Telecommunications: Intelsat Privatization and the Implementation of the ORBIT Act
Published: 2004-09-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2000, the Congress passed the Open-market Reorganization for the Betterment of International Telecommunications Act (ORBIT Act) to help promote a more competitive global satellite services market. The ORBIT Act called for the full privatization of INTELSAT, a former intergovernmental organization that provided international satellite services. GAO agreed to provide federal officials' and stakeholders' views on (1) whether the privatization steps required by the ORBIT Act have been implemented and whether there were potential inconsistencies between ORBIT Act requirements and U.S. obligations made in international trade agreements; (2) whether access by global satellite companies to non-U.S. markets has improved since the enactment of the ORBIT Act and, if so, to what is this generally attributed; and (3) if any market access problems remain, what role does the Federal Communications Commission (FCC) have in addressing those problems under the ORBIT Act.
section_title: What GAO Found
paragraphs: Most of INTELSAT's privatization steps have taken place and a variety of stakeholders told us that implementation of the ORBIT Act was not inconsistent with the commitments that the United States made in international trade agreements. In July 2001, INTELSAT transferred its satellite and financial assets to a private company. FCC determined that this and other actions satisfied the ORBIT Act requirements for INTELSAT's privatization but noted that the company must hold an initial public offering (IPO) of securities by a required date. The current deadline for the IPO is June 30, 2005. Because Intelsat has not completed the IPO, some satellite companies assert that privatization is not fully complete. Some parties have pointed out that there was a possibility that implementation of the ORBIT Act could have given rise to action arguably inconsistent with commitments that the United States made in international trade agreements. However, we were told that actual implementation avoided such outcomes and no disputes arose. Most stakeholders and experts that GAO spoke with believe that access to non-U.S. satellite markets has improved, but few attribute this improvement to the ORBIT Act. These stakeholders and experts said that global trade agreements, such as the WTO's basic telecommunications commitments, and the global trend towards privatization of telecommunications companies have improved access in non-U.S. markets. Several stakeholders and experts told GAO that improvements in market access were already underway when the Congress passed the ORBIT Act and that the act has complemented ongoing trends towards more open satellite markets. Some satellite companies report continuing market access problems, but there are disagreements regarding whether FCC should investigate and resolve these problems. Some satellite companies that GAO spoke with report problems with access to non-U.S. satellite markets, which they attribute to countries with policies that favor domestic and regional satellite companies, countries exercising control over content, bureaucratic processes in various countries, and long-term business relationships between INTELSAT and various telecommunications companies. Most companies GAO spoke with report that Intelsat does not take active steps to acquire preferential or exclusive market access, and Intelsat itself stated that it does not seek nor, if offered, would accept preferential market access. Finally, some companies suggest that FCC should take a more proactive role in investigating market access problems, rather than assuming an adjudicative role. FCC said that evidence provided to the agency has not been sufficient to warrant action and also suggested that trade disputes are more appropriately addressed by the United States Trade Representative.

section_title: Letter
paragraphs: INTELSAT was created as an intergovernmental organization designed to  bring satellite services—such as international telephone calls and relay of  television signals internationally—to countries around the world. As an  operator of an international network of communications satellites,  INTELSAT was capitalized and controlled primarily by the designated  signatories of the governments that entered into the agreement to form  INTELSAT. Due to its intergovernmental nature, INTELSAT benefited from  many privileges that privately owned companies do not enjoy. During the  1990s, there was considerable criticism from new commercial satellite  companies focused on the difficulty of competing against a company with  the advantages that flowed from INTELSAT’s intergovernmental status. At  about the same time, decision-makers within INTELSAT began to believe  that its intergovernmental structure led to a slow decision-making process  that did not enable INTELSAT to be sufficiently nimble in the increasingly  dynamic global communications marketplace.
In 2000, the Congress passed the Open-market Reorganization for the  Betterment of International Telecommunications Act (ORBIT Act) to help  promote a more competitive global satellite communication services  market. The ORBIT Act called for the full privatization of INTELSAT and  imposed certain criteria on the nature of INTELSAT’s privatization. You  asked us to provide information related to the implementation of the  ORBIT Act and the status of market access for global satellite companies in  countries around the world. Specifically, this report provides federal  officials’ and stakeholders’ views on (1) whether the privatization steps  required by the ORBIT Act have been implemented and whether there were  potential inconsistencies between ORBIT Act requirements and U.S.  obligations made in international trade agreements; (2) whether access by  global satellite companies to non-U.S. markets has improved since the  enactment of the ORBIT Act and, if so, to what is this generally attributed;  and (3) if any market access problems remain, what role does the Federal  Communications Commission (FCC) have in addressing those problems  under the ORBIT Act. In addition, you asked us to provide information  related to the tax status of INTELSAT prior to privatization as well as the  current tax treatment of multinational corporations. As we agreed, we are  issuing a separate report to you on these tax issues.
To respond to the three objectives of this report, we conducted semi- structured interviews with a variety of industry participants. We  interviewed five satellite service providers and six scholars and attorneys  who specialize in the regulatory and market access issues related to  satellite communications. We selected scholars and attorneys based on  their recently published articles or speeches on competition in the satellite  services market. We also interviewed officials from FCC; the United States  Trade Representative (USTR); the Department of State; the National  Telecommunications and Information Administration (NTIA); and the  International Telecommunications Satellite Organization, an  intergovernmental entity formed when INTELSAT privatized that works to  ensure that satellite service is available to countries that might not  otherwise have access to such services. We also reviewed key documents,  including relevant provisions of the Communications Satellite and ORBIT  acts, and other relevant documents obtained from FCC, USTR, and NTIA  about the ORBIT Act and related concerns about market access in non-U.S.  markets. Using FCC’s Electronic Comment Filing System, we searched for  filings on market access concerns and checked for any other such  complaints filed with the agency. We also searched for any complaints on  market access issues that might be filed with USTR and NTIA. We did not  verify the reliability of these complaint data because these issues were not  material to the primary focus of this report.
We conducted our review from February through June 2004 in accordance  with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: The Congress passed the Communications Satellite Act of 1962 to promote  the creation of a global satellite communications system. As a result of this  legislation, the United States joined with 84 other nations in establishing  the International Telecommunications Satellite Organization—more  commonly known as INTELSAT—roughly 10 years later. Each member  nation designated a single telecommunications company to represent its  country in the management and financing of INTELSAT. These companies  were called signatories to INTELSAT, and were typically government- owned telecommunications companies, such as France Telecom, that  provided satellite communications services as well as other domestic  communications services. Unlike any of the other nations that originally  formed INTELSAT, the United States designated a private company,  Comsat Corporation, to serve as its signatory to INTELSAT.
During the 1970s and early 1980s, INTELSAT was the only wholesale  provider of certain types of global satellite communications services such  as international telephone calls and relay of television signals  internationally. By the mid-1980s, however, the United States began  encouraging the development of commercial satellite communications  systems that would compete with INTELSAT. In 1988, PanAmSat was the  first commercial company to begin launching satellites in an effort to  develop a global satellite system. Within a decade after PanAmSat first  entered the market, INTELSAT faced global satellite competitors.  Moreover, intermodal competition emerged during the 1980s and 1990s as  fiber optic networks were widely deployed on the ground and underwater  to provide international communications services.
As competition to INTELSAT grew, there was considerable criticism from  commercial satellite companies because they believed that INTELSAT  enjoyed advantages stemming from its intergovernmental status that made  it difficult for other companies to compete in the market. In particular,  these companies noted that INTELSAT enjoyed immunity from legal  liability and was often not taxed in the various countries that it served. By  the mid-1990s, competitors began to argue that for the satellite  marketplace to become fully competitive, INTELSAT would need to be  privatized so that it would operate like any other company and no longer  enjoy such advantages. At about the same time, INTELSAT recognized that  privatization would be best for the company. Decision-makers within  INTELSAT noted that the cumbersome nature of the intergovernmental  decision-making process left the company unable to rapidly respond to  changing market conditions. In 1999, INTELSAT announced its decision to  privatize and thus become a private corporation.
By the late 1990s, the United States government also decided that it would  be in the interests of consumers and businesses in the United States for  INTELSAT to privatize. The ORBIT Act, enacted in March 2000, was  designed to promote a competitive global satellite communication services  market. It did so primarily by calling for INTELSAT to be fully privatized.  The ORBIT Act required, for example, that INTELSAT be transformed into  a privately held, for-profit corporation with a board of directors that would  be largely independent of former INTELSAT signatories. Moreover, the act  required that the newly privatized Intelsat retain no privileges or other  benefits from governments that had previously owned or controlled it. To  ensure that this transformation occurred, the Congress imposed certain  restrictions on the granting of licenses that allow Intelsat to provide  services within the United States. The Congress coupled the issuance of  licenses granted by FCC to INTELSAT’s successful privatization under the  ORBIT Act. That is, FCC was told to consider compliance with provisions  of the ORBIT Act as it made decisions about licensing Intelsat’s domestic  operations in the United States. Moreover, FCC was empowered to restrict  any satellite operator’s provision of certain new services from the United  States to any country that limited market access exclusively to that  satellite operator.
Market access for satellite firms to non-U.S. markets was also affected by  trade agreements that were negotiated during the 1990s. Specifically, the  establishment of the World Trade Organization (WTO) on January 1, 1995,  with its numerous binding international trade agreements formalized global  efforts to open markets to the trade of services. Since that time, WTO has  become the principal international forum for discussion, negotiation, and  resolution of trade issues. For example, the first global trade agreement  that promotes countries’ open and nondiscriminatory market access to  services was the General Agreement on Trade in Services (GATS), which  provides a legal framework for addressing barriers to international trade  and investment in services, and includes specific commitments by member  countries to restrict their use of these barriers. Since adoption of a basic  telecommunications services protocol by the GATS in 1998,  telecommunications trade commitments have also been incorporated into  the WTO rules. Such commitments resulted in member countries agreeing  to open markets to telecommunications services, such as global satellite  communications services.
section_title: Most INTELSAT Privatization Steps Have Taken Place and Stakeholders Stated That Implementation of the ORBIT Act Was Not Inconsistent with U.S. Obligations in International Trade Agreements
paragraphs: FCC determined that INTELSAT’s July 2001 privatization was in  accordance with the ORBIT Act’s requirements and licensed the new  private company to provide services within the United States. FCC’s grant  of these licenses was conditioned on Intelsat holding an initial public  offering (IPO) of securities by October 1, 2001. The Congress and FCC have  extended this date three times and the current deadline for the IPO is June  30, 2005. Because Intelsat has not yet completed the IPO, some competing  satellite companies have stated that the privatization is not fully complete.  Some parties have pointed out that there was a possibility that  implementation of the ORBIT Act could have given rise to action arguably  inconsistent with commitments that the United States made in  international trade agreements. However, we were told that actual  implementation avoided such outcomes and no disputes arose.
subsections: section_title: Most Stakeholders Believe INTELSAT’s Privatization Is Consistent with the ORBIT Act’s Requirements, but the IPO Remains a Final Step
paragraphs: On July 18, 2001, INTELSAT transferred virtually all of its financial assets  and liabilities to a private company called Intelsat, Ltd., a holding company  incorporated in Bermuda. Intelsat, Ltd. has several subsidiaries, including a  U.S.-incorporated indirect subsidiary called Intelsat, LLC. Upon their  execution of privatization, INTELSAT signatories received shares of  Intelsat, Ltd. in proportion to their investment in the intergovernmental  INTELSAT. Two months before the privatization, FCC determined that  INTELSAT’s privatization plan was consistent with the requirements of the  ORBIT Act for a variety of reasons, including the following.
Intelsat, Ltd.’s Shareholders’ Agreement provided sufficient evidence  that the company would conduct an IPO, which would in part satisfy the  act’s requirement that Intelsat be an independent commercial entity.
Intelsat, Ltd. no longer enjoyed the legal privileges or immunities of the  intergovernmental INTELSAT, since it was organized under Bermuda  law and subject to that country’s tax and legal liability requirements.
Both Intelsat, Ltd. and Intelsat, LLC are incorporated in countries that  are signatories to the WTO and have laws that secure competition in  telecommunications services.
Intelsat, Ltd. converted into a stock corporation with a fiduciary board  of directors. In particular, FCC said that the boards of directors of both  Intelsat, Ltd. and Intelsat, LLC were subject to the laws of Bermuda and  the United States, respectively, and that the laws of these countries  require boards of directors to have fiduciary obligations to the company.
Measures taken to ensure that a majority of the members of Intelsat,  Ltd.’s board of directors were not directors, employees, officers,  managers, or representatives of any signatory or former signatory of the  intergovernmental INTELSAT were consistent with the requirements of  the ORBIT Act.
Intelsat, Ltd. and its subsidiaries had only arms-length business  relationships with certain other entities that obtained INTELSAT’s  assets.
In light of these findings, FCC conditionally authorized Intelsat, LLC to use  its U.S. satellite licenses to provide services within the United States.  However, FCC conditioned this authorization on Intelsat, Ltd.’s conducting  an IPO of securities as mandated by the ORBIT Act. In December 2003,  FCC noted that if Intelsat, Ltd. did not conduct an IPO by the statutory  deadline, the agency would limit or deny Intelsat, LLC’s applications or  requests and revoke the previous authorizations granting Intelsat, LLC the  authority to provide satellite services in the United States. In March 2004,  Intelsat, Ltd. filed a registration statement with the Securities and  Exchange Commission (SEC) indicating its intention to conduct an IPO.  Since that time, however, the Congress further extended the required date  by which the IPO must occur. In May 2004, the Congress extended the IPO  deadline to June 30, 2005, and authorized FCC to further extend that  deadline to December 31, 2005, under certain conditions. In late May 2004,  Intelsat withdrew its filing with SEC regarding its registration to conduct  an IPO. On August 16, 2004, Intelsat, Ltd. announced that its Board of  Directors approved the sale of the company to a consortium of four private  investors; the sale requires the approval of shareholders holding 60 percent  of Intelsat's outstanding shares and also regulatory approval. According to  an Intelsat official, this transaction, if approved, would eliminate former  signatories’ ownership in Intelsat.
Most companies and experts that we interviewed believe that, to date,  Intelsat’s privatization has been in accordance with the ORBIT Act’s  requirements, and some of these companies and experts that we  interviewed believe that FCC is fulfilling its duties to ensure that the  privatization is consistent with the act. These parties noted that the ORBIT  Act set forth many requirements for Intelsat and that most of these  requirements have been fulfilled. However, some companies and experts  believe that the IPO is a key element to complete Intelsat’s privatization.  According to some parties, the IPO would further dilute signatory  ownership in Intelsat, Ltd. as envisioned by the ORBIT Act, which would  reduce any incentive that former signatories might have to favor Intelsat  when selecting a company to provide satellite services. Table 1 compares  Intelsat, Ltd.’s ownership on the day of privatization in 2001 with the  ownership as of May 6, 2004. As indicated in the table, in May 2004, more  than 50 percent of Intelsat, Ltd. was owned by the former signatories to the  intergovernmental INTELSAT; although, as mentioned above, the recently  announced purchase of Intelsat by four private investors, if approved,  would eliminate former signatory ownership in Intelsat, according to an  Intelsat official.
section_title: Stakeholders Note Potential for Inconsistencies between ORBIT Act and International Trade Agreements, but Stated That Implementation of the Act Was Not Inconsistent with Those Agreements
paragraphs: We were told that there were potential inconsistencies between the ORBIT  Act and obligations the United States made in international trade  agreements. In particular, the ORBIT Act set requirements for INTELSAT’s  privatization that, if not met, could have triggered FCC’s denial of licenses  that would allow a successor private company to INTELSAT to provide  services in the United States once that company was incorporated under  foreign law. Some stakeholders told us that, had this occurred, FCC’s  actions could have been viewed as inconsistent with U.S. obligations in  international trade agreements. In fact, on August 1, 2000, following the  enactment of the ORBIT Act, the European Commission (EC) stated that  the ORBIT Act raised a general concern regarding its compatibility with the  U.S. obligations in the WTO. The EC further emphasized that if the act was  going to be used against European Union (EU) interests, the EU would  consider exercising its rights to file a trade dispute under the WTO.
While we were told that potential inconsistencies could have arisen,  INTELSAT privatized according to the ORBIT Act removing any need for  FCC to act in a manner that might be inconsistent with U.S. international  trade obligations, and no trade disputes arose. Most stakeholders we spoke  with generally stated that the ORBIT Act’s requirements have not conflicted  with international trade agreements during the privatizations of INTELSAT.  Officials from FCC, USTR, the Department of State, as well as satellite  company representatives and experts on telecommunications issues, told  us that INTELSAT privatized according to the act’s requirements. Several  stakeholders emphasized that trade disputes had not arisen because  INTELSAT privatized in accordance with the ORBIT Act. As of June 2004,  WTO and USTR documentation showed that no trade complaints had been  filed at the WTO about the ORBIT Act and INTELSAT’s privatization.  Finally, several stakeholders noted that the act had the effect of  complementing international trade agreements by seeking to further open  and liberalize trade in international satellite communications services.
section_title: Stakeholders Attribute Recent Improvements in Market Access to Global Trade Agreements and Privatization Trends, Rather Than the ORBIT Act
paragraphs: According to most stakeholders and experts we spoke with, access to non- U.S. satellite markets has generally improved during the past decade. In  particular, global satellite companies appear less likely now than they were  in the past to encounter government restraints or business practices that  limit their ability to provide service in non-U.S. markets. All five satellite  companies that we spoke with indicated that access to non-U.S. satellite  markets has generally improved. Additionally, four experts that we spoke  with also told us that market access has generally improved.
Most stakeholders that we spoke with attributed the improved access in  non-U.S. satellite markets to the WTO and global trade agreements and the  trend towards privatization in the global telecommunications industry,  rather than to the ORBIT Act. Five satellite companies and four of the  experts that we spoke with said that agreements negotiated through the  WTO, such as the basic telecommunications commitments, helped improve  access in non-U.S. satellite markets. Additionally, two of the satellite  companies and one expert told us that the trend towards privatization in  the telecommunications industry—such as governments privatizing state- controlled telephone companies—has helped improve market access. At  the same time, many stakeholders noted that the ORBIT Act had little to no  impact on improving market access. According to several stakeholders,  market access was already improving when the ORBIT Act was passed.  While some of those we spoke with noted that the ORBIT Act might have  complemented the ongoing trends in improved market access, only one  satellite company we interviewed stated that the act itself improved market  access. This company noted that, by breaking the ownership link between  state-owned or monopoly telecommunications companies and Intelsat, the  ORBIT Act encouraged non-U.S. telecommunications companies to  consider procuring services from competitive satellite companies.
section_title: Some Companies Say That Market Access Challenges Remain and Suggest More FCC Action under the ORBIT Act to Address These Issues
paragraphs: Some satellite companies have stated that some market access problems  still exist, which they attribute to foreign government policies that limit or  slow entry. Some of the companies and experts we spoke with attribute any  continuing preference that governments and foreign telecommunications  companies may have for doing business with Intelsat to the long-standing  business relationships that were forged over a period of time. While some  satellite companies believe that FCC should be taking a more proactive  approach toward addressing any remaining market access problems in  non-U.S. markets, FCC has stated that concerns about these issues  provided to them have not been specific enough to warrant an FCC  proceeding. Additionally, FCC has stated that many concerns about market  access issues would be most appropriately filed with USTR. USTR has  received no complaints about access problems by satellite companies in  non-U.S. markets in either their annual review of compliance with  telecommunications trade agreements, or in comments solicited in the  context of ongoing WTO services negotiations.
subsections: section_title: Remaining Concerns about Market Access Focus Largely on Foreign Government Regulatory Structure
paragraphs: Despite the general view that market access has improved, some satellite  companies and experts expressed concerns that market access issues still  exist. These companies and experts generally attributed any remaining  market access problems to foreign government policies that limit or slow  satellite competitors’ access to certain markets. For example:  Some companies and experts we spoke with said that some countries  have policies that favor domestic satellite providers over other satellite  systems and that this can make it difficult for nondomestic companies  to provide services in these countries. For example, we were told that  some countries require satellite contracts to go first to any domestic  satellite providers that can provide the service before other providers  are considered.
Some companies and one expert we spoke with said that because some  countries carefully control and monitor the content that is provided  within their borders, the countries’ policies may limit certain satellite  companies’ access to their markets.
Several companies and an expert we interviewed said that many  countries have time-consuming or costly approval processes for satellite  companies. In particular, we were told that some countries have  bureaucratic processes for licensing and other necessary business  activities that make it time-consuming and costly for satellite companies  to gain access to these markets.
section_title: Some Stakeholders Believe That Legacy Business Relationships also Contribute to Market Access Problems
paragraphs: Some stakeholders believe that Intelsat may benefit from legacy business  relationships. For approximately 30 years, INTELSAT was the dominant  provider of global satellite services. Moreover, until 2001, INTELSAT was  an intergovernmental organization, funded and controlled through  signatories—often state-controlled telecommunications companies—of the  member governments. Several stakeholders noted that Intelsat may benefit  from the long-term business relationships that were forged over the  decades, since telecommunications companies in many countries will feel  comfortable continuing to do business with Intelsat as they have for years.  Additionally, two of the satellite companies noted that because some of  these companies have been investors in the privatized Intelsat, there may  be an incentive to favor Intelsat over other satellite competitors. One global  satellite company told us that Intelsat’s market access advantages continue  because of inertia—inertia that will only dissipate with time. Two  stakeholders also noted that because companies—including domestic  telecommunications providers as well as direct customers of satellite  services—have plant and equipment as well as proprietary satellite  technology in place to receive satellite services from Intelsat, it might cost  a significant amount of money for companies to replace equipment in order  to use satellite services from a different satellite provider. These legacy  advantages can make it more difficult for satellite companies to convince  telecommunications companies to switch from Intelsat’s service to their  service.
However, some other companies have a different view on whether Intelsat  has any preferential or exclusive market access advantages.  Representatives of Intelsat, Ltd. told us that Intelsat seeks market access  on a transparent and nondiscriminatory basis and that Intelsat has  participated with other satellite operators, through various trade  organizations, to lobby governments to open their markets.  Representatives of Intelsat, Ltd. also told us that former signatories of  Intelsat own such small percentages of Intelsat, Ltd. that such ownership  interests would not likely influence market access decisions in countries in  which the government still controls the former signatory. Some companies  and many of the experts that we interviewed told us that, in their view,  Intelsat does not have preferential access to non-U.S. satellite markets.  Further, all five satellite companies as well as several experts that we  spoke with said that they have no knowledge that Intelsat in any way seeks  or accepts exclusive market access arrangements or attempts to block  competitors’ access to non-U.S. satellite markets. While Intelsat is the sole  provider of satellite service into certain countries, we were generally told  that traffic into some countries is “thin”—that is, there is not much traffic,  and therefore there is little revenue potential. In such cases, global satellite  companies other than Intelsat may not be interested in providing service to  these countries. Thus, the lack of competition in some non-U.S. satellite  markets does not necessarily indicate the presence of barriers to market  access for competitive satellite companies.
section_title: Some Satellite Companies and FCC Differ on FCC’s Responsibilities under the ORBIT Act
paragraphs: Some of the companies we spoke with believe that FCC should take a more  proactive role in improving access for satellite companies in non-U.S.  markets. In particular, some satellite companies and an expert we spoke  with indicated that FCC has not done enough to appropriately implement  the ORBIT Act because, in their view, the ORBIT Act shifted the burden to  FCC to investigate and prevent access issues, rather than solely to  adjudicate concerns brought before it. One satellite company said that  section 648 of the ORBIT Act, which prohibits any satellite operator from  acquiring or enjoying an exclusive arrangement for service to or from the  United States, provides a vehicle for FCC to investigate the status of access  for satellite companies to other countries’ markets. If FCC were to find a  violation of section 648, it would have the authority to withdraw or modify  the relevant company’s licenses to provide services within the U.S.  market. Another satellite company told us that FCC should conduct an  ORBIT Act inquiry under the privatization sections of the act to address any  market access issues that might arise if Intelsat has preferential market  access related to any remaining advantages from its previous  intergovernmental status.
Certain other companies, experts, and FCC told us that nothing to date has  occurred that would require additional FCC actions regarding the  implementation of the ORBIT Act. FCC officials told us that they do not  believe that FCC should undertake investigations of market access  concerns without specific evidence of violations of section 648 of the  ORBIT Act. While some comments filed with FCC in proceedings on  Intelsat’s licensing and for FCC’s annual report on the ORBIT Act raise  concerns about market access, FCC has stated that these filings amount  only to general allegations and fall short of alleging any specific statutory  violation that would form a basis sufficient to trigger an FCC enforcement  action. Some companies and experts that we spoke with agreed that no  evidence of a market access problem has been put forth that would warrant  an FCC investigation under the ORBIT Act. Even the satellite companies  that complained to FCC in the context of Intelsat’s licensing proceedings  told us that they had not made any formal complaints of ORBIT Act  violations or asked FCC to initiate a proceeding on the matter. Additionally,  FCC told us that broad market access concerns are most appropriately  handled by USTR through the WTO. USTR has received no complaints  about access problems by satellite companies in non-U.S. markets in either  their annual review of compliance with telecommunications trade  agreements, or in comments solicited in the context of ongoing WTO  services negotiations.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Federal Communications  Commission (FCC), the Department of State, the National  Telecommunications and Information Administration (NTIA) of the  Department of Commerce, and the United States Trade Representative  (USTR) for their review and comment. FCC did not provide comments.  USTR and the Department of State provided technical comments that were  incorporated into the report. NTIA also provided technical comments that  were incorporated into the report as appropriate and also sent formal  comments in a letter, which appears in appendix II. In its formal comments,  NTIA stated that they generally agree with the findings of our report and  remain interested in developments regarding Intelsat’s further plans to  pursue a private equity buyout.
section_title: Industry Comments
paragraphs: We also invited representatives from five companies to review and  comment on a draft of this report. These companies included: Intelsat, Ltd.;  Lockheed Martin Corporation; PanAmSat Corporation; SES Americom Inc.;  and New Skies Satellites N.V. New Skies and PanAmSat did not provide  comments on the draft report. Both Lockheed Martin and Intelsat provided  technical comments that we incorporated as appropriate. SES Americom  provided both technical comments—which we addressed as appropriate— and substantive comments that expressed concerns about our  characterization of some of the issues discussed in this report. The  comments from SES Americom and our response are contained in  appendix I.
As agreed with your offices, unless you publicly release its contents earlier,  we plan no further distribution of this report until 15 days after the date of  this letter. At that time, we will provide copies to interested congressional  committees; the Chairman, FCC; and other interested parties. We will also  make copies available to others upon request. In addition, this report will  be available at no charge on the GAO Web site at http://www.gao.gov. If you  have any questions about this report, please contact me at (202) 512-2834  or goldsteinm@gao.gov or Amy Abramowitz at (202) 512-2834.
Major contributors to this report include Amy Abramowitz, Michael  Clements, Emil Friberg, Bert Japikse, Logan Kleier, Richard Seldin, and  Juan Tapia-Videla.
section_title: Discussion of Comments from SES Americom
paragraphs: SES Americom Inc. provided several comments on the draft report. While  several were minor technical comments, which we incorporated as  appropriate, some of the comments were of a more substantive nature.  This appendix provides a summary of the substantive comments and GAO’s  response to those comments.
SES Americom stated that while GAO notes that several companies  have stated that Intelsat’s privatization is not complete until the IPO  occurs, GAO fails to note that FCC’s International Bureau has also  stated this to be the case.
GAO response: Our discussion of FCC’s authorization of licenses for  Intelsat to operate in the U.S. makes clear that FCC provided these  licenses on a conditional basis because the required IPO had yet to  occur.
SES Americom states that GAO’s discussion of possible preferences  countries and businesses may have for doing business with Intelsat does  not fully explain why this may occur. While SES notes that GAO  correctly attributes possible preferences to long term business  relationships companies/countries may have with Intelsat, SES  Americom believes that GAO should mention that possible preferences  also arise because Intelsat’s customers have equipment suitable solely  for use with Intelsat satellites.
GAO response: Regarding customer equipment, we mention that  companies have plant and equipment in place to receive service from  Intelsat that might cost a significant amount of money to replace, which  we believe adequately addresses this point.
SES Americom states that GAO should preface our discussion of the  required IPO with the word “equity”.
GAO response: The ORBIT Act’s requirement for an IPO does not  specifically state “equity IPO,” but states that Intelsat must hold an “IPO  of securities.” Nevertheless, in the context of Inmarsat’s required IPO,  which is also required under the ORBIT Act, FCC is currently reviewing  this very issue—that is, whether the IPO must be an offering of equity  securities. Thus, FCC’s decision will determine how this will be  interpreted.
section_title: Comments from the Department of Commerce
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section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Congressional Relations
section_title: Public Affairs