Home > 106th Congressional Bills > S. 376 (rs) To amend the Communications Satellite Act of 1962 to promote competition and privatization in satellite communications, and for other purposes. [Reported in Senate] ...

S. 376 (rs) To amend the Communications Satellite Act of 1962 to promote competition and privatization in satellite communications, and for other purposes. [Reported in Senate] ...

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  1st Session
                                 S. 376



                             July 12, 1999

                 Referred to the Committee on Commerce


                                 AN ACT

     To amend the Communications Satellite Act of 1962 to promote 
  competition and privatization in satellite communications, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,


    This Act may be cited as the ``Open-market Reorganization for the 
Betterment of International Telecommunications Act''.


    It is the purpose of this Act to promote a fully competitive 
domestic and international market for satellite communications services 
for the benefit of consumers and providers of satellite services by 
fully encouraging the privatization of the intergovernmental satellite 
organizations, INTELSAT and Inmarsat, and reforming the regulatory 
framework of the COMSAT Corporation.


    The Congress finds that:
            (1) International satellite communications services 
        constitute a critical component of global voice, video and data 
        services, play a vital role in the integration of all nations 
        into the global economy and contribute toward the ability of 
        developing countries to achieve sustainable development.
            (2) The United States played a pivotal role in stimulating 
        the development of international satellite communications 
        services by enactment of the Communications Satellite Act of 
        1962 (47 U.S.C. 701-744), and by its critical contributions, 
        through its signatory, the COMSAT Corporation, in the 
        establishment of INTELSAT, which has successfully established 
        global satellite networks to provide member countries with 
        worldwide access to telecommunications services, including 
        critical lifeline services to the developing world.
            (3) The United States played a pivotal role in stimulating 
        the development of international satellite communications 
        services by enactment of the International Maritime Satellite 
        Telecommunications Act (47 U.S.C. 751-757), and by its critical 
        contributions, through its signatory, COMSAT, in the 
        establishment of Inmarsat, which enabled member countries to 
        provide mobile satellite services such as international 
        maritime and global maritime distress and safety services to 
        include other satellite services, such as land mobile and 
        aeronautical communications services.
             (4) By statute, COMSAT, a publicly traded corporation, is 
        the sole United States signatory to INTELSAT and, as such, is 
        responsible for carrying out United States commitments under 
        the INTELSAT Agreement and the INTELSAT Operating Agreement. 
        Pursuant to a binding Headquarters Agreement, the United 
        States, as a party to INTELSAT, has satisfied many of its 
        obligations under the INTELSAT Agreement.
             (5) In the 37 years since enactment of the Communications 
        Satellite Act of 1962, satellite technology has advanced 
        dramatically, large-scale financing options have improved 
        immensely and international telecommunications policies have 
        shifted from those of natural monopolies to those based on 
        market forces, resulting in multiple private commercial 
        companies around the world providing, or preparing to provide, 
        the domestic, regional, and global satellite telecommunications 
        services that only INTELSAT and Inmarsat had previously had the 
        capabilities to offer.
             (6) Private commercial satellite communications systems 
        now offer the latest telecommunications services to more and 
        more countries of the world with declining costs, making 
        satellite communications an attractive complement as well as an 
        alternative to terrestrial communications systems, particularly 
        in lesser developed countries.
             (7) To enable consumers to realize optimum benefits from 
        international satellite communications services, and to enable 
        these systems to be competitive with other international 
        telecommunication systems, such as fiber optic cable, the 
        global trade and regulatory environment must support vigorous 
        and robust competition.
             (8) In particular, all satellite systems should have 
        unimpeded access to the markets that they are capable of 
        serving, and the ability to compete in a fair and meaningful 
        way within those markets.
             (9) Transforming INTELSAT and Inmarsat from 
        intergovernmental organizations into conventional satellite 
        services companies is a key element in bringing about the 
        emergence of a fully competitive global environment for 
        satellite services.
            (10) The issue of privatization of any State-owned firm is 
        extremely complex and multifaceted. For that reason, the sale 
        of a firm at arm's length does not automatically, and in all 
        cases, extinguish any prior subsidies or government conferred 
             (11) It is in the interest of the United States to 
        negotiate the removal of its reservation in the Fourth Protocol 
        to the General Agreement on Trade in Services regarding 
        INTELSAT's and Inmarsat's access to the United States market 
        through COMSAT as soon as possible, but such reservation cannot 
        be removed without adequate assurance that the United States 
        market for satellite services will not be disrupted by such 
        INTELSAT or Inmarsat access.
             (12) The Communications Satellite Act of 1962, and other 
        applicable United States laws, need to be updated to encourage 
        and complete the pro-competitive privatization of INTELSAT and 
        Inmarsat, to update the domestic United States regulatory 
        regime governing COMSAT, and to ensure a competitively neutral 
        United States framework for the provision of domestic and 
        international telecommunications services via satellite 


    The Communications Satellite Act of 1962 (47 U.S.C. 701) is amended 
by adding at the end the following:


           ``Subtitle A--Transition to a Privatized INTELSAT


    ``It is the policy of the United States to--
            ``(1) encourage INTELSAT to privatize in a pro-competitive 
        manner as soon as possible, but not later than January 1, 2002, 
        recognizing the need for a reasonable transition and process to 
        achieve a full, pro-competitive restructuring; and
            ``(2) work constructively with its international partners 
        in INTELSAT, and with INTELSAT itself, to bring about a prompt 
        restructuring that will ensure fair competition, both in the 
        United States as well as in the global markets served by the 
        INTELSAT system; and
            ``(3) encourage Inmarsat's full implementation of the terms 
        and conditions of its privatization agreement.


    ``(a) Advocacy.--As the United States signatory to INTELSAT, COMSAT 
shall act as an aggressive advocate of pro-competitive privatization of 
INTELSAT. With respect to the consideration within INTELSAT of any 
matter related to its privatization, COMSAT shall fully consult with 
the United States Government prior to exercising its voting rights and 
shall exercise its voting rights in a manner fully consistent with any 
instructions issued. In the event that the United States signatory to 
INTELSAT is acquired after enactment of this section, the President and 
the Commission shall assure that the instructional process safeguards 
against conflicts of interest.
    ``(b) Annual Reports.--The President and the Commission shall 
report annually to the Committee on Commerce of the House of 
Representatives and the Committee on Commerce, Science, and 
Transportation of the Senate, respectively, on the progress being made 
by INTELSAT and Inmarsat to privatize and complete privatization in a 
pro-competitive manner.


    ``(a) INTELSAT shall be prohibited from entering the United States 
market directly to provide any satellite communications services or 
space segment capacity to carriers (other than the United States 
signatory) or end users in the United States until July 1, 2001 or 
until INTELSAT achieves a pro-competitive privatization pursuant to 
section 613 (a) if privatization occurs earlier.
    ``(b) Notwithstanding subsection (a), INTELSAT shall be prohibited 
from entering the United States market directly to provide any 
satellite communications services or space segment capacity to any 
foreign signatory, or affiliate thereof, and no carrier, other than the 
United States signatory, nor any end user, shall be permitted to invest 
directly in INTELSAT.
    ``(c) Pending INTELSAT's privatization, the Commission shall ensure 
that the United States signatory is compensated by direct access users 
for the costs it incurs in fulfilling its obligations under this Act.
    ``(d) The provisions of subsections (b) and (c) shall remain in 
effect only until INTELSAT achieves a pro-competitive privatization 
pursuant to section 613 (a).

   ``Subtitle B--Actions to Ensure Pro-Competitive Satellite Services


    ``(a) In General.--The President shall seek a pro-competitive 
privatization of INTELSAT as soon as practicable, but no later than 
January 1, 2002. Such privatization shall be confirmed by a final 
decision of the INTELSAT Assembly of Parties and shall be followed by a 
timely initial public offering taking into account relative market 
    ``(b) Ensure Continuation of Privatization.--The President and the 
Commission shall seek to ensure that the privatization of Inmarsat 
continues in a pro-competitive manner.


    ``(a) In General.--With respect to any application for a satellite 
earth station or space station under title III of the Communications 
Act of 1934 (47 U.S.C 301 et seq.) or any application under section 214 
of that Act (47 U.S.C. 214), or any letter of intent to provide service 
in the United States via non-United States licensed space segment, 
submitted by a privatized IGO affiliate or successor, the Commission--
            ``(1) shall apply a presumption in favor of entry to an IGO 
        affiliate or successor licensed by a WTO Member for services 
        covered by United States commitments under the WTO Basic 
        Telecom Agreement;
            ``(2) may attach conditions to any grant of authority to an 
        IGO affiliate or successor that raises the potential for 
        competitive harm; or
            ``(3) shall in the exceptional case in which an application 
        by an IGO affiliate or successor would pose a very high risk to 
        competition in the United States satellite market, deny the 
    ``(b) Determination Factors.--In determining whether an application 
to serve the United States market by an IGO affiliate raises the 
potential for competitive harm or risk under subsection (a)(2), the 
Commission shall determine whether any potential anti-competitive or 
market distorting consequences of continued relationships or 
connections exist between an IGO and its affiliates including--
            ``(1) whether the IGO affiliate is structured to prevent 
        anti-competitive practices such as collusive behavior or cross-
            ``(2) the degree of affiliation between the IGO and its 
            ``(3) whether the IGO affiliate can directly or indirectly 
        benefit from IGO privileges and immunities;
            ``(4) the ownership structure of the affiliate and the 
        effect of IGO and other Signatory ownership and whether the 
        affiliate is independent of IGO signatories or former 
        signatories who control telecommunications market access in 
        their home territories;
            ``(5) the existence of clearly defined arm's-length 
        conditions governing the affiliate-IGO relationship including 
        separate officers, directors, employees, and accounting 
            ``(6) the existence of fair market valuing for permissible 
        business transactions between an IGO and its affiliate that is 
        verifiable by an independent audit and consistent with normal 
        commercial practice and generally accepted accounting 
            ``(7) the existence of common marketing;
            ``(8) the availability of recourse to IGO assets for credit 
        or capital;
            ``(9) whether an IGO registers or coordinates spectrum or 
        orbital locations on behalf of its affiliate; and
            ``(10) whether the IGO affiliate has corporate charter 
        provisions prohibiting reaffiliation with the IGO after 
    ``(c) Sunset.--The provisions of subsection (b) shall cease to have 
effect upon approval of the application pursuant to section 613.
    ``(d) Public Interest Determination.--Nothing in this Act affects 
the Commission's ability to make a public interest determination 
concerning any application pertaining to entry into the United States 

              PRIVATIZED IGOS.

    ``(a) In General.--Upon a final decision of the INTELSAT Assembly 
of Parties creating the legal structure and characteristics of the 
privatized INTELSAT and recognizing that Inmarsat transitioned into a 
private company on April 15, 1999, the President shall within 30 days 
report to the Congress on the extent to which such privatization 
framework meets each of the criteria in subsection (c), and whether 
taking into consideration all other relevant competitive factors, entry 
of a privatized INTELSAT or Inmarsat into the United States market will 
not be likely to distort competition.
    ``(b) Purpose of Privatization Criteria.--The criteria provided in 
subsection (c) shall be used as--
            ``(1) the negotiation objectives for achieving the 
        privatization of INTELSAT no later than January 1, 2002, and 
        also for Inmarsat;
            ``(2) the standard for measuring, pursuant to subsection 
        (a), whether negotiations have resulted in an acceptable 
        framework for achieving the pro-competitive privatization of 
        INTELSAT and Inmarsat; and
            ``(3) licensing criteria by the Commission in making its 
        independent determination of whether the certified framework 
        for achieving the pro-competitive privatization of INTELSAT and 
        Inmarsat has been properly implemented by the privatized 
        INTELSAT and Inmarsat.
    ``(c) Privatization Criteria.--A pro-competitively privatized 
INTELSAT or Inmarsat--
            ``(1) has no privileges or immunities limiting legal 
        accountability, commercial transparency, or taxation and does 
        not unfairly benefit from ownership by former signatories who 

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