in our *Notice* that
post-privatization distribution arrangements should not limit
INTELSAT\'s commercial flexibility to develop and provide services, and
thereby diminish its competitive effectiveness.[^97] However, unlike any
of its competitors who make use of distribution agreements, INTELSAT is
developing post-privatization distribution arrangements under its
current intergovernmental structure. As part of the privatization
process, INTELSAT Management and existing Signatories, who do not have
fiduciary responsibilities either to INTELSAT or to the future private
company, are drafting an agreement that will govern the sales and
distribution arrangements for INTELSAT. In effect, post-privatization
distribution arrangements are being developed by current and future
customers as well as owners of the private company which are in a
position to refuse to privatize should the post-privatization sales
structure not meet with their approval. We have pointed out that U.S.
carriers that are the global competitors to INTELSAT Signatories do not
have an opportunity to participate in these negotiations.[^98] Thus, we
would be concerned if the post-privatization sales and distribution
structure carries forward some of the same privileges or protections
enjoyed by Signatories, including Comsat, from the pre-privatization
structure. Based on these concerns, we will continue to pay close
attention to the agreements that result from the ongoing distribution
negotiations to ensure that the benefits of direct access are not
diminished in the privatization process.[^99]

**F. Conclusions as to \"Sufficient Opportunity\"**

34 We conclude that U.S. users and providers of telecommunications
services currently do not have sufficient opportunity to access INTELSAT
capacity directly to meet their service or capacity requirements. This
conclusion is based on our findings that (1) Comsat now controls through
lease or reservation nearly 60 percent of INTELSAT capacity that can be
accessed from the United States; (2) some of the remaining INTELSAT
capacity that is accessible from the United States is used by foreign
Signatories and is not necessarily available for U.S. use; (3)
uncommitted capacity is spread over 13 U.S.-accessible satellites; and
(4) the capacity that is available on these satellites is not
necessarily useful to direct access users from a customer requirements
standpoint. These findings are further supported by the fact that both
Comsat and direct access users commenting in this proceeding have
reported difficulty in obtaining capacity to satisfy customer needs. The
difficulties primarily are due to capacity shortages caused by high
demand, and by what appears to be procedural complications in
\"matching\" capacity that is available. Given these circumstances, U.S.
customers in the satellite services market are not able to enjoy the
full benefits of competition that might otherwise be generated by direct
access, and U.S. common carriers that must compete with current INTELSAT
Signatories in the global telecommunications market will continue to be
competitively disadvantaged in terms of INTELSAT rates and
services.[^100]

35 The record in connection with future INTELSAT capacity is less clear.
It appears that INTELSAT capacity that is accessible to the United
States will increase and Comsat\'s overall share by 2003 will decrease.
Nonetheless, Comsat\'s share will remain significant, and be subject to
renewal rights under INTELSAT\'s procedures. These procedures
essentially ensure Comsat and other Signatories the ability to continue
to control INTELSAT capacity in the future. It appears that these
procedures will also be continued in post-privatization distribution
arrangements. Moreover, the additional capacity INTELSAT plans to
introduce by the end of 2003 will be spread over several satellites,
some of which may not be as useful as others to direct access customers
from a customer requirements standpoint. On the other hand, the direct
access users commenting in this proceeding have not been explicit as to
their future needs and whether those needs will be satisfied by future
capacity increases. As a result, we cannot make a determination as to
whether in the near future they will have \"sufficient opportunity\" to
directly access INTELSAT within the meaning of Section 641(b).

**IV. ALTERNATIVES FOR APPROPRIATE ACTION**

36 Section 641(b) directs the Commission to take \"appropriate action\"
to facilitate direct access if sufficient opportunity for such access
does not exist.[^101] We found above that users and service providers do
not have sufficient opportunity for direct access. The *Notice* invited
comment on a number of options for appropriate action if we found that
there was not sufficient opportunity for direct access. We address those
comments below.

**A. Commercial Solution**

37 In the *Notice*, we tentatively concluded that the Commission should
rely initially on a \"commercial solution\" if it were to determine that
there was insufficient opportunity for direct access.[^102] We explained
that commercial negotiations between Comsat and direct access customers,
if successful, would result in a faster resolution of satellite capacity
allocation issues than a regulatory solution.[^103] We also reasoned
that a solution reached through commercial negotiations is more likely
to address the specific needs of direct access customers.[^104] Finally,
we noted that a commercial solution would be consistent with the
approach it adopted in the *Direct Access Order*.[^105]

38 ATC and Sprint/WorldCom assert that the commercial solution has
already failed.[^106] Comsat replies that there have been several
instances where Comsat and direct access customers were able to reach
agreements to provide for access to INTELSAT, so the commercial solution
has worked.[^107] Lockheed Martin claims that no commenter has cited a
specific case where commercial negotiations failed.[^108] Lockheed
Martin also asserts that commercial negotiations have been working as
intended to drive down the margin between the INTELSAT Utilization
Charge and Comsat\'s rates.[^109]

39 Lockheed Martin argues that a regulatory solution would be
appropriate only if Comsat is holding capacity that is unique to the
needs of a user or service provider\'s requirements, Comsat has not
negotiated in good faith, and Comsat is holding INTELSAT capacity for
the purpose of extending its prior exclusive access rather than meeting
current or anticipated service requests.[^110] Lockheed Martin contends
that the commenters have not shown that they have a unique need to
access INTELSAT to meet their service or capacity requirements, nor that
Comsat has not negotiated in good faith.[^111]

40 We will pursue a commercial solution as proposed in the *Notice* and
the *Direct Access Order*.[^112] At this time, it appears that
commercial negotiations are more likely than a regulatory approach to
result in a faster solution that addresses the specific needs of direct
access customers. As a general matter, it is preferable to rely on
market mechanisms because a regulatory approach could distort the
market.[^113] Similarly, negotiated solutions between Comsat and direct
access customers are more likely than government-imposed arrangements to
achieve in the near future a balanced solution that will best benefit
both Comsat and direct access customers, and so are more likely to
further the public interest.

41 In this instance, we disagree with ATC and Sprint/WorldCom that any
commercial solution is destined to fail. Comsat and Lockheed Martin note
that several direct access orders have been filled.[^114] Moreover,
Comsat also observes that it has renewed with INTELSAT only 26 of 56
Bulk Capacity leases involving 584.6 MHz of capacity, while
relinquishing 30 leases involving 220.4 MHz.[^115] Thus, we have no
basis, at this time, for concluding that Comsat is unwilling or unable
to negotiate mutually beneficial solutions to provide for access to
INTELSAT by direct access customers. Given the potential public interest
benefits of a commercial solution, ATC\'s and Sprint/WorldCom\'s
concerns are not sufficient to reject a commercial solution from the
outset. As discussed further below, however, we may revisit this
conclusion depending on the outcome of the negotiation period.

**B. Guidelines for Negotiation**

42 In supporting commercial solution, Cable & Wireless suggests
guidelines for commercial negotiations based on Section 252 of the
Communications Act, as amended by the Telecommunications Act of 1996
(1996 Act).[^116] Specifically, Cable & Wireless recommends (a)
requiring Comsat to act in good faith upon a request for and during
negotiations for access to INTELSAT capacity; (b) specifying specific
time frames to commence and finalize these negotiations, and (c)
identifying circumstances in which the Commission would intervene in the
negotiations.[^117] Cable & Wireless recommends requiring Comsat to
start negotiations with 10 days of a written request from a carrier.
Cable & Wireless also suggests giving Comsat and the carrier the right
to request Commission intervention after 60 days.[^118] According to
Cable & Wireless, the Commission should be able to review the record of
the negotiations to determine whether the parties have negotiated in
good faith. If Comsat has not negotiated in good faith, Cable & Wireless
recommends requiring Comsat to make that capacity available on
reasonable terms. If the carrier requesting capacity has not negotiated
in good faith, Cable & Wireless states that the Commission could find
that the carrier is not entitled to the capacity it seeks.[^119]
Lockheed Martin advocates a commercial solution without any requirements
or guidelines, because such guidelines could reduce incentives for
either of the parties to reach a negotiated agreement.[^120]

43 We agree that adopting guidelines for commercial negotiations is
likely to facilitate the negotiations. We decline to adopt detailed
requirements as Cable & Wireless recommends, however. Rather, we will
adopt general guidelines for negotiations on availability of capacity
and for resolution of problems associated with \"matching\" with foreign
correspondents\' facilities. We require Comsat to enter into
negotiations with direct access customers on options to make capacity
available where it is clear there is insufficient capacity available
that is not controlled by Comsat. Options raised in this proceeding
should be part of those discussions. Comsat and direct access users must
file reports with the Commission on or before March 13, 2001, on the
progress of the negotiations. We emphasize that we are not mandating any
particular result for these negotiations. Rather, we suggest these
guidelines hoping that they will facilitate the discussions and assist
the parties\' efforts to reach mutually beneficial agreements.

44 We noted above that, according to Sprint/WorldCom, direct access
opportunities are more limited than they would be otherwise because
INTELSAT\'s internal \"matching\" procedures can be confusing to foreign
correspondents, or place them at risk of losing INTELSAT capacity.[^121]
We also directed the International Bureau to consult with INTELSAT to
explore ways of revising INTELSAT\'s procedures to mitigate this
confusion or risk without affecting INTELSAT\'s ability to manage its
capacity supply and provide operational support.[^122] Those INTELSAT
consultations could be important to the \"matching\" issue in the direct
access negotiations. Accordingly, we direct the Bureau to discuss the
results of those INTELSAT consultations with all parties involved in the
direct access negotiations.

45 We disagree with Cable & Wireless that the Commission should
intervene within 70 days of a request for direct access. We explained in
the section above that negotiated agreements between Comsat and direct
access customers are more likely than government-imposed arrangements to
achieve a balanced solution that will best benefit both Comsat and
direct access customers, and so are more likely to further the public
interest. We do not want to intervene in the negotiations until we are
certain that those negotiations cannot be successful.[^123]

46 We need not decide at this time what actions we will take if we find
that Comsat or a direct access user has not negotiated in \"good
faith,\" as Cable & Wireless recommends. As we discuss further in the
next section of this Order, we do not foreclose any regulatory option at
this time. First, if a commercial solution is successful, then we will
not need to adopt a regulatory solution at all. Second, if a commercial
solution is not successful, then the reason or reasons why it is not
successful may play a role in the regulatory solution we adopt, if any.
Therefore, we are not in a position at this time to decide whether to
adopt a request-by-request approach like the one advocated by Cable &
Wireless, and to foreclose more broad-based regulatory approaches like
the ones discussed in the *Notice*.[^124] Deciding a course of action
now if we find that either Comsat or a direct access customer does not
negotiate in \"good faith\" would be tantamount to foreclosing more
broad-based regulatory options.

**C. Regulatory Solution as a \"Backstop\"**

47 We adopt our proposal in the *Notice* and retain the option to adopt
a regulatory solution if commercial solutions are unsuccessful.[^125] If
we find that a commercial solution does not \"facilitate\" direct access
in a reasonable number of cases, that commercial solution by itself
would not be considered \"appropriate action\" within the meaning of
Section 641(b). We do not foreclose any regulatory option at this time.
We will address issues raised in connection with any particular
regulatory solution or solutions that may be appropriate when and if we
decide it is necessary to adopt a regulatory solution at all. In
particular, we need not reach arguments regarding the construction of
Section 641(c) at this time,[^126] and so we need not determine what
actions on Comsat contracts are permitted by the ORBIT Act, if any.
Furthermore, the *Direct Access Order* concluded that the Commission
could require \"portability\" of INTELSAT space segment capacity if
Comsat increases its control of that capacity to deny direct access
users the benefits of direct access.[^127] We note here that,
independent of our Congressional mandate under the ORBIT Act, we can and
will revisit the portability issue, as we explained in the *Direct
Access Order*.

48 In addition, we see no reason to limit our options on regulatory
solutions to short-term requirements. We disagree with Comsat and
Lockheed Martin that any regulatory solution we may adopt in this
proceeding cannot apply after INTELSAT is privatized.[^128] Comsat\'s
control of INTELSAT capacity may result at least in part from
pre-privatization benefits, including its former monopoly over access to
INTELSAT capacity in the United States. If Comsat retains a
disproportionate amount of control over access to INTELSAT\'s space
segment capacity after privatization, then competition in the provision
of space segment capacity will be less vigorous than it would be
otherwise. Such a market distortion could harm the interests of U.S.
satellite service customers. The ORBIT Act effectively mandates direct
access as a matter of law and policy in the United States,[^129] and
directs the Commission to \"take such steps as necessary to prevent the
circumvention of this section.\"[^130] Although Comsat correctly
observes that the ORBIT Act establishes separate definitions for
\"INTELSAT\" and its \"successor entity,\"[^131] and that Section 641(b)
refers only to \"INTELSAT,\" nothing in Section 641(b) explicitly
permits circumvention of this direct access policy, either before or
after privatization. Depending on the final privatization agreement and
the results of the negotiations we require in this proceeding, we may
not need to resolve this possible tension in statutory construction.
Accordingly, we do not address this issue further at this time.

**V. OTHER ISSUES**

49 The Commission also requested comment on parties\' initial
experiences in obtaining direct access to INTELSAT capacity.[^132]
Sprint/WorldCom alleges that Comsat has access to information submitted
to INTELSAT by direct access customers, and can use this information to
exploit or interfere with direct access customers\' business
opportunities.[^133] Sprint/WorldCom also maintains that Comsat\'s
influence within INTELSAT causes INTELSAT to process direct access
orders unnecessarily slowly, sometimes forcing a customer to renew a
contract with Comsat to avoid a lapse in service.[^134] Sprint/WorldCom
maintains further that Comsat\'s rate structure effectively requires
long-term renewals because the mark-ups on short-term renewals are
prohibitively expensive.[^135] However, Comsat responds that it no
longer has access to direct access customers\' information.[^136] It has
revised its tariff so that direct access customers submit their
information directly to INTELSAT.[^137]

50 Sprint/WorldCom alleges that Comsat has access to information on
INTELSAT satellite deployment schedules and capacity availability that
is not available to direct access customers.[^138] Comsat claims that it
makes relevant information publicly available, and that direct access
users and Signatories receive the same general information regarding
available capacity.[^139] Comsat also notes that some U.S. direct access
users have a controlling interest in foreign Signatories, and so can
obtain information from INTELSAT through those Signatories.[^140]
Comsat\'s statements persuade us that direct access customers are not
disadvantaged in obtaining direct access capacity by any lack of
relevant information at this time. Therefore, we need not take further
action at this time.

51 ATC asserts that Comsat\'s 5.58 percent surcharge makes U.S.
providers of INTELSAT capacity uncompetitive.[^141] Lockheed Martin
asserts that this issue is outside the scope of this proceeding.[^142]
Sprint raised this issue in a petition for reconsideration of the
*Direct Access Order*, but it is outside the scope of this proceeding.

52 ATC complains that Comsat plans to increase ATC\'s current contract
rate by 10 percent as of the end of ATC\'s current contract.[^143] This
assertion, even if true, is not by itself relevant to determining
whether there are sufficient opportunities for direct access.

53 ATC suggests reimposing dominant carrier regulation on Comsat.[^144]
Lockheed Martin maintains that there is no basis for reimposing dominant
carrier regulation, and that this would have no effect on \"thin
routes,\" where Comsat is already regulated as a dominant carrier.[^145]
We agree with Lockheed Martin that there is no support in the record in
this proceeding for reimposing dominant carrier regulation on Comsat,
and so this cannot constitute \"appropriate action\" within the meaning
of Section 641(b).

54 As required by Section 603 of the Regulatory Flexibility Act
(\"RFA\"),[^146] an Initial Regulatory Flexibility Analysis (\"IRFA\")
was incorporated in the *Notice*. The Commission then sought written
public comment in that proceeding, including comments on the IRFA. No
party filed comments in response to the IRFA. Further, this *Report and
Order* promulgates no new rules and our action here does not affect the
previous analysis in the *Notice*. The Commission certifies that there
will be no significant effect on a substantial number of small entities.

**VI. ORDERING CLAUSES**

55 Accordingly, IT IS ORDERED, pursuant to Sections 102(c), 210(c)(2),
201(c)(11), and 641 of the Communications Satellite Act of 1962, as
amended, 47 U.S.C. §§ 721(c), 741(c)(2), 741(c)(11), 765, and Sections
1, 2, 4(c), 201, 202, 214, 301, 303, 307, 308, and 309 of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(c),
201, 202, 214, 301, 303, 307, 308, and 309, that the requirements and
policies set forth in this Report and Order ARE ADOPTED.

56 IT IS FURTHER ORDERED that Comsat Corporation SHALL FILE the report
discussed in this Order on or before March 13, 2001.

57 IT IS FURTHER ORDERED that authority is delegated to the Chief,
International Bureau, as specified herein, to effect the decisions set
forth above.

58 IT IS FURTHER ORDERED that the Motion for Extension of Time filed by
Comsat Corporation on July 24, 2000, IS GRANTED.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPENDIX A**

[Pleadings]{.underline}

[Comments]{.underline}

ATC Teleports, Inc. (ATC)

Cable & Wireless U.S.A., Inc. (Cable & Wireless)

Comsat Corporation (Comsat)

Lockheed Martin Corporation (Lockheed Martin)

Sprint Communications Company L.P. and WorldCom, Inc. (Sprint/WorldCom)

[Replies]{.underline}

ATC (Confidential and Non-Confidential)

Cable & Wireless (Confidential and Non-Confidential)

Sprint/WorldCom (Confidential and Non-Confidential)

[Responses to Replies]{.underline}

Comsat

Lockheed Martin (Confidential and Non-Confidential)

[Letters and *Ex Parte* Statements]{.underline}

-   Letter from Kenneth D. Katkin, Counsel for Comsat, to Steven Spaeth,
    Staff Attorney, International Bureau (dated July 13, 2000) (*Comsat
    July 13 Appendix A Letter*) (supplementing the data filed in the
    Appendix A attached to Comsat\'s Comments).

-   Letter from Kenneth D. Katkin, Counsel for Comsat, to Steven Spaeth,
    Staff Attorney, International Bureau (dated July 13, 2000) (*Comsat
    July 13 Appendix B Letter*) (explaining the Appendix B attached to
    Comsat\'s Comments).

-   Letter from Lawrence W. Secrest III, Counsel for Comsat, to
    Thomas S. Tycz, Chief, Satellite and Radiocommunication Division,
    International Bureau (dated Aug. 9, 2000) (*Comsat August 9
    Letter*).

-   Letter from Lawrence W. Secrest III, Counsel for Comsat, to
    Thomas S. Tycz, Chief, Satellite and Radiocommunication Division,
    International Bureau (dated Aug. 16, 2000) (*Comsat August 16
    Letter*).

-   Letter from Alfred M. Mamlet, Counsel for WorldCom, Inc., to Magalie
    Roman Salas, Secretary, FCC, (dated Aug. 21, 2000) (Sprint/WorldCom
    *ex parte* statement).

-   Letter from Lawrence W. Secrest III, Counsel for Comsat, to Douglas
    Webbink, Chief Economist, International Bureau (dated Aug. 23, 2000)
    (Comsat *ex parte* statement).

-   Letter from Lawrence W. Secrest III, Counsel for Comsat, to Magalie
    Roman Salas, Secretary, FCC, (dated Aug. 25, 2000) (*Comsat August
    25 Letter*).

**APPENDIX B**

[Satellites Included in Comsat Information Submission
Requirement]{.underline}

[Existing]{.underline}

[Satellite]{.underline} [Location]{.underline}

IS-805 55.5° W.L. (304.5° E.L.)

IS-706 53.0° W.L. (307.0° E.L.)

IS-709 50.0° W.L. (310.0° E.L.)

IS-601 34.5° W.L. (325.5° E.L.)

IS-801 31.5° W.L. (328.5° E.L.)

IS-511 29.5° W.L. (330.5° E.L.)

IS-605 27.5° W.L. (332.5° E.L.)

IS-603 24.5° W.L. (335.5° E.L.)

IS-705 18.0° W.L. (342.0° E.L.)

IS-707 1.0° W.L. (359.0° E.L.)

IS-802 186.0° W.L. (174.0° E.L.)

IS-702 183.0° W.L. (177.0° E.L.)

IS-701 180.0° W.L. (180.0° E.L.)

[Planned]{.underline}

[Satellite]{.underline} [Location]{.underline} [Operational
Date]{.underline}[^147]

IS-ALPHA-1 50.0° W.L. (310.0° E.L.) May 31, 2003

IS-904 34.5° W.L. (325.5° E.L.) Feb. 28, 2002

IS-907 31.5° W.L. (328.5° E.L.) Feb. 28, 2003

IS-905 27.5° W.L. (332.5° E.L.) Aug. 31, 2002

IS-903 24.5° W.L. (335.5° E.L.) Nov. 30, 2001

IS-906 18.0° W.L. (342.0° E.L.) Nov. 30, 2002

IS-ALPHA-2 1.0° W.L. (359.0° E.L.) Nov. 30, 2003

[^1]: Communications Satellite Act of 1962, 47 U.S.C. §§ 701 *et seq*.;
    Open-Market Reorganization for the Betterment of International
    Telecommunications Act, Pub. L. No. 106-180, 114 Stat. 48 (2000),
    *to be codified at* 47 U.S.C. § 761 *et seq*. The ORBIT Act adds
    Title VI to the Satellite Act, entitled \"Communications Competition
    and Privatization.\"

[^2]: ^?^ Section 641(a) of the Satellite Act, as amended by the ORBIT
    Act, 47 U.S.C. § 765(a).

[^3]: Availability of INTELSAT Space Segment Capacity to Users and
    Service Providers Seeking To Access INTELSAT Directly, Notice of
    Proposed Rulemaking, IB Docket No. 00-91, 15 FCC Rcd 10606, 10607
    (para. 6) (2000) (*Notice*); Direct Access to the INTELSAT System,
    IB Docket No. 98-192, Report and Order, 14 FCC Rcd 15703, 15708
    (para. 8) (1999) (*Direct Access Order*).

[^4]: ^?^ Section 641(b) of the Satellite Act, as amended by the ORBIT
    Act, 47 U.S.C. § 765(b).

[^5]: ^?^ *Id*.

[^6]: *Notice*, 15 FCC Rcd at 10607 (para. 6); *Direct Access Order*, 14
    FCC Rcd at 15708 (para. 8).

[^7]: *Direct Access Order*, 14 FCC Rcd at 15706 (para. 5).

[^8]: ^?^ *Direct Access Order*, 14 FCC Rcd at 15706-07 (para. 5).
    Comsat receives a 5.58 percent surcharge from direct access users on
    the rates they pay to INTELSAT. *See Direct Access Order*, 14 FCC
    Rcd at 15739-41 (paras. 89-93).

[^9]: Section 641(c) of the Satellite Act, as amended by the ORBIT Act,
    47 U.S.C. § 765(c).

[^10]: *Notice*, 15 FCC Rcd at 10614 (paras. 20, 22). These satellites
    are listed in Appendix B to this Order.

[^11]: *Notice*, 15 FCC Rcd at 10614 (para. 22), *citing* 47 C.F.R. §
    0.459 (governing requests for confidential treatment).

[^12]: Availability of INTELSAT Space Segment Capacity to Users and
    Service Providers Seeking To Access INTELSAT Directly, Order
    Adopting Protective Order, IB Docket No. 00-91, DA 00-1428 (Int\'l
    Bur., rel. July 5, 2000) (*Comsat Confidentiality Order*).

[^13]: *Comsat Confidentiality Order* at para. 6. On July 24, 2000,
    Comsat filed a motion to extend the time to file its Response, and
    for Lockheed Martin to file its response, from July 24 to July 25,
    2000. The Commission does not grant motions for extension of time
    routinely. 47 C.F.R. § 1.46(a). In this case, however, Comsat
    explained that computer system \"crashes\" caused its attorneys
    significant difficulties with word processing and printing Comsat\'s
    response, and for sharing drafts with Lockheed Martin\'s attorneys.
    Comsat Motion at 1. Because Comsat provided good cause for an
    extension, and because this one-day extension does not prejudice any
    other party in this proceeding, we grant Comsat\'s motion.

[^14]: The parties submitting pleadings are listed in Appendix A to this
    Order. Appendix A also lists the letters and *ex parte* statements
    on which we rely in this proceeding.

[^15]: *Notice*, 15 FCC Rcd at 10614 (para. 21).

[^16]: *Notice*, 15 FCC Rcd at 10614 (para. 20).

[^17]: *Notice*, 15 FCC Rcd at 10609 (para. 10).

[^18]: *See* Sprint/WorldCom Reply at 6-7; ATC Reply at 3.

[^19]: *See* Sprint/WorldCom Reply at 6-7; ATC Reply at 3.

[^20]:
    > Comsat Comments at 15. *See also* Lockheed Martin Response at 7-9.

[^21]: Comsat Comments at 18 n.22. *See also* Lockheed Martin Comments
    at 16-17.

[^22]: Comsat Comments at 23-25, Comsat Response at 20-21.

[^23]: Lockheed Martin Comments at 7-9.

[^24]: Lockheed Martin Comments at 12.

[^25]: Sprint/WorldCom Reply at 4-6. *See also* ATC Reply at 6
    (dismissing rule of reason as irrelevant).

[^26]: *Notice*, 15 FCC Rcd at 10610-11 (para. 15).

[^27]: Lockheed Martin Comments at 12.

[^28]: *See*, *e.g.*, *Open Video System Second Report and Order*, 11
    FCC Rcd at 18320 n.430; *MCI/BT Merger Order*, 9 FCC Rcd at 3970
    (para. 48).

[^29]: ^?^ GRs are available for both \"operational\" and
    \"non-operational\" capacity. *Notice*, 15 FCC Rcd at 10610 (para.
    13), *citing* INTELSAT Tariff Manual, July 1999, at 96-99.
    Operational capacity is capacity on a satellite currently
    operational at a specific orbit location, or on a replacement
    satellite with the same or similar characteristics as the satellite
    it will replace. Non-operational capacity is capacity on a satellite
    at a new orbit location, and capacity on a replacement satellite
    with significantly different characteristics from the satellite it
    will replace. *Notice*, 15 FCC Rcd at 10609-10 (para. 12).

[^30]: ^?^ FRRs are available for operational capacity only. *Notice*,
    15 FCC Rcd at 10610 (para. 13).

[^31]: ^?^ *Notice*, 15 FCC Rcd at 10610 (para. 14).

[^32]: *Notice*, 15 FCC Rcd at 10614 (para. 20).

[^33]: *Notice*, 15 FCC Rcd at 10614 (para. 22).

[^34]: *Notice*, 15 FCC Rcd at 10614 (para. 22).

[^35]: *Notice*, 15 FCC Rcd at 10614 (para. 22).

[^36]: *Notice*, 15 FCC Rcd at 10614 (para. 22).

[^37]: *Notice*, 15 FCC Rcd at 10610-11 (para. 15).

[^38]: For purposes of this Order, a \"transponder unit\" provides 36
    MHz of capacity.

[^39]: *See* Comsat Comments at 4 (Fig. 1); Comsat *Ex Parte* Statement.

[^40]: ^?^ Very few of INTELSAT\'s U.S.‑accessible transponders, 73 of
    489 or 15 percent, have more than 6 MHz of uncommitted capacity. In
    other words, 85 percent of INTELSAT\'s U.S.‑accessible transponders
    have less than 6 MHz of available capacity. In Table 1 of its
    comments, Comsat lists 14 service orders which INTELSAT denied. All
    but one of those orders were for customers ordering capacity from
    Comsat in segments of 6 MHz or greater. This suggests that capacity
    which is divided up into segments of less than 6 MHz is likely to be
    too fragmented to be useful in many cases. In addition, each beam
    provides capacity only in one direction, either from the United
    States to other countries or other countries to the United States.
    Thus, even in cases where 6 MHz of capacity is available, it is
    possible that it could not be useful for some purposes, such as
    telephony, unless there is an equal amount of capacity available for
    the return path on the same satellite.

[^41]: WorldCom identifies 10 of the 13 INTELSAT satellites accessible
    from the United States that carry its traffic. Sprint/WorldCom *ex
    parte* statement at 12. Sprint states that it accesses 9 of the 10
    INTELSAT satellites that WorldCom accesses from earth stations owned
    or leased by Sprint, but it also \"uses capacity on certain other
    INTELSAT satellites that is purchased by earth station owners with
    which Sprint contracts.\" Sprint/WorldCom *ex parte* statement at
    11. There are twelve 36-MHz equivalent transponder units of
    uncommitted capacity on the three satellites that neither Sprint nor
    WorldCom identify as carrying their traffic.

[^42]: In INTELSAT\'s BG-129-13E (17 November 1999), INTELSAT describes
    its satellite deployment plans, and identifies four Atlantic Ocean
    Region satellites and two Pacific Ocean Region satellites in its
    \"Nominal Satellite Deployment Plan\" as slated for public switched
    network or public data network services. We do not identify those
    satellites here because BG-129-13E is an \"INTELSAT Restricted\"
    document, *i.e.*, proprietary to INTELSAT Signatories and the
    Commission.

    The direct access user commenters do not identify the specific
    satellites or locations that are used to meet their primary needs.
    Only Sprint/WorldCom discusses this issue at all. In their *ex
    parte* statement, Sprint reports that it uses nine INTELSAT
    satellites, and WorldCom reports that it uses ten, but neither
    identify the satellites that meet their primary needs. In their
    comments, Sprint claims that it uses about 4400 circuits, the
    equivalent of about nine transponder units, and WorldCom more than
    10,000 circuits, or about 19 transponder units, but again do not
    identify specific satellites. Sprint/WorldCom Comments at 7. (We
    equated 540 circuits to one 36 MHz transponder unit.)

[^43]: Comsat Comments at 7-8.

[^44]: Comsat Comments at 7.

[^45]: *See* App. C to this Order.

[^46]: Other INTELSAT Signatories in the Western Hemisphere own about
    15.87 percent of INTELSAT. *See* Applications of INTELSAT LLC for
    Authority to Operate, and to Further Construct, Launch, and Operate
    C-Band and Ku-band Satellites That Form a Global Communications
    System in Geostationary Orbit, Memorandum Opinion, Order and
    Authorization, FCC 00-287 (rel. Aug. 8, 2000) (*INTELSAT Order*), at
    App. B. Comsat owns about 20.42 percent. If Signatories\' use of
    INTELSAT capacity is approximately proportional to their ownership
    shares, then about 16 percent of INTESAT capacity accessible from
    the United States will probably be reserved to other INTELSAT
    Signatories.

[^47]: *Direct Access Order*, 14 FCC Rcd at 15720-27 (paras. 35-50).

[^48]: ATC Reply at 5.

[^49]: Comsat Response at 6 and Att. A.

[^50]: Sprint/WorldCom *Ex Parte* Statement at 2.

[^51]: Letter from Thomas S. Tycz, Chief, Satellite and
    Radiocommunication Division, to Lawrence W. Secrest III, Counsel for
    Comsat Corporation (dated Aug. 10, 2000).

[^52]: *See Comsat August 16 Letter* at 4.

[^53]: For example, a satellite which could provide 500 MHz of
    dual-polarized C-band bandwidth, and 500 MHz of singly-polarized
    Ku-band bandwidth to the United States, would provide a maximum of
    36 transponders outgoing and 36 transponders incoming to the United
    States at any one time, if no capacity were provided to Canada and
    Latin America. In its letter, Comsat suggests that such a satellite
    can provide 88 transponders to the United States.

[^54]: In a later *ex parte* statement, Comsat admits that not all of
    the transponders addressed in the *Comsat August 16 Letter* include
    the United States in their coverage area at this time. *Comsat
    August 25 Letter* at 3. We note, however, that nothing in our rules
    now prevents U.S. carriers from contracting with Signatories in
    foreign countries to carry the INTELSAT traffic from U.S. earth
    stations to INTELSAT satellites using foreign signatories\'
    capacity.

[^55]: In the *Notice*, the Commission observed that the satellite at
    inclined orbit, currently located at 29.5° W.L., is of marginal use
    because of the inclined orbit and because the connectivity is
    limited to a single spot beam. *Notice*, 15 FCC Rcd at 10613
    (para.18). Satellites in inclined orbits are of limited usefulness
    because they are not fully geostationary.

[^56]: The 40 percent assumption is based on the fact that Comsat owns
    about 20 percent of INTELSAT. Therefore, we assume that Comsat will
    use about 20 percent of INTELSAT\'s capacity to carry traffic from
    the United States to foreign countries, and other Signatories will
    use another 20 percent to carry traffic from foreign countries to
    the United States. The 60 percent assumption is based on Comsat\'s
    claim that about 500 of the 827 transponders on the satellites
    listed in the appendices in the *Notice*, or about 60 percent, can
    be used to provide service to the United States. *Comsat August 25
    Letter* at 4.

[^57]: *See Comsat August 16 Letter* at 4.

[^58]: Sprint/WorldCom *Ex Parte* Statement at 2.

[^59]: Comsat characterizes bulk capacity as \"raw\" transmission
    capacity that is tailored to satisfy the particular needs of an
    individual customer. Comsat Comments at 16. Comsat describes
    standardized circuits as circuits not reserved on an individual
    basis, but assigned to particular frequencies and transponder units
    on certain INTELSAT satellites earmarked for use in providing public
    switched services. Comsat Comments at 19. The terms \"bulk
    capacity\" and \"standardized circuits\" are not defined or used in
    INTELSAT\'s July 2000 tariff manual. \"Bulk capacity\" appears to be
    the term used with respect to Transponder Lease Services in Section
    II of INTELSAT\'s Tariff Manual. The INTELSAT Tariff Manual explains
    that Transponder Leases offer more flexibility that other INTELSAT
    leases, and can be used to implement a number of other services,
    including domestic/regional video, Internet, data, public switched
    and cable restoration. INTELSAT Tariff Manual, July 2000, at 66.
    \"Standardized circuits\" appear to be the Channel/Carrier Services
    discussed in Section I of INTELSAT\'s Tariff Manual. These services
    are voice and data services, and include Intermediate Data Rate
    (IDR) service, INTELSAT Business Service (IBS), and Time Division
    Multiple Access (TDMA) service. We use the terms \"bulk capacity\"
    and \"standardized circuits\" to be consistent with the pleadings.

[^60]: INTELSAT Tariff Manual, July 2000, at 100.

[^61]: INTELSAT Tariff Manual, July 2000, at 63-65.

[^62]: Comsat Comments at 19.

[^63]: *Comsat August 9 Letter* at 3. *See also* *Comsat July 13 Letter*
    at 2-3.

[^64]: *Comsat August 9 Letter* at 2.

[^65]: *See* INTELSAT Tariff Manual, July 2000, at 63-65.

[^66]: INTELSAT Tariff Manual, July 2000, at 105.

[^67]: Comsat Comments at 17 (automatic FRR); Comsat Comments at 22
    (contracts for Standardized Circuits).

[^68]: Comsat also maintains that INTELSAT does not inform Comsat who
    the challenger is. Comsat Comments at 17-18.

[^69]: INTELSAT Tariff Manual, July 2000, at 103.

[^70]: Comsat Response at 6-7.

[^71]: ^?^ *Notice*, 15 FCC Rcd at 10614-13 (para. 23).

[^72]: ^?^ *Notice*, 15 FCC Rcd at 10614-15 (para. 23).

[^73]: ^?^ *Notice*, 15 FCC Rcd at 10614-15 (para. 23).

[^74]: In order to connect with a carrier in a foreign country, a U.S.
    carrier must contract with Comsat or directly with INTELSAT for
    capacity from the United States to the INTELSAT satellite, and the
    frequency and bandwidth must \"match\" the connection from the
    INTELSAT satellite to the foreign country obtained by the foreign
    carrier. *See* *Notice*, 15 FCC Rcd at 10613 (para. 17).

[^75]: ^?^ *Notice*, 15 FCC Rcd at 10613-14 (para. 23).

[^76]: Specifically, Sprint/WorldCom claims that 138 of its 311 direct
    access orders remain pending. Of the 172 orders that have been
    processed, 26 have been filled, 72 have been denied for lack of
    capacity, and 74 have been denied because of a lack of a foreign
    match. When measured on a capacity basis, 12 percent have been
    filled, 46 percent unfilled due to lack of capacity, and 42 percent
    unfilled due to lack of a foreign match. Sprint/WorldCom Comments at
    8-10.

[^77]: Sprint/WorldCom Comments at 10.

[^78]: Sprint/WorldCom Comments at 10.

[^79]: Sprint/WorldCom Comments at 10. A \"frequency change\" is when a
    Signatory or direct access user requests INTELSAT to reassign its
    service from one frequency to another on a particular satellite.
    WorldCom contemplated this approach as an alternative to terminating
    service and initiating a new service on another transponder or
    frequency band.

[^80]: Sprint/WorldCom Comments at 10 and Att. 3.

[^81]: Sprint/WorldCom *Ex Parte* Statement at 3.

[^82]: Comsat Response at 24-26.

[^83]: Comsat Response at 5; Lockheed Martin Response at 6.

[^84]: Comsat Response at 8-9. *See also* Lockheed Martin Response at 6.

[^85]: Comsat claims its unfilled orders amount to about thirty-five 36
    MHz-equivalent transponder units when measured on a capacity basis,
    while WorldCom\'s unfilled orders amount to only eight transponder
    units. Comsat Response at 9-10.

[^86]: Letter from Thomas S. Tycz, Chief, Satellite and
    Radiocommunication Division, to Lawrence W. Secrest III, Counsel for
    Comsat Corporation (dated Aug. 10, 2000).

[^87]: *Comsat August 16 Letter* at 2-3.

[^88]: *Comsat August 16 Letter* at 3 n.3.

[^89]: *Notice*, 15 FCC Rcd at 10611 (para. 16).

[^90]: *Notice*, 15 FCC Rcd at 10611 (paras. 16-17).

[^91]: *Notice*, 15 FCC Rcd at 10611 (para. 17).

[^92]: *Notice*, 15 FCC Rcd at 10611 (para. 17).

[^93]: Cable & Wireless Comments at 12-14.

[^94]: Comsat Comments at 36-37. *See also* Lockheed Martin Response at
    23.

[^95]: Sprint/WorldCom Comments at 15 n.41.

[^96]: Lockheed Martin Redacted Response at 23.

[^97]: *Notice*, 15 FCC Rcd at 10611 (para. 17).

[^98]: *Notice*, 15 FCC Rcd at 10611 n.27.

[^99]: We also note that the final distribution agreements will be part
    of the review that the Commission will undertake as a part of our
    review of INTELSAT's overall privatization in the context of our
    licensing procedure.

[^100]: *Direct Access Order*, 14 FCC Rcd at 15720-27 (paras. 35-50).

[^101]: Section 641(b) of the Satellite Act, as amended by the ORBIT
    Act, 47 U.S.C. § 765(b).

[^102]: *Notice*, 15 FCC Rcd at 10615 (para. 25).

[^103]: *Notice*, 15 FCC Rcd at 10615 (para. 25).

[^104]: *Notice*, 15 FCC Rcd at 10615 (para. 25).

[^105]: *Notice*, 15 FCC Rcd at 10615 (para. 25). *See Direct Access
    Order*, 14 FCC Rcd at 15755 (para. 128).

[^106]: ATC Comments at 4; Sprint/WorldCom Reply at 9-10.

[^107]: Comsat Response at 15-16.

[^108]: Lockheed Martin Response at 12.

[^109]: Lockheed Martin Response at 22-23.

[^110]: Lockheed Martin Comments at 12.

[^111]: Lockheed Martin Response at 18-19.

[^112]: *Notice*, 15 FCC Rcd at 10615 (para. 25); *Direct Access Order*,
    14 FCC Rcd at 15755 (para. 128).

[^113]: In the *Access Reform Order*, the Commission noted that
    competition was beginning to develop in the market for \"access\"
    services, services provided by local telephone companies to long
    distance telephone companies, to give long distance companies access
    to end users. The Commission adopted a \"market-based\" approach
    rather than a \"prescriptive\" approach to drive access rates closer
    to cost, because \"\[c\]ompetitive markets are superior mechanisms
    for protecting consumers by ensuring that goods and services are
    provided to customers in the most efficient manner possible to
    protect consumers and the public interest.\" *See generally* Access
    Charge Reform, First Report and Order, CC Docket No. 96-262, 12 FCC
    Rcd 15982, 16094-96 (paras. 262-65) (1997) (*Access Reform Order*),
    *aff\'d sub nom*. Southwestern Bell Telephone Co. v. FCC, 153 F.3d
    523, 546-49 (8th Cir. 1998).

[^114]: Comsat Comments at 3-5; Comsat Response at 5; Lockheed Martin
    Response at 6. Comsat filed an *ex parte* statement on August 23,
    2000, showing that additional direct access orders were filled
    during the three-month period from May 1 to July 31, 2000. Comsat
    *ex parte* statement.

[^115]: Comsat Response at 6.

[^116]: Cable & Wireless Comments at 8-9, *citing* 47 U.S.C. § 252.

[^117]: Cable & Wireless Comments at 8-9.

[^118]: Cable & Wireless Comments at 8-9.

[^119]: Cable & Wireless Comments at 9.

[^120]: Lockheed Martin Comments at 11; Lockheed Martin Response at
    23-24.

[^121]: *See* Section III.D., *supra*. *See also* Sprint/WorldCom
    Comments at 10.

[^122]: Section III.D., *supra*.

[^123]: We do not intend this six-month negotiation period to limit
    direct access users\' ability to place new direct access orders with
    INTELSAT for capacity that is not held by Comsat under the INTELSAT
    direct access procedures currently in place. Rather, we intend this
    negotiation to be directed at INTELSAT capacity currently held by
    Comsat.

[^124]: *Notice*, 15 FCC Rcd at 10615-16 (paras. 24-27).

[^125]: *Notice*, 15 FCC Rcd at 10615 (para. 25). *See also Direct
    Access Order*, 14 FCC Rcd at 15755-56 (para. 128) (direct access
    users may petition the Commission for a regulatory solution in the
    event that commercial solutions were unsuccessful). Similarly, in
    the *Access Reform Order*, the Commission retained a regulatory
    \"backstop\" to its market-based approach to access reform.
    Specifically, the Commission required local telephone companies to
    file cost studies about three-and-a-half years after the *Access
    Reform Order* was adopted, so that the Commission could prescribe
    cost-based rates. *Access Reform Order*, 12 FCC Rcd at 16096-97
    (paras. 267-68).

[^126]: *See*, *e.g.*, Comsat Comments at 30-32; Comsat Response at
    17-20; Lockheed Martin Comments at 13-14; Lockheed Martin Response
    at 19.

[^127]: *Direct Access Order*, 14 FCC Rcd at 15755-56 (para. 128);
    *Notice*, 15 FCC Rcd at 10607-08 (paras. 7-8). In this context,
    portability would permit a customer of Comsat to obtain directly
    from INTELSAT the transponder capacity it was receiving through
    Comsat. *Notice*, 15 FCC Rcd at 10607-08 (para. 7).

[^128]: Comsat Comments at 34-36; Comsat Response at 30-31; Lockheed
    Martin Comments at 18. *But see* ATC Reply at 6; Sprint/WorldCom
    Reply at 4-7.

[^129]: Section 641(a) of the Satellite Act, as amended by the ORBIT
    Act, 47 U.S.C. § 765(a).

[^130]: Section 641(b) of the Satellite Act, as amended by the ORBIT
    Act, 47 U.S.C. § 765(b).

[^131]: Comsat Comments at 35, Comsat Response at 30. *Compare* Section
    681(a)(1) of the Satellite Act, as amended by the ORBIT Act, 47
    U.S.C. § 769(a)(1), *with* Section 681(a)(7) of the Satellite Act,
    as amended by the ORBIT Act, 47 U.S.C. § 769(a)(7).

[^132]: *Notice*, 15 FCC Rcd at 10614 (para. 21).

[^133]: Sprint/WorldCom Comments at 12.

[^134]: Sprint/WorldCom Comments at 11.

[^135]: Sprint/WorldCom Comments at 11, *citing* *Direct Access Order*,
    14 FCC Rcd at 15807-10 (Table D).

[^136]: Comsat Comments at 3 n.4; Lockheed Martin Response at 10-11.

[^137]: *See* Comsat World Systems, Tariff F.C.C. No. 4, Transmittal No.
    145, Section 2.2, 2nd revised page 6 (effective Feb. 15, 2000).

[^138]: Sprint/WorldCom Comments at 11-12; Sprint/WorldCom Reply at 8.

[^139]: Comsat Response at 11.

[^140]: Comsat Response at 11.

[^141]: ATC Comments at 3-4.

[^142]: Lockheed Martin Response at 21-22.

[^143]: ATC Comments at 3.

[^144]: ATC Reply at 7.

[^145]: ^?^ Lockheed Martin Response at 22.

[^146]: ^?^ *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et
    seq.*, has been amended by the Contract With America Advancement Act
    of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (\"CWAAA\").
    Title II of the CWAAA is the Small Business Regulatory Enforcement
    Fairness Act of 1996 (\"SBREFA\").

[^147]: Operational dates were taken from Applications of INTELSAT LLC
    for Authority to Operate, and to Further Construct, Launch, and
    Operate C-Band and Ku-band Satellites That Form a Global
    Communications System in Geostationary Orbit, Memorandum Opinion,
    Order and Authorization, FCC 00-287 (rel. Aug. 8, 2000), at App. A.