June 15, 2001

FCC 01-190

## FCC REPORT TO CONGRESS AS REQUIRED BY THE ORBIT ACT

This report is submitted in accordance with Section 646 of the
Open-market Reorganization for the Betterment of International
Telecommunications Act (ORBIT Act).[^1]

Section 646 states:

> "(a) ANNUAL REPORTS - The President and the Commission shall report to
> the Committees on Commerce and International Relations of the House of
> Representatives and the Committees on Commerce, Science, and
> Transportation and Foreign Relations of the Senate within 90 calendar
> days of the enactment of this title, and not less than annually
> thereafter, on the progress made to achieve the objectives and carry
> out the purposes and provisions of this title. Such reports shall be
> made available immediately to the public."
>
> "(b) CONTENTS OF REPORTS - The reports submitted pursuant to
> subsection (a) shall include the following:
>
> > "(1) Progress with respect to each objective since the most recent
> > preceding report.
>
> > "(2) Views of the Parties with respect to privatization.
>
> > "(3) Views of the industry and consumers on privatization.
>
> > "(4) Impact privatization has had on United States industry, United
> > States jobs, and United States industry's access to the global
> > marketplace."

##### Progress as to Objectives and Purposes

The purpose of the ORBIT Act is "to promote a fully competitive global
market for satellite communication services for the benefit of consumers
and providers of satellite services and equipment by fully privatizing
the intergovernmental satellite organizations, INTELSAT and
Inmarsat".[^2]

The ORBIT Act: (1) mandates the privatization of INTELSAT and Inmarsat;
(2) establishes criteria to ensure a pro-competitive privatization; (3)
requires the Commission to determine whether INTELSAT, Inmarsat, and the
INTELSAT spin-off, New Skies Satellites N.V. (New Skies), have been
privatized in a manner that will harm competition in the United States;
(4) requires the Commission to use the privatization criteria specified
in the ORBIT Act as a basis for making its competition determination;
and (5) directs the Commission to "limit through conditions or deny"
applications or requests to provide "non-core" services to, from, or
within the United States if it finds that competition will be
harmed.[^3] It provides for certain exceptions to limitations on
non-core services in the event of such a determination. The Act also
prohibits the Commission from authorizing certain "additional" services
pending privatization consistent with the criteria in the Act.[^4] In
addition, the Act directs the Commission to undertake a rulemaking
proceeding to assure U.S. users opportunity for direct access to the
INTELSAT System.

The Commission made its first report to Congress on its actions to
implement the ORBIT Act on June 15, 2000, following enactment of the Act
on March 17, 2000.[^5] In preparation of this report, the Commission
issued a Public Notice on April 13, 2001 inviting comment appropriate to
the development of this second report.[^6]

### **Commission Actions and Activities**

The Commission has undertaken the following actions required by the
ORBIT Act, or related to its objectives and purposes. The actions
described below have been taken to ensure that INTELSAT, Inmarsat, and
New Skies have been privatized in a procompetitive manner consistent
with the privatization criteria of the Act.[^7] These actions have also
been taken to implement certain deregulatory measures in the Act.[^8]

###### INTELSAT

A.  Privatization Negotiations

-   FCC staff participated in international meetings held by INTELSAT
    regarding the privatization of INTELSAT. Those meetings included the
    Assemblies of Parties held in November 2000 and April 2001,
    regularly scheduled Board of Governors meetings, and the meetings of
    a working group that developed INTELSAT's post-privatization
    distribution and wholesale customer arrangements.[^9]

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-   As described below, INTELSAT has decided to privatize on July
    18, 2001. The privatized INTELSAT will become an FCC licensee for
    existing and planned satellites that provide services in the C- and
    Ku-bands.

> B. FCC Licensing Proceeding

-   On August 8, 2000, the Commission released the *Intelsat LLC
    Licensing Order* authorizing Intelsat LLC to operate its existing
    and planned C- and Ku-band satellites as a U.S. licensee upon
    privatization of INTELSAT. [^10] The authorizations were conditioned
    upon a subsequent finding by the Commission that INTELSAT's
    privatization would be consistent with the ORBIT Act criteria and
    they will not be effective until INTELSAT actually privatized by
    transferring its assets to a private corporation and its ITU network
    filings to the national registries of the United States and the
    United Kingdom.

-   Intelsat LLC is the separate private Delaware company created by
    INTELSAT to hold the U.S. authorizations and associated space
    segment assets upon privatization. The *Intelsat LLC Licensing
    Order* conditionally authorized Intelsat LLC to operate 17
    satellites presently owned and operated by INTELSAT, 10 future
    replacement satellites, and 13 modifications permitting relocation
    of existing satellites upon launch of planned satellites. As part of
    the authorizations, the Commission waived some of its technical
    rules in connection with operation of existing and planned
    satellites.[^11]

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-   On December 14, 2000, the Commission released an *Order on
    Reconsideration* denying petitions for reconsideration filed by
    PanAmSat Corporation and GE American Communications, Inc.[^12] In
    that order, the Commission confirmed its decisions in its *Licensing
    Order* to: (1) cancel, in accordance with ITU procedures, INTELSAT
    orbital registrations should it in the future no longer license
    their use by Intelsat LLC, (2) license Intelsat LLC\'s use of six
    currently "unused" orbital locations held by INTELSAT under ITU
    procedures, (3) not declare Intelsat LLC a dominant carrier for
    services to thin route countries, (4) waive its requirement that
    Telemetry, Tracking and Control (TT&C) operations be located at the
    band edge, (5) waive its requirement that U.S. licensed satellites
    employ linear polarization on C-band satellites, and (6) waive its
    two-degree spacing requirements.

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-   On May 29, 2001, the Commission released the *INTELSAT ORBIT Act
    Compliance Order* finding that (1) INTELSAT's privatization is
    consistent with the non-IPO criteria specified in Sections 621 and
    622 of the ORBIT Act and (2) the use of space segments operated by
    Intelsat LLC for services to, from or within the United States will
    not harm competition in the telecommunications market of the United
    States as contemplated by Section 601(b) of the ORBIT Act. As a
    result, the licenses that the Commission issued to Intelsat LLC on
    August 8, 2000, will become effective upon INTELSAT's privatization
    on July 18, 2001 when INTELSAT transfers (1) its satellites and
    associated assets to Intelsat LLC and (2) its ITU network filings
    for the locations associated with the operation of those satellites,
    on a permanent basis, subject to the terms of the *Intelsat LLC
    Licensing Order* to the United States national registry. [^13]

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-   The privatized INTELSAT is required by the ORBIT Act to conduct an
    IPO by October 1, 2001 to "substantially dilute" ownership by former
    INTELSAT Signatories. The Commission may extend this deadline to no
    later than December 31, 2002.[^14] The Commission found in its May
    29, 2001 decision that the ORBIT Act permits it to authorize
    services upon privatization prior to INTELSAT conducting its IPO,
    provided that INTELSAT's privatization is otherwise consistent with
    the Act's criteria. The Commission required the privatized INTELSAT
    must file with the Commission 30 days after conduct of its IPO a
    demonstration that that the IPO is consistent with Section 621(2)
    and 621(5)(A)(I) of the ORBIT Act. The Commission will then
    determine whether INTELSAT has achieved "substantial dilution" as
    required by the ORBIT Act. If the IPO is not conducted within the
    timeframe established by the ORBIT Act or if "substantial dilution"
    is not achieved, the Commission retains authority under Section
    601(b)(1)(B) of the Act to take appropriate action.[^15]

###### Inmarsat

-   Inmarsat privatized on April 15, 1999, prior to enactment of the
    ORBIT Act. The Commission has before it various applications from
    Comsat Corporation; Stratos Mobile Networks, LLC; SITA Information
    Computing Canada, Inc.; Honeywell, Inc.; Marisat Communications
    Network, Inc.; and Deere & Company to use Inmarsat for
    communications services to, from or within the United States.
    Inmarsat has recently taken certain actions which it states brings
    it into compliance with the privatization criteria of the ORBIT Act.
    The Commission is reviewing the applications and actions undertaken
    by Inmarsat to determine compliance with the ORBIT Act and to
    consider other issues raised in these proceedings. Action is
    anticipated in the near future. If the Commission concludes that
    Inmarsat's privatization is not consistent with the Act's
    privatization criteria, the Act directs the Commission to limit by
    condition or deny authorizations for non-core services.[^16]

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-   The ORBIT Act requires Inmarsat to conduct an IPO no later than
    October 1, 2000. The Act permits the Commission to extend this
    deadline to no later than December 31, 2001.[^17] In August 2000,
    Inmarsat requested a six-month extension of the IPO deadline to July
    1, 2001. On October 3, 2000, the Commission granted the request on
    the basis that Inmarsat had demonstrated the need to restructure the
    company and develop innovative services in order to make an IPO
    attractive to investors and to achieve the substantial dilution of
    shareholder ownership as required by the Act.[^18] In that decision,
    the Commission found that the ORBIT Act specifically provides for
    the authorization of Inmarsat services prior to Inmarsat's conduct
    of an IPO, provided that other requirements of the ORBIT Act are
    satisfied.

-   On April 5, 2001, Inmarsat filed for a second extension of its IPO
    deadline to December 31, 2001 based on unfavorable market
    conditions. The request was placed on public notice on April 12,
    2001.[^19] The Commission is currently reviewing comments received
    in the proceeding and analyzing the issues raised. Action is
    anticipated in the near future.

###### New Skies Satellites

-   New Skies is the Netherlands-based INTELSAT spin-off created in 1998
    as INTELSAT's first step toward privatization. In 1999, the
    Commission granted U.S. earth station operators limited three-year
    authorizations to operate with New Skies in the U.S. market pending
    New Skies' taking certain actions to become independent of INTELSAT.
    [^20] The Commission found that New Skies had not yet: (1) conducted
    an initial public offering (IPO) as anticipated by the INTELSAT
    Assembly of Parties decision approving New Skies' creation; (2)
    novated customer contracts inherited from INTELSAT,[^21] also as
    anticipated by the Assembly decision, and; (3) terminated certain of
    transitional support agreements with INTELSAT. It said that it would
    consider extension of the three-year earth station licenses granted
    to a normal, full "ten-year" license term if New Skies demonstrates
    that it has achieved independence from INTELSAT.

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-   The ORBIT Act requires "separated entities" created before January
    1, 1999 to conduct an IPO no later than July 1, 2000. New Skies is a
    "separated entity." The section permits the Commission to extend
    this deadline to no later than July 31, 2001. On May 26, 2000, New
    Skies requested a six-month extension of the deadline. On June 30,
    2000, the Commission released an order finding that New Skies had
    demonstrated diligence in preparing for an IPO and had acted
    reasonably in delaying its IPO based on the advice of its investment
    bankers and underwriters, who focused their recommendations on then
    unfavorable market conditions.[^22]

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-   New Skies conducted its IPO in October 2000. On March 29, 2001, the
    Commission granted New Skies' request to provide satellite services
    to, from, and within the United States on a full-term basis. In
    taking this action, the Commission found that: (1) New Skies has met
    the criteria, specified under Sections 621 and 623 of the ORBIT Act
    and required by the 1999 *New Skies Market Access Order*, for
    achieving independence from INTELSAT and (2) the use of space
    segment operated by New Skies will not harm competition in the U.S.
    telecommunications market, as contemplated in Section 601 of the
    ORBIT Act. The Commission also extended to full term the
    authorizations of U.S. earth stations now operating with New Skies
    satellites. And, subject to conditions, it granted to New Skies an
    extended waiver of the two-degree spacing policy for New Skies'
    currently operating satellites and one replacement satellite to be
    launched later this year.[^23]

###### Lockheed Martin -- Comsat Merger

-   The Commission on September 15, 1999, authorized Lockheed Martin to
    acquire up to 49 percent of the stock of Comsat Corporation
    ("Comsat"), within the limitations then placed on common carrier
    ownership of Comsat's stock under the Communications Satellite Act
    of 1962. [^24] The ORBIT Act terminated the 1962 Act's ownership
    restrictions on Comsat. As a result, on March 23, 2000, Lockheed
    Martin filed an application with the Commission for transfer of
    control of Comsat's various licenses and authorizations. On July 31,
    2000, the Commission found that Lockheed Martin's purchase of Comsat
    was in the public interest and authorized Comsat to assign its FCC
    licenses and authorizations to a wholly owned subsidiary of Lockheed
    Martin Corporation, permitting the completion of the planned merger.
    In making this finding, the Commission determined that the merger
    would not have any adverse impact on the current level of
    competition in any relevant market relating to the provision of
    satellite services. The Commission also found that the acquisition
    of Comsat may have potential efficiencies that will allow the merged
    company to compete more effectively in the global telecommunications
    marketplace.

###### Direct Access

-   Section 641(a) of the ORBIT Act requires that users and service
    providers be permitted to obtain Level 3 direct access to INTELSAT
    capacity. Previously, the Commission decided in a rulemaking
    proceeding that Level 3 direct access is in the public
    interest.[^25]

-   As required by Section 641(b), the Commission initiated a rulemaking
    proceeding to determine whether users or providers of
    telecommunications services have sufficient opportunity to access
    INTELSAT space segment capacity directly to meet their service or
    capacity requirements.[^26] On September 14, 2000, the Commission
    released its *INTELSAT Capacity Order* finding that users and
    service providers do not have \"sufficient opportunity\" for direct
    access \"to meet their service or capacity requirements.\" [^27] To
    facilitate opportunities for direct access, the Commission required
    Comsat and direct access customers to negotiate in good faith to
    find commercial solutions and stated that it would consider other
    \"appropriate action\" if it found that commercial solutions do not
    create a sufficient opportunity for direct access users and service
    providers to meet their service or capacity requirements. The
    Commission also emphasized its concern that post-privatization sales
    and distribution arrangements not carry forward special privileges
    and protections for Signatories.

-   On March 13, 2001, Comsat submitted a report detailing the results
    of its negotiations and maintaining that direct access opportunities
    are increasing for those who want them. The negotiations resulted in
    a commercial agreement between Comsat and WorldCom. The Commission
    placed Comsat's report on public notice on April 6 and BT North
    America and Sprint commented opposing termination of the
    proceeding.[^28] At this time the Commission is reviewing the issues
    to determine whether further steps may be appropriate.

-   In its May 29, 2001 *INTELSAT ORBIT Act Compliance Order*, the
    Commission found that the post-privatization distribution and
    wholesale customer agreements approved by the INTELSAT Board of
    Governors did not give any indication that Signatories would be able
    to obtain any protections or privileges that direct access users
    would not be able to obtain as well. The specific agreements that
    the Commission reviewed are non-exclusive and will be the only
    versions of those agreements available for signature prior to
    privatization. INTELSAT decided to make them available prior to
    privatization to all entities authorized to access the INTELSAT
    system as of the date of privatization, including to U.S. direct
    access users. The privatized INTELSAT will have the same flexibility
    as any other commercial carrier to negotiate individual contracts
    with customers. The Commission found, however, no indication that
    privatized INTELSAT will be inappropriately motivated to favor its
    former Signatories over other users. Moreover, the agreements are
    subject to national law, which would include the ORBIT Act. The
    Commission concluded, therefore, that the INTELSAT privatization
    will carry forward the intent of Section 641(a) to continue to make
    direct access available to U.S. customers.[^29]

###### Regulatory Fees

-   The ORBIT Act authorizes the Commission "to impose similar
    regulatory fees on the United States signatory which it imposes on
    other entities providing similar services."[^30] The Commission
    considered in its rulemaking proceeding on assessment and collection
    of regulatory fees for fiscal year 2000 whether it is appropriate to
    impose regulatory fees on Comsat.[^31] On July 10, 2000, the
    Commission released an Order concluding that Comsat should pay a
    proportionate share of the fees applicable to holders of Title III
    authorizations to launch and operate geosynchronous space
    stations.[^32] Consistent with past decisions, the Commission stated
    that the costs attributable to space station oversight include costs
    directly related to INTELSAT signatory activities and are distinct
    from those recovered by other fees that Comsat pays, such as
    application fees, fees applicable to international bearer circuits,
    fees covering Comsat\'s non-Intelsat satellites, and earth station
    fees.[^33]

#### B. Status of INTELSAT Privatization

Substantial progress has been made toward achieving a primary purpose of
the ORBIT Act -- fully privatizing INTELSAT.[^34] As noted above, the
Commission has found that INTELSAT's planned privatization will be
consistent with the privatization criteria of the Act,[^35] and that
competition in the U.S. market will not be harmed by the planned
privatization.[^36] Below, we discuss the progress to date and describe
the planned privatization.

*(1) Progress of Discussions*

In the year since the Commission's 2000 report to Congress, INTELSAT has
held numerous meetings focused largely on the privatization process. In
September 2000, the INTELSAT Board of Governors formally recommended
that the Assembly of Parties accept the FCC licenses issued in August
2000, and select the United States to receive and license INTELSAT's
orbital registrations upon privatization, based upon the terms of the
*Licensing Order.*[^37] The Board also selected the United Kingdom as a
backup jurisdiction for licensing INTELSAT's existing and planned
satellites operating in the C-band and Ku-band "should the terms of the
U.S. license approval be adversely affected prior to
privatization."[^38] An Assembly of Parties (comprised of the member
governments of INTELSAT), held November 13-17, 2000, confirmed the
decision of a 1999 Assembly of Parties that INTELSAT should restructure,
decided on the terms and conditions that would apply to the
restructuring, and approved amendments to the INTELSAT Agreement
necessary to effect the privatization. It also endorsed the Board's
decision on selection of licensing jurisdictions and other aspects of
INTELSAT's privatization.[^39] Subsequent to the November Assembly, the
INTELSAT Board of Governors approved underlying documents creating the
private company and made preparations to implement privatization by July
18, 2001, the target date established by the November Assembly.[^40]

In approving the amendments to the INTELSAT Agreement necessary to
effect privatization, the November Assembly also agreed to "rapidly
implement" the amendments such that they take effect on July 18, 2001 in
order to avoid delaying the privatization transactions by a year or more
pending formal entry into force of the amendments. While the United
States consistently advocated the April 1, 2001 privatization target
date incorporated into the ORBIT Act, some Parties raised concerns
regarding the need to allow for sufficient time to conclude the
legislative processes necessary for their governments to officially
accept the amendments. In addition, certain Parties invoked a provision
of the INTELSAT Agreement that provides that "an amendment shall not
enter into force less than eight months after the date it has been
approved by the Assembly of Parties."[^41] The Assembly of Parties
agreed to a date of July 18, 2001 \-- eight months and one day after the
close of the Assembly of Parties meeting at which the privatization
decisions were finalized.

As part of its decision to privatize INTELSAT, the November Assembly
decided to leave in place a small residual intergovernmental
organization to be known as ITSO, an acronym for the International
Telecommunications Satellite Organization. ITSO will, through a "Public
Services Agreement" with the privatized INTELSAT, monitor the
performance of the company's public service obligations to: maintain
global connectivity and global coverage, provide non-discriminatory
access to the system, and honor the lifeline connectivity obligation
(LCO) to certain customers (those customers in poor or underserved
countries that have a high degree of dependence on INTELSAT).[^42] Under
these commitments, the privatized INTELSAT will keep capacity available
to lifeline users at fixed pre-privatization costs for approximately 12
years, while the lifeline users will only be committed for its capacity
on a year-to-year basis at their option. ITSO will have no operational
or commercial role.

*(2) Planned Privatization*

At the March 2001 meeting, the Board of Governors gave final approval to
corporate and other documents that would create the private company and
implement the November Assembly decision. In April 2001, another
Assembly of Parties selected Ahmed Toumi of Morocco as the first
Director General of ITSO. The Board of Governors meeting scheduled for
June 15 -- 22 will work to complete its due diligence in preparation for
privatization on July 18, 2001.

Upon privatization, all of INTELSAT's operational assets and liabilities
will be transferred to a group of affiliated national corporations with
a holding company structure as shown in Attachment A. Intelsat Ltd. will
be the holding company for all other companies in the group and
organized under the laws of Bermuda. It will hold the United Kingdom
authorizations for ITU registrations in the Ka-, BSS-, and V-bands.[^43]
Intelsat Bermuda Ltd., a wholly-owned subsidiary of Intelsat Ltd., will
be responsible for operational matters involving control of space and
ground segment assets from Bermuda.[^44] Intelsat Services Corporation,
a wholly-owned subsidiary of Intelsat Bermuda and organized as a
Delaware corporation, will undertake day-to-day operation of the
satellite network and provide administrative services to Intelsat
Bermuda including marketing, operations, legal, engineering and billing
services.[^45] It also will own and operate ground segment assets in the
United States. Intelsat Holdings LLC, also a Delaware corporation and
wholly-owned subsidiary of Intelsat Bermuda, will function only as a
holding company for Intelsat LLC -- the U.S. licensee for operation of
existing and planned satellites in the C-band and Ku-band.[^46] All
space segment assets operating in these bands will be transferred to
Intelsat LLC, also a Delaware corporation.[^47] Intelsat LLC will sell
all of its space segment capacity to Intelsat Bermuda.[^48] Intelsat
U.K. Ltd., a wholly-owned subsidiary of Intelsat Bermuda, will handle
all customer contracts on behalf of the Intelsat system. All customer
contracts will be novated to Intelsat U.K. upon privatization; Intelsat
U.K. will buy space segment capacity from Intelsat Bermuda to serve
existing and future customers.[^49] Customers will be able to acquire
Intelsat space segment capacity either through distributors or on a
wholesale customer basis.[^50] The Intelsat holding company structure
will also include regional support centers and field offices, as shown
in Attachment A, providing marketing support and located in various
countries.

The companies created will have fiduciary boards of directors. The
companies will not have an immune or privileged status. The selection
procedure for board members will result in a board that is compliant
with the ORBIT Act as well as with the requirements of the New York and
London stock exchanges. The licensing companies will be located in
countries (U.S. and U.K.) that have effective competition laws and have
commitments under the WTO Agreement that include non-discriminatory
access to their satellite markets. These companies will be subject to
U.S. or U.K. licensing authorities and will conduct satellite
coordinations according to ITU procedures under the auspices of these
authorities. An Intelsat Ltd. IPO is anticipated prior to the final date
(December 31, 2002) established by the ORBIT Act.

Upon privatization, former INTELSAT Signatories or non-Signatory
investing entities will be issued shares in Intelsat Ltd. according to
their March 2001 investment shares in INTELSAT. They will be the
shareholders of Intelsat Ltd. until it conducts an IPO. INTELSAT
currently anticipates that Intelsat Ltd. will conduct an IPO within a
year after the date of privatization -- well within the timeframe
specified in the Act.

II. **Views of INTELSAT Parties on Privatization**

The Commission has not received any views from Parties regarding
privatization in response to the Public Notice.

**III. Views of Industry and Consumers on Privatization**

PanAmSat Corporation (PanAmSat), Lockheed Martin Corporation (Lockheed
Martin), INTELSAT, Inmarsat Ventures plc. (Inmarsat), the Committee to
Restructure the International Satellite Organizations (CRISO), Motient
Services Inc. (Motient), and Deere & Company (Deere) responded to the
Commission's public notice inviting comments appropriate to the
development of this report. The Commission received no filings
specifically representing views of consumers or consumer groups.

Lockheed Martin and INTELSAT state that the decisions taken by the
various INTELSAT bodies are sufficient to meet the ORBIT Act's non-IPO
criteria. Lockheed Martin argues that INTELSAT privatization as
currently set forth and Inmarsat's actual privatization will have a
number of benefits to consumers and industry should the Commission grant
each full access to the U.S. market including: (1) introducing effective
competitors into the market, (2) full access by consumers to the full
range of legal remedies, (3) contribution to U.S. jobs and productivity
as a result of having the INTELSAT service and licensing companies
located in the United States, and (4) continued global access
commitments through the public service agreements into which each
organization and its residual IGO entered.

PanAmSat argues that although it is privatizing, INTELSAT will maintain
market exclusivity in numerous countries in contravention of the ORBIT
Act. PanAmSat proposes that the U.S. government should work with the
International Telecommunication Union (ITU) to undertake a study to
assess the relative market access opportunities of private satellite
operators. It also proposes the creation of an organization comprised of
industry representatives, satellite user groups, and national and
international regulatory authorities from around the world to encourage
the development of open and competitive satellite markets.

In response to this proposal, Lockheed Martin argues that INTELSAT is
not the cause of market access barriers and has not used its current
intergovernmental organization (IGO) status to provide privileges for
the privatized Intelsat LLC. On the contrary, it states, INTELSAT has
sought to further open market access in its member countries. While
market access should be pursued in a variety of fora, Lockheed Martin
argues that is a trade matter that should be pursued through trade
avenues and not through the ITU, as trade matters are not within the
ITU's mandate.

In the Intelsat LLC *Licensing Order,* the Commission conditioned the
authorizations granted to Intelsat LLC on compliance with the ORBIT Act
restrictions on exclusive arrangements for the provision of satellite
services between the United States and other countries[^51][^52] We
found in the INTELSAT *ORBIT Act Compliance Order* that the INTELSAT
privatization will not violate this restriction and said we would
enforce it in the future on a case-by-case basis as facts may
require[^53][^54] We agree with PanAmSat, however, that market entry is
fundamental to achieving and maintaining competition in satellite
communications. The Commission therefore will continue to work with the
U.S. government agencies that have the primary responsibility for
ensuring that U.S. operators secure market access overseas. We believe
that PanAmSat's specific proposals should be considered in an
inter-agency context.

Inmarsat, Deere and Lockheed Martin maintain that Inmarsat has already
privatized and has done so in a manner consistent with the ORBIT Act
subject to Inmarsat undertaking an IPO by the final date incorporated in
the Act. Motient maintains that Inmarsat has not privatized consistent
with the criteria in the ORBIT Act in that it has not completed an IPO
and some of its managers and officers still hold financial interests in
former signatories. The comments of these parties reflect the views
argued in ongoing Commission proceedings in which the Commission is
assessing whether Inmarsat has met the criteria for privatization set
forth in the ORBIT Act. We will address their concerns in the
appropriate proceeding and report our findings to Congress as required
by the Act.

Copies of the comments are attached.

**IV. Impact of Privatization**

Section 646 requests that we report on the impact of privatization on
U.S. industry, jobs, and industry access to the global market. Since
INTELSAT has not yet privatized, we cannot report on actual impact. We
can, however, identify some of the expected effects on industry and
access to the global market based on the decisions already taken by
INTELSAT.

The privatization, as structured, is designed to allow privatized
INTELSAT to continue to operate in a manner and provide services that
meet U.S. commercial and governmental (including national security)
needs. The United States will retain under its jurisdiction a company
with valuable satellite assets and associated orbital locations.
Furthermore, the location of the service and licensing companies in the
United States may contribute to jobs and productivity in the United
States. INTELSAT currently employs approximately 900 individuals, many
of whom are highly skilled in the intricacies of high technology
business. In addition, having Intelsat LLC as a U.S. licensee will also
help prevent future warehousing of orbital locations in the C- and
Ku-Bands. The Commission has (1) imposed milestone requirements on
INTELSAT with respect to construction, launch and operation of new
satellites; and (2) required that any future requests by INTELSAT to
acquire new orbital locations in the C- and Ku- Bands be subject to FCC
approval.

Potential coordination problems between other U.S. satellite operators
and INTELSAT are expected to ease after privatization when INTELSAT
becomes a U.S. licensee. Coordination between U.S. licensed satellite
operators is conducted without direct FCC intervention except as may be
necessary to address issues that might not be resolved by the licensees
in a manner consistent with Commission rules. Coordination between
non-U.S. licensed satellite operators and Intelsat LLC would be
conducted in accordance with ITU procedures and would involve other
governments. In this respect, the fact that Intelsat LLC will be an FCC
licensee will facilitate greater U.S. flexibility in negotiations with
non-U.S. licensed operators in instances where solutions to satellite
coordination issues impact both the operation of Intelsat LLC satellites
and other nearby U.S. licensed systems. Additionally, with Intelsat LLC
as a U.S. licensee, U.S. involvement and impact in international fora on
satellite issues may increase given Intelsat LLC's worldwide ownership.

Finally, both Inmarsat's privatization and INTELSAT's planned
privatization have placed a priority on continued provision of service
to all portions of the globe. Inmarsat committed to support global
maritime distress and safety services and the INTELSAT Assembly of
Parties determined that privatized INTELSAT should be contractually
bound under a Public Service Agreement with the residual IGO to ensure
continued global connectivity \-- particularly to countries dependent on
INTELSAT's satellite services.

**V.** **Summary**

The Commission has undertaken a number of proceedings required by or
related to the ORBIT Act and Commission staff continue to work to
implement the Act through participation in an advisory capacity in all
meetings related to these negotiations. The Commission will continue to
implement and enforce the requirements of the ORBIT Act. On the whole,
we believe that U.S. policy goals regarding the promotion of a fully
competitive global market for satellite communications services are
being met in accordance with the Act. The Commission will inform
Congress of the actions it takes to implement the requirements of the
ORBIT Act and the impact of those actions in its next annual report.

Enclosures: Comments received in response to the Commission's Public
Notice.

####### ATTACHMENT A

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[^1]: Pub. L. No. 106-180; 114 Stat. 48 (2000), §646.

[^2]: Pub. L. No. 106-180, § 2.

[^3]: The Act defines "non-core" services as "services other than
    public-switched network voice telephony and occasional-use
    television" with respect to INTELSAT, and as "services other than
    global maritime distress and safety services or other existing
    maritime or aeronautical services for which there are not
    alternative providers" with respect to Inmarsat. Pub. L. No.
    106-180, § 681(a)(11).

[^4]: The Act defines "additional" services as "direct-to-home (DTH) or
    direct broadcast satellite (DBS) video services, or services in the
    Ka or V bands" for INTELSAT and as "those non-maritime or
    non-aeronautical mobile services in the 1.5 and 1.6 GHz band on
    planned satellites or the 2 GHz band" for Inmarsat. Pub. L. No.
    106-180, § 681(a)(12).

[^5]: *FCC Report to Congress as Required by the ORBIT Act* (rel. June
    15, 2000).

[^6]: Public Notice, Report No. SPB-167, April 13, 2001.

[^7]: Pub. L. No. 106-180, §§ 601, 621,622, 623, 624, and 648.

[^8]: Pub. L. No. 106-180, §§ 641 and 645(1).

[^9]: The Assembly of Parties is the principal governing organ of
    INTELSAT and is composed of all the Parties (the national
    governments for which the INTELSAT Agreement has entered into
    force). The Assembly's primary purpose is to consider general policy
    and long-term objectives of INTELSAT consistent with the terms of
    the underlying INTELSAT Agreement. Agreement relating to the
    International Telecommunications Satellite Organization, "INTELSAT,"
    23 U.S.T. 3813; TIAS No. 7532, (February 12, 1973) (*INTELSAT
    Agreement*) Articles VII(a) and (b).

[^10]: *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 LLC Licensing Order*).

[^11]: Section 601(b)(1)(D) of the ORBIT Act permitted the Commission to
    act on the Intelsat LLC application prior to completion of then
    ongoing privatization negotiations, if such action was necessary,
    for the United States to become the licensing jurisdiction for
    INTELSAT. In accordance with Section 601(b)(1)(D), the Commission
    conditioned the authorizations upon compliance with provisions of
    the ORBIT Act. Pub. L. 106-180 § 601(b)(1)(D). *See also* §§ 621 and
    622.

[^12]: *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*,
    Order on Reconsideration, FCC 00-437 (rel. Dec. 14, 2000)(*Intelsat
    LLC Reconsideration Order*).

[^13]: *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 00-183 (rel. May 29,
    2001) (*Intelsat LLC ORBIT Compliance Order*).

[^14]: Pub. L. No. 106-180, § 621(5)(A)(i).

[^15]: If the IPO does not meet the time or size requirements
    established in the ORBIT Act, Section 601(b)(1)(B) of the Act states
    that the Commission "shall limit through conditions or deny" any
    applications before it at that time and "limit or revoke previous
    authorizations to provide non-core services to, from, or within the
    United States." Pub. L. No. 106-180, § 601(b)(1)(B).

[^16]: Pub. L. No. 106-180, § 621(5)(B).

[^17]: Pub. L. No. 106-180, § 621(5)(A)(ii).

[^18]: *In the Matter of Inmarsat Ventures Ltd, Request for Extension of
    Time Under Section 621(5) of the ORBIT Act*, Memorandum Opinion and
    Order, FCC 00-356 (rel. Oct. 3, 2000).

[^19]: Public Notice, Report No. SAT-00069, April 12, 2001.

[^20]: *See In the Matter of New Skies Satellites, N.V. for
    Authorization to Access the U.S. Market*, Order and Authorization*,*
    14 FCC Rcd. 13003 (1999).

[^21]: Novation is the substitution of a new obligation or contract for
    an old one by mutual agreement of all parties concerned. In this
    case it refers to the substitution of New Skies for INTELSAT in the
    customer contracts inherited by New Skies from INTELSAT.

[^22]: *In the Matter of New Skies Satellites, N.V. Request for an
    Extension under Section 623(1) of the ORBIT Act*, Memorandum Opinion
    and Order, FCC 00-234 (rel. June 30, 2000).

[^23]: *In the Matter of New Skies Satellites, N.V. Request for
    Unconditional Authority to Access the U.S. Market*, Memorandum
    Opinion and Order, FCC 01-107, ¶ 34-40 (rel. March 29, 2001)(*New
    Skies Order*).

[^24]: *In the Matter of Lockheed Martin Corporation, Regulus, LLC and
    Comsat Corporation Application for Transfer of Control of Comsat
    Government Systems, Inc.,* Memorandum, Order and Authorization, FCC#
    99-237, (rel. Sept. 15, 1999). sub nom. PanAmSat Corporation v. FCC,
    et al. Nos. 99-1384 and 99-1385, 2000 WL 621421 appeal dismissed
    with partial vacatur (D.C. Cir. April 20, 2000) (grant by court of
    joint request for dismissal on the basis that the ORBIT Act mooted
    underlying complaints).

[^25]: *Direct Access to the INTELSAT System*, Report and Order, 14 FCC
    Rcd. 15703 (1999). 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 without having to use a Signatory as a
    middleman.

[^26]: *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, FCC 00-186 (rel. May 24,
    2000) *(INTELSAT Capacity NPRM*).

[^27]: *In the Matter of the Availability of INTELSAT Space Segment
    Capacity to Users and Service Providers Seeking to Access INTELSAT
    Directly*, Report and Order, Docket No. 00-91 (rel. Sept. 14,
    2000)(*INTELSAT Capacity Order)*.

[^28]: Public Notice, Report No. SPB-166, April 6, 2001.

[^29]: *Intelsat LLC ORBIT Compliance Order* at ¶¶ 66-69.

[^30]: Pub. Law 106-180 § 642\[c\]. A 1998 decision of the United States
    Court of Appeals for the District of Columbia Circuit in *PanAmSat
    Corp. v. FCC,* 198 F.3d 890 (D.C. Cir. 1999), set aside and remanded
    the Commission's 1998 fee order, which did not assess a fee against
    Comsat.

[^31]: *In re Assessment and Collection of Regulatory Fees for Fiscal
    Year 2000*, Notice of Proposed Rulemaking, FCC 00-117, MD Docket No.
    00-58 at ¶¶ 16-17 (rel. Apr. 3, 2000).

[^32]: *In re Assessment and Collection of Regulatory Fees for Fiscal
    Year 2000*, FCC 00-117, MD Docket No. 00-58 at ¶ 24 (rel. July 10,
    2000).

[^33]: *Id.*

[^34]: Pub. L. No. 106-180, § 2.

[^35]: Pub. L. No. 106-180, §§ 621 and 622.

[^36]: Pub. L. No. 106-180, §§ 601(b).

[^37]: INTELSAT Press Release, "INTELSAT Board Chooses United States as
    Jurisdiction for Privatized Service Company; Accepts FCC Licenses"
    (Sep. 15, 2000).

[^38]: *Id.* The Board also selected the United Kingdom as the licensing
    jurisdiction for future satellites that may be constructed for
    operating in the Ka-band, V-band and BSS band.

[^39]: *INTELSAT Assembly of Parties Record of Decisions of the
    Twenty-Fifth (Extraordinary) Meeting,* AP-25-3E FINAL W/11/00 ¶ 34
    (Nov. 27, 2000)("2000 Assembly Decision"). *See* also INTELSAT Press
    Release, Historic Assembly says "All Systems Go" for 2001: "INTELSAT
    Privatization Plan and Schedule Formally Approved by Governments,"
    November 20, 2000.

[^40]: *See* 2000 Assembly Decision.

[^41]: *INTELSAT Agreement* Article XVII(f).

[^42]: 2000 Assembly Decision at 6-8.

[^43]: *In the Matter of 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*, Intelsat LLC Supplemental Information, at 15
    (Dec. 18, 2000)(*Supplemental Information*).

[^44]: *Id.* at 15-16.

[^45]: *Id.* at 15-16.

[^46]: *Id.* at 16.

[^47]: *Id.*

[^48]: *In the Matter of 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*, Intelsat LLC Information Regarding
    Post-Privatization Distribution Arrangements at 2, note 6 (Mar. 16,
    2001).

[^49]: *Id.* at 2.

[^50]: *Id.* at 3.

[^51]: ^.^

[^52]: *Licensing Order* at ¶¶ 27-28.

[^53]: ^.^

[^54]: *INTELSAT ORBIT Act Compliance Order* at ¶¶ 57-62.