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e 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 pla

ce 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. Representativ

es 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 cont

rols 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 servic

e 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. 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 secti

ons 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 viola

tions 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 ei

ther their annual review of compliance with telecommunications trade agreements, or in comments solicited in the context of ongoing WTO services negotiations. 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 p

rovided 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. 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 char

ge 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. 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 equipmen

t 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 I

ntelsat 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. The Government Accountability Office, the audit, evaluation and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the

performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no cost is through GAO’s Web site (ww

w.gao.gov). Each weekday, GAO posts newly released reports, testimony, and correspondence on its Web site. To have GAO e-mail you a list of newly posted products every afternoon, go to www.gao.gov and select “Subscribe to Updates.”