[House Report 105-494]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     105-494
_______________________________________________________________________


 
   COMMUNICATIONS SATELLITE COMPETITION AND PRIVATIZATION ACT OF 1998

                                _______
                                

 April 27, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 1872]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Commerce, to whom was referred the bill 
(H.R. 1872) to amend the Communications Satellite Act of 1962 
to promote competition and privatization in satellite 
communications, and for other purposes, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    12
Background and Need for Legislation..............................    13
Hearings.........................................................    31
Committee Consideration..........................................    32
Rollcall Votes...................................................    32
Committee Oversight Findings.....................................    36
Committee on Government Reform and Oversight.....................    36
New Budget Authority, Entitlement Authority, and Tax Expenditures    36
Committee Cost Estimate..........................................    36
Congressional Budget Office Estimate.............................    36
Federal Mandates Statement.......................................    40
Advisory Committee Statement.....................................    40
Constitutional Authority Statement...............................    40
Applicability to Legislative Branch..............................    40
Section-by-Section Analysis of the Legislation...................    40
Changes in Existing Law Made by the Bill, as Reported............    66
Additional and Dissenting Views..................................    82

                               Amendment

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Communications Satellite Competition 
and Privatization Act of 1998''.

SEC. 2. PURPOSE.

  It is the purpose of this Act 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.

SEC. 3. REVISION OF COMMUNICATIONS SATELLITE ACT OF 1962.

  The Communications Satellite Act of 1962 (47 U.S.C. 101) is amended 
by adding at the end the following new title:

        ``TITLE VI--COMMUNICATIONS COMPETITION AND PRIVATIZATION

      ``Subtitle A--Actions To Ensure Procompetitive Privatization

``SEC. 601. FEDERAL COMMUNICATIONS COMMISSION LICENSING.

  ``(a) Licensing for Separated Entities.--
          ``(1) Competition test.--The Commission may not issue a 
        license or construction permit to any separated entity, or 
        renew or permit the assignment or use of any such license or 
        permit, or authorize the use by any entity subject to United 
        States jurisdiction of any space segment owned, leased, or 
        operated by any separated entity, unless the Commission 
        determines that such issuance, renewal, assignment, or use will 
        not harm competition in the telecommunications market of the 
        United States. If the Commission does not make such a 
        determination, it shall deny or revoke authority to use space 
        segment owned, leased, or operated by the separated entity to 
        provide services to, from, or within the United States.
          ``(2) Criteria for competition test.--In making the 
        determination required by paragraph (1), the Commission shall 
        use the licensing criteria in sections 621 and 623, and shall 
        not make such a determination unless the Commission determines 
        that the privatization of any separated entity is consistent 
        with such criteria.
  ``(b) Licensing for INTELSAT, Inmarsat, and Successor Entities.--
          ``(1) Competition test.--The Commission shall substantially 
        limit, deny, or revoke the authority for any entity subject to 
        United States jurisdiction to use space segment owned, leased, 
        or operated by INTELSAT or Inmarsat or any successor entities 
        to provide non-core services to, from, or within the United 
        States, unless the Commission determines--
                  ``(A) after January 1, 2002, in the case of INTELSAT 
                and its successor entities, that INTELSAT and any 
                successor entities have been privatized in a manner 
                that will not harm competition in the 
                telecommunications markets of the United States; or
                  ``(B) after January 1, 2001, in the case of Inmarsat 
                and its successor entities, that Inmarsat and any 
                successor entities have been privatized in a manner 
                that will not harm competition in the 
                telecommunications markets of the United States.
          ``(2) Criteria for competition test.--In making the 
        determination required by paragraph (1), the Commission shall 
        use the licensing criteria in sections 621, 622, and 624, and 
        shall not make such a determination unless the Commission 
        determines that such privatization is consistent with such 
        criteria.
          ``(3) Clarification: competitive safeguards.--In making its 
        licensing decisions under this subsection, the Commission shall 
        consider whether users of non-core services provided by 
        INTELSAT or Inmarsat or successor or separated entities are 
        able to obtain non-core services from providers offering 
        services other than through INTELSAT or Inmarsat or successor 
        or separated entities, at competitive rates, terms, or 
        conditions. Such consideration shall also include whether such 
        licensing decisions would require users to replace equipment at 
        substantial costs prior to the termination of its design life. 
        In making its licensing decisions, the Commission shall also 
        consider whether competitive alternatives in individual markets 
        do not exist because they have been foreclosed due to 
        anticompetitive actions undertaken by or resulting from the 
        INTELSAT or Inmarsat systems. Such licensing decisions shall be 
        made in a manner which facilitates achieving the purposes and 
        goals in this title and shall be subject to notice and comment.
  ``(c) Additional Considerations in Determinations.--In making its 
determinations and licensing decisions under subsections (a) and (b), 
the Commission shall take into consideration the United States 
obligations and commitments for satellite services under the Fourth 
Protocol to the General Agreement on Trade in Services.
  ``(d) Independent Facilities Competition.--Nothing in this section 
shall be construed as precluding COMSAT from investing in or owning 
satellites or other facilities independent from INTELSAT and Inmarsat, 
and successor or separated entities, or from providing services through 
reselling capacity over the facilities of satellite systems independent 
from INTELSAT and Inmarsat, and successor or separated entities. This 
subsection shall not be construed as restricting the types of contracts 
which can be executed or services which may be provided by COMSAT over 
the independent satellites or facilities described in this subsection.

``SEC. 602. INTELSAT OR INMARSAT ORBITAL LOCATIONS.

  ``(a) Required Actions.--Unless, in a proceeding under section 
601(b), the Commission determines that INTELSAT or Inmarsat have been 
privatized in a manner that will not harm competition, then--
          ``(1) the President shall oppose, and the Commission shall 
        not assist, any registration for new orbital locations for 
        INTELSAT or Inmarsat--
                  ``(A) with respect to INTELSAT, after January 1, 
                2002, and
                  ``(B) with respect to Inmarsat, after January 1, 
                2001, and
          ``(2) the President and Commission shall, consistent with the 
        deadlines in paragraph (1), take all other necessary measures 
        to preclude procurement, registration, development, or use of 
        new satellites which would provide non-core services.
  ``(b) Exception.--
          ``(1) Replacement and previously contracted satellites.--
        Subsection (a) shall not apply to--
                  ``(A) orbital locations for replacement satellites 
                (as described in section 622(2)(B)), and
                  ``(B) orbital locations for satellites that are 
                contracted for as of March 25, 1998, if such satellites 
                do not provide additional services.
          ``(2) Limitation on exception.--Paragraph (1) is available 
        only with respect to satellites designed to provide services 
        solely in the C and Ku, for INTELSAT, and L, for Inmarsat, 
        bands.

``SEC. 603. ADDITIONAL SERVICES AUTHORIZED.

  ``(a) Services Authorized During Continued Progress.--
          ``(1) Continued authorization.--The Commission may issue an 
        authorization, license, or permit to, or renew the license or 
        permit of, any provider of services using INTELSAT or Inmarsat 
        space segment, or authorize the use of such space segment, for 
        additional services (including additional applications of 
        existing services) or additional areas of business, subject to 
        the requirements of this section.
          ``(2) Additional services permitted under new contracts 
        unless progress fails.--If the Commission makes a finding under 
        subsection (b) that conditions required by such subsection have 
        not been attained, the Commission may not, pursuant to 
        paragraph (1), permit such additional services to be provided 
        directly or indirectly under new contracts for the use of 
        INTELSAT or Inmarsat space segment, unless and until the 
        Commission subsequently makes a finding under such subsection 
        that such conditions have been attained.
          ``(3) Prevention of evasion.--The Commission shall, by rule, 
        prescribe means reasonably designed to prevent evasions of the 
        limitations contained in paragraph (2) by customers who did not 
        use specific additional services as of the date of the 
        Commission's most recent finding under subsection (b) that the 
        conditions of such subsection have not been obtained.
  ``(b) Requirements for Annual Findings.--
          ``(1) General requirements.--The findings required under this 
        subsection shall be made, after notice and comment, on or 
        before January 1 of 1999, 2000, 2001, and 2002. The Commission 
        shall find that the conditions required by this subsection have 
        been attained only if the Commission finds that--
                  ``(A) substantial and material progress has been made 
                during the preceding period at a rate and manner that 
                is probable to result in achieving pro-competitive 
                privatizations in accordance with the requirements of 
                this title; and
                  ``(B) neither INTELSAT nor Inmarsat are hindering 
                competitors' or potential competitors' access to the 
                satellite services marketplace.
          ``(2) First finding.--In making the finding required to be 
        made on or before January 1, 1999, the Commission shall not 
        find that the conditions required by this subsection have been 
        attained unless the Commission finds that--
                  ``(A) COMSAT has submitted to the INTELSAT Board of 
                Governors a resolution calling for the pro-competitive 
                privatization of INTELSAT in accordance with the 
                requirements of this title; and
                  ``(B) the United States has submitted such resolution 
                at the first INTELSAT Assembly of Parties meeting that 
                takes place after such date of enactment.
          ``(3) Second finding.--In making the finding required to be 
        made on or before January 1, 2000, the Commission shall not 
        find that the conditions required by this subsection have been 
        attained unless the INTELSAT Assembly of Parties has created a 
        working party to consider and make recommendations for the pro-
        competitive privatization of INTELSAT consistent with such 
        resolution.
          ``(4) Third finding.--In making the finding required to be 
        made on or before January 1, 2001, the Commission shall not 
        find that the conditions required by this subsection have been 
        attained unless the INTELSAT Assembly of Parties has approved a 
        recommendation for the pro-competitive privatization of 
        INTELSAT in accordance with the requirements of this title.
          ``(5) Fourth finding.--In making the finding required to be 
        made on or before January 1, 2002, the Commission shall not 
        find that the conditions required by this subsection have been 
        attained unless the pro-competitive privatization of INTELSAT 
        in accordance with the requirements of this title has been 
        achieved by such date.
          ``(6) Criteria for evaluation of hindering access.--The 
        Commission shall not make a determination under paragraph 
        (1)(B) unless the Commission determines that INTELSAT and 
        Inmarsat are not in any way impairing, delaying, or denying 
        access to national markets or orbital locations.
  ``(c) Exception for Services Under Existing Contracts If Progress Not 
Made.--This section shall not preclude INTELSAT or Inmarsat or any 
signatory thereof from continuing to provide additional services under 
an agreement with any third party entered into prior to any finding 
under subsection (b) that the conditions of such subsection have not 
been attained.

  ``Subtitle B--Federal Communications Commission Licensing Criteria: 
                         Privatization Criteria

``SEC. 621. GENERAL CRITERIA TO ENSURE A PRO-COMPETITIVE PRIVATIZATION 
                    OF INTELSAT AND INMARSAT.

  ``The President and the Commission shall secure a pro-competitive 
privatization of INTELSAT and Inmarsat that meets the criteria set 
forth in this section and sections 622 through 624. In securing such 
privatizations, the following criteria shall be applied as licensing 
criteria for purposes of subtitle A:
          ``(1) Dates for privatization.--Privatization shall be 
        obtained in accordance with the criteria of this title of--
                  ``(A) INTELSAT as soon as practicable, but no later 
                than January 1, 2002, and
                  ``(B) Inmarsat as soon as practicable, but no later 
                than January 1, 2001.
          ``(2) Independence.--The successor entities and separated 
        entities of INTELSAT and Inmarsat resulting from the 
        privatization obtained pursuant to paragraph (1) shall--
                  ``(A) be entities that are national corporations; and
                  ``(B) have ownership and management that is 
                independent of--
                          ``(i) any signatories or former signatories 
                        that control access to national 
                        telecommunications markets; and
                          ``(ii) any intergovernmental organization 
                        remaining after the privatization.
          ``(3) Termination of privileges and immunities.--The 
        preferential treatment of INTELSAT and Inmarsat shall not be 
        extended to any successor entity or separated entity of 
        INTELSAT or Inmarsat. Such preferential treatment includes--
                  ``(A) privileged or immune treatment by national 
                governments;
                  ``(B) privileges or immunities or other competitive 
                advantages of the type accorded INTELSAT and Inmarsat 
                and their signatories through the terms and operation 
                of the INTELSAT Agreement and the associated 
                Headquarters Agreement and the Inmarsat Convention; and
                  ``(C) preferential access to orbital locations, 
                including any access to orbital locations that is not 
                subject to the legal or regulatory processes of a 
                national government that applies due diligence 
                requirements intended to prevent the warehousing of 
                orbital locations.
          ``(4) Prevention of expansion during transition.--During the 
        transition period prior to full privatization, INTELSAT and 
        Inmarsat shall be precluded from expanding into additional 
        services (including additional applications of existing 
        services) or additional areas of business.
          ``(5) Conversion to stock corporations.--Any successor entity 
        or separated entity created out of INTELSAT or Inmarsat shall 
        be a national corporation established through the execution of 
        an initial public offering as follows:
                  ``(A) Any successor entities and separated entities 
                shall be incorporated as private corporations subject 
                to the laws of the nation in which incorporated.
                  ``(B) An initial public offering of securities of any 
                successor entity or separated entity shall be conducted 
                no later than--
                          ``(i) January 1, 2001, for the successor 
                        entities of INTELSAT; and
                          ``(ii) January 1, 2000, for the successor 
                        entities of Inmarsat.
                  ``(C) The shares of any successor entities and 
                separated entities shall be listed for trading on one 
                or more major stock exchanges with transparent and 
                effective securities regulation.
                  ``(D) A majority of the board of directors of any 
                successor entity or separated entity shall not be 
                subject to selection or appointment by, or otherwise 
                serve as representatives of--
                          ``(i) any signatory or former signatory that 
                        controls access to national telecommunications 
                        markets; or
                          ``(ii) any intergovernmental organization 
                        remaining after the privatization.
                  ``(E) Any transactions or other relationships between 
                or among any successor entity, separated entity, 
                INTELSAT, or Inmarsat shall be conducted on an arm's 
                length basis.
          ``(6) Regulatory treatment.--Any successor entity or 
        separated entity shall apply through the appropriate national 
        licensing authorities for international frequency assignments 
        and associated orbital registrations for all satellites.
          ``(7) Competition policies in domiciliary country.--Any 
        successor entity or separated entity shall be incorporated and 
        headquartered in a nation or nations that--
                  ``(A) have effective laws and regulations that secure 
                competition in telecommunications services;
                  ``(B) are signatories of the World Trade Organization 
                Basic Telecommunications Services Agreement; and
                  ``(C) have a schedule of commitments in such 
                Agreement that includes non-discriminatory market 
                access to their satellite markets.
          ``(8) Return of unused orbital locations.--INTELSAT, 
        Inmarsat, and any successor entities and separated entities 
        shall not be permitted to warehouse any orbital location that--
                  ``(A) as of March 25, 1998, did not contain a 
                satellite that was providing commercial services, or, 
                subsequent to such date, ceased to contain a satellite 
                providing commercial services; or
                  ``(B) as of March 25, 1998, was not designated in 
                INTELSAT or Inmarsat operational plans for satellites 
                for which construction contracts had been executed.
        Any such orbital location of INTELSAT or Inmarsat and of any 
        successor entities and separated entities shall be returned to 
        the International Telecommunication Union for reallocation.
          ``(9) Appraisal of assets.--Before any transfer of assets by 
        INTELSAT or Inmarsat to any successor entity or separated 
        entity, such assets shall be independently audited for purposes 
        of appraisal, at both book and fair market value.
          ``(10) Limitation on investment.--Notwithstanding the 
        provisions of this title, COMSAT shall not be authorized by the 
        Commission to invest in a satellite known as K-TV, unless 
        Congress authorizes such investment.

``SEC. 622. SPECIFIC CRITERIA FOR INTELSAT.

  ``In securing the privatizations required by section 621, the 
following additional criteria with respect to INTELSAT privatization 
shall be applied as licensing criteria for purposes of subtitle A:
          ``(1) Number of competitors.--The number of competitors in 
        the markets served by INTELSAT, including the number of 
        competitors created out of INTELSAT, shall be sufficient to 
        create a fully competitive market.
          ``(2) Prevention of expansion during transition.--
                  ``(A) In general.--Pending privatization in 
                accordance with the criteria in this title, INTELSAT 
                shall not expand by receiving additional orbital 
                locations, placing new satellites in existing 
                locations, or procuring new or additional satellites 
                except as permitted by subparagraph (B), and the United 
                States shall oppose such expansion--
                          ``(i) in INTELSAT, including at the Assembly 
                        of Parties,
                          ``(ii) in the International Telecommunication 
                        Union,
                          ``(iii) through United States instructions to 
                        COMSAT,
                          ``(iv) in the Commission, through declining 
                        to facilitate the registration of additional 
                        orbital locations or the provision of 
                        additional services (including additional 
                        applications of existing services) or 
                        additional areas of business; and
                          ``(v) in other appropriate fora.
                  ``(B) Exception for certain replacement satellites.--
                The limitations in subparagraph (A) shall not apply to 
                any replacement satellites if--
                          ``(i) such replacement satellite is used 
                        solely to provide public-switched network voice 
                        telephony or occasional-use television 
                        services, or both;
                          ``(ii) such replacement satellite is procured 
                        pursuant to a construction contract that was 
                        executed on or before March 25, 1998; and
                          ``(iii) construction of such replacement 
                        satellite commences on or before the final date 
                        for INTELSAT privatization set forth in section 
                        621(1)(A).
          ``(3) Technical coordination among signatories.--Technical 
        coordination shall not be used to impair competition or 
        competitors, and coordination under Article XIV(d) of the 
        INTELSAT Agreement shall be eliminated.

``SEC. 623. SPECIFIC CRITERIA FOR INTELSAT SEPARATED ENTITIES.

  ``In securing the privatizations required by section 621, the 
following additional criteria with respect to any INTELSAT separated 
entity shall be applied as licensing criteria for purposes of subtitle 
A:
          ``(1) Date for public offering.--Within one year after any 
        decision to create any separated entity, a public offering of 
        the securities of such entity shall be conducted.
          ``(2) Privileges and immunities.--The privileges and 
        immunities of INTELSAT and its signatories shall be waived with 
        respect to any transactions with any separated entity, and any 
        limitations on private causes of action that would otherwise 
        generally be permitted against any separated entity shall be 
        eliminated.
          ``(3) Interlocking directorates or employees.--None of the 
        officers, directors, or employees of any separated entity shall 
        be individuals who are officers, directors, or employees of 
        INTELSAT.
          ``(4) Spectrum assignments.--After the initial transfer which 
        may accompany the creation of a separated entity, the portions 
        of the electromagnetic spectrum assigned as of the date of 
        enactment of this title to INTELSAT shall not be transferred 
        between INTELSAT and any separated entity.
          ``(5) Reaffiliation prohibited.--Any merger or ownership or 
        management ties or exclusive arrangements between a privatized 
        INTELSAT or any successor entity and any separated entity shall 
        be prohibited until 15 years after the completion of INTELSAT 
        privatization under this title.

``SEC. 624. SPECIFIC CRITERIA FOR INMARSAT.

  ``In securing the privatizations required by section 621, the 
following additional criteria with respect to Inmarsat privatization 
shall be applied as licensing criteria for purposes of subtitle A:
          ``(1) Multiple signatories and direct access.--Multiple 
        signatories and direct access to Inmarsat shall be permitted.
          ``(2) Prevention of expansion during transition.--Pending 
        privatization in accordance with the criteria in this title, 
        Inmarsat should not expand by receiving additional orbital 
        locations, placing new satellites in existing locations, or 
        procuring new or additional satellites, except for specified 
        replacement satellites for which construction contracts have 
        been executed as of March 25, 1998, and the United States shall 
        oppose such expansion--
                  ``(A) in Inmarsat, including at the Council and 
                Assembly of Parties,
                  ``(B) in the International Telecommunication Union,
                  ``(C) through United States instructions to COMSAT,
                  ``(D) in the Commission, through declining to 
                facilitate the registration of additional orbital 
                locations or the provision of additional services 
                (including additional applications of existing 
                services) or additional areas of business, and
                  ``(E) in other appropriate fora.
        This paragraph shall not be construed as limiting the 
        maintenance, assistance or improvement of the GMDSS.
          ``(3) Number of competitors.--The number of competitors in 
        the markets served by Inmarsat, including the number of 
        competitors created out of Inmarsat, shall be sufficient to 
        create a fully competitive market.
          ``(4) Reaffiliation prohibited.--Any merger or ownership or 
        management ties or exclusive arrangements between Inmarsat or 
        any successor entity or separated entity and ICO shall be 
        prohibited until 15 years after the completion of Inmarsat 
        privatization under this title.
          ``(5) Interlocking directorates or employees.--None of the 
        officers, directors, or employees of Inmarsat or any successor 
        entity or separated entity shall be individuals who are 
        officers, directors, or employees of ICO.
          ``(6) Spectrum assignments.--The portions of the 
        electromagnetic spectrum assigned as of the date of enactment 
        of this title to Inmarsat--
                  ``(A) shall, after January 1, 2006, or the date on 
                which the life of the current generation of Inmarsat 
                satellites ends, whichever is later, be made available 
                for assignment to all systems (including the privatized 
                Inmarsat) on a nondiscriminatory basis and in a manner 
                in which continued availability of the GMDSS is 
                provided; and
                  ``(B) shall not be transferred between Inmarsat and 
                ICO.
          ``(7) Preservation of the gmdss.--The United States shall 
        seek to preserve space segment capacity of the GMDSS.

``SEC. 625. ENCOURAGING MARKET ACCESS AND PRIVATIZATION.

  ``(a) NTIA Determination.--
          ``(1) Determination required.--Within 180 days after the date 
        of enactment of this section, the Secretary of Commerce shall, 
        through the Assistant Secretary for Communications and 
        Information, transmit to the Commission--
                  ``(A) a list of Member countries of INTELSAT and 
                Inmarsat that are not Members of the World Trade 
                Organization and that impose barriers to market access 
                for private satellite systems; and
                  ``(B) a list of Member countries of INTELSAT and 
                Inmarsat that are not Members of the World Trade 
                Organization and that are not supporting pro-
                competitive privatization of INTELSAT and Inmarsat.
          ``(2) Consultation.--The Secretary's determinations under 
        paragraph (1) shall be made in consultation with the Federal 
        Communications Commission, the Secretary of State, and the 
        United States Trade Representative, and shall take into account 
        the totality of a country's actions in all relevant fora, 
        including the Assemblies of Parties of INTELSAT and Inmarsat.
  ``(b) Imposition of Cost-based Settlement Rate.--Notwithstanding--
          ``(1) any higher settlement rate that an overseas carrier 
        charges any United States carrier to originate or terminate 
        international message telephone services, and
          ``(2) any transition period that would otherwise apply,
the Commission may by rule prohibit United States carriers from paying 
an amount in excess of a cost-based settlement rate to overseas 
carriers in countries listed by the Commission pursuant to subsection 
(a).
  ``(c) Settlements Policy.--The Commission shall, in exercising its 
authority to establish settlements rates for United States 
international common carriers, seek to advance United States policy in 
favor of cost-based settlements in all relevant fora on international 
telecommunications policy, including in meetings with parties and 
signatories of INTELSAT and Inmarsat.

         ``Subtitle C--Deregulation and Other Statutory Changes

``SEC. 641. DIRECT ACCESS; TREATMENT OF COMSAT AS NONDOMINANT CARRIER.

  ``The Commission shall take such actions as may be necessary--
          ``(1) to permit providers or users of telecommunications 
        services to obtain direct access to INTELSAT telecommunications 
        services--
                  ``(A) through purchases of space segment capacity 
                from INTELSAT as of January 1, 2000, if the Commission 
                determines that--
                          ``(i) INTELSAT has adopted a usage charge 
                        mechanism that ensures fair compensation to 
                        INTELSAT signatories for support costs that 
                        such signatories would not otherwise be able to 
                        avoid under a direct access regime, such as 
                        insurance, administrative, and other operations 
                        and maintenance expenditures;
                          ``(ii) the Commission's regulations ensure 
                        that no foreign signatory, nor any affiliate 
                        thereof, shall be permitted to order space 
                        segment directly from INTELSAT in order to 
                        provide any service subject to the Commission's 
                        jurisdiction;
                          ``(iii) the Commission has in place a means 
                        to ensure that carriers will be required to 
                        pass through to end-users savings that result 
                        from the exercise of such authority;
                  ``(B) through investment in INTELSAT as of January 1, 
                2002, if the Commission determines that such investment 
                will be attained under procedures that assure fair 
                compensation to INTELSAT signatories for the market 
                value of their investments;
          ``(2) to permit providers or users of telecommunications 
        services to obtain direct access to Inmarsat telecommunications 
        services--
                  ``(A) through purchases of space segment capacity 
                from Inmarsat as of January 1, 2000, if the Commission 
                determines that--
                          ``(i) Inmarsat has adopted a usage charge 
                        mechanism that ensures fair compensation to 
                        Inmarsat signatories for support costs that 
                        such signatories would not otherwise be able to 
                        avoid under a direct access regime, such as 
                        insurance, administrative, and other operations 
                        and maintenance expenditures;
                          ``(ii) the Commission's regulations ensure 
                        that no foreign signatory, nor any affiliate 
                        thereof, shall be permitted to order space 
                        segment directly from Inmarsat in order to 
                        provide any service subject to the Commission's 
                        jurisdiction;
                          ``(iii) the Commission has in place a means 
                        to ensure that carriers will be required to 
                        pass through to end-users savings that result 
                        from the exercise of such authority; and
                  ``(B) through investment in Inmarsat as of January 1, 
                2001, if the Commission determines that such investment 
                will be attained under procedures that assure fair 
                compensation to Inmarsat signatories for the market 
                value of their investments;
          ``(3) to act on COMSAT's petition to be treated as a 
        nondominant carrier for the purposes of the Commission's 
        regulations according to the provisions of section 10 of the 
        Communications Act of 1934 (47 U.S.C. 160); and
          ``(4) to eliminate any regulation on the availability of 
        direct access to INTELSAT or Inmarsat or to any successor 
        entities after a pro-competitive privatization is achieved 
        consistent with sections 621, 622 and 624.

``SEC. 642. TERMINATION OF MONOPOLY STATUS.

  ``(a) Renegotiation of Monopoly Contracts Permitted.--The Commission 
shall, beginning January 1, 2000, permit users or providers of 
telecommunications services that previously entered into contracts or 
are under a tariff commitment with COMSAT to have an opportunity, at 
their discretion, for a reasonable period of time, to renegotiate those 
contracts or commitments on rates, terms, and conditions or other 
provisions, notwithstanding any term or volume commitments or early 
termination charges in any such contracts with COMSAT.
  ``(b) Commission Authority To Order Renegotiation.--Nothing in this 
title shall be construed to limit the authority of the Commission to 
permit users or providers of telecommunications services that 
previously entered into contracts or are under a tariff commitment with 
COMSAT to have an opportunity, at their discretion, to renegotiate 
those contracts or commitments on rates, terms, and conditions or other 
provisions, notwithstanding any term or volume commitments or early 
termination charges in any such contracts with COMSAT.
  ``(c) Provisions Contrary to Public Policy Void.--Whenever the 
Commission permits users or providers of telecommunications services to 
renegotiate contracts or commitments as described in this section, the 
Commission may provide that any provision of any contract with COMSAT 
that restricts the ability of such users or providers to modify the 
existing contracts or enter into new contracts with any other space 
segment provider (including but not limited to any term or volume 
commitments or early termination charges) or places such users or 
providers at a disadvantage in comparison to other users or providers 
that entered into contracts with COMSAT or other space segment 
providers shall be null, void, and unenforceable.

``SEC. 643. SIGNATORY ROLE.

  ``(a) Limitations on Signatories.--
          ``(1) National security limitations.--The Federal 
        Communications Commission, after a public interest 
        determination, in consultation with the Executive Branch, may 
        restrict foreign ownership of a United States signatory if the 
        Commission determines that not to do so would constitute a 
        threat to national security.
          ``(2) No signatories required.--The United States Government 
        shall not require signatories to represent the United States in 
        INTELSAT or Inmarsat or in any successor entities after a pro-
        competitive privatization is achieved consistent with sections 
        621, 622 and 624.
  ``(b) Clarification of Privileges and Immunities of COMSAT.--
          ``(1) Generally not immunized.--Notwithstanding any other law 
        or executive agreement, COMSAT shall not be entitled to any 
        privileges or immunities under the laws of the United States or 
        any State on the basis of its status as a signatory of INTELSAT 
        or Inmarsat.
          ``(2) Limited immunity.--COMSAT and any other company 
        functioning as United States signatory to INTELSAT or Inmarsat 
        shall not be liable for action taken by it in carrying out the 
        specific, written instruction of the United States issued in 
        connection with its relationships and activities with foreign 
        governments, international entities, and the intergovernmental 
        satellite organizations.
          ``(3) Provisions prospective.--Paragraph (1) shall not apply 
        with respect to liability for any action taken by COMSAT before 
        the date of enactment of the Communications Satellite 
        Competition and Privatization Act of 1998.
  ``(c) Parity of Treatment.--Notwithstanding any other law or 
executive agreement, the Commission shall have the authority to impose 
similar regulatory fees on the United States signatory which it imposes 
on other entities providing similar services.

``SEC. 644. ELIMINATION OF PROCUREMENT PREFERENCES.

  ``Nothing in this title or the Communications Act of 1934 shall be 
construed to authorize or require any preference, in Federal Government 
procurement of telecommunications services, for the satellite space 
segment provided by INTELSAT, Inmarsat, or any successor entity or 
separated entity.

``SEC. 645. USE OF ITU TECHNICAL COORDINATION.

  ``The Commission and United States satellite companies shall utilize 
the International Telecommunication Union procedures for technical 
coordination with INTELSAT and its successor entities and separated 
entities, rather than INTELSAT procedures.

``SEC. 646. TERMINATION OF COMMUNICATIONS SATELLITE ACT OF 1962 
                    PROVISIONS.

  ``Effective on the dates specified, the following provisions of this 
Act shall cease to be effective:
          ``(1) Date of enactment of this title: Sections 101 and 102; 
        paragraphs (1), (5) and (6) of section 201(a); section 301; 
        section 303; section 502; and paragraphs (2) and (4) of section 
        504(a).
          ``(2) On the effective date of the Commission's order that 
        establishes direct access to INTELSAT space segment: Paragraphs 
        (1), (3) through (5), and (8) through (10) of section 201(c); 
        and section 304.
          ``(3) On the effective date of the Commission's order that 
        establishes direct access to Inmarsat space segment: 
        Subsections (a) through (d) of section 503.
          ``(4) On the effective date of a Commission order determining 
        under section 601(b)(2) that Inmarsat privatization is 
        consistent with criteria in sections 621 and 624: Section 
        504(b).
          ``(5) On the effective date of a Commission order determining 
        under section 601(b)(2) that INTELSAT privatization is 
        consistent with criteria in sections 621 and 622: Paragraphs 
        (2) and (4) of section 201(a); section 201(c)(2); subsection 
        (a) of section 403; and section 404 .

``SEC. 647. REPORTS TO THE CONGRESS.

  ``(a) Annual Reports.--The President and the Commission shall report 
to the Congress 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 industry and consumers on privatization.

``SEC. 648. CONSULTATION WITH CONGRESS.

  ``The President's designees and the Commission shall consult with the 
Committee on Commerce of the House of Representatives and the Committee 
on Commerce, Science, and Transportation of the Senate prior to each 
meeting of the INTELSAT or Inmarsat Assembly of Parties, the INTELSAT 
Board of Governors, the Inmarsat Council, or appropriate working group 
meetings.

``SEC. 649. SATELLITE AUCTIONS.

  ``Notwithstanding any other provision of law, the Commission shall 
not have the authority to assign by competitive bidding orbital 
locations or spectrum used for the provision of international or global 
satellite communications services. The President shall oppose in the 
International Telecommunication Union and in other bilateral and 
multilateral fora any assignment by competitive bidding of orbital 
locations or spectrum used for the provision of such services.

           ``Subtitle D--Negotiations To Pursue Privatization

``SEC. 661. METHODS TO PURSUE PRIVATIZATION.

  ``The President shall secure the pro-competitive privatizations 
required by this title in a manner that meets the criteria in subtitle 
B.

                       ``Subtitle E--Definitions

``SEC. 681. DEFINITIONS.

  ``(a) In General.--As used in this title:
          ``(1) INTELSAT.--The term `INTELSAT' means the International 
        Telecommunications Satellite Organization established pursuant 
        to the Agreement Relating to the International 
        Telecommunications Satellite Organization (INTELSAT).
          ``(2) Inmarsat.--The term `Inmarsat' means the International 
        Mobile Satellite Organization established pursuant to the 
        Convention on the International Maritime Organization.
          ``(3) Signatories.--The term `signatories'--
                  ``(A) in the case of INTELSAT, or INTELSAT successors 
                or separated entities, means a Party, or the 
                telecommunications entity designated by a Party, that 
                has signed the Operating Agreement and for which such 
                Agreement has entered into force or to which such 
                Agreement has been provisionally applied;
                  ``(B) in the case of Inmarsat, or Inmarsat successors 
                or separated entities, means either a Party to, or an 
                entity that has been designated by a Party to sign, the 
                Operating Agreement.
          ``(4) Party.--The term `Party'--
                  ``(A) in the case of INTELSAT, means a nation for 
                which the INTELSAT agreement has entered into force or 
                been provisionally applied; and
                  ``(B) in the case of Inmarsat, means a nation for 
                which the Inmarsat convention has entered into force.
          ``(5) Commission.--The term `Commission' means the Federal 
        Communications Commission.
          ``(6) International telecommunication union.--The term 
        `International Telecommunication Union' means the 
        intergovernmental organization that is a specialized agency of 
        the United Nations in which member countries cooperate for the 
        development of telecommunications, including adoption of 
        international regulations governing terrestrial and space uses 
        of the frequency spectrum as well as use of the geostationary 
        satellite orbit.
          ``(7) Successor entity.--The term `successor entity'--
                  ``(A) means any privatized entity created from the 
                privatization of INTELSAT or Inmarsat or from the 
                assets of INTELSAT or Inmarsat, but
                  ``(B) does not include any entity that is a separated 
                entity.
          ``(8) Separated entity.--The term `separated entity' means a 
        privatized entity to whom a portion of the assets owned by 
        INTELSAT or Inmarsat are transferred prior to full 
        privatization of INTELSAT or Inmarsat, including in particular 
        the entity whose structure was under discussion by INTELSAT as 
        of March 25, 1998, but excluding ICO.
          ``(9) Orbital location.--The term `orbital location' means 
        the location for placement of a satellite on the geostationary 
        orbital arc as defined in the International Telecommunication 
        Union Radio Regulations.
          ``(10) Space segment.--The term `space segment' means the 
        satellites, and the tracking, telemetry, command, control, 
        monitoring and related facilities and equipment used to support 
        the operation of satellites owned or leased by INTELSAT, 
        Inmarsat, or a separated entity or successor entity.
          ``(11) Non-core.--The term `non-core services' means, with 
        respect to INTELSAT provision, services other than public-
        switched network voice telephony and occasional-use television, 
        and with respect to Inmarsat provision, services other than 
        global maritime distress and safety services or other existing 
        maritime or aeronautical services for which there are not 
        alternative providers.
          ``(12) Additional services.--The term `additional services' 
        means Internet services, high-speed data, interactive services, 
        non-maritime or non-aeronautical mobile services, Direct to 
        Home (DTH) or Direct Broadcast Satellite (DBS) video services, 
        or Ka-band services.
          ``(13) INTELSAT agreement.--The term `INTELSAT Agreement' 
        means the Agreement Relating to the International 
        Telecommunications Satellite Organization (`INTELSAT'), 
        including all its annexes (TIAS 7532, 23 UST 3813).
          ``(14) Headquarters agreement.--The term `Headquarters 
        Agreement' means the International Telecommunication Satellite 
        Organization Headquarters Agreement (November 24, 1976) 
        (TIAS8542, 28 UST 2248).
          ``(15) Operating agreement.--The term `Operating Agreement' 
        means--
                  ``(A) in the case of INTELSAT, the agreement, 
                including its annex but excluding all titles of 
                articles, opened for signature at Washington on August 
                20, 1971, by Governments or telecommunications entities 
                designated by Governments in accordance with the 
                provisions of the Agreement, and
                  ``(B) in the case of Inmarsat, the Operating 
                Agreement on the International Maritime Satellite 
                Organization, including its annexes.
          ``(16) Inmarsat convention.--The term `Inmarsat Convention' 
        means the Convention on the International Maritime Satellite 
        Organization (Inmarsat) (TIAS 9605, 31 UST 1).
          ``(17) National corporation.--The term `national corporation' 
        means a corporation the ownership of which is held through 
        publicly traded securities, and that is incorporated under, and 
        subject to, the laws of a national, state, or territorial 
        government.
          ``(18) COMSAT.--The term `COMSAT' means the corporation 
        established pursuant to title III of the Communications 
        Satellite Act of 1962 (47 U.S.C. 731 et seq.)
          ``(19) ICO.--The term `ICO' means the company known, as of 
        the date of enactment of this title, as ICO Global 
        Communications, Inc.
          ``(20) Replacement satellites.--The term `replacement 
        satellite' means a satellite that replaces a satellites that 
        fails prior to the end of the duration of contracts for 
        services provided over such satellite and that takes the place 
        of a satellite designated for the provision of public-switched 
        network and occasional-use television services under contracts 
        executed prior to March 25, 1998 (but not including K-TV or 
        similar satellites). A satellite is only considered a 
        replacement satellite to the extent such contracts are equal to 
        or less than the design life of the satellite.
          ``(21) GMDSS.--The term `global maritime distress and safety 
        services' or `GMDSS' means the automated ship-to-shore distress 
        alerting system which uses satellite and advanced terrestrial 
        systems for international distress communications and promoting 
        maritime safety in general. The GMDSS permits the worldwide 
        alerting of vessels, coordinated search and rescue operations, 
        and dissemination of maritime safety information.
  ``(b) Common Terminology.--Except as otherwise provided in subsection 
(a), terms used in this title that are defined in section 3 of the 
Communications Act of 1934 have the meanings provided in such 
section.''.

                          Purpose and Summary

    The fundamental purposes of the bill are to encourage 
privatization of the intergovernmental satellite organizations 
(IGOs) that dominate international satellite communications and 
to promote a robustly competitive satellite communications 
marketplace. The bill seeks to eliminate the provision of 
commercial satellite communications by intergovernmental 
organizations. The bill also seeks to ensure that the 
privatized entities be independent of the IGO ``signatories.'' 
By privatizing INTELSAT and Inmarsat as outlined in H.R. 1872, 
the unfair advantages now enjoyed by these organizations would 
be eliminated, in favor of a level playing field for all 
competitors. This in turn would bring consumers lower prices, 
higher service quality, improved efficiency, innovative new 
products, and more choice.
    H.R. 1872 promotes the privatization of INTELSAT and 
Inmarsat by using the incentive of access to the U.S. 
marketplace if the IGOs privatize in an expeditious and pro-
competitive manner. The bill is also designed to eliminate any 
unfair advantages of IGOs or their spin-offs or successors over 
their competitors gained through their intergovernmental 
status. Pro-competitive privatizations are sought by requiring 
the Federal Communications Commission (FCC or the Commission) 
to determine that the IGOs and their privatized ``successor'' 
or ``separated'' follow-ons have been privatized in a manner 
that would not harm competition in the U.S., prior to 
authorizing the provision of advanced services in the U.S. 
market.
    The primary incentive in the bill for INTELSAT and Inmarsat 
to privatize is to limit their access to the U.S. market if 
they do not privatize in a pro-competitive manner by a date 
certain. In order to provide these organizations with a 
reasonable transition period in which to accomplish a full 
privatization, the bill provides INTELSAT until January 1, 
2002, and Inmarsat until January 1, 2001. If privatization does 
not occur by the dates provided, the bill requires the FCC to 
limit, deny or revoke authority for the IGO's provision of 
``non-core services'' to the U.S. market. Furthermore, the bill 
prohibits separated entities from being authorized to provide 
services in the U.S. if they are not structured in a pro-
competitive manner.
    Another key part of the bill is the possibility of 
restrictions on additional services during the pendency of 
privatization. This lever provides that INTELSAT and Inmarsat 
cannot provide additional services under new contracts unless 
the FCC annually determines that: (1) Substantial and material 
progress is being made towards privatization; and (2) INTELSAT 
and Inmarsat are not hindering competitors' access to foreign 
markets.
    The bill explicitly eliminates COMSAT's monopoly for the 
provision of IGO services in the U.S. by permitting other 
service providers to directly access IGOs satellites as of 
January 1, 2000. The bill also allows COMSAT's customers a one-
time opportunity to renegotiate their contracts with the 
previous monopoly provider after January 1, 2000.
    Lastly, the bill includes a number of additional 
deregulatory measures designed to ensure that all U.S. 
satellite service providers can compete as efficiently as 
possible within the U.S. satellite marketplace. The bill also 
prohibits the FCC from auctioning orbital slots or spectrum 
assignments for global satellite systems and requires the 
Administration to oppose such spectrum auctions in 
international fora.

                  Background and Need for Legislation

                             I. Background

    In 1962, Congress passed the Communications Satellite Act 
(the 1962 Act), creating a new organization, the Communications 
Satellite Corporation (COMSAT), with the specific charter of 
forming a consortium to operate an international commercial 
satellite communications system. As a result, COMSAT, and 
subsequently, the International Telecommunications Satellite 
Organization (INTELSAT) were established with the assistance of 
a partnership of nations in Europe, North America, and 
developing areas of the world. In 1973, INTELSAT was converted 
into an international treaty organization. At the time of the 
1962 Act's passage, it was believed that individual companies 
were not capable, in those early days of satellite technology, 
of bearing the financial risk of constructing and operating a 
global satellite communications system.
    Today, INTELSAT is a global communications satellite 
cooperative with 142 member countries which provides space 
segment for international telecommunications. It currently 
operates 20-26 satellites. It is the dominant provider of 
international ``fixed'' satellite services (e.g., transoceanic 
telephone calls, video feeds) and is seeking to expand into a 
wide array of advanced services.
    In 1978, Congress amended the 1962 Act to add a new title V 
which provided for U.S. participation in a new 
intergovernmental entity. In 1979, a similar organization to 
INTELSAT--the International Maritime Satellite Organization 
(Inmarsat)--came into existence when 26 member nations signed 
the Inmarsat Convention and Operating Agreement. Inmarsat 
developed out of the perceived need for a global maritime 
communications satellite system that would provide distress, 
safety and communications services to all seafaring nations in 
a single cooperative, cost-sharing entity. Inmarsat began 
providing commercial service in 1982. Today, Inmarsat has 82 
member countries and operates eight satellites.
    INTELSAT and Inmarsat are controlled by ``Parties'' and 
``signatories.'' The Parties, which are the national government 
members of the INTELSAT and Inmarsat agreements, have ultimate 
control. The signatories are the owners and operators of the 
systems. They distribute INTELSAT and Inmarsat services in 
their own country. The majority of signatories are government-
owned or controlled telecommunications monopolies in their own 
country. For example, France Telecom, which is the dominant 
provider of telecommunications services in France is the French 
signatory to INTELSAT and Inmarsat. The signatories are 
designated by the member countries to own \1\ their shares in 
the IGOs, with ownership based on an individual member 
country's use of the system. Accordingly, the U.S., the largest 
user in both systems, currently controls an 18 percent 
ownership in INTELSAT and a 23 percent ownership in Inmarsat.
---------------------------------------------------------------------------
    \1\ Ownership in INTELSAT or Inmarsat may not be an entirely 
appropriate term as the signatories ownership share is allocated by 
usage rather than investment and varies over time.
---------------------------------------------------------------------------
    COMSAT, the U.S. signatory to INTELSAT and Inmarsat, has 
the sole right of access to INTELSAT and Inmarsat in the United 
States. Any private company wishing to use INTELSAT's or 
Inmarsat's satellites to or from the U.S. must purchase 
satellite capacity through COMSAT. In this regime, COMSAT buys 
INTELSAT and Inmarsat capacity and resells it to U.S.-based 
customers, which include broadcast, private network and long-
distance customers (e.g., MCI, AT&T, WorldCom and Sprint which 
use approximately 80 percent of COMSAT's private line and 
switched-voice services).

                   II. The Private Satellite Industry

    In the early to mid 1980's, a number of applicants filed 
petitions with the FCC for permission to launch and operate 
private satellite systems that would carry international 
traffic in competition with INTELSAT. In response to this 
private sector interest in competing with INTELSAT, the Reagan 
Administration developed the Separate System Policy. This 
policy for the first time permitted satellite systems 
``separate'' from INTELSAT to compete with the organization, 
but limited their activities to certain business applications 
(e.g., television signal carriage for broadcasters and private-
line circuits). The provision of these limited, business-
oriented services was considered by the Reagan Administration 
not to pose significant economic harm to INTELSAT, and, thus, 
was not inconsistent with U.S. obligations under the 
Agreements. In response to President Reagan's policy, the FCC 
licensed a number of separate systems, but in order to protect 
INTELSAT from significant economic harm, prevented the separate 
systems from interconnecting with public switched networks 
(referred to as the ``PSN restriction''). The PSN restriction 
thus prevented separate systems from entering the lucrative, 
high-volume telephony or public data markets.
    Since the first private satellite launch in 1988, the 
private satellite industry has grown slowly. The industry 
contends that this slow pace of growth is due to INTELSAT's 
continued market dominance and anti-competitive practices. 
Today, only three separate satellite systems survive from the 
original eight applicants. PanAmSat, which was recently 
purchased by Hughes Communications, Inc., operates 5 
predominantly international satellites. Orion Network Systems, 
which was recently purchased by Loral, currently operates one 
satellite and is planning the launch of a second satellite in 
late 1998-1999. Columbia Communications currently leases 
capacity on National Aeronautical and Space Administration 
(NASA) satellites and soon will add to its capacity by 
receiving an old, inclined orbit satellite from INTELSAT to 
resolve their dispute over a particular orbital location.
    The provision requiring that INTELSAT be protected from 
significant economic harm is no longer enforced by the Parties. 
Therefore, the PSN restriction has been eased by several 
Administrations and the FCC over time to permit separate 
systems to compete for all segments of satellite communications 
services in the United States. But because market opportunities 
were limited for separate systems until recently, these 
systems' current customer bases comprise customers for those 
permitted services. For instance, PanAmSat predominantly 
provides video services.

                   III. The Expected Satellite Future

    While the international satellite market has yet to reach 
its potential, the future of international satellite services 
looks promising. Experts predict that more than 1,700 
satellites will be launched in the next decade, an increase of 
almost 10 times the 200 or so commercial satellites now in 
orbit worldwide. Furthermore, it is estimated that revenue from 
satellite services will more than triple from $9 billion today 
to $29 billion within the next two to three years.\2\
---------------------------------------------------------------------------
    \2\ See Shine, Eric, ``The Satellite Blast Off,'' Business Week 
(January 27, 1997), citing Bear, Sterns & Co. analyst; See generally, 
Cook, William J., ``1997: A Space Odyssey,'' U.S. News & World Report; 
Crossman, MB, ``Fixed and Mobile Satellite Services--Industry Report,'' 
Rauscher, Pierce Refsnes, Inc. (April 11, 1997); and Anselm, Joseph, 
``Launchers See Nothing But Blue Skies Ahead,'' Aviation Week and Space 
Technology (April 7, 1997).
---------------------------------------------------------------------------
    This potential growth can be traced to four main reasons: 
(1) demand for services has increased; (2) the world's domestic 
telecommunications monopolies are privatizing and being subject 
to competition; (3) the innovation and development of non-
geostationary systems; and (4) the cost of satellite 
construction, launch and operation and that of related 
equipment has dropped dramatically. Existing and new satellite 
providers are planning ahead to meet the needs of consumers 
worldwide. From hand-held wireless communications to Internet 
access to advanced direct-to-home video services, satellite 
providers are planning to compete for customers'' 
communications needs. In many instances, satellite providers 
are planning to serve markets that today do not exist. It is 
estimated that over half of the world's population have never 
placed a phone call. Many fewer have ever used the Internet. 
These populations represent new markets that are often unserved 
by traditional networks because of the high-cost of ubiquitous 
service with traditional landline technology. Companies 
preparing to enter the wireless telephone marketplace include 
such players as: Iridium, Globalstar, ICO Global Communications 
(the spin-off of Inmarsat), and MCHI/Ellipso. Companies 
preparing to enter the satellite data marketplace include: 
Teledesic, Motorola's Celestri, Loral's Cyberstar and Hughes'' 
Spaceway.
    The cost of producing a satellite system has decreased, in 
part, because of improvements in technology. Advances in 
battery power and digital compression techniques coupled with 
improvements in mass production capabilities and launch 
facilities have made the prospects for launching new satellite 
ventures less risky. Thus, as technology has made producing 
satellites more cost-efficient, the ability of satellites to 
compete directly with traditional land-line networks has 
increased.
    American firms represent a commanding presence in the 
growth of satellite services. American ingenuity and the 
entrepreneurial spirit are combining to meet the demand for 
satellite services. In many instances, American 
telecommunications providers are using their expertise and 
success gained in American domestic market to develop 
opportunities in overseas satellite markets. This has led to a 
high demand for American manufacturers and providers of 
satellite products and services. Correspondingly, the growth in 
demand in satellite services is producing high-wage employment 
for American workers.

             IV. Barriers to Competitive Satellite Markets

    While the global satellite marketplace is expected to grow, 
there are significant barriers in many markets that hamper 
competition. These impediments are the outgrowth of the 
structure and operations of the IGOs, INTELSAT and Inmarsat, 
and the relationship of these IGOs with their Member nations. 
Furthermore, INTELSAT and Inmarsat have the advantage of an 
unmatched fleet of international satellites in key orbital 
locations, financed at preferential rates available to IGOs 
that can more easily raise capital.
    The Committee believes that INTELSAT and Inmarsat enjoy a 
substantial market advantage that harms the development of 
competition: the inherent incentive is for signatories to favor 
INTELSAT, Inmarsat and any non-independent spin-off over 
private satellite providers because the signatories own 
INTELSAT and Inmarsat. For example, in order to compete in a 
particular market, a private satellite provider may be required 
to provide confidential marketing and business data to the 
licensing authority, which may be the same entity as the 
signatory, or own the signatory. Thus, a private competitor may 
be forced to provide confidential data to a competitor. Since 
the regulatory agency or ministry responsible for 
telecommunications policy in IGO Member countries often owns 
the signatory, the agency or ministry with licensing authority 
has a disincentive to permit a private satellite provider to 
enter that country's market and compete against the signatory. 
The majority of signatories to the IGOs are government- owned 
operators whose regulatory bodies have a financial interest in 
limiting competition.
    The Committee believes that INTELSAT and Inmarsat and their 
signatories have used their market dominance and governmental 
status to keep emerging U.S. competitors from expanding into 
overseas markets for satellite services. This point was clearly 
made in the September 30, 1997, hearing on H.R. 1872. For 
example, in that hearing, Mr. Kenneth Gross, President of 
Columbia Communications, described how the Department of 
Defense, through MCI, tried to use Columbia to provide services 
to an Air Force Base in the Azores, Portugal. The foreign 
signatory, Marconi, declared that no other provider than 
INTELSAT could be used for this service. As a signatory, 
Marconi has a direct financial interest in INTELSAT maximizing 
its revenues, since it receives a return from the usage of 
INTELSAT's satellites. Mr. Gross concluded that, due to such 
conflicts of interest between the operators and regulators, 
``the result is higher prices to the end user, higher prices to 
the Defense Department, and to the U.S. Government.'' \3\
---------------------------------------------------------------------------
    \3\ Hearing before the Subcommittee on Telecommunications, Trade, 
and Consumer Protection on H.R. 1872, the Communications Satellite 
Competition and Privatization Act of 1997; September 30, 1997; page 59; 
Serial No. 105-61.
---------------------------------------------------------------------------
    The international treaty structure of both INTELSAT and 
Inmarsat provide these organizations the opportunity to file 
for orbital slots and spectrum allocations through the host 
governments, which pass the applications directly to the 
International Telecommunication Union (ITU) without the review 
process that private companies are subjected to. For example, 
the FCC processes INTELSAT's applications as a formality, 
forwarding them to the ITU automatically. INTELSAT is 
headquartered in the U.S., thus the FCC acts as the regulatory 
body through which INTELSAT applies to the ITU. Inmarsat is 
headquartered in the United Kingdom, and the U.K. regulatory 
body performs the same function.
    In addition, there is an incentive to provide INTELSAT and 
Inmarsat orbital locations and spectrum because the Parties' 
representatives at the ITU often have an ownership stake, 
through their government-owned signatories in INTELSAT and 
Inmarsat. The Committee believes that this favorable treatment 
in the ITU has resulted in many of the limited supply of well-
placed geostationary orbital locations in generally-used 
frequencies being allocated to INTELSAT and Inmarsat. The 
Committee notes that INTELSAT and Inmarsat currently have a 
disproportionate number of orbital locations relative to 
competitors. Many of these orbital slots apparently are not 
planned for use in the near future, but have presumably been 
obtained because INTELSAT and Inmarsat are aware of other 
competitors' interest in the similar locations.
    INTELSAT and Inmarsat also benefit from certain privileges 
and immunities, providing them with advantages that private 
satellite providers consider barriers to market entry. The 
privileges and immunities include: diplomatic status, tax 
exemption, antitrust immunity, government subsidies, and 
freedom from the regulatory process.

                    V. Failed Restructuring Efforts

    INTELSAT and Inmarsat have been considering privatization, 
termed ``restructuring'' by the IGOs, for several years. In 
fact, in 1991, Inmarsat voted to create the affiliate ICO 
Global Communications. INTELSAT started to consider 
privatization in 1995 with the formation of the INTELSAT 2000 
Working Party. The IGOs recognize that in order to extend their 
dominance in core services to advanced services, they must 
reform their current multilayered structures. However, given 
the predominant government control of the organizations, and 
the fact that in most IGO countries the government still 
provides commercial telecommunications services, privatization 
discussions have been proceeding at a slower pace than the U.S. 
feels is appropriate.
    INTELSAT and Inmarsat have been exploring options to enter 
the ``new'' satellite markets (e.g., global mobile wireless 
telephone and data service, broadband data) to compete against 
the newly formed satellite providers, while still maintaining 
their current market dominance. To date, both INTELSAT and 
Inmarsat have taken steps to spin off affiliates to enter new 
growth markets. On March 31, 1998, INTELSAT agreed to spin off 
certain assets, including five satellites and several 
additional orbital locations, to a new corporation to be known 
as ``New Skies Satellites, N.V.'' (New Skies). Inmarsat is 
currently considering a plan to privatize its operations. 
Inmarsat Parties and signatories have expressed an interest in 
the new Inmarsat providing a mobile broadband data service. 
Details of the Inmarsat privatization plan are to be finalized 
later in 1998. Under H.R. 1872, the Committee expects that any 
U.S. acceptance of the plan will require that direct access to 
the new Inmarsat by competitors to the signatories be 
permitted, that Inmarsat's privileges and immunities not be 
extended to the new Inmarsat or former signatories, and that 
such privatization otherwise be consistent with this title.
    The Committee is especially troubled by INTELSAT's New 
Skies, N.V. proposal. This spin-off will be harmful to private 
satellite competitors because it will obtain satellites from 
INTELSAT at below market rates and INTELSAT and its Member 
nations will own 100 percent of New Skies. The Administration 
objected in December 1996 when INTELSAT announced that it was 
procuring a satellite to provide direct broadcast satellite 
services (known as ``K-TV'') on the principle that an IGO 
should not expand into a market that the private sector is 
capable ofserving. Under the 1962 Act, the FCC must authorize 
COMSAT's investment in IGO satellites, prior to any investment. 
INTELSAT procured the satellite, despite U.S. government opposition. 
Now this specific satellite is to be transferred below market value to 
New Skies to compete against private satellite providers. The IGO is, 
therefore, buying satellites with its advantageous ability to raise 
capital from its largely monopoly signatories and transferring these 
satellites to New Skies, an affiliate to be wholly-owned by INTELSAT 
and its signatories. Thus, these satellites provide New Skies with an 
unfair market advantage.
    Also troubling under this proposal is that New Skies will 
have transferred to it two Ka-band orbital locations currently 
registered to INTELSAT which do not contain satellites. The 
Committee intends to ensure a pro-competitive spin off of 
INTELSAT. As currently structured, New Skies is not pro-
competitive and would not be permitted to provide services to 
the U.S. marketplace under H.R. 1872. The possible denial of 
U.S. market access may persuade New Skies' and INTELSAT's 
management to amend New Skies' ownership, management, and 
operations over time. Until it is structured in a pro-
competitive manner, the FCC should prevent INTELSAT from 
transferring licenses or orbital locations to New Skies.
    These IGO spin-offs neither decrease the market control of 
the remaining organizations nor promote the competitive nature 
of the international satellite marketplace. Many in private 
industry view the proposals by INTELSAT and Inmarsat for 
limited reform as insufficient, particularly since the same 
national telecommunications providers that own the IGOs own the 
spin-off/new entity.
    Thus, IGO restructuring and privatization without 
guidelines or leverage from the U.S. has not produced a fully 
pro-competitive result and is, therefore, not in the public 
interest. The Committee believes without sufficient guidance 
and incentives, the IGOs will not adopt a pro-competitive 
restructuring, and is moving H.R. 1872 to resolve this problem 
so that privatization of the IGOs will promote competition in 
the domestic and global satellite services marketplace.

                       vi. the committee approach

    H.R. 1872 is based on simple principles: reliance on the 
private sector and non-discriminatory competition; the 
government should not provide commercial services that the 
private sector can provide; and competitors should compete on a 
level playing field.
    The bill provides a firm time-line and road-map for the 
privatization of INTELSAT and Inmarsat. If these organizations 
fail to move towards a pro-competitive privatization, then they 
would be prevented from offering additional services in the 
U.S. marketplace. In addition, if they do not privatize in a 
pro-competitive manner by dates certain, these organizations 
would be prevented from offering non-core services in the U.S. 
marketplace--a broader category than ``additional services.'' 
The bill would also prevent any new spin-offs of these 
organizations from serving the U.S. market unless they are 
organized in a pro-competitive manner. Thus, whether access to 
the U.S. market is ever limited is completely within the IGOs' 
and their signatories' control.
    The Committee believes that the only significant leverage 
the U.S. government has over INTELSAT or Inmarsat is the 
ability to limit access to the world's richest and most 
developed satellite market--the United States--if they do not 
move forward toward a pro-competitive restructuring.
    The Committee believes that the possibility of lost revenue 
is necessary to convince the INTELSAT and Inmarsat leadership 
to adopt pro-competitive privatization. Faced with a choice 
between losing access to the U.S. market or reorganizing as a 
private company with no unfair advantages, the Committee 
believes that these organizations will privatize consistent 
with The Committee policy principles. If that is not the case, 
the Committee fully supports limiting these organizations' 
ability to serve the U.S. market. For too long the U.S. 
consumer has been exploited by INTELSAT and Inmarsat through 
paying prices higher than necessary.4 The Committee 
expects that any excess demand created if INTELSAT and Inmarsat 
are limited in serving the U.S. market can be met by 
competitive satellite providers already in existence and those 
due to become operational shortly. In addition, the bill 
provides adequate safeguards to prevent U.S. consumers from 
being harmed, should the IGOs' market access be limited.
---------------------------------------------------------------------------
    \4\ The hearing record contains data showing that INTELSAT, 
Inmarsat and COMSAT implore huge mark-ups on satellite services. See 
Hearing before the Subcommittee on Telecommunications, Trade, and 
Consumer Protection on H.R. 1872, the Communications Satellite 
Competition and Privatization Act of 1997; September 30, 1997; Serial 
No. 105-61.
---------------------------------------------------------------------------
    During the Committee's deliberation, the Committee 
considered efforts to remove the market access restrictions and 
replace them with a modified international settlement policy. 
The Committee soundly rejected this argument. In particular, an 
amendment offered at Full Committee to replace the threat of 
market access limitations with the imposition of a lower 
settlement rate on all foreign carriers whose governments 
opposed privatization or denied market access to private 
satellite service providers was rejected by an 37-8 vote. The 
Committee found that settlement rates were an inadequate 
substitute to the market access incentives that would render 
the bill ineffective. Nor would the imposition of lower 
settlement rates address the underlying principle of ending the 
provision of commercial services by an IGO. The Committee 
firmly believes that no effective alternative to the market 
access restrictions has been identified that would produce a 
pro-competitive privatization.
    The legislation also prevents the IGOs from expanding with 
new orbital locations and new satellites for non-core services 
or additional services. The Committee is concerned that the 
IGOs already have a number of anti-competitive advantages in 
the satellite communications marketplace to the detriment of 
consumers and competitors, as described in this report. Orbital 
locations are scarce resources, particularly in the 
geostationary orbit. To permit the IGOs to grow in terms of 
orbital locations, numbers of operational satellites and in 
provision of additional, non-core services would seriously 
frustrate competition, to the detriment of the commercial 
industry and consumers. The restrictions in this section are 
essential to preventfurther entrenchment of the IGOs in the 
commercial marketplace as well as to provide incentives to expedite 
privatization.
    It is not necessary for intergovernmental treaty 
organizations to provide commercial international satellite 
services in competition with private companies. Furthermore, 
the existence of such organizations distorts the marketplace 
and frustrates the development of a fully competitive private 
market. There is substantial evidence that the IGOs have used 
their dominant position in the marketplace and their 
governmental privileges and immunities to stifle competition. 
The current structure not only harms the commercial satellite 
industry, but also results in increased costs to users of these 
services, including the U.S. government. Increased competition 
as a result of privatization, moreover, promises substantial 
consumer benefits estimated at $6.9 billion. U.S. consumers 
alone are estimated to reap a savings of $1.4 billion. This is 
in addition to the $1.5 billion consumers in the U.S. are 
estimated to receive from direct access. These figures reflect 
a 31 percent savings for consumers over what they would pay 
under the present regime operated by IGOs.5
---------------------------------------------------------------------------
    \5\ See ``Analysis of the Privatization of the Intergovernmental 
Satellite Organizations Proposed by H.R. 1872,'' by the Satellite 
Users' Coalition, dated March 1998, page 22.
---------------------------------------------------------------------------
    The Committee's intent is to promote competition and remove 
government from commercial service provision, rather than to 
punish the IGOs or their signatory, COMSAT. H.R. 1872 is 
designed to encourage a competitive restructuring of INTELSAT 
and Inmarsat and to strengthen all U.S. satellite service 
providers, including COMSAT, by the introduction of non-
discriminatory competition. The Committee notes that it 
included a deregulatory subtitle to eliminate regulations, once 
competition is permitted, that have posed significant costs for 
COMSAT, out of a desire to see COMSAT compete vigorously with 
other competitors, on a level playing field.
    The Committee has found that although privatization or 
competition may seem threatening or even punitive to 
incumbents, the end results are instead beneficial to both the 
incumbent provider and society at large. As past experience 
demonstrates, competition in the telecommunications market 
leads to an expansion in the market's size. Likewise, 
eliminating out-dated regulatory burdens enables all entities 
to compete more effectively. An example is the impact on AT&T's 
long-distance services of the 1984 divestiture. Since 1984, 
AT&T has continually lost market-share to competitors. Its 
overall market share for long-distance services has decreased 
from over 90 percent to about 50 percent. However, even as its 
market share has decreased, AT&T's long-distance minutes and 
revenues have grown, as the competitive provision of long-
distance services resulted in an overall increase in long-
distance calling. In other words, competition grew the entire 
market, so that while AT&T had a smaller slice, the overall pie 
was much larger. AT&T has enjoyed record growth in earning and 
net revenues. Thus, while the Committee moves forward H.R. 1872 
to promote competition, it expects the bill will also 
positively impact COMSAT's revenues in the long-term. The 
Committee also takes note of these facts in evaluating COMSAT's 
claims of declining shares of some telecommunications markets 
while actual minutes of use have increased.
    The Committee has also examined the U.S. domestic market 
with respect to satellite services. Over 85 nations permit 
competition for access to INTELSAT services, known as direct 
access. This includes direct access for space segment capacity. 
At least 14 nations permit investment direct access. The United 
States is behind other nations in this aspect of permitting 
competition in its domestic telecommunications market. 
Consumers pay the price for this. The Commissions' answers to 
questions for the record in the Committee's hearing on this 
legislation, for example, indicate that COMSAT marks up 
INTELSAT's rates by an average of 68 percent. COMSAT marks up 
Inmarsat rates for military uses by as much as 86 
percent.6 These figures, as well as a private study, 
indicate that substantial savings may result from direct 
access. Moreover, competition generally leads to lower prices. 
Investment direct access has the added advantage of 
diversifying ownership of the IGOs. Thus, the Committee finds 
that direct access is in the public interest. Further, the 
Committee finds that both direct access for space segment 
capacity and investment direct access are in the public 
interest and that such interest will be served by adopting all 
forms of direct access as soon as possible. The Committee finds 
that the Commission currently has the authority to permit 
direct access under current statutes. The Committee also finds 
that the Commission has the authority to create a form of 
virtual direct access in the case of Inmarsat until Inmarsat 
permits direct access. The Committee expects the President to 
successfully negotiate to achieve adoption of direct access by 
Inmarsat.
---------------------------------------------------------------------------
    \6\ Hearing before the Subcommittee on Telecommunications, Trade, 
and Consumer Protection on H.R. 1872, the Communications Satellite 
Competition and Privatization Act of 1997; September 30, 1997; page 
156; Serial No. 105-61.
---------------------------------------------------------------------------

                      vii. the need for fresh look

    ``Fresh look'' is a policy used by the FCC in the past to 
permit customers to renegotiate their contracts with a carrier 
with market power once new competition enters the marketplace. 
Under H.R. 1872, COMSAT's customers would be permitted, on a 
one-time basis, to take a fresh look at their existing 
contracts. The fresh look period authorized in the bill would 
begin after January 1, 2000, when the Committee intends new 
competitors will be permitted to compete with COMSAT for 
INTELSAT and Inmarsat access. The Committee expects the 
Commission to provide a single negotiation period of reasonable 
duration for customers to review and possibly renegotiate or be 
released from their COMSAT contracts.
    The Committee believes that the United States should not 
maintain a monopoly for access to INTELSAT and Inmarsat 
services. H.R. 1872, therefore, includes provisions to end 
COMSAT's monopoly for INTELSAT and Inmarsat services by 
implementing direct access. The Committee believes that fresh 
look is a necessary complement to direct access. The 
Committee's goal of introducing competition to the U.S. market 
for IGO services would not be fully achieved if consumers could 
not take advantage of competitive alternatives, due to 
beinglocked into long-term contracts with COMSAT. Thus, direct access 
and fresh look are complementary policy tools to promote competition.
    The Committee is aware that the Commission has implemented 
fresh look in at least four instances in the past: (1) 
allocation of Radio Band, 6 FCC Rcd 4582 (1991) (fresh look 
required in the context of air-to-ground radio telephone 
service as a condition of grant of title III license); (2) 
competition in the Interstate Interexchange Marketplace, 7 FCC 
Rcd 2677 (1992) (fresh look required for AT&T customers of 
tariff 12 packages that included 800 service bundled with 
interexchange service to terminate inbound 800 service without 
liability within 90 days of the time 800 numbers became 
portable); (3) expanded interconnection with local telephone 
company facilities, 7 FCC Rcd 7369 (1992) (fresh look approved 
for new competitive opportunities under special access expanded 
interconnection, permitting special access customers to 
terminate certain long-term local exchange carriers' special 
access arrangements if those customers wished to obtain the 
benefits of new, more competitive alternatives); and (4) 
implementation of local competition provisions of the 
Telecommunications Act of 1996, 11 FCC Rcd 15499 (1996) 
(permitting renegotiation of contracts to implement reciprocal 
compensation requirement between wireless carriers).
    The Committee takes note of how the application of fresh 
look in the past has improved competition in the related 
services. For example, during the 800 number portability fresh 
look period, consumers were provided the opportunity to 
renegotiate long-term contracts with AT&T. The companies that 
used fresh look to their advantage include, but are not limited 
to: Avis, Inc., Boise Cascade Corp., James River Corp., 
Courtaulds Coatings, Inc., Unisys Corp., Unum Life Insurance 
Co., Cargill, Inc., Ceridian Corp., Kimberly Quality Care, 
Federal Reserve Bank of Chicago, Bear, Sterns & Company, Inc., 
Blue Cross and Blue Shield, Diebold Group, Inc., The Guardian 
Life Insurance Company of America, Random House, Inc., 
Outrigger Hotels, America West Airlines, Equifax, First 
Financial Management, ITT Community Development of Palm Coast, 
National Data, National Westminster Bank, Morris Air, Ceridan 
Corp., Kemper Financial Services and CSX.7 In many 
instances, AT&T retained its existing customers by improving 
service, reliability and price commitments. In other instances, 
customers switched to new providers. While it is true that the 
former monopoly or dominant carrier, once fresh look is 
implemented, will have to compete to retain customers, it is 
unlikely that fresh look will result in a sizable migration of 
customers to new providers. This is true due to both the long-
standing relationship between COMSAT and its customers, and the 
ubiquity of INTELSAT and Inmarsat satellite coverage, which 
will continue to give those organizations a considerable 
advantage for many years to come.
---------------------------------------------------------------------------
    \7\ See: Gareiss, Robin, ``The Fight is On For `800' Users,'' 
Communications Week, April 19, 1993; Wallace, Bob, ``Winds of Change 
Sweeping Over Cooped-up 800 World; Carriers Wage War of Numbers on 
Defections,'' Network World, May 3, 1993; Gareiss, Robin, ``Carriers 
Count Spoils of `800' Portability, Communications Week, May 3, 1993; 
Burch, Bill, ``MCI Claims to be the Big Winner Under Fresh Look,'' 
Network World, August 2, 1993; Wallace, Bob, ``Users Ready for a Fresh 
Look,'' Network World, July 12, 1993; Communications Daily, ``AT&T 
Claims $140 Million; MCI Says it Has $170 Million in New 800 Business 
Under Fresh Look,'' April 29, 1993.
---------------------------------------------------------------------------
    COMSAT has used its monopoly for INTELSAT and Inmarsat 
services to enter into long-term contracts with its consumers. 
It is evident that INTELSAT and Inmarsat have market power with 
respect to certain satellite services, whether it is for 
primary communications or back-up communications. As the 
monopoly distributor of their services in the U.S., COMSAT 
enjoys the benefits of this market power. It is not in the 
public interest for consumers to be tied in contracts entered 
into in a monopoly environment when new providers enter the 
market, for example through the direct access provisions of the 
bill. COMSAT should not assume that because of its current 
monopoly, Congress would never impose economic regulation to 
eliminate that monopoly or otherwise promote competition 
through such policy tools as fresh look. Congress reserved the 
right to alter the existing relationship between COMSAT and 
INTELSAT and Inmarsat in the 1962 Satellite Act. In this 
instance, the Committee is exercising this right to promote 
competition to the benefit of American satellite service 
customers.
    The Committee believes that the fresh look provision 
contained in H.R. 1872, as reported by the Committee, is an 
important policy tool for effectuating competition. The 
Committee includes fresh look in H.R. 1872 because it believes 
that fresh look should be included in any type of international 
satellite reform legislation.

             viii. safeguards for certain inmarsat services

    H.R. 1872, as reported by the Committee, contains a number 
of modifications to clarify the Committee's intent that the 
provisions designed to encourage the privatization of Inmarsat 
will not adversely impact the provision of maritime safety 
services. Nor is H.R. 1872 intended to force users who rely on 
Inmarsat maritime and aeronautical service to immediately stop 
using Inmarsat for the provision of safety-related maritime or 
aeronautical services. Accordingly, the FCC is to consider in 
licensing decisions under new section 601 whether users of non-
core services provided by Inmarsat are able to obtain such 
services from providers other than Inmarsat at competitive 
rates, terms, and conditions, or whether costs to replace 
equipment incompatible with the new competitors' systems are 
exorbitant.
    While the Committee believes that private satellite systems 
will soon be offering competitive alternatives to all of the 
COMSAT-provided Inmarsat services, the bill ensures that 
Inmarsat's maritime and aeronautical services, and in 
particular the Global Maritime Distress Satellite System 
(GMDSS), will continue to be available to current and future 
users. In particular, the bill as reported includes specific 
provisions: (1) regarding Inmarsat replacement satellites (new 
section 602(b)); (2) providing that the Commission may 
authorize COMSAT to provide additional services, using Inmarsat 
facilities as long as continued progress is made toward 
privatization of Inmarsat (new section 603(a)); (3) providing 
even if progress is not being made, COMSAT will be able to 
continue to provide additional services under contracts in 
existence on the date a finding of no progress is made (new 
section 603(c)); and (4) providing that the United States must 
take steps necessary to preserve the GMDSS (new sections 
624(2)and 624(7)). These provisions provide the necessary assurances 
that the bill will not harm Inmarsat users.
    Inmarsat appears to be moving forward on its own a plan for 
privatization. Given the current provisions in the Satellite 
Act, including title VI, the Committee finds that 
implementation in the United States of the plan being 
considered currently by Inmarsat, or agreement by the U.S. to 
such plan, as well as the creation of a new intergovernmental 
organization, would require legislation amending the Satellite 
Act. The Committee also finds that provisional application or 
agreement regarding an Inmarsat privatization plan similar to 
that currently being discussed would also require such 
legislation. INTELSAT recently decided to transfer a portion of 
its assets to a new affiliate, but has made no progress toward 
pro-competitive privatization. This spin-off apparently may 
also require legislative authorization.

              IX. Safeguards for Certain INTELSAT Services

    H.R. 1872 contains provisions to help ensure that INTELSAT 
users will not be harmed by the transition to a privatized and 
competitive market. These provisions are described in the 
section-by-section analysis of new section 601 in general and 
new section 601(b)(3) in particular, but are parallel to the 
safeguards provided for Inmarsat users.

                   X. Constitutionality of H.R. 1872

    During consideration of H.R. 1872 by the Committee, several 
Members asked whether certain provisions of the bill raised 
constitutional questions. Specifically, several Members asked 
whether the bill's provisions relating to permitting COMSAT's 
customers to renegotiate their contracts (section 642) and 
possible restrictions on COMSAT's distribution of IGO services 
(through sections 601 and 603) would constitute impermissible 
takings; whether the bill would encroach on the Executive's 
foreign affairs authority; and whether the bill was tantamount 
to a bill of attainder. The Committee analyzed these and other 
constitutional issues, and concludes that the bill does not 
contain any unconstitutional provisions.
    In conducting this analysis, the Committee examined the 
following constitutional concerns: (1) takings; (2) bill of 
attainder; (3) the President's foreign affairs authority; (4) 
free speech clause of the First Amendment; and (5) due process/
impairment of contracts. The Committee was assisted in this 
analysis by the American Law Division of the Congressional 
Research Service (CRS).

A. Takings

    Under the Fifth Amendment to the Constitution, private 
property cannot be taken by the government for public use, 
without just compensation. Under judicial precedent 
interpreting the Fifth Amendment, there are basically two 
separate takings doctrines--``per se takings'' and ``economic 
regulation takings''. H.R. 1872 would not raise per se takings 
issues, due to the lack of any tangible or real property 
involved. The Supreme Court rarely finds a takings due to 
economic regulation. In fact, to find a takings due to 
statutory economic regulation, the Supreme Court has required 
first that there be a substantive due process violation in the 
statute. Since the Court has not found a substantive due 
process violation in an economic regulation statute for over 
half a century, takings in that realm are equally unlikely.
    New section 601(a) would prospectively require the 
Commission to prevent separated entities from entering and 
providing service in the U.S. market if they were not 
structured in a pro-competitive manner. COMSAT may continue to 
own a portion of the INTELSAT affiliate New Skies, a 
``separated entity'' under the bill. The Court has often stated 
that ``those who do business in a heavily regulated field 
cannot complain when the legislative scheme is altered from 
time to time.'' See, e.g., Concrete Pipe & Products, Inc. v. 
Construction Laborers Pension Trust, 508 U.S. 602, 643 (1993).
    There is no property right in the possibility of future 
business expansion. Nothing in takings law guarantees an owner 
the continued use of its property in the most profitable 
manner. Thus even if one were to contend that space segment 
were property, Section 601(a)(1) does not appropriate such 
space segment.
    New section 601(b) would require the Commission to restrict 
access for INTELSAT and Inmarsat to serve the U.S. for non-core 
services if they did not privatize pro-competitively in 
accordance with the legislation. A takings claim here is 
unfounded. When establishing telecommunications policy, the 
Committee and the Commission have routinely stated that 
licenses are not private property. The Commission is currently 
authorized to limit, deny, or revoke licenses in many 
circumstances for legitimate purposes. The fact that this may 
cause an financial impact on COMSAT is irrelevant under a 
constitutional analysis.
    If such an argument were persuasive, the Commission would 
be without the right to revoke licenses in the public interest 
because doing so would most certainly raise a takings complaint 
from the aggrieved party. CRS has analyzed this issue and has 
found no case where a taking claim was upheld solely on the 
basis of a government-induced reduction in the value of an 
investment other than in land. And, as discussed earlier, the 
Court has been extremely reluctant to find takings based on 
economic regulation, particularly when that regulation merely 
adjusts the regulatory scheme in a heavily regulated area and 
does not significantly benefit the government.
    New section 603 would prevent INTELSAT and Inmarsat from 
offering additional services under new contracts if the FCC 
finds in its annual privatization review that these 
organizations have not made substantial and material progress 
towards privatization or are hindering new competitors from 
entering foreign markets. There is no property right in the 
possibility of future business expansion, even if the 
government entity in question encouraged the belief at one time 
that such expansion would be allowed.
    New section 641 would allow U.S. providers of 
telecommunications services to directly access INTELSAT and 
Inmarsat rather than being forced to go through COMSAT. 
TheCommittee notes that Congress reserved the right to repeal, alter, 
or amend the provisions of the Act of 1962. See, section 301 of the 
1962 Act, 47 U.S.C. 732 (1962). Of course, Congress could do so with or 
without a specific reservation, but the fact that it included this 
express reservation provides COMSAT notice that reliance on the status 
quo or an expectation that Congress would never reform the satellite 
regulatory regime through economic regulation would be unwarranted.
    New section 642 would require the Commission to permit 
users of telecommunications services a one-time opportunity to 
take a ``fresh look'' and, at their choice, renegotiate their 
contracts with COMSAT. The Supreme Court has repeatedly 
rejected takings claims based on Federal frustration of 
contracts between private parties. 8
---------------------------------------------------------------------------
    \8\ Concrete Pipe; Connolly; Omnia Commercial Co. v.  United 
States, 261 U.S. 502 (1923). In the lower courts, see Chang v. United 
States, 859 F.2d 893 (Fed. Cir. 1988).
---------------------------------------------------------------------------
    A concern was raised during the Subcommittee markup that 
portions of the bill may violate the Tucker Act or subject the 
U.S. Government to liabilities under the Tucker Act, 28 U.S.C. 
Sec. 1491. The Tucker Act is a jurisdictional statute, 
providing the Court of Federal Claims with jurisdiction over 
private causes of actions. It does not provide affirmative, 
substantive protections against certain government actions. The 
function of the Tucker Act is to waive the sovereign immunity 
of the United States to certain types of money claims, and vest 
jurisdiction over such claims in the U.S. Court of Federal 
Claims. In other words, the Tucker Act merely permits a suit 
for restitution if there is a valid claim against the U.S. The 
Tucker Act by itself creates no substantive right of action. In 
this instance, the Committee has found no liability under or 
violations of the takings clause and, thus, the Tucker Act is 
not applicable, nor violated by H.R. 1872.

B. Bill of attainder

    Article I, section 9, clause 3 of the Constitution 
prohibits bills of attainder. The bill authorizes, or in some 
cases directs, that the FCC take action COMSAT may consider 
harmful to its interests, such as in new sections 601, 603 and 
section 642. However, a bill of attainder is not merely 
legislation that a company believes is harmful to its 
interests, but is a legislative determination of guilt and 
punishment. Because the Committee's goal is economic regulation 
that promotes competition and privatization in the satellite 
market, not to punish any particular entity, it believes that 
H.R. 1872 is not a bill of attainder.
    In any bill of attainder case there must be present two 
elements--the requisite specificity and the intent to punish--
but the existence of the former element without the latter is 
insufficient to establish an existence of a bill of attainder. 
In Nixon v. Administrator of General Services, 433 U.S. 425, 
468-84 (1977), the Supreme Court, in upholding legislation to 
assert Federal Government control over President Nixon's 
Presidential papers, ``denied that the clause limited the power 
of Congress to burden some persons or groups while not so 
treating all other plausible individuals or groups. Even the 
law's specificity in referring to the former President by name 
and applying only to him did not condemn the act, because he 
`constituted a legitimate class of one' on whom Congress could 
`fairly and rationally' focus.'' Because COMSAT currently has a 
monopoly to distribute IGO services in the U.S., COMSAT is ``a 
legitimate class of one'' for purposes of economic regulation 
and the required element of specificity for a bill of attainder 
is not met.
    Notwithstanding that the first prong of the bill of 
attainder test is inapplicable in this case, the Committee 
analyzed whether the second prong is applicable. The Committee 
concluded that the second prong of the test--the intent to 
punish--is equally inapplicable. The Court used a three-pronged 
analysis to reject the Nixon case: (1) the law imposed no 
punishment traditionally judged to be prohibited by the clause; 
(2) the law, viewed functionally in terms of the type and 
severity of burdens imposed, could rationally be said to 
further non-punitive legislative purposes; and (3) the law had 
no legislative record evincing a congressional intent to 
punish.
    As the Supreme Court has ruled, ``only the clearest proof 
will suffice to establish the unconstitutionality of a 
statute'' on the basis that it ``was so punitive either in 
purpose or effect as to constitute a penal statute rather than 
a regulatory one.'' Hudson v. United States, 118 S.Ct. 488,493 
(1997).
    As has been stated in Part VI: The Committee Approach, 
supra, the Committee has no intent to punish COMSAT. The 
Committee seeks to stop the expansion of government provision 
of commercial services and have all service providers compete 
on a non-discriminatory basis. The Committee removes regulatory 
burdens from COMSAT that would hinder its operations in a 
competitive market. The Committee has the regulatory, not 
punitive, motive to promote competition in the domestic and 
global satellite services market.
    In sum, the purpose of the proposed legislation, as 
expressed throughout the course of the Committee's deliberation 
of H.R. 1872, to promote competition in telecommunications 
markets and a pro-competitive privatization of the IGOs, is 
clearly non-punitive. The Committee believes and concludes that 
H.R. 1872 does not constitute a bill of attainder.

C. First amendment

    The First Amendment provides that Congress shall make no 
law abridging the freedom of speech. Opponents of the bill 
could suggest that new sections 601 and 603 of the Satellite 
Act, as proposed to added by H.R. 1872, could be ruled 
unconstitutional as an infringement on COMSAT's First Amendment 
rights. Specifically, they might raise questions whether new 
sections 601(b) and 603, requiring the Commission to prevent 
INTELSAT and Inmarsat (and consequently COMSAT) from providing 
non-core services or additional services, respectively, if 
certain conditions are not met, would prevent COMSAT from 
offering certain communications and information services, 
including Internet content. Under this analysis, they might 
argue that new section 601(a)'s requirements that the 
Commission prevent separated entities from providingservices in 
the U.S. unless certain conditions are met could constitute 
impermissible restraints on speech.
    However, in potentially precluding providers from providing 
additional media, H.R. 1872 is comparable to antitrust laws 
that prevent combinations by media owners in restraint of 
trade. In addition to general antitrust laws, such as the 
Sherman Act, 15 U.S.C. Sec. 1, the FCC has various rules 
embodying such restrictions, including the daily newspaper 
cross-ownership rule, 47 C.F.R. Sec. 73.3555(d). The Supreme 
Court has upheld, against First Amendment challenges, both the 
application of the Sherman Act to the news media, and prior 
versions of the cross-ownership rule.
    Two caveats apply to the general rule that government may 
apply business restrictions on the provision of media services: 
government cannot create a special tax on media products and 
even content-neutral restrictions may be subject to an 
intermediate level of scrutiny by the courts. The government is 
given significant leeway in enacting such restrictions. In 
Turner Broadcasting System, Inc. v. Federal Communications 
Commission, 512 U.S. 664 (1994), the Supreme Court found that a 
content-neutral regulation will be sustained if it promotes a 
substantial governmental interest that would be achieved less 
effectively absent the regulation. In other words, the 
regulation need not be the least restrictive one the government 
could have chosen, but it may not burden substantially more 
speech than is necessary to further the government's legitimate 
interests. The Committee concludes that this legislation does 
indeed promote such a substantial government interest.
    Further, it appears that any speech restriction that would 
result from prohibiting some providers of services from 
providing, or COMSAT from investing in, additional services, 
such as the Internet, would constitute, at most, a content-
neutral incidental speech restriction. As such, it would be 
constitutional if it promotes a substantial governmental 
interest that would be less effective absent the regulation. 
The purpose of the bill is to promote a fully competitive 
global market for satellite communication services for the 
benefit of consumers and providers of satellite services and 
equipment. The Committee finds this to be a substantial 
governmental interest.
    The Committee believes and concludes that H.R. 1872 does 
not interfere with COMSAT's First Amendment rights. CRS' 
analysis of these issues is consistent with this finding. The 
Committee further believes that the provisions of new sections 
601 and 603 are necessary to promote a competitive satellite 
marketplace, both globally and domestically. The impact of the 
bill would be substantially less effective absent such 
provisions. Thus, the Committee finds that any concerns raised 
on possibly interfering with COMSAT's First Amendment rights 
are without merit.

D. Foreign Authority

    The Committee analyzed whether H.R. 1872 would encroach on 
the President's foreign affairs prerogatives by establishing 
instructions for positions in international negotiations. For 
example, new section 661 requires the President to secure a 
pro-competitive privatization of INTELSAT and Inmarsat based 
upon the criteria outlined in subtitle B of the bill. Further, 
new section 621 requires the President to secure a pro-
competitive privatization of INTELSAT and Inmarsat consistent 
with the criteria outlined in new sections 622 to 624. New 
sections 602, 648, and 649 might also raise similar questions. 
The Committee has reviewed these concerns and found that they 
do not encroach on Executive authority. This position is echoed 
by CRS's legal analysis.9
---------------------------------------------------------------------------
    \9\ Memorandum to House Committee on Commerce from American Law 
Division, Congressional Research Service, entitled ``Presidential and 
Congressional Interaction Issue;'' dated April 15, 1998.
---------------------------------------------------------------------------
    While it can be debated whether the Congress or the 
President has the authority to take the lead in foreign 
affairs, it is clear that the Congress and the Executive Branch 
share authority over establishment of foreign policy. As a 
general proposition, Congress and the President share power to 
act interrelatedly in this international/national arena. The 
President has the responsibility, under the Constitution, to 
determine the form and manner in which the United States will 
maintain relations with foreign nations. Only if there is some 
exclusivity conferred on the President by the Constitution or 
if there is some denial to Congress by the Constitution of the 
authority to legislate requirements in this area would there be 
a problem of validity.
    The Committee notes that the current statute already 
provides direction to, and obligations on, the President. For 
instance, section 201(a)(1) of the 1962 Act requires the 
President to aid the development and continuation of a 
commercial communications satellite system. Clearly the past 
does not support any proposition of presidential exclusivity in 
respect to INTELSAT or Inmarsat. Indeed the former organization 
emerged within the confines of the 1962 Act, and the latter was 
established pursuant to the International Maritime Satellite 
Act. The Committee strongly believes guiding the President on 
IGO policy is consistent with Congressional authority provided 
under the Constitution and with the precedence established in 
the 1962 Act.
    Congress has a number of delegated powers, including most 
formidably, the authority to regulate commerce among the States 
and with foreign nations. To Congress falls the legislative 
responsibility to enact laws establishing national policy, and, 
unless Congress invades some constitutional prerogative of the 
President, he is obligated to carry out that policy, not only 
in domestic affairs but in the context of international affairs 
as well. If Congress establishes a policy inconsistent with our 
obligations to other nations or to international bodies, it is 
the responsibility of the President to so notify those 
entities. It is not a constitutional issue if the statute, 
instead of leaving unexpressed the obligation, specifies that 
he is to carry out his international responsibilities to 
effectuate the policy thus statutorily set. Thus, even if the 
Administration were to object to the role provided the 
President in H.R. 1872, this would not, in the Committee's view 
raise Constitutional questions.

E. Due Process/Impairment of Contracts

    The Committee analyzed whether H.R. 1872 would interfere 
with private contracts of COMSAT or others, and thus violate 
the Constitution's due process requirements. The Fifth 
Amendment to the Constitution states that no person shall be 
deprived of life, liberty, or property, without due process of 
law. The issues raised regarding the bill's impact on contracts 
and the due process clause seem to be two-fold: (1) the bill 
could prevent COMSAT from executing its obligations and 
contracts made with INTELSAT and Inmarsat; and (2) COMSAT's 
current contracts would be explicitly subject to a one-time 
renegotiation under the bill's ``fresh look'' provisions. The 
Committee reviewed these concerns and believes that they do not 
raise constitutional problems. The Committee also consulted 
with and reviewed the work of CRS on this specific 
issue.10 CRS's analysis supports the Committee's 
conclusion that there is no impermissible interference with 
contracts or due process problems with the legislation.
---------------------------------------------------------------------------
    \10\ Memorandum to the House Committee on Commerce from American 
Law Division, Congressional Research Service, entitled ``Congressional 
Interference with Existing Contacts''; dated April 14, 1998.
---------------------------------------------------------------------------
    CRS notes that ``as a general rule, congressional 
legislation that interferes with private contracts is 
scrutinized under the lenient rational-basis review accorded 
economic regulations, whether the legislation operates 
retroactively or not.'' In passing the 1962 Act, Congress 
intended that the Act could be modified and expressly retained 
the authority to ``repeal, alter or amend'' it. Thus, it is 
clear that COMSAT and other companies cannot with any validity 
claim a property right in any current arrangement under the 
Act. Bowen v. Agencies Opposed to Social Security Entrapment, 
477 U.S. 41, 52 (1986) supports this very conclusion.
    The Supreme Court ruled in Fleming v. Rhodes, 331 U.S. 100, 
107 (1947) ``So long as the Constitution authorizes the 
subsequently enacted legislation, the fact that its provisions 
limit or interfere with previously acquired rights does not 
condemn it. Immunity from federal regulation is not gained 
through forehanded contracts. Were it otherwise, the paramount 
powers of Congress could be nullified by prophetic 
discernment.'' In addition, in FHA v. The Darlington, Inc., 358 
U.S. 84, 91 (1958) the Court declared, ``those that do business 
in the regulated field cannot object if the legislative scheme 
is buttressed by subsequent amendments to achieve the 
legislative end.'' COMSAT today is regulated as a dominant 
common carrier under title II of the Communications Act of 1934 
in certain respects.
    The Supreme Court has noted that economic regulation, that 
is, ``a law adjusting the burdens and benefits of economic 
life,'' enjoys before the courts a presumption of 
constitutionality, unless the legislature acts in an arbitrary 
and irrational way. Usery v. Turner Elkhorn Mining Co., 428 
U.S. 1, 15 (1976). Laws upsetting expectations under contracts 
may have a retroactive effect, but this fact does not alter the 
analysis. See PBGC v. R. A. Gray & Co., 467 U.S. at 729.

          [T]he strong deference accorded legislation in the 
        field of national economic policy is no less applicable 
        when that legislation is applied retroactively. 
        Provided that the retroactive application of a statute 
        is supported by a legitimate legislative purpose 
        furthered by rational means, judgments about the wisdom 
        of such legislation remain within the exclusive 
        province of the legislative and executive branches. Id.

    In addition, the Supreme Court stated in Usery that ``[O]ur 
cases are clear that legislation readjusting rights and burdens 
is not unlawful solely because it upsets otherwise settled 
expectations.'' Usery v. Turner Elkhorn Mining Co., 428 U.S., 
15-16. See also Concrete Pipe & Products of California, Inc. v. 
Construction Laborers Pension Trust, 508 U.S. 602, 637 (1993).
    A portion of COMSAT's current contracts are with agencies 
of the Federal government, such as the Department of Defense, 
that could be impacted by the implementation of this 
legislation, including new sections 601, 603, and 642. If the 
requirements of the legislation for a pro-competitive 
privatization are not met, it is possible that COMSAT would be 
unable to perform all of its obligations under contracts with 
such Federal agencies. But this fact would not give rise to any 
liability on the part of COMSAT or the United States. COMSAT 
would presumably have a defense of impossibility of 
performance. Moreover, no liability could be passed through to 
the Government because of the sovereign acts doctrine. That is, 
the Government as sovereign and the Government as contractor 
constitute two separate roles. If the Government acts as 
sovereign, in its legislative or executive capacity, to make 
impossible the performance of its obligations, it cannot be 
held responsible in its capacity as a contractor. See Horowitz 
v. United States, 267 U.S. 458 (1925).
    Thus, the government acting in its capacity as sovereign 
with the intention of creating a competitive satellite 
marketplace, both domestically and globally, would not incur 
liability or cause constitutional problems due to the bill's 
potential impact on COMSAT's contracts with Federal agencies. 
It, thus, would appear that no constitutional issue would be 
raised by any provision that would limit the exercise of pre-
existing contract rights of COMSAT or other entities, either in 
terms of agreements with telecommunications companies, INTELSAT 
or Inmarsat, or with governmental agencies. The Committee, 
therefore, finds that there is no valid legal concern with 
respect to contractual interference or due process.

                                Hearings

    The Subcommittee on Telecommunications, Trade, and Consumer 
Protection held a hearing on H.R. 1872, the Communications 
Satellite Competition and Privatization Act of 1997, on 
September 30, 1997. The Subcommittee received testimony from: 
Ms. Regina M. Keeney, International Bureau Chief, Federal 
Communications Commission; Mr. Jack A. Gleason, Associate 
Administrator for International Affairs, National 
Telecommunications and Information Administration, Department 
of Commerce; Mr. Warren Y. Zeger, General Counsel, 
COMSATCorporation; Mr. Frederick A. Landman, President and CEO, 
PanAmSat Corporation; Mr. Kenneth Gross, President and COO, Columbia 
Communications Corporation; and Mr. Gerald B. Helman, Vice President, 
Mobile Communications Holdings, Inc./ELLIPSO.

                        Committee Consideration

    The Subcommittee on Telecommunications, Trade, and Consumer 
Protection met in open markup sessions on March 4, 1998, and 
March 18, 1998 to consider H.R. 1872, the Communications 
Satellite Competition and Privatization Act of 1998. On March 
18, 1998, the Subcommittee approved H.R. 1872 for Full 
Committee consideration, amended, by a voice vote.

                             Rollcall Votes

    Clause 2(l)(2)(B) of Rule XI of the Rules of the House 
requires the Committee to list the recorded votes on the motion 
to report legislation and amendments thereto. A motion by Mr. 
Bliley to order H.R. 1872 reported to the House, amended, was 
agreed to by a voice vote, a quorum being present. The 
following are the recorded votes on amendments to H.R. 1872, 
including the names of those Members voting for and against, 
and the voice votes taken on amendments offered to H.R. 1872.





                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of 
the House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee finds that 
H.R. 1872, the Communications Satellite Competition and 
Privatization Act of 1998, would result in no new or increased 
budget authority, entitlement authority, or tax expenditures or 
revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of rule XI of the Rules of 
the House of Representatives, the following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 23, 1998.
Hon. Tom Bliley,
Chairman, House of Representatives,
Committee on Commerce, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1872, the 
Communications Satellite Competition and Privatization Act of 
1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Kathleen 
Gramp (for federal costs) and Patrice Gordon and Jean Wooster 
(for the private-sector impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 1872--Communications Satellite Competition and Privatization Act 
        of 1998

    Summary: H.R. 1872 would amend existing law regarding the 
federal regulation of international satellite communications 
systems and their relationship to the U.S. market. Two treaty-
based entities--the International Telecommunications Satellite 
Organization (INTELSAT) and the International Mobile Satellite 
Organization (Inmarsat)--currently provide most satellite-based 
communications services worldwide. A private company, COMSAT, 
serves as the U.S. signatory to both organizations and, under 
current law, has the exclusive right to market their services. 
This bill would allow customers to purchase services directly 
from INTELSAT and Inmarsat and to renegotiate contracts with 
COMSAT under certain terms and conditions. If the privatization 
of INTELSAT and Inmarsat occurs in a manner inconsistent with 
the criteria and deadlines in the bill, the Federal 
Communications Commission (FCC) would be required to limit the 
types of services and facilities that these entities can 
provide in the U.S. market. The bill also would modify COMSAT's 
rights and status as signatory, and would make the company 
subject to the FCC's regulatory fees. The FCC and the 
Department of Commerce (DOC) would have to issue various 
reports, findings, and determinations to implement these 
provisions, but the bill would eliminate certain administrative 
tasks after certain reforms take effect.
    CBO estimates that implementing this bill would have no 
significant budgetary effects over the 1999-2003 period, but 
could result in lower costs to federal agencies for 
international telecommunications services in future years. The 
legislation would not affect direct spending or receipts; 
therefore, pay-as-you-go-procedures would not apply. H.R. 1872 
contains no intergovernmental mandates as defined in the 
Unfunded Mandates Reform Act of 1995 (UMRA) and would impose no 
costs on state, local, or tribal governments. H.R. 1872 would 
impose new private-sector mandates as defined by UMRA. CBO 
estimates that the cost of those mandates would not exceed the 
statutory threshold established in UMRA ($100 million in one 
year, adjusted annually for inflation).
    Estimated cost to the Federal Government: H.R. 1872 would 
affect discretionary spending on regulatory activities and 
purchases of international telecommunications services. CBO 
estimates that the administrative costs associated with 
implementing this bill would have no significant effect on net 
spending by the FCC and DOC. We estimate that the FCC would 
spend a few million dollars over the five-year period to 
prepare the determinations and reports required by the bill, 
assuming appropriation of the necessary amounts. Because the 
commission is authorized under current law to collect fees from 
the telecommunications industry sufficient to offset the cost 
of its regulatory and applications activities, CBO assumes that 
these additional costs would be offset by an increase in 
collections credited to annual appropriations for the FCC. 
Likewise, we assume that any reduction in spending resulting 
from the repeal of existing statutory tasks would be offset by 
a reduction in receipts. Hence, we estimate that the net effect 
of this additional workload on the FCC's discretionary spending 
would be negligible. In addition, we estimate that DOC would 
spend less than $100,000 in 1999 to prepare reports on access 
to markets in INTELSAT and Inmarsat-member nations.
    The bill also would require COMSAT to pay regulatory fees. 
By itself, that requirement would not change the amount of 
receipts collected by the FCC because the agency's receipts are 
based on the amounts appropriated. However, having COMSAT pay 
regulatory fees would increase the number of companies liable 
for the fee, which would reduce the amount that must be paid by 
other companies. According to the FCC, COMSAT's payments would 
total about $650,000 per year.
    H.R. 1872 could result in lower prices in the future for 
international telecommunications services purchased by the 
federal government, but CBO estimates that such savings are 
unlikely to be significant during the 1999-2003 period. 
According to COMSAT, the company's direct sales to the federal 
government totaled about $50 million in 1997, most of which 
involved sales to the Department of Defense and the Federal 
Aviation Administration. Provisions in this bill allowing 
agencies to purchase services directly from INTELSAT or 
Inmarsat after January 1, 2000, may result in savings relative 
to current law. Given the time that would be needed to resolve 
various technical and contractual issues related to direct 
access, CBO expects that such savings, if they occur, would not 
be significant during the next five years. Provisions allowing 
agencies to renegotiate existing contracts with COMSAT are 
unlikely to yield significant savings because most government 
contracts do not involve long-term volumetric commitments. The 
cost of services purchased from other providers, such as AT&T, 
MCI, and Sprint, could decline if those companies reduce their 
costs as a result of this legislation, but CBO cannot estimate 
the magnitude or timing of such savings.
    CBO also expects that federal agencies would be unlikely to 
incur significant costs if the privatization of INTELSAT and 
Inmarsat were to trigger the restrictions in the bill on the 
types of services those entities can provide in the U.S. 
market. Finally, it is possible that enacting H.R. 1872 would 
result in litigation regarding the rights and status of COMSAT. 
CBO has no basis for predicting the likelihood or potential 
costs of such litigation.
    Pay-as-you-go considerations: None.
    Estimated impact on State, local, and tribal governments: 
H.R. 1872 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on state, local, or tribal 
governments.

Estimated impact on the private sector

    H.R. 1872 would impose new private-sector mandates, as 
defined by UMRA, on COMSAT (a private firm, created by federal 
statute) and on owners of earth stations who buy services from 
INTELSAT and Inmarsat. (An earth station consists of an antenna 
and associated electrical equipment that transmit and receive 
radio signals). CBO estimates that the direct costs of 
complying with private-sector mandates in the bill in each of 
the years 2000 through 2004 would be below the statutory 
threshold established in UMRA ($100 million in 1996, adjusted 
annually for inflation). In addition to the costs of mandates, 
the bill would affect the future business potential of COMSAT 
in a variety of other ways. Those effects depend on whether 
INTELSAT and Inmarsat meet the criteria for privatization 
included in the bill. CBO has not attempted to estimate the 
magnitude of those effects.
            Mandates in the bill
    H.R. 1872 would impose three specific mandates on the 
private sector. The most costly is contained in section 642. 
That section would direct the FCC, beginning January 1, 2000, 
to require COMSAT to allow its customers to renegotiate their 
service contracts or terminate them without liability.
            Estimating the cost of section 642
    Section 642 would allow firms that have contracted with 
COMSAT for telecommunications services to take a ``fresh look'' 
at those contracts. COMSAT's status as the sole U.S. supplier 
of access to INTELSAT and Inmarsat services would be eliminated 
by section 641. Thus, the fresh look provision would allow 
COMSAT's current customers to take advantage of a new, more 
competitive market by negotiating more favorable terms with 
COMSAT or by terminating their contracts without liability if 
they can obtain better terms directly from INTELSAT and 
Inmarsat (or their successors) or from other satellite service 
providers. CBO estimates that the direct cost to COMSAT of the 
fresh look provision would be less than $100 million annually 
between 2000 through 2004 (the first five years that the 
mandate would be effective.)
    That estimate is based on information provided separately 
by COMSAT, its major customers, and the FCC. The estimated 
costs represent the difference between COMSAT's current 
expected net income from long-term contracts or tariff 
commitments, and its estimated net income after contracts have 
been renegotiated. CBO expects, consistent with assumptions 
made by COMSAT and its customers, that in general contracts 
would be renegotiated at lower prices rather than being 
entirely broken. Further, CBO assumes that the costs 
attributable to H.R. 1872 would be solely those related to 
long-term contracts that otherwise could not be renegotiated 
until they expire. After existing contracts expire any reduced 
revenues to COMSAT from negotiations for follow-on contracts 
would be attributable to new market conditions rather than the 
fresh look mandate in the bill.
            Other mandates
    The other private-sector mandates pose minimal costs. If 
the privatization criteria for INTELSAT and Inmarsat are not 
met, section 601(b)(1) would direct the FCC to limit, deny, or 
revoke the license of any entity (primary earth stations) to 
use a space segment owned, leased or operated by INTELSAT or 
Inmarsat to provide so-called noncore services. The bill 
defines such services, with respect to INTELSAT, as ``services 
other than public-switched network voice telephone and 
occasional-use television'' and, with respect to Inmarsat, as 
``services other than global maritime distress and safety 
services or other existing maritime or aeronautical services 
for which there are not alternative providers.''
    On the one hand, if INTELSAT and Inmarsat are privatized in 
a manner specified by the bill, no private-sector mandate would 
be created. On the other hand, if privatization does not occur, 
the FCC would have to take into account the prospect of harm to 
the buyers of satellite services before making its licensing 
decision. CBO assumes that, if competitive alternatives did not 
exist, the FCC would not deny earth stations access to INTELSAT 
or Inmarsat satellites. Either way, the cost of this provision 
would be negligible. The third mandate would be created by 
section 643(c), which would impose regulatory fees on COMSAT. 
Those fees are estimated to be about $650,000 annually.
    Estimate prepared by: Federal costs: Kathleen Gramp; Impact 
on the private sector: Patrice Gordon and Jean Wooster.
    Estimate approved by: Robert A Sunshine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

                         Section 1. Short Title

    Section 1 designates the short title of the bill as the 
``Communications Satellite Competition and Privatization Act of 
1998.''

                           Section 2. Purpose

    Section 2 designates that the purpose of the 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 
(IGOs)--INTELSAT and Inmarsat.
    The Committee finds that private businesses in a 
competitive market, rather than intergovernmental organizations 
providing satellite communications services, best serves the 
interests of consumers, workers, and businesses. The Committee 
finds that it is in the public interest for private companies 
rather than intergovernmental organizations to provide 
satellite services. The Committee also finds that the current 
IGOs (i.e., INTELSAT and Inmarsat) as well as their 
signatories, impair competition, raise barriers to market 
access for competitors and potential competitors, impede 
innovation, and raise costs for consumers. The Committee finds 
that the signatories to the INTELSAT and Inmarsat agreements, 
many of which are government-owned or controlled, impede 
competition and grant unfair advantage to the IGOs. The primary 
purpose of new title VI is to end the role of intergovernmental 
organizations in providing commercial satellite communications 
services and to ensure that when such organizations are 
privatized, the privatized entities are independent of their 
current signatories or owners which control access to national 
markets and are otherwise organized in a manner that maximizes 
competition.

      Section 3. Revision of Communications Satellite Act of 1962

    Section 3 creates a new Title VI with ``Subtitle A,'' 
``Subtitle B'', ``Subtitle C,'' ``Subtitle D,'' and ``Subtitle 
E'' to the Communications Satellite Act of 1962 (the 1962 Act 
or Satellite Act).

         TITLE VI--COMMUNICATIONS COMPETITION AND PRIVATIZATION

       Subtitle A--Actions to Ensure Procompetitive Privatization

Section 601--Federal Communications Commission licensing

    New section 601(a) establishes a competition test which 
prohibits the Federal Communications Commission (FCC or the 
Commission), with respect to any separated entity, from: (1) 
issuing a license or construction permit; (2) renewing a 
license or permit; (3) permitting the assignment of a license 
or permit; or (4) authorizing the use by any entity subject to 
U.S. jurisdiction of any space segment owned or operated by a 
separated entity unless the Commission determines that such 
issuance, renewal, assignment, or use will not harm competition 
in the U.S. The Commission is required to deny or revoke 
authority to use space segment (i.e., satellite capacity) owned 
or operated by the separated entity to, from, or within the 
U.S. if it cannot make such a determination.
    This subsection is specifically intended to apply to, but 
is not limited in its application to, the planned INTELSAT 
spin-off currently known as ``INC'' or ``New Skies Satellites, 
N.V.''
    New section 601(a)(2) requires the Commission to use the 
licensing criteria created in new sections 621 and 623, as 
added by this title, when making a determination pursuant to 
paragraph 601(a)(1). The Commission is precluded from making 
such a determination unless the privatization of any separated 
entity occurs in a manner that is consistent with all of the 
criteria in new sections 621 and 623. The Committee's intent is 
to ensure that an anti- competitive restructuring does not 
occur and if it does, such separated entity will be denied 
access to the U.S. market until such time as it is structured 
in a pro-competitive manner, as defined by the criteria in new 
sections 621 and 623. Spin-offs of IGOs like INTELSAT and 
Inmarsat may have one or more special advantages or otherwise 
be harmful to competition.Such advantages include, but are not 
limited to, favorable market access due to their former 
intergovernmental status, possible broad signatory ownership, favorably 
obtained orbital locations, possible preexisting contracts obtained by 
the IGOs, possible transfer of assets at book value rather than market 
value, and discriminatory relationships with any remaining IGO. The 
Committee finds that an IGO spin-off is a unique entity, including by 
virtue of its parent's intergovernmental status or relationship with 
remaining IGOs, and that any of these types of advantages create a high 
risk to competition. The Committee concludes that privatization in a 
manner consistent with pro-competitive criteria in this title is in the 
public interest.
    New section 601(b)(1) establishes a competition test which 
requires the Commission to substantially limit, deny, or revoke 
the authorization of any entity subject to U.S. jurisdiction to 
use any space segment owned, leased, or operated by INTELSAT or 
Inmarsat or any successor entities thereof to provide non-core 
services unless the Commission determines that INTELSAT and its 
successor entities (after January 1, 2002) or Inmarsat and its 
successor entities (after January 1, 2001), have been 
privatized in a manner that will not harm competition in the 
U.S. Using access to the U.S. market as an incentive is the 
single best means to promote pro-competitive privatizations of 
the IGOs or otherwise influence IGO or former IGO behavior.
    New section 601(b)(1) requires the Commission to take 
action necessary to enforce these provisions. The Commission is 
to use its authority to prevent the IGOs from offering non-core 
services in the U.S. market if the IGOs do not privatize in a 
pro-competitive manner by the dates provided. This section does 
not in any way limit the authority of the Commission to 
otherwise limit, deny, or revoke access to the U.S. market for 
INTELSAT, Inmarsat or their successor entities either before or 
after the dates for privatization with respect to core or non-
core services.
    New section 601(b)(2) requires the Commission to use the 
licensing criteria created in new sections 621, 622, and 624, 
as added by this bill, when making a determination pursuant to 
new section 601(b)(1). The Committee finds that privatization 
in a manner consistent with pro-competitive criteria in this 
legislation is in the public interest. The Commission is 
prohibited from making such a determination unless the 
privatization of INTELSAT, Inmarsat, or any successor entity is 
consistent with all of such criteria. The Committee's intent is 
to ensure that any privatization or restructuring promotes 
competition and if a privatization consistent with this title 
does not occur, then INTELSAT, Inmarsat or a successor entity's 
access to the U.S. market for non-core services be 
substantially limited, denied, or revoked until such time as 
the entity is restructured in a pro-competitive manner as 
defined by the criteria in new sections 621, 622 and 623.
    The Committee finds that any special advantages retained by 
privatized IGOs will pose a high risk to competition. Such 
advantages include, but are not limited to, favorable market 
access due to their former intergovernmental status, possible 
broad signatory ownership, favorably obtained orbital 
locations, possible preexisting contracts obtained by an IGO, 
possible transfer of assets at book value rather than market 
value, and possible discriminatory relationships with the 
remaining IGOs. Other special advantages which would pose a 
high risk to competition include continued discriminatory 
relationships between a successor entity and a remaining IGO, 
collusive behavior or cross subsidization between a successor 
entity and a remaining IGO, any direct or indirect benefit from 
privileges and immunities, ownership that is not independent of 
signatories which control access to national markets or the 
current IGOs, the lack of arm's length relationship between the 
successor entity and remaining IGO, (including separate 
officers, directors, employees, resources, marketing efforts 
and accounting systems), no recourse to IGO assets including 
for credit or capital, and fair market valuing for permissible 
business transactions between the IGO and its successor entity 
that is verifiable by an independent audit and consistent with 
normal commercial practice. An IGO registering or coordinating 
spectrum or orbital locations for successors would also 
constitute an anti-competitive advantage.
    New section 601(b)(3) clarifies some of the factors the 
Commission is to consider in making the licensing 
determinations pursuant to new section 601(b). The Commission 
shall consider whether users of non-core services are able to 
obtain similar services from an alternative to INTELSAT, 
Inmarsat, or successor entities: (1) whether such an 
alternative offers services at competitive rates, terms, or 
conditions; (2) whether the users, such as airlines or maritime 
users, will have to replace equipment at substantial costs 
prior to the termination of its design life; and (3) whether 
competitive alternatives do not exist because they have been 
foreclosed or hindered due to anti-competitive actions 
undertaken by or resulting from the INTELSAT or Inmarsat 
systems. This section also notes that such licensing decisions 
shall be made in a manner which facilitates achieving the 
purposes and goals in this title. New paragraph (b)(3) is 
designed to clarify rather than modify the language in new 
paragraph (b)(1).
    New section 601(b)(3) is intended in part to address the 
questions raised by some parties regarding the potential impact 
of new section 601(b) on certain users. Some expressed a 
concern about the possibility that certain users might be 
required to switch from IGO services when there are not yet 
competitive alternatives available. The Committee addressed 
this concern by providing that the Commission is to consider in 
making its licensing decision under new section 601(b) whether 
users of non-core services are able to obtain such services 
other than through the IGOs at competitive rates, terms, and 
conditions. At the same time, the Committee does not wish to 
provide any incentive to the IGOs or their signatories to 
preclude market entry by U.S. satellite service providers in 
overseas markets, thus preventing competitive alternatives from 
developing. Some expressed a concern that some signatories, 
aware that the Commission might consider whether alternatives 
were available to users, might make it more difficult for such 
alternatives to develop. Thus the Committee provides that in 
making its licensing decisions the Commission shall consider 
whether competitive alternatives in individual markets do not 
exist because of actions taken by or resulting from the 
INTELSAT or Inmarsat systems. Under this subsection, the 
Commission may publish notice of a potential limitation or 
revocation of licenses prior to the privatization dates in new 
section 601, in order to provide an opportunity to users to 
avoid high costs of replacing equipment or transitioning from 
one system to another. This subsection makes clear, however, 
that the decisions shall be made in a manner which facilitates 
the pro-competitive privatization of INTELSAT and Inmarsat as 
outlined in this title. Thus the Commission must implement new 
subsection (b)(3) in a manner which is best suited to resultin 
the pro-competitive privatization of the IGOs as soon as practicable 
but no later than January 1, 2001, for Inmarsat and January 1, 2002, 
for INTELSAT and in a manner consistent with the criteria in subtitle 
B.
    The Committee notes that nothing in H.R. 1872 is intended 
to jeopardize the ability of the U.S. government to contract 
for satellite services as necessary to protect our national 
security. The Committee expects that the Commission will 
implement section 601(b)(3), and all other provisions of the 
bill, in a manner which takes into account U.S. national 
security interests. The Committee expects particular deference 
be given to the national security related needs of our 
intelligence agencies and the Department of Defense, and other 
similar agencies.
    The Committee's intent is that while the Commission is to 
apply sufficient pressure on the IGOs and their successors to 
privatize in a pro-competitive manner as defined in the 
legislation, in doing so, it should consider the impact on 
users as prescribed in the bill. The objective is to reduce the 
burden on users if IGOs are denied access to the U.S. market. 
The Committee recognizes that certain signatories or the IGOs 
may erect or maintain formal or informal barriers to 
competitors, with the effect of making it difficult for 
providers other than the IGOs to offer competitive services to 
those markets. Thus the Commission is required to consider 
whether competitive alternatives do not exist because they have 
been foreclosed or hindered due to anti-competitive actions 
undertaken by or resulting from the INTELSAT or Inmarsat 
systems.
    This legislation is consistent with the World Trade 
Organization (WTO) obligations of the United States. However, 
to clarify that this is the case, new section 601(c)(3) 
explicitly states that the Commission shall take into 
consideration the United States obligations and commitments for 
satellite services under the Fourth Protocol to the WTO's 
Services Agreement, which covers basic telecommunications, as 
it implements new subsections (a) and (b). New subsection (c) 
is not designed in any way to reduce the pro-competitive 
requirements or criteria in this title. It is intended to 
clarify that the Commission shall take notice of the WTO 
obligations of the U.S. as it implements this title. The 
Committee anticipates that the Commission will, in doing so, 
receive input from relevant Executive branch agencies.
    New section 601(d) expressly states that this legislation 
does not preclude COMSAT from investing in or owning satellite 
or other facilities independent from INTELSAT, Inmarsat or 
successor or separated entities, or from reselling the services 
or facilities of such independent systems. This provision 
clarifies the Committee's intent that this legislation not 
preclude COMSAT from providing services through facilities 
independent from the IGOs. Thus, the legislation permits COMSAT 
to provide services in advanced, high-growth areas, including 
additional and non-core services, regardless of the outcome of 
the annual privatization determinations under new subsection 
601(b)(1) or new section 603, provided that COMSAT does so 
through independent facilities.
    The Committee's goal is to motivate and provide incentives 
for the IGOs to privatize in a pro-competitive manner as soon 
as possible. Essentially, the Committee has used the 
possibility of continued access to the lucrative U.S. 
telecommunications market to encourage the IGOs to privatize. 
New section 601 therefore provides deadlines and specific 
competition criteria. If these requirements are not met, the 
IGOs access to the U.S. market will be restricted for non-core 
services.

Section 602--INTELSAT or Inmarsat orbital locations

    New section 602 requires the President, unless the FCC 
determines that the IGOs have been privatized in a manner that 
will not harm competition pursuant to new section 601(c), to 
oppose, and prohibits the FCC from in any way assisting, any 
registration for new orbital locations for INTELSAT after 
January 1, 2002, and for Inmarsat, after January 1, 2001. The 
President and the FCC also must take all measures necessary to 
preclude procurement, registration, development, or use of new 
satellites which would provide non-core services. COMSAT is 
required under the 1962 Act to obtain authorization by the FCC 
for investment in new INTELSAT or Inmarsat satellites.
    A limited exception is provided in that this restriction 
does not apply to orbital locations for replacement satellites 
pursuant to new section 622(2)(B) and orbital locations for 
satellites that are contracted for as of March 25, 1998, if 
such satellites do not provide additional services. Additional 
services are defined as Internet services, high-speed data, 
interactive services, non-maritime or non-aeronautical mobile 
services, DTH or DBS video services, or Ka-band services. Such 
services should be provided by the private sector rather than 
IGOs. This exception in new subsection (b) is not intended to 
provide an avenue for expansion for the IGOs, through 
acquisition of new orbital locations or expanding the use of 
existing locations. New subsection (b)(2) provides that this 
exception only applies to satellites which provide services in 
the C, Ku, and L bands.

Section 603--Additional services authorized

    New section 603(a)(1) provides that the Commission may, 
subject to conditions in new section 603, authorize the use of 
INTELSAT or Inmarsat space segment for certain advanced 
services defined as additional services. New section 603(a)(2) 
provides that if the Commission does not find that the 
requirements of its annual review process as required in new 
section 603(b) have been fully met, including that substantial 
and material progress has been made toward a pro-competitive 
privatization and that the IGOs are not hindering competitors 
market access, then the Commission may not permit COMSAT or 
other providers of IGO services to offer additional services 
under new contracts. Under new subsection 603(a)(2), the 
prohibition on additional services under new contracts would 
last until the Commission makes a finding that progress towards 
a pro-competitive privatization is being made.
    Under new section 603(a)(2), if progress is not found, the 
Commission is required to preclude the authorization, license, 
permit or renewal thereof for the use of IGO space segmentfor 
additional services provided directly or indirectly under new 
contracts. By including both the direct and indirect provision of 
additional services, the Committee intends to preclude evasion of this 
section, including through resale to new users by existing users. New 
subsection 603(a)(3) requires the Commission to establish rules to 
prevent evasion of the limitations in this section by users who did not 
use specific additional services as of the date of the Commission's 
most recent finding under new subsection (b) that the conditions of 
such subsection have not been met. Thus users who are utilizing one 
type of additional service cannot evade this section by purchasing 
another type of additional service following a negative finding. The 
intent of this subsection is to avoid a potential termination of the 
services a user is currently utilizing, if a negative finding is made, 
but to preclude COMSAT or other providers of IGO services from offering 
additional services under new contracts, if the requirements of new 
section 603 are not met. New section 603 in no way limits the authority 
of the Commission to limit additional services or other services of 
IGOs or separated or successor entities if it decides to do so in the 
public interest, to promote a pro-competitive privatization or 
otherwise.
    New section 603(b) requires the FCC to annually review 
whether progress is being made by the IGOs towards a pro-
competitive privatization and provides the dates by which these 
annual findings must occur. New section 603(b)(1) contains the 
primary criteria to be used in such findings. New section 
603(b)(1)(A) sets out the first of these: that substantial and 
material progress has been made during the preceding period at 
a rate and manner that is probable to result in achieving a 
pro-competitive privatization in accordance with this title. 
Thus, the Commission would be required to find that the 
requirements of the section were not met if at the time of a 
finding: (1) the rate of privatization was not moving at a pace 
that would result in privatization of INTELSAT by January 1, 
2002 and Inmarsat by January 1, 2001, or (2) that even if it 
were, it is not probable that such privatizations would occur 
in a manner consistent with all the requirements of this title. 
Moreover, progress must be substantial and material, that is, 
not merely statements of intent to privatize, in order for the 
Commission to make a positive finding.
    New section 603(b)(1)(B) sets out the second primary 
criterion for a positive annual finding: that neither INTELSAT 
or Inmarsat are hindering competitors' or potential 
competitors' access to the satellite services market place. 
Thus, if the Commission finds that the IGOs, either on their 
own or working with their signatory owners, are hindering 
access to the satellite services market, then it must find that 
the conditions in this section have not been met.
    New sections 603(b)(2)-(5) contain several specific 
conditions which, at a minimum, must be met in order for the 
Commission to make a positive annual finding. However, these 
minimum requirements alone are not sufficient for the 
Commission to make a positive finding. Both new sections 
603(b)(1)(A) and (B) must also be met prior to a positive 
finding. The principle criteria that must guide the 
Commission's analysis are those in new section 603(b)(1). The 
references to a pro-competitive privatization in new sections 
603(b)(2)-(5) refer to that described in the requirements of 
this title. For example, if the resolution described in new 
section 603(b)(2) is not consistent with and does not include 
the pro-competitive criteria in subtitle B, then the 
requirements of this section have not been met. The same 
applies with respect to the new sections 603(b)(3)-(5).
    New section 603(b)(6) defines the criterion of not 
hindering access and requires that the Commission not make a 
finding under new paragraph (1)(B) unless the Commission 
determines that the INTELSAT or Inmarsat are not in any way 
impairing, delaying or denying access to national markets or 
orbital locations for other satellite service providers. The 
Committee finds that the IGOs and their signatories have 
impaired market access and that the IGOs have warehoused 
orbital slots, impaired competition throughout the satellite 
coordination process, and otherwise created barriers to 
competition. This section therefore requires the Commission to 
make a negative finding under paragraph (1)(B) if it determines 
that the INTELSAT or Inmarsat systems are in any way impairing 
or delaying access to national markets or orbital locations.
    New section 603(c) grandfathers users under existing 
contracts, so that COMSAT or any other IGO Signatory may 
continue to provide additional services to any third party 
under a contract that predates a negative finding. This section 
is designed to avoid requiring the breach of existing contracts 
for IGO services by parties that have relied on such contracts 
in business planning. It is not intended to permit evasion of 
new subsection (b) through resale or other devices.

   Subtitle B--Federal Communications Commission Licensing Criteria: 
                         Privatization Criteria

Section 621--General criteria to ensure a pro-competitive privatization 
        of INTELSAT and Inmarsat

    New section 621 provides the Commission with the general 
criteria it must use in its determination of whether the 
licensing of the use of, or provision of service by, any of the 
privatized entities will harm competition in the U.S. market. 
In addition to the ten general criteria in new section 621, 
other provisions in subtitle B provide criteria specific to the 
privatization of INTELSAT, INTELSAT's separated entity, and 
Inmarsat. New section 621 directs the President and the 
Commission to secure pro-competitive privatizations of INTELSAT 
and Inmarsat in accordance with the criteria set out in 
subtitle B.
    New section 621(1) provides deadlines for the two 
organizations to obtain such a privatization. For INTELSAT, the 
deadline is as soon as practicable, but no later than January 
1, 2002, for Inmarsat it is as soon as practicable, but no 
later than January 1, 2001. The Committee believes that these 
dates are fully achievable for each organization, since they 
have been studying the issues associated with privatization for 
over four years.
    New section 621(2) sets out the key objective for 
privatizations of the IGOs, which is that their successor 
entities and separated entities be independent corporations. 
Currently, the IGOs are not corporations, incorporated in any 
one country and subject to that country's laws, but instead are 
treaty-based intergovernmental organizations, immune from many 
nationalgovernments' laws and regulations. In effect, the IGOs, 
providers of commercial services, have much of the legal status of a 
government entity. The intent of new section 621(2) is to ensure that 
the privatized entities do not operate with such privileged and immune 
treatment, but are subject to the same laws and regulations as other 
competitors. Accordingly, new section 621(2) requires that privatized 
entities be national corporations and have ownership and management 
that is independent of the IGOs and the signatories.
    Specifically, new section 621(2)(B)(I) provides that the 
privatized entities must have ownership and management that is 
independent of any signatories or former signatories that 
control access to national telecommunications markets, and 
ownership and management independent of any IGO remaining after 
the privatization. This is intended in part to remove the 
conflict of interest inherent when, as is often the case with 
the IGOs owners, the operators, or signatories, are owned by 
the same agency empowered to make interconnection arrangements 
or licensing decisions on additional market entry. In some 
cases, the IGO signatories are themselves the government 
licensing agency. If the privatized entities are owned by 
operators who can ensure new competitors are kept out of their 
national markets or raise barriers or otherwise impair market 
access, then such a privatization will harm competition.
    By ``independent,'' the Committee intends that the IGO 
privatizations result in entities that operate free from 
control of the IGOs and the IGO signatories, and that they 
instead function as normal private corporations, with fiduciary 
duties to private shareholders, and not to national 
governments. The Committee does not intend to bar investment in 
the privatized entities by any particular entity, but the 
signatories, acting in any collaborative function as they do 
now through IGO structure, should not control or influence the 
operations of any privatized entity. The Committee does not 
intend to provide ``veto'' power to any one country by the 
insistence of that country's signatory investing in a 
privatized entity. Rather, by ``independent,'' the Committee 
intends to provide some degree of flexibility and discretion to 
the Administration and the Commission in determining the 
totality of the privatized entity's independence, and therefore 
specifically avoids using investment limitations on a 
percentage basis. However, the Committee intends a minimum of a 
superabundant external investment, independent from the IGOs, 
signatories and former signatories, would be necessary to find 
that a privatized entity is indeed ``independent.'' Likewise, 
if signatory ownership creates an incentive or potential 
incentive for signatory favoritism of an IGO successor or 
separate entity, such structure should not be deemed 
independent.
    Likewise, the Commission should consider when making its 
determinations under new section 601, the totality of the 
privatized entities ownership and management structure. The 
Committee also expects the Commission would look to its 
precedents and relevant precedents in other bodies of law for 
determining independence in terms of corporate governance. If 
the IGOs or market-access controlling signatories have control 
of the board or in other ways control the operations and 
decisions of any privatized entities, then such entities would 
not be ``independent'' under the meaning of this section. The 
Committee recognizes that there are many ways to ``control'' 
access to markets. Legal control is one means. Control through 
facilities ownership or influence with authorities are others.
    Without the requirements of this section, the successor and 
separated entities of the IGOs could retain the same unfair 
market advantage over private competitors that the IGOs 
themselves have enjoyed. The legislation is concerned only with 
those signatories and former signatories who control market 
access. The Committee is determined to open markets to 
competitive suppliers of telecommunications services, so as to 
most reliably lower the costs of international communications 
for the benefit of consumers in the United States and 
worldwide.
    New section 621(3) requires as a pro-competitive criteria 
that the privatized entities may not operate with IGO 
privileges and immunities. This section seeks to prevent the 
IGO successor and separated entities from benefiting from 
another unfair competitive advantage that the IGOs have 
enjoyed. The IGOs have a full range of diplomatic and other 
treaty-based privileges and immunities, such as tax exemptions, 
immunity from lawsuits, antitrust immunity, and preferential 
access to orbital locations. These privileges and immunities 
have permitted the IGOs to warehouse scarce orbital slots, 
prevented competitors from obtaining orbital locations from 
which to compete, and have made it difficult, if not 
impossible, for private competitors to obtain legal redress for 
anti-competitive abuses that the IGOs may have engaged in.
    New section 621(3) provides that preferential treatment of 
the IGOs not be extended to any privatized entity. This section 
therefore prohibits extending any preferential treatment the 
IGOs have enjoyed. In addition, the section specifically 
includes privileged or immune treatment provided by national 
governments; privileges or immunities or other competitive 
advantages IGOs and their signatories enjoy through their 
intergovernmental agreements by which the IGOs operate; and 
preferential access to orbital locations including through the 
non-application of anti-warehousing requirements. By this 
language, the Committee intends that the privatized entities 
would be subject to the same requirements as any other 
competitor in a market, and would not be provided preferential 
access over its competitors to orbital locations, nor 
preferential status under a country's domestic law nor any 
other preferences, direct or indirect, of any kind. Therefore, 
to be pro-competitively structured, a privatized entity must be 
treated like any other competitor in each national market. For 
purposes of a Commission determination under new section 601, 
the Commission must consider that preferential treatment in 
other markets may harm competition in the U.S. market.
    New section 621(4) requires as one of the ten general 
criteria for a pro-competitive restructuring that during the 
transition period prior to full privatization, the IGOs shall 
not be permitted to expand into additional services, as defined 
by the bill. This limit on IGO expansion applies to additional 
applications of existing services or additional areas of 
business. Thus if an IGO attempts to offer an additional 
service by applying an existing service in a new or advanced 
manner, that service provision would also be precluded.
    New section 621(4) is intended to prevent the IGOs from 
leveraging their dominant positions in their core services into 
new and additional services. This is, in part, designed to 
address the phenomenon that, when dominant telecommunications 
companies are put on notice that competition is going to be 
permitted, they commonly seek to expand into new markets, using 
leverage from their dominant services to foreclose the market 
opportunities of new entrants.Such leveraging into advanced 
service sectors would be particularly troubling in this instance since 
the IGOs were given their monopolies only to facilitate their provision 
of core services, such as international telephony for INTELSAT and 
safety of life at sea for Inmarsat.
    New section 621(5) provides that any privatized entity 
shall be a national, public stock corporation whose shares are 
publicly traded and whose operations are subject to the laws of 
the nation of incorporation. Therefore, new section 621(5)(B) 
provides deadlines for initial public offerings of securities 
of any privatized entity. Those deadlines are no later than 
January 1, 2001, for the successor entities of INTELSAT and no 
later than January 1, 2000, for the successor entities of 
Inmarsat. The Committee notes that the general criteria only 
address the initial public offering (IPO) of stock in the 
successor entities. The Committee does not provide any deadline 
for any subsequent public offerings of stock, but notes that 
the deadline for a complete privatization, as provided in new 
section 621(1), is a year following each IPO, respectively for 
INTELSAT and Inmarsat.
    New section 621(5)(C) provides that the shares of the 
privatized entities be listed on major stock exchanges with 
transparent and effective securities regulation. This is to 
ensure that the stock of privatized entities is not protected 
by interested governments or subject to manipulation, but that 
its trading is instead subject to regulation that protects 
against such fraudulent, deceptive or otherwise abusive stock 
trading practices. The Committee also intends by this new 
section 621(5)(C) that such privatized entities be subject to 
the disclosure requirements of major stock exchanges and be 
subject to the fiduciary duties imposed on boards by nations 
with such exchanges. This subsection, like all of new section 
621, is necessary in part because the Committee finds that IGO 
successor or separated entities, given the intergovernmental 
status of their parent entities, are unique organizations, 
unlike other satellite service providers.
    New section 621(5)(D) requires that the board of directors 
of any privatized entity be independent of the signatories and 
the remaining IGOs. The section requires that a majority of the 
board of any successor or separated entity not be selected or 
appointed by, or otherwise represent any signatory or former 
signatory that controls access to national markets or any IGO 
remaining after privatization. By limiting the board selection 
by signatories that control market access in their countries, 
the Committee intends to prevent control of the board by 
signatories that can influence entry decisions in their 
respective markets. In many countries, the signatories are 
government-owned or controlled monopolies that control access 
to their telecommunications markets. In some markets, the 
signatory is the actual licensing body for that country. The 
intent of new section 621(5)(D) is thus analogous to that of 
new section 621(2)(B). As with that section, the Committee does 
not intend to bar COMSAT's participation in the selection 
process of future privatized entities' directors, since COMSAT 
does not control access to the U.S. telecommunications market.
    New section 621(5)(E) requires that all transactions 
between such entities and their former IGOs must be conducted 
at arm's length, in order to assure independence of the newly 
privatized entities, to assure fairness to competitors, and to 
promote transparency and market-based decision making.
    New sections 621 (6) and (7) reflect the Committee's intent 
that IGO successor and separated entities be fully subject to 
competition regulation and enforcement in the countries in 
which they are incorporated, headquartered, or doing business, 
and that such countries have progressive telecommunications 
regimes. New section 621(6) would therefore require that any 
privatized entity that is licensed by the FCC must have applied 
through the appropriate national licensing authorities for use 
of desired frequencies and orbital location registration. New 
section 621(7) would consequently prevent FCC licensing of an 
entity that forum shopped by incorporating in a country that 
does not have developed regulatory and competition regimes and 
which have not made WTO market opening commitments with respect 
to their satellite markets. This paragraph therefore requires 
that the domiciliary country have effective laws and 
regulations that secure competition in telecommunications 
services, and be a signatory of the WTO Services Agreement with 
a schedule of commitments covering non-discriminatory market 
access to its satellite services market. This subsection, like 
all of new section 621, is necessary in part because the 
Committee finds that IGO successor or separated entities are 
unique organizations, due to the intergovernmental status of 
their parent organizations, and therefore unlike other 
satellite service provides.
    New section 621(8) is intended to prevent the IGOs and 
their successor and separated entities from warehousing orbital 
locations. Over the years the IGOs have had privileged access 
to scarce orbital slots, since no national or international 
authority has overseen their access to slots to assure that 
they actually need or use the locations for which they apply. 
Other satellite operators are not so privileged. For instance, 
although the Commission and much of the rest of the world has 
established a policy of spacing satellites two degrees in the 
orbital arc apart from each other, to avoid interference to 
adjacent satellites, INTELSAT has generally insisted on three 
degree spacing between its satellites and those of other 
systems.
    Orbital slots are critical to operating a satellite system. 
Without orbital slots, competitors may not operate satellites 
nor offer services over their facilities in competition to the 
IGOs. The Committee, therefore, has provided in new section 
621(8) an anti-warehousing cut-off date of March 25, 1998. 
Under this paragraph, if the IGOs are not using their slots to 
provide commercial services by that date, or if they do not 
have firm operational plans and contractual commitments to do 
so, or to place a satellite in their reserved slots by that 
date, they must turn the slots back in to the International 
Telecommunication Union (ITU) for reallocation to satellite 
operators who will make use of them. INTELSAT's and Inmarsat's 
operational plans are adopted in official signatory meetings of 
the two organizations, by the Board of Governors and Council, 
respectively. The language requiring the provision of 
commercial services is intended to prevent the IGOs from 
warehousing orbital slots in which a satellite is located, but 
one that is not currently being used to provide services, due 
perhaps to its inclined orbit. The provision of commercial 
services would generally require a satellite to be in a non-
inclined orbit, for example so that a user's earth station 
could receive a steady signal.
    New section 621(9) requires an appraisal of the satellites 
and other assets transferred by an IGO to a successor or 
separated entity prior to such transfer. Under the paragraph, 
the appraisal must be at both book and fair market value and 
conducted by an independent third-party. All of the existing 
assets of the IGOs have been acquired by privileged treaty 
organizations and are to be transferred to private 
corporations. It is, therefore, important for government 
officials and the public to know the market value of the assets 
that will be conferred by the privatization of the IGOs. A 
determination can then be made by each national administration 
as to the most appropriate disposition of the profits from such 
transfers.
    Finally, new section 621(10) provides that COMSAT shall not 
be authorized by the Commission to invest in K-TV satellites, 
unless Congress specifically authorizes such investment. U.S. 
policy is that the INTELSAT should not procure the K-TV 
satellites. The Committee intends by this paragraph to ensure 
that U.S. policy is not thwarted by COMSAT's investment in such 
satellites unless Congress specifically provides authorization.
    In December 1996, the U.S. Administration opposed the 
procurement by INTELSAT of the K-TV satellite, which is 
designed to provide direct broadcast services, on the theory 
that IGOs should not expand into commercial services that the 
private sector can provide. Despite U.S. opposition, INTELSAT 
voted to procure the K-TV satellite. Under the 1962 Act, COMSAT 
must obtain Commission authorization prior to investing in IGO 
satellites. After INTELSAT's decision to procure K-TV, COMSAT 
petitioned the Commission for investment authorization. The 
Commission has not granted COMSAT's request. In April 1998, 
INTELSAT announced that the separated entity New Skies/INC will 
operate K-TV. INTELSAT wishes to transfer K-TV to New Skies at 
book value, debt free. Accordingly, new section 621(10) is 
intended to ensure that, if such transfer is attempted, COMSAT 
shall not be authorized to invest in K-TV satellites, until 
such time as the K-TV transfer and operation are consistent 
with other privatization criteria in the section. The Committee 
specifically finds at this time that approval of investment in 
K-TV is not in the public interest and that allocation or 
transfer of orbital slots for K-TV satellites is not in the 
public interest.

Section 622--Specific criteria for INTELSAT privatization

    In addition to the general privatization criteria that are 
intended to apply to the privatization of any successor or 
separated entity of an IGO, new section 622 provides criteria 
specific to the privatization of INTELSAT. In this section, the 
Committee highlights two important criteria for that 
privatization, both of which are intended to foster a 
competitive international satellite market undistorted by 
INTELSAT's leveraging of its status as an IGO, ownership 
structure, and dominant position in core telephone and video 
services into new service markets.
    First, new section 622(1) would require the Commission to 
determine for purposes of licensing whether the number of 
competitors created out of INTELSAT's present assets, when 
added to the number of competitors in markets served by 
INTELSAT, is sufficient to create a fully competitive market. 
While the Committee did not feel it necessary to specify a 
particular number of successor or separated entities to be 
created out of INTELSAT, it believes that multiple successor 
entities are more likely to lead to a fully competitive global 
satellite market, given the current market position and 
dominance of the IGOs. The Committee finds that the greater the 
number of competitors created out of INTELSAT, the more likely 
consumers and new entrants will benefit through the enhancement 
of competition. The Committee intends that the U.S. seek a 
privatization involving multiple entities created out of 
INTELSAT as a key part of its privatization policy, but does 
not specify the number of such entities which must be created.
    The Commission will be required under new section 601(b) to 
determine whether the licensing of a successor entity due to 
the privatization of INTELSAT will harm competition in the 
telecommunications market of the United States. Under new 
section 622(1), an aspect of this competition determination 
must include an analysis of whether the number of competitors 
created out of INTELSAT is sufficient to create a fully 
competitive market. If the Commission cannot make a 
determination that the requisite number of competitors are 
present, the lack of such competitors must be deemed a high 
risk to competition as would failure to meet any of the other 
criteria in this title.
    The Committee notes that new section 622(1) refers to the 
market served by INTELSAT. That market is a global market. New 
section 601(b) requires the Commission to undertake a 
determination regarding the effect on competition in the U.S. 
market. The Committee notes that given the inherently global 
nature of satellite services, the competitiveness of the global 
market will inevitably impact the competitiveness of the U.S. 
market for satellite services.
    New section 622(2) is intended to limit INTELSAT's 
expansion pending privatization. While new section 621(4) 
limits INTELSAT's expansion into new services, this paragraph 
limits INTELSAT's expansion by preventing its acquisition of 
additional orbital slots, placing new satellites in existing 
slots, and procuring additional satellites. Ever since 
privatization was first discussed, INTELSAT has engaged in a 
rapid expansion of its satellites and orbital slots. Since this 
rapid expansion has occurred at a time when the market share 
for INTELSAT's core telephony services in some markets is 
decreasing (although the total volume of telephone minutes has 
not decreased) due to the transfer of such traffic to fiber 
optic cables, INTELSAT may use its rapid build-up to use its 
privileged position and access to orbital slots to create a 
surplus of satellites or satellite capacity for new commercial 
services, thus impairing access to these new markets for 
competitors.
    Thus, in new section 622(2), the Committee directs the 
United States to oppose such INTELSAT expansion in INTELSAT, at 
the ITU, and in the Commission.
    The Committee, however, makes provision in new section 
622(2)(B) for INTELSAT's need to replace satellites used for 
the provision of core telephone and occasional video services, 
as long as such satellite is procured pursuant to a 
construction contract executed by March 25, 1998, and its 
construction commences by January 1, 2002.
    New section 622(3), like the previous paragraph, is 
intended to end INTELSAT's anti-competitive tactics. The 
paragraph requires as an additional pro-competitive criteria 
for INTELSAT's privatization that technical coordination 
between INTELSAT and others shall not be used to impair 
competition, and that coordination under Article XIV(d) of the 
INTELSAT Agreement shall be eliminated pursuant to the 
privatization process. Article XIV(d) currently requires all of 
INTELSAT's competitors to engage in coordination of their 
satellites with INTELSAT satellites, in order to avoid 
technical and economic harm to INTELSAT. By new section 622(3), 
the Committee intends that the review for economic harm to 
INTELSAT through the operation of a competitor's satellites be 
eliminated, thereby confirming a decision already made by 
INTELSAT, and that continuing technical coordination shall not 
be used for anti-competitive purposes.

Section 623--Specific criteria for INTELSAT separated entities

    New section 623 establishes criteria, in addition to the 
general criteria of new section 621, specific to the 
privatization of a separated entity of INTELSAT. Under new 
section 681(a)(8) of subtitle E on definitions, a separated 
entity of INTELSAT is defined in part as an entity whose 
structure was under discussion as of March 25, 1998. In early 
April 1998, INTELSAT adopted a plan to incorporate an 
affiliate, New Skies Satellites, N.V. The additional criteria 
in new section 623 will therefore be used by the FCC when it 
makes its determination, pursuant to new section 601(a), 
whether New Skies has been privatized in a manner that will not 
harm competition in the telecommunications markets of the U.S.
    Specifically, new section 623 adds the following criteria 
to a new section 601(a) determination: (1) the INTELSAT 
separated entity must conduct an IPO within one year after 
decision to create it--or by April 1, 1999; (2) the INTELSAT 
separated entity must waive any privileges and immunities for 
any transaction between INTELSAT and itself; (3) there must be 
no interlocking directorates between the INTELSAT separated 
entity and INTELSAT; (4) spectrum is not to be transferred from 
INTELSAT and the INTELSAT separated entity after its initial 
creation; and (5) there must be no reaffiliation through 
ownership, management or exclusive arrangements between the 
INTELSAT separated entity and INTELSAT until 15 years after the 
complete privatization of INTELSAT.
    The Committee intends by new section 623 in part to specify 
the elements that would define the independence of the 
separated entity from INTELSAT. Accordingly, new section 623(1) 
gives the separated entity one year to hold a public offering 
of its stock. Only when private, non-signatory owners hold a 
preponderance of the separated entities shares can there be any 
assurance of independence and autonomy from INTELSAT.
    New section 623(2) similarly carries forward the policy of 
new section 621 that a separated entity should in no way 
partake in the privileges and immunities enjoyed by INTELSAT. 
New section 621, for example, requires that transactions 
between INTELSAT and a separated entity be at arm's length. The 
only effective way to enforce that requirement is to ensure 
that INTELSAT will not assert its privileges and immunities if 
such a transaction is challenged in any court of law or before 
any competent regulatory body. In this provision, the Committee 
has sought to prevent a separated entity, which must have no 
privileges and immunities, from hiding behind those of 
INTELSAT.
    The Committee's goal is to ensure the creation of stand-
alone, truly independent separated entities. The prohibition in 
new section 623(3) on interlocking directorates is essential to 
that goal. Similarly, proscription in new section 623(4) on 
INTELSAT's continuing transfers of radio spectrum to a 
separated entity, after the initial transfers at the inception 
of such an entity, and the 15-year prohibition in new section 
623(5) on reaffiliation of a privatized INTELSAT and any 
successor or separated entity are intended to eliminate any 
remaining ties between INTELSAT and such entities.

Section 624--Specific criteria for Inmarsat

    New section 624 establishes criteria, in addition to the 
general criteria of new section 621, specific to the 
privatization of Inmarsat. Thus, the additional criteria in new 
section 624 would be used when the FCC makes its determination, 
pursuant to new section 601(b), whether Inmarsat and any 
successor entities have been privatized in a manner that will 
not harm competition in the telecommunications markets of the 
U.S.
    Specifically, new section 624 adds the following criteria: 
(1) multiple signatories and direct access to Inmarsat must be 
permitted; (2) Inmarsat must be prevented from expanding during 
the transition to full privatization; (3) there must exist a 
sufficient number of competitors in the markets served by 
Inmarsat, including the number of competitors created out of 
Inmarsat, to create a fully competitive market; (4) there are 
no ownership, management or exclusive arrangements between 
Inmarsat or any of its successor or separated entities and ICO 
for 15 years after Inmarsat's privatization; (5) there are no 
interlocking directorates or employees between Inmarsat or any 
of its successor or separated entities and ICO; and (6) 
Inmarsat spectrum, after January 1, 2006, or end of life of 
current Inmarsat satellites, whichever is later, must be 
available for assignment to all satellite systems on a non-
discriminatory basis. Thus the spectrum provided to Inmarsat is 
to be used for the key purpose for which Inmarsat was created--
particularly maritime safety--but is not to be used for a new 
type of service.
    While new sections 603 and 621(4) limit expansion of 
Inmarsat into new services, new section 624(2) limits 
Inmarsat's expansion pending privatization through the 
acquisition of additional orbital slots and new satellites. As 
is the case with INTELSAT, Inmarsat has engaged in the 
expansion of its satellites and orbital slots since 
privatization was first discussed. Since this expansion is 
occurring at a time when private competitors actively are 
seeking to enter the market for new services, Inmarsat is using 
its privileged position and access to orbital slots to create a 
surplus of satellites for new commercial services, thus 
impairing access to these new markets for competitors.
    New section 624(2) therefore directs the United States to 
oppose this Inmarsat tactic in the Inmarsat Assembly of Parties 
and Council, at the ITU and in the Commission. For purposesof 
the Commission and the Administration carrying out this directive, 
however, the Committee notes that new section 624(2) specifically 
provides that it shall not be construed to limit the maintenance, 
assistance, or improvement of the Global Maritime Distress and Safety 
Service (``GMDSS''). The Committee intends through both new sections 
624(2) and 624(7) that the United States will take all appropriate 
action to ensure the continued viability of GMDSS, which is currently 
provided by Inmarsat. To that end, the Committee also expects that the 
U.S. will actively support measures to enable private competitors to 
offer GMDSS in the future.
    New section 624(3) requires the Commission to consider the 
number of competitors created out of Inmarsat's present assets, 
added to the number of competitors in markets served by 
Inmarsat, when determining whether the use of a successor 
entity's services will harm competition in the U.S. New section 
624(3) is intended to facilitate the creation of a fully 
competitive market for mobile satellite services. While the 
Committee did not feel it necessary to specify a particular 
number of successor or separated entities to be created out of 
Inmarsat, it is its view that multiple entities are more likely 
to lead to a fully competitive market and that the U.S. should 
pursue the multiple subsidiary option.
    New section 624(4) specifically prohibits any recombination 
of Inmarsat or its successor entities with ICO until at least 
15 years after Inmarsat is privatized in accordance with the 
criteria in the bill. The 15 year remerger preclusion helps to 
prevent ICO from gaining unfair advantages over competitors or 
potential competitors by utilizing Inmarsat spectrum that was 
obtained by Inmarsat as an IGO. This provision prevents 
Inmarsat from evading the intent of the bill through merger or 
other joining with ICO, which is specifically excluded from the 
definition of ``separated entity.'' A similar purpose is 
underlies new section 624(5), which prohibits Inmarsat or its 
successor entities from sharing directors, officers, or 
employees with ICO.
    The Committee included new section 624(4) and (5) because 
it is concerned about the emerging U.S. mobile satellite 
service (MSS) industry's current access to global MSS spectrum. 
Any re-merger or affiliation of a privatized Inmarsat and ICO 
would also eliminate any near-term U.S. MSS access to that 
spectrum. Inmarsat has been assigned access to, and controls 56 
percent of available global MSS spectrum. ICO, with 82 percent 
of its investment held by Inmarsat signatories or organizations 
affiliated with an Inmarsat signatory, has been assigned, and 
controls 19 percent of available global MSS spectrum. The 
entire U.S. MSS industry currently has access to only 25 
percent of such global spectrum.
    The Committee therefore has concluded that there should be, 
in order to protect against competitive harm to the U.S. 
market, an absolute prohibition against the merger, 
reaffiliation, additional investment ownership, management ties 
or any exclusive arrangements between Inmarsat and ICO and/or 
any Inmarsat successor or separated entity for a period of 15 
years. The Committee has concluded that the Commission, with 
respect to one of the licensing criteria provided in new 
sections 621 and 624 for Inmarsat or Inmarsat successor or 
separated entities, shall specifically prohibit entry into the 
U.S. MSS market or revoke any such authority previously granted 
should these events occur.

Section 625--Encouraging market access and privatization

    New section 625 is intended to provide additional 
incentives for other nations that participate in the IGOs to 
support a pro-competitive privatization of the IGOs, but 
through a means that is consistent with U.S. obligations under 
the WTO Service Agreement. The Committee has therefore adopted 
a mechanism to use settlement rates for international message 
telephony as a means of encouraging both market access for 
private satellite systems and a pro-competitive privatization 
of INTELSAT.
    The Committee has provided new section 625 as an additional 
remedy that is targeted at the countries that deny market 
access to competitive satellite companies and that are opposing 
a timely and competitive privatization of INTELSAT and 
Inmarsat. Pursuant to new section 625, all relevant 
international telecommunications policies of the United States, 
including settlements policy, will be directed to the 
legislative objectives of lowering the costs of international 
telecommunications services for consumers.
    New section 625(a) accordingly requires the Secretary of 
Commerce, through the Assistant Secretary for Communications 
and Information, to transmit to the Commission a list of non-
WTO countries that impose barriers to competitive entry in 
their satellite market and a list of non-WTO countries that are 
opposing IGO privatization. The Commission may then impose a 
cost-based settlement rate on U.S. international common 
carriers settling their traffic with carriers from those 
countries, pursuant to new section 625(b). The Committee 
expects that other U.S. government agencies will take notice of 
this listing. Nothing in this title precludes the Commission 
from using settlement rates to encourage WTO member nations to 
support a pro-competitive privatization, using settlement rates 
as a lever, if otherwise consistent with U.S. obligations to 
the WTO. The Committee finds that lowering settlement rates to 
cost in any event would be in the public interest.
    The Committee notes that no specific time-frame for the 
imposition of cost-based rates on impeding countries is 
provided in new section 625, other than the 180 days from 
enactment provided to the Commerce Department and the agencies 
with which it must consult to provide a list to the Commission. 
The Committee thereby intends to provide the Commission with 
flexibility in the timing and decision to impose cost-based 
rates on impeding countries.
    New section 625(c) requires the Commission, in exercising 
its authority to establish settlement rates for U.S. 
international common carriers, to advocate in favor of cost-
based settlement rates in all relevant international 
telecommunications policy fora, including IGO meetings. By this 
paragraph, the Committee intends to clearly state that it is 
U.S. policy and in the public interest to establish cost-based 
settlement rates. The Committee believes that the Commission 
should exercise the authority it has to set settlement rates 
for U.S. carriers to advocate in favor of cost-based settlement 
rates, as opposed to cost-oriented rates or some other less 
competitive benchmark. The Committee believes that until 
international settlement rates are reduced to reflect the 
actual costs of terminating international calls on specific 
routes, theinternational market will continue to operate with 
significant distortive, above-cost subsidies, to the harm of 
competition and U.S. consumers.

          Subtitle C--Deregulation and Other Statutory Changes

Section 641--Direct access; treatment of COMSAT as nondominant carrier

    New sections 641(1) and (2) require the Commission to 
permit competitors to offer services through direct access to 
the INTELSAT and Inmarsat systems. The Commission is further 
required to ensure that direct access through the purchases of 
space segment from INTELSAT or Inmarsat is available by January 
1, 2000. The Commission is further required to ensure that 
direct access through investment directly in INTELSAT or 
Inmarsat by entities other than the U.S. signatory is 
permitted, by January 1, 2002, and Inmarsat, by January 1, 
2001. This section requires the Commission to take such actions 
as may be necessary to authorize such direct access.
    Currently, INTELSAT offers four types of direct access: 
Level 1, permitting a customer access to operational, technical 
and tariff information and permitting a customer to attend 
INTELSAT meetings; Level 2, permitting a consumer to access 
INTELSAT tariff and service terms and conditions; Level 3, 
permitting a consumer direct ordering and financial liability 
for services; and Level 4, permitting a consumer to directly 
invest.
    Inmarsat does not currently offer direct access to entities 
other than its signatories. However, the proposed privatization 
reportedly would terminate Inmarsat's Operating Agreement, 
including the provisions governing exclusive signatory 
distribution of Inmarsat service. If the Inmarsat Operating 
Agreement is terminated, former signatories, including COMSAT 
for provision of services in the United States, should not be 
the exclusive distributors of Inmarsat services. The Committee 
further finds that the U.S. Administration and the Commission 
should, in the public interest, ensure that any Inmarsat 
privatization plan includes direct access until full 
privatization is fully implemented. This statement should not 
be interpreted in any way as an endorsement of, or support for, 
the current Inmarsat privatization plans.
    Although over 85 nations worldwide now permit Level 3 
direct access to INTELSAT--resulting in dramatic savings to 
consumers--the United States, currently, does not. Currently, 
over 14 nations permit Level 4 direct access. This provision 
will help further deregulate the U.S. telecommunications 
marketplace, while bringing more opportunities and lower prices 
to consumers. The Committee believes that implementing direct 
access is of vital interest to the promotion of competition for 
INTELSAT and Inmarsat services in the United States, as well as 
in promoting competition for satellite services generally.
    New sections 641(1)(A)(i) through (iii) describe the 
circumstances which the Commission should determine are present 
when the Commission implements direct access through purchases 
of space segment capacity from INTELSAT. Likewise, new section 
641(2)(A)(i) through (iii) places similar requirements on the 
Commission before permitting telecommunications carriers to 
purchase space segment directly from Inmarsat. Specifically, 
the Commission would be required to determine the following 
conditions have been met prior to its implementation of direct 
access through purchases of space segment capacity: (1) 
INTELSAT and Inmarsat have a mechanism to ensure that 
signatories are compensated for unavoided support costs; (2) no 
foreign signatory is permitted to provide INTELSAT or Inmarsat 
service from the U.S.; and (3) carriers must pass through 
savings to end-users.
    The Committee intends that the Commission, in implementing 
new subsections 641(1)(A)(i) and 641(2)(A)(i), determine that 
the U.S. signatory be fairly compensated only for its 
unavoidable costs which it is required to incur as a signatory 
and which are in excess of payments from INTELSAT and Inmarsat 
to the U.S. signatory. Thus, the only costs covered by this 
section are those unavoidable signatory expenses in excess of 
all payments to signatories from the IGOs. Such payments 
include, but are not limited to, the INTELSAT Utilization 
Charge, or IUC. If such costs are in excess of or not otherwise 
covered by the IUC or by other payments to INTELSAT or 
Inmarsat, then this section shall be satisfied if INTELSAT or 
Inmarsat has in place or creates a mechanism or other 
methodology or legal regime which permits (or does not 
preclude) parties, particularly the U.S. party, to adopt means 
to ensure that such unavoidable, excess signatory costs are 
covered by payments from other direct access providers or 
otherwise covered or fairly compensated. In other words, either 
INTELSAT or Inmarsat providing payments which covers such 
excess, unavoidable costs themselves, or having a mechanism, 
methodology or legal regime which permits (or does not 
preclude) the Commission to establish a mechanism, other 
methodology, or legal regime to cover such costs, shall 
constitute the mechanism described in this section. The items 
cited in this section, namely insurance, administrative, and 
other operations and maintenance expenditures, are possible 
examples of what such costs might be. The Committee, however, 
intends that the Commission, as the expert agency with the 
ability to determine exactly what such unavoidable costs of 
serving as the U.S. signatory are, and whether such costs are 
in excess of payments the U.S. signatory receives from INTELSAT 
or Inmarsat, make the determinations as to which costs are 
unavoidable signatory expenses. The intent of this section is 
that a mechanism be in place to fairly compensate the U.S. 
signatory, currently COMSAT, for its unavoidable excess costs 
as signatory. The Committee does not intend the Commission to 
deny or delay or otherwise impair direct access to U.S. 
consumers due to circumstances effecting foreign signatories. 
The Committee expects that the Commission will establish, if 
necessary to have direct access for space segment capacity in 
place as of January 1, 2000, and investment direct access by 
January 1, 2002, (for INTELSAT) and January 1, 2001, (for 
Inmarsat), whatever rules are necessary to comply with this 
section, including but not limited those necessary for fair 
compensation of the unavoidable, excess signatory costs 
described herein. The Committee intends that this section be 
implemented in a manner so as to ensure that direct access 
through purchases of space segment capacity from the IGOs is 
available as of January 1, 2000, and investment direct access 
by January 1, 2002, for INTELSAT and January 1, 2001, for 
Inmarsat. Nothing in this section precludes the Commission from 
establishing direct access earlier with or without the 
structure described in this section. This section does, 
however, mandate direct accessfor space segment capacity as of 
January 1, 2000, and investment direct access as of January 1, 2002, 
for INTELSAT as of January 1, 2001, for Inmarsat, pursuant to this 
section.
    The Committee intends that the Commission, in implementing 
new subsections 641(1)(A)(ii) and 641(2)(A)(ii), does so in a 
manner consistent with U.S. obligations to the WTO and consults 
with Executive branch agencies in this regard.
    The Committee intends that the Commission, in implementing 
subsections 641(1)(A)(iii) and 641(2)(A)(iii), should not 
establish a ``means'' that imposes any administrative or 
regulatory burdens on the affected carriers or other burdens 
which might impair a carrier's ability to respond to the 
demands of a competitive marketplace. The Committee expects 
that the Commission can meet this condition, for example, 
simply by requiring the carriers to annually provide a letter 
to the Commission verifying that end-users are receiving 
savings from the implementation of direct access through 
purchases of space segment capacity from the IGOs. The 
Committee does not intend for the Commission to implement any 
form of carrier regulation or reporting requirement that would 
reinstate or be tantamount to dominant carrier regulation on 
carriers found to be non-dominant before the Committee's 
consideration of H.R. 1872 and subsequently relieved of such 
regulation, or to impose such regulation on carriers that have 
never been subject to it. The forgoing sentence does not apply 
to COMSAT in part because COMSAT is a unique entity created by 
Congress under the Satellite Act and serves a unique role as 
the U.S. signatory to the IGOs.
    The Committee believes that consumers will benefit from 
direct access and thus any type of extensive ``means'' beyond 
the most minimalist mechanism could reduce the competitive 
benefits of direct access. The Committee believes that the 
Commission should not impose any ``means'' that would impair or 
hinder, in any manner, carriers from taking advantage of direct 
access. The Committee notes that new subsections 641(1)(A)(iii) 
and (2)(A)(iii) state that the means be in place, not that the 
Commission take any specific action. The Committee also notes 
that the language does not refer to any specific amount or 
percentage of savings. Moreover, the Committee finds that 
competition is the best, most efficient and least burdensome 
means to ensure that savings are passed on to end users. Thus 
the Committee intends that this requirement would be met if the 
Commission finds that competition resulting from direct access 
will result in savings to consumers over what they might pay in 
the absence of direct access.11
---------------------------------------------------------------------------
    \11\ Letter to the Honorable Tom Bliley, Chairman, House Committee 
on Commerce from the Honorable William E. Kennard, Chairman, Federal 
Communications Commission, dated March 24, 1998.
---------------------------------------------------------------------------
    New sections 641(1)(B) and 641(2)(B) require the Commission 
to ensure that prior to permitting Level 4 direct access to 
INTELSAT or investment in Inmarsat that such investment will be 
attained under procedures ensuring that INTELSAT and Inmarsat 
signatories will receive fair compensation for the market value 
of their investment.
    The Committee intends that none of these conditions should 
be interpreted in a manner which impairs or prohibits the 
implementation of direct access. However, the Committee has 
received information from the Commission which highlight that 
these conditions could be interpreted to prevent direct access 
from the IGOs from being implemented by the dates in the 
bill.12 The Commission outlined scenarios in which 
the conditions could not be met and thus direct access would 
not occur. The Commission also raised serious concerns 
regarding whether these conditions could be reached prior to 
the dates outlined in the bill. The Committee intends that this 
section should be implemented in a manner so that no form of 
direct access will be impaired or delayed. However, the 
Committee intends to review these provisions in light of the 
concerns raised by the Commission and others regarding possible 
interpretations, in order to make them consistent with the 
intent of the Committee to end the monopoly provision of IGO 
services in this country through establishing direct access.
---------------------------------------------------------------------------
    \12\ Letter to the Honorable Tom Bliley, Chairman, House Committee 
on Commerce from the Honorable William E. Kennard, Chairman, Federal 
Communications Commission, dated March 24, 1998.
---------------------------------------------------------------------------
    The Committee believes the FCC has the current authority to 
institute direct access. By including provisions in this bill 
on direct access the Committee does not intend to imply that 
there is a need to amend any provision of the 1962 Act to 
provide for direct access. Furthermore, the Committee does not 
intend to prevent the Commission from exercising its existing 
discretion to provide for direct access to INTELSAT or Inmarsat 
prior to the deadlines outlined in the bill.
    New section 641(3) requires the Commission to take action, 
as appropriate, on COMSAT's petition to be treated as a non-
dominant common carrier for purposes of Commission regulatory 
treatment according to the provisions of section 10 of the 
Communications Act of 1934. The Committee does not here take a 
position on whether the petition should be granted.
    New section 641(4) requires the Commission to sunset any 
regulation providing for direct access to INTELSAT or Inmarsat 
when these organizations fully privatize in a pro-competitive 
manner pursuant to the provisions of the bill. The Committee 
believes that it is unnecessary to require direct access once 
INTELSAT and Inmarsat are fully privatized in accordance with 
this title.

Section 642--Termination of monopoly status

    New section 642 implements a policy doctrine known as 
``fresh look.'' Fresh look permits customers, at their own 
choice, to renegotiate their contracts once a barrier to 
competition has been eliminated. This gives customers an 
opportunity to take advantage of the arrival of new competitive 
providers in a market.
    New section 642(a) requires the Commission, beginning on 
January 1, 2000, to permit users or providers of 
telecommunications services under previous contracts or 
commitments with COMSAT, at their discretion, to have a one-
time opportunity to renegotiate their contracts or commitments 
on rates, terms and conditions. Under this section, the 
Committee expects that users or providers will be given one 
opportunity for a reasonable time period after January 1, 2000 
to renegotiate their contracts or commitments with COMSAT. 
Users would have the option of renegotiating their contracts 
during the period delineated as reasonable by the Commission. 
Some users and providers may opt to wait, for example, until 
Level 3 direct access providers are fully operational, before 
electing to exercise their right for fresh look as provided 
under this section. Users will presumably require some time to 
examine the options available and engage in contract 
negotiations. This is why the Committee required the Commission 
to determine a reasonable negotiation period, rather than just 
permitting fresh look on a specific date.
    New section 642(b) makes clear that existing Commission 
authority to implement fresh look is not altered or prohibited 
by new section 642(a). The Committee notes that given COMSAT's 
unique status as the U.S. signatory to IGOs, fresh look may be 
in the public interest in other circumstances. In addition to 
January 1, 2000, the Committee believes that the Commission 
should permit consumers to renegotiate their contracts or 
commitments on rates, terms, and conditions with COMSAT without 
threat of penalty whenever the situation warrants.
    The Committee intends to ensure that COMSAT does not use 
its market power to impose on customers contracts which have 
the effect of vitiating or impairing the effectiveness of this 
section. New subsection 642(c) therefore provides that whenever 
users or providers of telecommunications services are permitted 
to renegotiate contracts or commitments with COMSAT, the 
Commission is authorized to declared null, void and 
unenforceable any provision of a contract that restricts the 
ability of the customer to modify existing contracts, or enter 
into contracts with new providers. Such restrictions, should 
include withdrawal penalties or termination charges.

Section 643--Signatory role

    New section 643(a) permits the Commission to restrict 
foreign ownership of a U.S. signatory if the Commission 
determines that not doing so would constitute a threat to 
national security. Any such restriction may be adopted only 
after a public interest determination by the Commission, which 
is required to consult with the President prior to making a 
determination. This provision must be implemented in a manner 
consistent with the U.S. obligations under the WTO agreements.
    During markup of H.R. 1872, the Committee removed explicit 
instructions to require the Commission to permit multiple U.S. 
signatories to INTELSAT and Inmarsat. The removal of this 
provision should not be viewed as a lack of interest by the 
Committee to see multiple U.S. signatories to INTELSAT and 
Inmarsat. The Committee believes INTELSAT and Inmarsat 
permitting multiple signatories may be beneficial, but that a 
statutory change is unnecessary to permit it.
    New section 643(a)(2) provides that the U.S. is not 
required to have signatories represent it at INTELSAT or 
Inmarsat meetings, once the IGOs privatize in a pro-competitive 
manner pursuant to the provisions of the bill. The Committee 
believes that it is unnecessary for the U.S. to require a 
signatory to INTELSAT or Inmarsat once these organizations are 
fully privatized.
    New section 643(b) provides that COMSAT has no privileges 
and immunities under U.S. law on the basis of its signatory 
status to INTELSAT or Inmarsat. An exception is provided if 
COMSAT or any other U.S. signatory takes action pursuant to the 
specific, written instructions of the U.S. government.
    New section 643(c), ``Parity of Treatment,'' provides the 
Commission, starting on the date of enactment of the bill, with 
authority to enact regulatory fees on any U.S. signatory to 
INTELSAT or Inmarsat at the rate similar to the fees imposed on 
other entities providing similar services. The Committee 
believes that the Commission currently has the statutory 
authority to impose such fees but wishes to make explicit here 
that the Commission does indeed have such authority. This 
subsection should not be interpreted to imply that the 
Commission does not currently have the authority to enact such 
regulatory fees.

Section 644--Elimination of procurement preferences

    New section 644 prevents, starting on the date of enactment 
of the bill, any interpretation that the 1962 Act or 
Communications Act of 1934 implies or authorizes any preference 
for the U.S. Government procuring telecommunications services 
from INTELSAT, Inmarsat or COMSAT over any private provider of 
services. The Committee finds that in this unique circumstance 
involving an IGO the public interest would be served by using 
this provision as a basis for using U.S. government procurement 
as leverage to promote a pro-competitive privatization of the 
IGOs in accordance with this title.

Section 645--Use of ITU technical coordination

    New section 645 requires the Commission and U.S. satellite 
companies, starting on the date of enactment of the bill, to 
use the ITU procedures for technical coordination with regards 
to INTELSAT, or its successor or separated entities. This is 
intended to prevent the use of INTELSAT procedures, which have 
in the past been used to harm competitors by raising barriers 
to entry, and may continue to inherently benefit INTELSAT or 
its successor or separated entities over private U.S. satellite 
providers, when coordinating technical interference between 
systems.

Section 646--Termination of Communications Satellite Act of 1962 
        provisions

    New section 646 repeals certain portions of the 1962 Act 
that are no longer necessary as provisions of the bill become 
fully implemented. The bill ties the elimination of certain 
statutory provisions to the effective dates of certain 
provisions of the bill. The Committee finds that these 
provisions would no longer be necessary upon the date to which 
their repeal is tied to.
    New section 646 repeals section 304 of the 1962 Act on the 
date of direct access. At the Full Committee markup, the 
Committee amended H.R. 1872 to move the repeal of section 304, 
including the ten-percent ownership cap on COMSAT in section 
304(b)(3), to the effective date of the Commission's order 
establishing direct access to INTELSAT. Prior to the 
Subcommittee markup, section 304 was to be repealed on the date 
of enactment. In Subcommittee, the date of ``direct access'' 
(which was defined in the bill as introduced as including both 
Level 3 and Level 4 direct access) was moved from ``as soon as 
practicable'' to a later point and the definition was deleted 
and the current language regarding direct access was added. 
Thus, in Full Committee, the repeal of section 304 was made co-
synchronous to the date direct access is implemented, which for 
the purposes of repealing section 304 refers to the date direct 
access at all levels or forms is fully implemented. This repeal 
date is important, in part, because absent direct access, a 
single international services carrier or Regional Bell 
Operating Company, for example, could purchase COMSAT while 
COMSAT retains an aspect of its monopoly over access to an IGO 
and could potentially use COMSAT's market power and bottleneck 
position as the exclusive U.S. reseller of IGO services in an 
anti-competitive manner.

Section 647--Reports to Congress

    New section 647 requires the Commission to provide a 
detailed report to Congress within 90 days of enactment of the 
bill, and not less than annually thereafter, on the status of 
achieving privatization as required by the bill. The Committee 
intends that the Commission seek public comment in preparing 
these reports. The Committee intends that each provision of 
this title regarding privatization be addressed in the report. 
The report is required to be made public.

Section 648--Consultation with Congress

    New section 648 requires the Administration and the 
Commission to consult with the House Committee on Commerce and 
the Senate Committee on Commerce, Science and Transportation 
prior to each various meeting of INTELSAT and Inmarsat.

Section 649--Satellite auctions

    New section 649 prevents the Commission from using 
competitive bidding procedures (i.e., auctions) to award 
licenses for spectrum or orbital locations used for providing 
international satellite services. In addition, it requires the 
Administration to oppose the adoption of auctions to award 
licenses for orbital locations or satellite services in the ITU 
and other fora.
    The Committee believes that auctions of spectrum or orbital 
locations could threaten the viability and availability of 
global and international satellite services, particularly 
because concurrent or successive spectrum auctions in the 
numerous countries in which U.S.-owned global satellite service 
providers seek downlink or service provision licenses could 
place significant financial burdens on providers of such 
services. This problem would be compounded by the fact that the 
multi-year period required for design, construction and launch 
of global and international satellite systems usually requires 
service providers to invest substantial resources well before 
they obtain all needed worldwide licenses and spectrum 
assignments. The uncertainty created by spectrum auctions could 
disrupt the availability of capital for such projects, and 
significantly reduce the available benefits offered by global 
and international satellite systems.

            Subtitle D--Negotiations to Pursue Privatization

Section 661--Methods to pursue privatizations

    New section 661 directs the President to secure the 
privatization of INTELSAT and Inmarsat, and any separated or 
successor entities, in a manner that meets the criteria set 
forth in subtitle B (new sections 621-625). The Committee 
intends that the President will use all means available, 
including any authority available to the President in addition 
to that specifically provided in new title VI, to achieve the 
purposes of this legislation.

                        Subtitle E--Definitions

Section 681--Definitions

    New section 681 adds to the 1962 Act the following new 
definitions: (1) INTELSAT; (2) Inmarsat; (3) signatories; (4) 
party; (5) commission; (6) International Telecommunication 
Union; (7) successor entity; (8) separated entity; (9) orbital 
location; (10) space segment; (11) non-core; (12) additional 
services; (13) INTELSAT Agreement; (14) Headquarters Agreement; 
(15) Operating Agreement; (16) Inmarsat Convention; (17) 
national corporation; (18) COMSAT; (19) ICO; (20) Replacement 
Satellites; and (21) Global Mobile Distress and Safety 
Services.
    With respect to new section 681(8), which defines 
``separated entity,'' the Committee notes the following: 
notwithstanding the definitions in this bill, ICO remains 
subject to FCC entry regulation under the Commission's recent 
``DISCO II'' decision. The Committee recognizes that the 
Commission's Report and Order \13\ defined ICO as an IGO 
affiliate. The Commission defines an IGO affiliate as an entity 
created by an IGO, in which IGO and IGO affiliates maintain 
ownership interests. The ``DISCO II'' Report and Order 
establishes a framework for the evaluation of entry into the 
U.S. market for both IGOs and their affiliates.
---------------------------------------------------------------------------
    \13\ In the Matter of Amendment of the Commission's Regulatory 
Policies to Allow Non-U.S.-Licensed Space Stations to Provide Domestic 
and International Satellite Service in the United States--IB Docket 96-
111.
---------------------------------------------------------------------------
    This bill does not specifically apply the ``DISCO II'' term 
``affiliate'' to ICO. The Committee also specifically excludes 
ICO as a separated entity for purposes of the privatization of 
Inmarsat. The Committee stresses however, that its exclusion of 
ICO as a ``separated entity'' should not be considered as 
modifying, redefining or changing the Commission's ``DISCO II'' 
decision in any way. For purposes of the ``DISCO II'' Order, 
the Committee does not intend to effect the Commission's 
treatment of ICO as an IGO affiliate when considering ICO's 
applications to provide satellite services in the U.S.
    The Committee notes that the definitions of ``non-core 
services'' and ``additional services'' overlap. ``Additional 
services'' are specifically identified because they are 
services that the Committee believes INTELSAT or Inmarsat 
already are actively seeking to provide or seeking to establish 
the capability to provide. The Committee expects the Commission 
to consider substantially similar services to those 
specifically listed as additional services. ``Additional 
services'' are generally a subset of ``non-core services.'' 
During Full Committee consideration of the bill, the Committee 
rejected an amendment which would have defined non-core 
services as those provided over frequencies that COMSAT is not 
now currently using because such a definition would in the 
Committee's view have made the bill ineffective. This position 
was supported by the analysis of the FCC.\14\
---------------------------------------------------------------------------
    \14\ Letter to the Honorable Tom Bliley, Chairman, House Committee 
on Commerce from the Honorable William E. Kennard, Chairman, Federal 
Communications Commission, dated March 24, 1998.
---------------------------------------------------------------------------
    New section 681(b) states that, except where defined 
otherwise in new section 681(a), terms used in the bill have 
the same meaning as those terms have under section 3 of the 
Communications Act of 1934 (47 U.S.C. 153).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (new matter is printed 
in italic):

THE COMMUNICATIONS SATELLITE ACT OF 1962

           *       *       *       *       *       *       *


         TITLE VI--COMMUNICATIONS COMPETITION AND PRIVATIZATION

       Subtitle A--Actions To Ensure Procompetitive Privatization

SEC. 601. FEDERAL COMMUNICATIONS COMMISSION LICENSING.

  (a) Licensing for Separated Entities.--
          (1) Competition test.--The Commission may not issue a 
        license or construction permit to any separated entity, 
        or renew or permit the assignment or use of any such 
        license or permit, or authorize the use by any entity 
        subject to United States jurisdiction of any space 
        segment owned, leased, or operated by any separated 
        entity, unless the Commission determines that such 
        issuance, renewal, assignment, or use will not harm 
        competition in the telecommunications market of the 
        United States. If the Commission does not make such a 
        determination, it shall deny or revoke authority to use 
        space segment owned, leased, or operated by the 
        separated entity to provide services to, from, or 
        within the United States.
          (2) Criteria for competition test.--In making the 
        determination required by paragraph (1), the Commission 
        shall use the licensing criteria in sections 621 and 
        623, and shall not make such a determination unless the 
        Commission determines that the privatization of any 
        separated entity is consistent with such criteria.
  (b) Licensing for INTELSAT, Inmarsat, and Successor 
Entities.--
          (1) Competition test.--The Commission shall 
        substantially limit, deny, or revoke the authority for 
        any entity subject to United States jurisdiction to use 
        space segment owned, leased, or operated by INTELSAT or 
        Inmarsat or any successor entities to provide non-core 
        services to, from, or within the United States, unless 
        the Commission determines--
                  (A) after January 1, 2002, in the case of 
                INTELSAT and its successor entities, that 
                INTELSAT and any successor entities have been 
                privatized in a manner that will not harm 
                competition in the telecommunications markets 
                of the United States; or
                  (B) after January 1, 2001, in the case of 
                Inmarsat and its successor entities, that 
                Inmarsat and any successor entities have been 
                privatized in a manner that will not harm 
                competition in the telecommunications markets 
                of the United States.
          (2) Criteria for competition test.--In making the 
        determination required by paragraph (1), the Commission 
        shall use the licensing criteria in sections 621, 622, 
        and 624, and shall not make such a determination unless 
        the Commission determines that such privatization is 
        consistent with such criteria.
          (3) Clarification: competitive safeguards.--In making 
        its licensing decisions under this subsection, the 
        Commission shall consider whether users of non-core 
        services provided by INTELSAT or Inmarsat or successor 
        or separated entities are able to obtain non-core 
        services from providers offering services other than 
        through INTELSAT or Inmarsat or successor or separated 
        entities, at competitive rates, terms, or conditions. 
        Such consideration shall also include whether such 
        licensing decisions would require users to replace 
        equipment at substantial costs prior to the termination 
        of its design life. In making its licensing decisions, 
        the Commission shall also consider whether competitive 
        alternatives in individual markets do not exist because 
        they have been foreclosed due to anticompetitive 
        actions undertaken by or resulting from the INTELSAT or 
        Inmarsat systems. Such licensing decisions shall be 
        made in a manner which facilitates achieving the 
        purposes and goals in this title and shall be subject 
        to notice and comment.
  (c) Additional Considerations in Determinations.--In making 
its determinations and licensing decisions under subsections 
(a) and (b), the Commission shall take into consideration the 
United States obligations and commitments for satellite 
services under the Fourth Protocol to the General Agreement on 
Trade in Services.
  (d) Independent Facilities Competition.--Nothing in this 
section shall be construed as precluding COMSAT from investing 
in or owning satellites or other facilities independent from 
INTELSAT and Inmarsat, and successor or separated entities, or 
from providing services through reselling capacity over the 
facilities of satellite systems independent from INTELSAT and 
Inmarsat, and successor or separated entities. This subsection 
shall not be construed as restricting the types of contracts 
which can be executed or services which may be provided by 
COMSAT over the independent satellites or facilities described 
in this subsection.

SEC. 602. INTELSAT OR INMARSAT ORBITAL LOCATIONS.

  (a) Required Actions.--Unless, in a proceeding under section 
601(b), the Commission determines that INTELSAT or Inmarsat 
have been privatized in a manner that will not harm 
competition, then--
          (1) the President shall oppose, and the Commission 
        shall not assist, any registration for new orbital 
        locations for INTELSAT or Inmarsat--
                  (A) with respect to INTELSAT, after January 
                1, 2002, and
                  (B) with respect to Inmarsat, after January 
                1, 2001, and
          (2) the President and Commission shall, consistent 
        with the deadlines in paragraph (1), take all other 
        necessary measures to preclude procurement, 
        registration, development, or use of new satellites 
        which would provide non-core services.
  (b) Exception.--
          (1) Replacement and previously contracted 
        satellites.--Subsection (a) shall not apply to--
                  (A) orbital locations for replacement 
                satellites (as described in section 622(2)(B)), 
                and
                  (B) orbital locations for satellites that are 
                contracted for as of March 25, 1998, if such 
                satellites do not provide additional services.
          (2) Limitation on exception.--Paragraph (1) is 
        available only with respect to satellites designed to 
        provide services solely in the C and Ku, for INTELSAT, 
        and L, for Inmarsat, bands.

SEC. 603. ADDITIONAL SERVICES AUTHORIZED.

  (a) Services Authorized During Continued Progress.--
          (1) Continued authorization.--The Commission may 
        issue an authorization, license, or permit to, or renew 
        the license or permit of, any provider of services 
        using INTELSAT or Inmarsat space segment, or authorize 
        the use of such space segment, for additional services 
        (including additional applications of existing 
        services) or additional areas of business, subject to 
        the requirements of this section.
          (2) Additional services permitted under new contracts 
        unless progress fails.--If the Commission makes a 
        finding under subsection (b) that conditions required 
        by such subsection have not been attained, the 
        Commission may not, pursuant to paragraph (1), permit 
        such additional services to be provided directly or 
        indirectly under new contracts for the use of INTELSAT 
        or Inmarsat space segment, unless and until the 
        Commission subsequently makes a finding under such 
        subsection that such conditions have been attained.
          (3) Prevention of evasion.--The Commission shall, by 
        rule, prescribe means reasonably designed to prevent 
        evasions of the limitations contained in paragraph (2) 
        by customers who did not use specific additional 
        services as of the date of the Commission's most recent 
        finding under subsection (b) that the conditions of 
        such subsection have not been obtained.
  (b) Requirements for Annual Findings.--
          (1) General requirements.--The findings required 
        under this subsection shall be made, after notice and 
        comment, on or before January 1 of 1999, 2000, 2001, 
        and 2002. The Commission shall find that the conditions 
        required by this subsection have been attained only if 
        the Commission finds that--
                  (A) substantial and material progress has 
                been made during the preceding period at a rate 
                and manner that is probable to result in 
                achieving pro-competitive privatizations in 
                accordance with the requirements of this title; 
                and
                  (B) neither INTELSAT nor Inmarsat are 
                hindering competitors' or potential 
                competitors' access to the satellite services 
                marketplace.
          (2) First finding.--In making the finding required to 
        be made on or before January 1, 1999, the Commission 
        shall not find that the conditions required by this 
        subsection have been attained unless the Commission 
        finds that--
                  (A) COMSAT has submitted to the INTELSAT 
                Board of Governors a resolution calling for the 
                pro-competitive privatization of INTELSAT in 
                accordance with the requirements of this title; 
                and
                  (B) the United States has submitted such 
                resolution at the first INTELSAT Assembly of 
                Parties meeting that takes place after such 
                date of enactment.
          (3) Second finding.--In making the finding required 
        to be made on or before January 1, 2000, the Commission 
        shall not find that the conditions required by this 
        subsection have been attained unless the INTELSAT 
        Assembly of Parties has created a working party to 
        consider and make recommendations for the pro-
        competitive privatization of INTELSAT consistent with 
        such resolution.
          (4) Third finding.--In making the finding required to 
        be made on or before January 1, 2001, the Commission 
        shall not find that the conditions required by this 
        subsection have been attained unless the INTELSAT 
        Assembly of Parties has approved a recommendation for 
        the pro-competitive privatization of INTELSAT in 
        accordance with the requirements of this title.
          (5) Fourth finding.--In making the finding required 
        to be made on or before January 1, 2002, the Commission 
        shall not find that the conditions required by this 
        subsection have been attained unless the pro-
        competitive privatization of INTELSAT in accordance 
        with the requirements of this title has been achieved 
        by such date.
          (6) Criteria for evaluation of hindering access.--The 
        Commission shall not make a determination under 
        paragraph (1)(B) unless the Commission determines that 
        INTELSAT and Inmarsat are not in any way impairing, 
        delaying, or denying access to national markets or 
        orbital locations.
  (c) Exception for Services Under Existing Contracts If 
Progress Not Made.--This section shall not preclude INTELSAT or 
Inmarsat or any signatory thereof from continuing to provide 
additional services under an agreement with any third party 
entered into prior to any finding under subsection (b) that the 
conditions of such subsection have not been attained.

   Subtitle B--Federal Communications Commission Licensing Criteria: 
                         Privatization Criteria

SEC. 621. GENERAL CRITERIA TO ENSURE A PRO-COMPETITIVE PRIVATIZATION OF 
                    INTELSAT AND INMARSAT.

  The President and the Commission shall secure a pro-
competitive privatization of INTELSAT and Inmarsat that meets 
the criteria set forth in this section and sections 622 through 
624. In securing such privatizations, the following criteria 
shall be applied as licensing criteria for purposes of subtitle 
A:
          (1) Dates for privatization.--Privatization shall be 
        obtained in accordance with the criteria of this title 
        of--
                  (A) INTELSAT as soon as practicable, but no 
                later than January 1, 2002, and
                  (B) Inmarsat as soon as practicable, but no 
                later than January 1, 2001.
          (2) Independence.--The successor entities and 
        separated entities of INTELSAT and Inmarsat resulting 
        from the privatization obtained pursuant to paragraph 
        (1) shall--
                  (A) be entities that are national 
                corporations; and
                  (B) have ownership and management that is 
                independent of--
                          (i) any signatories or former 
                        signatories that control access to 
                        national telecommunications markets; 
                        and
                          (ii) any intergovernmental 
                        organization remaining after the 
                        privatization.
          (3) Termination of privileges and immunities.--The 
        preferential treatment of INTELSAT and Inmarsat shall 
        not be extended to any successor entity or separated 
        entity of INTELSAT or Inmarsat. Such preferential 
        treatment includes--
                  (A) privileged or immune treatment by 
                national governments;
                  (B) privileges or immunities or other 
                competitive advantages of the type accorded 
                INTELSAT and Inmarsat and their signatories 
                through the terms and operation of the INTELSAT 
                Agreement and the associated Headquarters 
                Agreement and the Inmarsat Convention; and
                  (C) preferential access to orbital locations, 
                including any access to orbital locations that 
                is not subject to the legal or regulatory 
                processes of a national government that applies 
                due diligence requirements intended to prevent 
                the warehousing of orbital locations.
          (4) Prevention of expansion during transition.--
        During the transition period prior to full 
        privatization, INTELSAT and Inmarsat shall be precluded 
        from expanding into additional services (including 
        additional applications of existing services) or 
        additional areas of business.
          (5) Conversion to stock corporations.--Any successor 
        entity or separated entity created out of INTELSAT or 
        Inmarsat shall be a national corporation established 
        through the execution of an initial public offering as 
        follows:
                  (A) Any successor entities and separated 
                entities shall be incorporated as private 
                corporations subject to the laws of the nation 
                in which incorporated.
                  (B) An initial public offering of securities 
                of any successor entity or separated entity 
                shall be conducted no later than--
                          (i) January 1, 2001, for the 
                        successor entities of INTELSAT; and
                          (ii) January 1, 2000, for the 
                        successor entities of Inmarsat.
                  (C) The shares of any successor entities and 
                separated entities shall be listed for trading 
                on one or more major stock exchanges with 
                transparent and effective securities 
                regulation.
                  (D) A majority of the board of directors of 
                any successor entity or separated entity shall 
                not be subject to selection or appointment by, 
                or otherwise serve as representatives of--
                          (i) any signatory or former signatory 
                        that controls access to national 
                        telecommunications markets; or
                          (ii) any intergovernmental 
                        organization remaining after the 
                        privatization.
                  (E) Any transactions or other relationships 
                between or among any successor entity, 
                separated entity, INTELSAT, or Inmarsat shall 
                be conducted on an arm's length basis.
          (6) Regulatory treatment.--Any successor entity or 
        separated entity shall apply through the appropriate 
        national licensing authorities for international 
        frequency assignments and associated orbital 
        registrations for all satellites.
          (7) Competition policies in domiciliary country.--Any 
        successor entity or separated entity shall be 
        incorporated and headquartered in a nation or nations 
        that--
                  (A) have effective laws and regulations that 
                secure competition in telecommunications 
                services;
                  (B) are signatories of the World Trade 
                Organization Basic Telecommunications Services 
                Agreement; and
                  (C) have a schedule of commitments in such 
                Agreement that includes non-discriminatory 
                market access to their satellite markets.
          (8) Return of unused orbital locations.--INTELSAT, 
        Inmarsat, and any successor entities and separated 
        entities shall not be permitted to warehouse any 
        orbital location that--
                  (A) as of March 25, 1998, did not contain a 
                satellite that was providing commercial 
                services, or, subsequent to such date, ceased 
                to contain a satellite providing commercial 
                services; or
                  (B) as of March 25, 1998, was not designated 
                in INTELSAT or Inmarsat operational plans for 
                satellites for which construction contracts had 
                been executed.
        Any such orbital location of INTELSAT or Inmarsat and 
        of any successor entities and separated entities shall 
        be returned to the International Telecommunication 
        Union for reallocation.
          (9) Appraisal of assets.--Before any transfer of 
        assets by INTELSAT or Inmarsat to any successor entity 
        or separated entity, such assets shall be independently 
        audited for purposes of appraisal, at both book and 
        fair market value.
          (10) Limitation on investment.--Notwithstanding the 
        provisions of this title, COMSAT shall not be 
        authorized by the Commission to invest in a satellite 
        known as K-TV, unless Congress authorizes such 
        investment.

SEC. 622. SPECIFIC CRITERIA FOR INTELSAT.

  In securing the privatizations required by section 621, the 
following additional criteria with respect to INTELSAT 
privatization shall be applied as licensing criteria for 
purposes of subtitle A:
          (1) Number of competitors.--The number of competitors 
        in the markets served by INTELSAT, including the number 
        of competitors created out of INTELSAT, shall be 
        sufficient to create a fully competitive market.
          (2) Prevention of expansion during transition.--
                  (A) In general.--Pending privatization in 
                accordance with the criteria in this title, 
                INTELSAT shall not expand by receiving 
                additional orbital locations, placing new 
                satellites in existing locations, or procuring 
                new or additional satellites except as 
                permitted by subparagraph (B), and the United 
                States shall oppose such expansion--
                          (i) in INTELSAT, including at the 
                        Assembly of Parties,
                          (ii) in the International 
                        Telecommunication Union,
                          (iii) through United States 
                        instructions to COMSAT,
                          (iv) in the Commission, through 
                        declining to facilitate the 
                        registration of additional orbital 
                        locations or the provision of 
                        additional services (including 
                        additional applications of existing 
                        services) or additional areas of 
                        business; and
                          (v) in other appropriate fora.
                  (B) Exception for certain replacement 
                satellites.--The limitations in subparagraph 
                (A) shall not apply to any replacement 
                satellites if--
                          (i) such replacement satellite is 
                        used solely to provide public-switched 
                        network voice telephony or occasional-
                        use television services, or both;
                          (ii) such replacement satellite is 
                        procured pursuant to a construction 
                        contract that was executed on or before 
                        March 25, 1998; and
                          (iii) construction of such 
                        replacement satellite commences on or 
                        before the final date for INTELSAT 
                        privatization set forth in section 
                        621(1)(A).
          (3) Technical coordination among signatories.--
        Technical coordination shall not be used to impair 
        competition or competitors, and coordination under 
        Article XIV(d) of the INTELSAT Agreement shall be 
        eliminated.

SEC. 623. SPECIFIC CRITERIA FOR INTELSAT SEPARATED ENTITIES.

  In securing the privatizations required by section 621, the 
following additional criteria with respect to any INTELSAT 
separated entity shall be applied as licensing criteria for 
purposes of subtitle A:
          (1) Date for public offering.--Within one year after 
        any decision to create any separated entity, a public 
        offering of the securities of such entity shall be 
        conducted.
          (2) Privileges and immunities.--The privileges and 
        immunities of INTELSAT and its signatories shall be 
        waived with respect to any transactions with any 
        separated entity, and any limitations on private causes 
        of action that would otherwisegenerally be permitted 
against any separated entity shall be eliminated.
          (3) Interlocking directorates or employees.--None of 
        the officers, directors, or employees of any separated 
        entity shall be individuals who are officers, 
        directors, or employees of INTELSAT.
          (4) Spectrum assignments.--After the initial transfer 
        which may accompany the creation of a separated entity, 
        the portions of the electromagnetic spectrum assigned 
        as of the date of enactment of this title to INTELSAT 
        shall not be transferred between INTELSAT and any 
        separated entity.
          (5) Reaffiliation prohibited.--Any merger or 
        ownership or management ties or exclusive arrangements 
        between a privatized INTELSAT or any successor entity 
        and any separated entity shall be prohibited until 15 
        years after the completion of INTELSAT privatization 
        under this title.

SEC. 624. SPECIFIC CRITERIA FOR INMARSAT.

  In securing the privatizations required by section 621, the 
following additional criteria with respect to Inmarsat 
privatization shall be applied as licensing criteria for 
purposes of subtitle A:
          (1) Multiple signatories and direct access.--Multiple 
        signatories and direct access to Inmarsat shall be 
        permitted.
          (2) Prevention of expansion during transition.--
        Pending privatization in accordance with the criteria 
        in this title, Inmarsat should not expand by receiving 
        additional orbital locations, placing new satellites in 
        existing locations, or procuring new or additional 
        satellites, except for specified replacement satellites 
        for which construction contracts have been executed as 
        of March 25, 1998, and the United States shall oppose 
        such expansion--
                  (A) in Inmarsat, including at the Council and 
                Assembly of Parties,
                  (B) in the International Telecommunication 
                Union,
                  (C) through United States instructions to 
                COMSAT,
                  (D) in the Commission, through declining to 
                facilitate the registration of additional 
                orbital locations or the provision of 
                additional services (including additional 
                applications of existing services) or 
                additional areas of business, and
                  (E) in other appropriate fora.
        This paragraph shall not be construed as limiting the 
        maintenance, assistance or improvement of the GMDSS.
          (3) Number of competitors.--The number of competitors 
        in the markets served by Inmarsat, including the number 
        of competitors created out of Inmarsat, shall be 
        sufficient to create a fully competitive market.
          (4) Reaffiliation prohibited.--Any merger or 
        ownership or management ties or exclusive arrangements 
        between Inmarsat or any successor entity or separated 
        entity and ICO shall be prohibited until 15 years after 
        the completion of Inmarsat privatization under this 
        title.
          (5) Interlocking directorates or employees.--None of 
        the officers, directors, or employees of Inmarsat or 
        any successor entity or separated entity shall be 
        individuals who are officers, directors, or employees 
        of ICO.
          (6) Spectrum assignments.--The portions of the 
        electromagnetic spectrum assigned as of the date of 
        enactment of this title to Inmarsat--
                  (A) shall, after January 1, 2006, or the date 
                on which the life of the current generation of 
                Inmarsat satellites ends, whichever is later, 
                be made available for assignment to all systems 
                (including the privatized Inmarsat) on a 
                nondiscriminatory basis and in a manner in 
                which continued availability of the GMDSS is 
                provided; and
                  (B) shall not be transferred between Inmarsat 
                and ICO.
          (7) Preservation of the gmdss.--The United States 
        shall seek to preserve space segment capacity of the 
        GMDSS.

SEC. 625. ENCOURAGING MARKET ACCESS AND PRIVATIZATION.

  (a) NTIA Determination.--
          (1) Determination required.--Within 180 days after 
        the date of enactment of this section, the Secretary of 
        Commerce shall, through the Assistant Secretary for 
        Communications and Information, transmit to the 
        Commission--
                  (A) a list of Member countries of INTELSAT 
                and Inmarsat that are not Members of the World 
                Trade Organization and that impose barriers to 
                market access for private satellite systems; 
                and
                  (B) a list of Member countries of INTELSAT 
                and Inmarsat that are not Members of the World 
                Trade Organization and that are not supporting 
                pro-competitive privatization of INTELSAT and 
                Inmarsat.
          (2) Consultation.--The Secretary's determinations 
        under paragraph (1) shall be made in consultation with 
        the Federal Communications Commission, the Secretary of 
        State, and the United States Trade Representative, and 
        shall take into account the totality of a country's 
        actions in all relevant fora, including the Assemblies 
        of Parties of INTELSAT and Inmarsat.
  (b) Imposition of Cost-based Settlement Rate.--
Notwithstanding--
          (1) any higher settlement rate that an overseas 
        carrier charges any United States carrier to originate 
        or terminate international message telephone services, 
        and
          (2) any transition period that would otherwise apply,
the Commission may by rule prohibit United States carriers from 
paying an amount in excess of a cost-based settlement rate to 
overseas carriers in countries listed by the Commission 
pursuant to subsection (a).
  (c) Settlements Policy.--The Commission shall, in exercising 
its authority to establish settlements rates for United States 
international common carriers, seek to advance United States 
policy in favor of cost-based settlements in all relevant fora 
on international telecommunications policy, including in 
meetings with parties and signatories of INTELSAT and Inmarsat.

          Subtitle C--Deregulation and Other Statutory Changes

SEC. 641. DIRECT ACCESS; TREATMENT OF COMSAT AS NONDOMINANT CARRIER.

  The Commission shall take such actions as may be necessary--
          (1) to permit providers or users of 
        telecommunications services to obtain direct access to 
        INTELSAT telecommunications services--
                  (A) through purchases of space segment 
                capacity from INTELSAT as of January 1, 2000, 
                if the Commission determines that--
                          (i) INTELSAT has adopted a usage 
                        charge mechanism that ensures fair 
                        compensation to INTELSAT signatories 
                        for support costs that such signatories 
                        would not otherwise be able to avoid 
                        under a direct access regime, such as 
                        insurance, administrative, and other 
                        operations and maintenance 
                        expenditures;
                          (ii) the Commission's regulations 
                        ensure that no foreign signatory, nor 
                        any affiliate thereof, shall be 
                        permitted to order space segment 
                        directly from INTELSAT in order to 
                        provide any service subject to the 
                        Commission's jurisdiction;
                          (iii) the Commission has in place a 
                        means to ensure that carriers will be 
                        required to pass through to end-users 
                        savings that result from the exercise 
                        of such authority;
                  (B) through investment in INTELSAT as of 
                January 1, 2002, if the Commission determines 
                that such investment will be attained under 
                procedures that assure fair compensation to 
                INTELSAT signatories for the market value of 
                their investments;
          (2) to permit providers or users of 
        telecommunications services to obtain direct access to 
        Inmarsat telecommunications services--
                  (A) through purchases of space segment 
                capacity from Inmarsat as of January 1, 2000, 
                if the Commission determines that--
                          (i) Inmarsat has adopted a usage 
                        charge mechanism that ensures fair 
                        compensation to Inmarsat signatories 
                        for support costs that such signatories 
                        would not otherwise be able to avoid 
                        under a direct access regime, such as 
                        insurance, administrative, and other 
                        operations and maintenance 
                        expenditures;
                          (ii) the Commission's regulations 
                        ensure that no foreign signatory, nor 
                        any affiliate thereof, shall be 
                        permitted to order space segment 
                        directly from Inmarsat in order to 
                        provide any service subject to the 
                        Commission's jurisdiction;
                          (iii) the Commission has in place a 
                        means to ensure that carriers will be 
                        required to pass through to end-users 
                        savings that result from the exercise 
                        of such authority; and
                  (B) through investment in Inmarsat as of 
                January 1, 2001, if the Commission determines 
                that such investment will be attained under 
                procedures that assure fair compensation to 
                Inmarsat signatories for the market value of 
                their investments;
          (3) to act on COMSAT's petition to be treated as a 
        nondominant carrier for the purposes of the 
        Commission's regulations according to the provisions of 
        section 10 of the Communications Act of 1934 (47 U.S.C. 
        160); and
          (4) to eliminate any regulation on the availability 
        of direct access to INTELSAT or Inmarsat or to any 
        successor entities after a pro-competitive 
        privatization is achieved consistent with sections 621, 
        622 and 624.

SEC. 642. TERMINATION OF MONOPOLY STATUS.

  (a) Renegotiation of Monopoly Contracts Permitted.--The 
Commission shall, beginning January 1, 2000, permit users or 
providers of telecommunications services that previously 
entered into contracts or are under a tariff commitment with 
COMSAT to have an opportunity, at their discretion, for a 
reasonable period of time, to renegotiate those contracts or 
commitments on rates, terms, and conditions or other 
provisions, notwithstanding any term or volume commitments or 
early termination charges in any such contracts with COMSAT.
  (b) Commission Authority To Order Renegotiation.--Nothing in 
this title shall be construed to limit the authority of the 
Commission to permit users or providers of telecommunications 
services that previously entered into contracts or are under a 
tariff commitment with COMSAT to have an opportunity, at their 
discretion, to renegotiate those contracts or commitments on 
rates, terms, and conditions or other provisions, 
notwithstanding any term or volume commitments or early 
termination charges in any such contracts with COMSAT.
  (c) Provisions Contrary to Public Policy Void.--Whenever the 
Commission permits users or providers of telecommunications 
services to renegotiate contracts or commitments as described 
in this section, the Commission may provide that any provision 
of any contract with COMSAT that restricts the ability of such 
users or providers to modify the existing contracts or enter 
into new contracts with any other space segment provider 
(including but not limited to any term or volume commitments or 
early termination charges) or places such users or providers at 
a disadvantage in comparison to other users or providers that 
entered into contracts with COMSAT or other space segment 
providers shall be null, void, and unenforceable.

SEC. 643. SIGNATORY ROLE.

  (a) Limitations on Signatories.--
          (1) National security limitations.--The Federal 
        Communications Commission, after a public interest 
        determination, in consultation with the Executive 
        Branch, may restrict foreign ownership of a United 
        States signatory if the Commission determines that not 
        to do so would constitute a threat to national 
        security.
          (2) No signatories required.--The United States 
        Government shall not require signatories to represent 
        the United States in INTELSAT or Inmarsat or in any 
        successor entities after a pro-competitive 
        privatization is achieved consistent with sections 621, 
        622 and 624.
  (b) Clarification of Privileges and Immunities of COMSAT.--
          (1) Generally not immunized.--Notwithstanding any 
        other law or executive agreement, COMSAT shall not be 
        entitled to any privileges or immunities under the laws 
        of the United States or any State on the basis of its 
        status as a signatory of INTELSAT or Inmarsat.
          (2) Limited immunity.--COMSAT and any other company 
        functioning as United States signatory to INTELSAT or 
        Inmarsat shall not be liable for action taken by it in 
        carrying out the specific, written instruction of the 
        United States issued in connection with its 
        relationships and activities with foreign governments, 
        international entities, and the intergovernmental 
        satellite organizations.
          (3) Provisions prospective.--Paragraph (1) shall not 
        apply with respect to liability for any action taken by 
        COMSAT before the date of enactment of the 
        Communications Satellite Competition and Privatization 
        Act of 1998.
  (c) Parity of Treatment.--Notwithstanding any other law or 
executive agreement, the Commission shall have the authority to 
impose similar regulatory fees on the United States signatory 
which it imposes on other entities providing similar services.

SEC. 644. ELIMINATION OF PROCUREMENT PREFERENCES.

  Nothing in this title or the Communications Act of 1934 shall 
be construed to authorize or require any preference, in Federal 
Government procurement of telecommunications services, for the 
satellite space segment provided by INTELSAT, Inmarsat, or any 
successor entity or separated entity.

SEC. 645. USE OF ITU TECHNICAL COORDINATION.

  The Commission and United States satellite companies shall 
utilize the International Telecommunication Union procedures 
for technical coordination with INTELSAT and its successor 
entities and separated entities, rather than INTELSAT 
procedures.

SEC. 646. TERMINATION OF COMMUNICATIONS SATELLITE ACT OF 1962 
                    PROVISIONS.

  Effective on the dates specified, the following provisions of 
this Act shall cease to be effective:
          (1) Date of enactment of this title: Sections 101 and 
        102; paragraphs (1), (5) and (6) of section 201(a); 
        section 301; section 303; section 502; and paragraphs 
        (2) and (4) of section 504(a).
          (2) On the effective date of the Commission's order 
        that establishes direct access to INTELSAT space 
        segment: Paragraphs (1), (3) through (5), and (8) 
        through (10) of section 201(c); and section 304.
          (3) On the effective date of the Commission's order 
        that establishes direct access to Inmarsat space 
        segment: Subsections (a) through (d) of section 503.
          (4) On the effective date of a Commission order 
        determining under section 601(b)(2) that Inmarsat 
        privatization is consistent with criteria in sections 
        621 and 624: Section 504(b).
          (5) On the effective date of a Commission order 
        determining under section 601(b)(2) that INTELSAT 
        privatization is consistent with criteria in sections 
        621 and 622: Paragraphs (2) and (4) of section 201(a); 
        section 201(c)(2); subsection (a) of section 403; and 
        section 404 .

SEC. 647. REPORTS TO THE CONGRESS.

  (a) Annual Reports.--The President and the Commission shall 
report to the Congress 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 industry and consumers on privatization.

SEC. 648. CONSULTATION WITH CONGRESS.

  The President's designees and the Commission shall consult 
with the Committee on Commerce of the House of Representatives 
and the Committee on Commerce, Science, and Transportation of 
the Senate prior to each meeting of the INTELSAT or Inmarsat 
Assembly of Parties, the INTELSAT Board of Governors, the 
Inmarsat Council, or appropriate working group meetings.

SEC. 649. SATELLITE AUCTIONS.

  Notwithstanding any other provision of law, the Commission 
shall not have the authority to assign by competitive bidding 
orbital locations or spectrum used for the provision of 
international or global satellite communications services. The 
President shall oppose in the International Telecommunication 
Union and in other bilateral and multilateral fora any 
assignment by competitive bidding of orbital locations or 
spectrum used for the provision of such services.

            Subtitle D--Negotiations To Pursue Privatization

SEC. 661. METHODS TO PURSUE PRIVATIZATION.

  The President shall secure the pro-competitive privatizations 
required by this title in a manner that meets the criteria in 
subtitle B.

                        Subtitle E--Definitions

SEC. 681. DEFINITIONS.

  (a) In General.--As used in this title:
          (1) INTELSAT.--The term ``INTELSAT'' means the 
        International Telecommunications Satellite Organization 
        establishedpursuant to the Agreement Relating to the 
International Telecommunications Satellite Organization (INTELSAT).
          (2) Inmarsat.--The term ``Inmarsat'' means the 
        International Mobile Satellite Organization established 
        pursuant to the Convention on the International 
        Maritime Organization.
          (3) Signatories.--The term ``signatories''--
                  (A) in the case of INTELSAT, or INTELSAT 
                successors or separated entities, means a 
                Party, or the telecommunications entity 
                designated by a Party, that has signed the 
                Operating Agreement and for which such 
                Agreement has entered into force or to which 
                such Agreement has been provisionally applied; 
                and
                  (B) in the case of Inmarsat, or Inmarsat 
                successors or separated entities, means either 
                a Party to, or an entity that has been 
                designated by a Party to sign, the Operating 
                Agreement.
          (4) Party.--The term ``Party''--
                  (A) in the case of INTELSAT, means a nation 
                for which the INTELSAT agreement has entered 
                into force or been provisionally applied; and
                  (B) in the case of Inmarsat, means a nation 
                for which the Inmarsat convention has entered 
                into force.
          (5) Commission.--The term ``Commission'' means the 
        Federal Communications Commission.
          (6) International telecommunication union.--The term 
        ``International Telecommunication Union'' means the 
        intergovernmental organization that is a specialized 
        agency of the United Nations in which member countries 
        cooperate for the development of telecommunications, 
        including adoption of international regulations 
        governing terrestrial and space uses of the frequency 
        spectrum as well as use of the geostationary satellite 
        orbit.
          (7) Successor entity.--The term ``successor 
        entity''--
                  (A) means any privatized entity created from 
                the privatization of INTELSAT or Inmarsat or 
                from the assets of INTELSAT or Inmarsat, but
                  (B) does not include any entity that is a 
                separated entity.
          (8) Separated entity.--The term ``separated entity'' 
        means a privatized entity to whom a portion of the 
        assets owned by INTELSAT or Inmarsat are transferred 
        prior to full privatization of INTELSAT or Inmarsat, 
        including in particular the entity whose structure was 
        under discussion by INTELSAT as of March 25, 1998, but 
        excluding ICO.
          (9) Orbital location.--The term ``orbital location'' 
        means the location for placement of a satellite on the 
        geostationary orbital arc as defined in the 
        International Telecommunication Union Radio 
        Regulations.
          (10) Space segment.--The term ``space segment'' means 
        the satellites, and the tracking, telemetry, command, 
        control, monitoring and related facilities and 
        equipment used to support the operation of satellites 
        owned or leased by INTELSAT, Inmarsat, or a separated 
        entity or successor entity.
          (11) Non-core.--The term ``non-core services'' means, 
        with respect to INTELSAT provision, services other than 
        public-switched network voice telephony and occasional-
        use television, and with respect to Inmarsat provision, 
        services other than global maritime distress and safety 
        services or other existing maritime or aeronautical 
        services for which there are not alternative providers.
          (12) Additional services.--The term ``additional 
        services'' means Internet services, high-speed data, 
        interactive services, non-maritime or non-aeronautical 
        mobile services, Direct to Home (DTH) or Direct 
        Broadcast Satellite (DBS) video services, or Ka-band 
        services.
          (13) INTELSAT agreement.--The term ``INTELSAT 
        Agreement'' means the Agreement Relating to the 
        International Telecommunications Satellite Organization 
        (``INTELSAT''), including all its annexes (TIAS 7532, 
        23 UST 3813).
          (14) Headquarters agreement.--The term ``Headquarters 
        Agreement'' means the International Telecommunication 
        Satellite Organization Headquarters Agreement (November 
        24, 1976) (TIAS 8542, 28 UST 2248).
          (15) Operating agreement.--The term ``Operating 
        Agreement'' means--
                  (A) in the case of INTELSAT, the agreement, 
                including its annex but excluding all titles of 
                articles, opened for signature at Washington on 
                August 20, 1971, by Governments or 
                telecommunications entities designated by 
                Governments in accordance with the provisions 
                of the Agreement, and
                  (B) in the case of Inmarsat, the Operating 
                Agreement on the International Maritime 
                Satellite Organization, including its annexes.
          (16) Inmarsat convention.--The term ``Inmarsat 
        Convention'' means the Convention on the International 
        Maritime Satellite Organization (Inmarsat) (TIAS 9605, 
        31 UST 1).
          (17) National corporation.--The term ``national 
        corporation'' means a corporation the ownership of 
        which is held through publicly traded securities, and 
        that is incorporated under, and subject to, the laws of 
        a national, state, or territorial government.
          (18) COMSAT.--The term ``COMSAT'' means the 
        corporation established pursuant to title III of the 
        Communications Satellite Act of 1962 (47 U.S.C. 731 et 
        seq.).
          (19) ICO.--The term ``ICO'' means the company known, 
        as of the date of enactment of this title, as ICO 
        Global Communications, Inc.
          (20) Replacement satellites.--The term ``replacement 
        satellite'' means a satellite that replaces a satellite 
        that fails prior to the end of the duration of 
        contracts for services provided over such satellite and 
        that takes the place of a satellite designated for the 
        provision of public-switched network and occasional-use 
        television services under contracts executed prior to 
        March 25, 1998 (but not including K-TV or similar 
        satellites). A satellite is only considered a 
        replacement satellite to the extent such contracts are 
        equal to or less than the design life of the satellite.
          (21) GMDSS.--The term ``global maritime distress and 
        safety services'' or ``GMDSS'' means the automated 
        ship-to-shore distress alerting system which uses 
        satellite and advanced terrestrial systems for 
        international distress communications and promoting 
        maritime safety in general. The GMDSS permits the 
        worldwide alerting of vessels, coordinated search and 
        rescue operations, and dissemination of maritime safety 
        information.
  (b) Common Terminology.--Except as otherwise provided in 
subsection (a), terms used in this title that are defined in 
section 3 of the Communications Act of 1934 have the meanings 
provided in such section.

                     ADDITIONAL VIEWS OF MR. TAUZIN

    While I, along with many of my colleagues support the pro-
competitive goals of H.R. 1872, I continue to have strong 
reservations about the so-called ``Fresh Look'' provisions of 
the bill. Because these provisions abrogate private contracts 
that were negotiated between Comsat and its carrier-customers, 
I offered an amendment to strike these provisions in the 
Commerce Committee. Although the committee narrowly rejected my 
amendment, I continue to oppose them, and hope that the full 
House of Representatives will vote to strike the ``Fresh Look'' 
provisions when it considers H.R. 1872.
    In my view, the ``Fresh Look'' provisions are 
unconstitutional takings of Comsat's property, and will 
ultimately subject the U.S. Government--and the taxpayers to 
substantial claims for damages. As if that's not enough, the 
``Fresh Look'' provisions are unfair, and cannot be justified 
on the basis of the factual record that has been developed at 
the Federal Communications Commission and in a Federal court.

                               background

    Several years ago, as a result of both a series of 
regulatory changes that were designed to increase competition 
in international telecommunications and the widespread 
deployment of fiber optic cables, Comsat negotiated long-term 
contracts with the largest long distance companies to carry 
international traffic using INTELSAT's facilities. Comsat is 
the owner of the U.S. share of the INTELSAT's system. These 
contracts were designed to guarantee a steady stream of traffic 
in the face of increased competition from other satellite 
systems and fiber optic cables. In return for long term traffic 
commitments, Comsat dropped its prices considerably. These 
contracts (with AT&T, MCI, Worldcom and Sprint) were 
renegotiated in 1993 and 1994, at a time when competing 
satellite systems were permitted to, and did bid for this 
traffic.

               the ``fresh look'' provisions of h.r. 1872

    As reported by the Commerce Committee, H.R. 1872 proposes a 
new section 642 of the Communications Satellite Act of 1962. 
Subsection (a) of the proposed new section reads as follows:

          The Commission shall, beginning January 1, 2000, 
        permit users or providers of telecommunications 
        services that previously entered into contracts or are 
        under a tariff commitment with COMSAT to have an 
        opportunity, at their discretion, for a reasonable 
        period of time, to renegotiate those contracts or 
        commitments on rates, terms, and conditions or other 
        provisions, notwithstanding any term or volume 
        commitments or early termination charges in any such 
        contracts with COMSAT.

    The effect of the new section will be to permit Comsat's 
carrier-customers to walk away from commitments they made in 
voluntary negotiations. They will have had the benefits of 
lower prices for that portion of the contract they chose to 
honor, but Congress will have given them the ability to 
unilaterally terminate the remaining portion of the contract 
without penalty. In my view, this policy is wrong, and needs to 
be stricken from the bill.
1. The ``Fresh Look'' provisions of H.R. 1872 are unconstitutional 
        takings of Comsat's property, and will create a massive 
        liability for America's taxpayers
    The ``Fresh Look'' provisions take away from Comsat, by 
name, contract rights for which it bargained. Comsat is a 
private, investor-owned entity, and contract rights are 
property. See Lynch v. United States, 292 U.S. 571, 579 (1934) 
(``Valid contracts are property, whether the obligor be a 
private individual, a municipality, a state, or the United 
States.''). The Government cannot simply take that property, as 
the ``fresh look'' provisions would do, without paying for it. 
See id.; see also Allied Structural Steel v. Spannaus, 438 U.S. 
234, 247 (1978) (government could not ``nullify express terms 
of [a] company's contractual obligations'').
    The proponents of ``Fresh Look'' point to cases where 
companies holding adjudicated unlawful monopolies were required 
to allow other parties out of contracts that had been used to 
maintain the monopolies. Indeed, the bill puts the word 
``monopoly'' in the title of the section. But no court has 
found that Comsat has any monopoly, let alone an unlawful one, 
and it plainly does not; it has less than a quarter of the 
satellite telecommunications market. Any attempted 
congressional adjudication that Comsat has an unlawful 
monopoly, and deserves to be punished by having its contracts 
taken away, would usurp the judiciary's function and be an 
unconstitutional Bill of Attainder. See United States v. Brown, 
381 U.S. 437 (1965); SBC Communications, Inc. v. FCC, 981 F. 
Supp. 996 (N.D. Tex. 1997).
    Proponents of ``Fresh Look'' also invoke the doctrine that 
``federal frustration of contracts between private parties'' is 
permissible, but that doctrine has no application here. The 
``frustration'' doctrine says that if a new general policy 
(e.g., a safety regulation) incidentally alters private 
contractual relationships (e.g. a construction contract) the 
private parties have no claim. See e.g., Norman v. Baltimore & 
O.R.R., 294 U.S. 240, 307-08 (1935). But no case has ever come 
close to holding or suggesting that the government can simply 
declare that all signed contracts of a specific, named 
contractor are open for ``renegotiation'' without any court 
determination that the contractor has broken the law. Any such 
statute would be plainly unconstitutional. See e.g., Connolly 
v. Pension Benefit Guaranty Corp., 475 U.S. 211, 224 (1986) 
(fact that Congress might incidentally interfere private 
contracts by regulating their subject matter does not mean 
``that contractual rights are never property rights or that the 
Governmentmay always take them for its own benefit without 
compensation'').

2. The ``Fresh Look'' provisions of H.R. 1872 are unfair

    Based on the long-term guarantees of traffic resulting from 
Comsat's carrier-contracts, Comsat itself contracted with 
Intelsat's for the capacity to handle that traffic. Comsat's 
contracts with INTELSAT's will remain in force, even if the 
carrier-contracts that formed the basis for the INTELSAT's 
contracts are abrogated by Congress. Comsat will continue to be 
liable for its contractual obligations to INTELSAT's, and will 
be required to pay $845 million over the life of the contracts. 
Yet because of the ``Fresh Look'' provisions of H.R. 1872, the 
guarantee of traffic will have been eradicated by Congress. 
This is unfair to Comsat, and as noted above, will result in 
the U.S. government paying off substantial claims for damages 
to which Comsat will be entitled.
    In addition, these contracts represent 93% of Comsat's 
INTELSAT's-derived revenues. Placing a significant portion of 
the company's revenues at risk, while at the same time 
requiring Comsat to fulfill its obligations pursuant to the 
Intelsat's contracts, would be ruinous to Comsat.

3. The ``Fresh Look'' provisions of H.R. 1872 are unjustified on the 
        basis of the record compiled by the FCC and a Federal court

    Comsat's carrier-contracts cover international switched-
voice traffic. Comsat's share of this market is only 20%. If 
80% of this traffic can be--and is--routed over facilities that 
compete with Comsat's, claims that Comsat has ``locked up'' 
traffic are utterly without merit.
    Moreover, the record demonstrates that these contracts were 
entered into voluntarily. Comsat and AT&T jointly petitioned 
the Federal Communications Commission to find that these 
contracts were in the public interest. In their joint filing, 
Comsat and AT&T stated that

          PanAmSat's arguments are likewise without merit. 
        First, PanAmSat asserts that the Agreement 
        inappropriately ``locks in'' both AT&T and COMSAT. 
        However, to the extent COMSAT and AT&T have assumed 
        mutual commitments, that is not inappropriate; rather 
        it is the nature of long-term arrangements. In any 
        event, the Agreement is non-exclusive, and leaves both 
        parties with substantial flexibility. AT&T is free to 
        place traffic not covered therein on ``whatever 
        facilities it should select, consistent only with U.S. 
        law and international obligations,'' and COMSAT is free 
        to compete for additional AT&T traffic, as well as the 
        traffic of other service carriers.

See, Joint Reply Comments of Comsat and AT&T, In the Matter of 
Policy for the Distribution of United States International 
Carrier Circuits Among Available Facilities During the Post-
1988 Period, CC Docket No. 87-67, at 6 (footnotes omitted).
    Moreover, in an antitrust suit involving these contracts, 
the court stated that

          * * * nothing in the record suggests that Comsat 
        secured any of the contracts by means of any 
        anticompetitive act against [PanAmSat]. On the 
        contrary, the record suggests that for their own 
        reasons, the common carriers elected to secure long-
        term deals with Comsat only after considering and 
        rejecting offers from PAS.

Alpha Lyracom Space Communs. v. COMSAT Corp., 968 F. Supp. 876, 
894 (S.D.N.Y. 1996) (citations omitted), aff'd, Alpha Lyracom 
Space Communs. v. COMSAT Corp., 113 F.3d 372 (2d Cir. N.Y. 
1997).

                               CONCLUSION

    Despite the absence of any facts that would justify 
Congress imposing a remedy as draconian as ``Fresh Look,'' the 
Committee narrowly rejected my amendment to strike the 
provision; therefore, when the House considers H.R. 1872, I 
intend to support a similar amendment. Congress should not be 
in the business of voiding contracts voluntarily entered into 
by private parties.
    As I have discussed in these views, the ``Fresh Look'' 
provisions constitute a compensable taking which would hold the 
taxpayers liable for substantial claims for damages. These 
provisions would leave Comsat liable for paying for the traffic 
that the contracts guaranteed, even after Congress repealed the 
guarantee. Finally, there is no factual basis for imposing 
``Fresh Look.'' The carrier-contracts are neither exclusive nor 
anticompetitive. They are voluntary agreements between private 
parties. Congress should not impair the ability of either party 
to rely upon the commitments made by the other to fulfill their 
obligations under these contracts.

                            ADDITIONAL VIEWS

    We support the pro-competitive, deregulatory goals embodied 
in H.R. 1872, and we were pleased to support the legislation as 
it moved through the Commerce Committee. We are deeply 
concerned, however, about several provisions that were included 
in the bill when the ``Dingell amendment'' was accepted during 
consideration of the bill by the Subcommittee on 
Telecommunications, Trade and Consumer Protection.
    The ``Dingell amendment,'' which addresses the terms and 
conditions under which direct access to intergovernmental 
satellite organization facilities may be granted, contains two 
provisions--641(1)(A)(iii) and 641(2)(A)(iii)--which are 
decidedly at odds with the pro-competitive, deregulatory thrust 
of H.R. 1872. These provisions, which would direct the Federal 
Communications Commission (``FCC'' or ``Commission'') to 
involve itself in the pricing decisions of carriers which are 
considered by the FCC to be non-dominant,\1\ are unnecessary, 
intrusive, and contrary to the direction that the FCC should be 
headed with respect to regulation of the telecommunications 
market. We find it ironic that these ill-advised, regulatory 
provisions were included in a section of the bill titled 
``Deregulation and Other Statutory Changes.''
---------------------------------------------------------------------------
    \1\ The FCC found in its AT&T Non-Dominance Order that no carrier 
is dominant in the provision of international services. See In the 
matter of motion of AT&T Corp. to be Declared Non-Dominant for 
International Service, FCC 96-209, released May 14, 1996.
---------------------------------------------------------------------------
    The parties most likely to take advantage of direct access 
are carriers competing in the international long-distance 
market. This market is highly competitive, and market forces 
will provide participants in this market with discipline as 
they establish their prices. Should these parties obtain direct 
access, competition will compel them to ``flow-through'' any 
cost-savings to their end customers; carriers which fail to do 
so will inevitably lost market share. Thus, we do not believe 
there is any compelling rationale for the Commission to involve 
itself in the area of international long-distance pricing, 
except to the extent that Commission involvement is necessary 
to ensure that U.S. carriers are not forced to pay inflated 
settlements rates to foreign monopolies.\2\
---------------------------------------------------------------------------
    \2\ See In the Matter of International Settlement Rates, FCC IB 96-
261, released August 18, 1997.
---------------------------------------------------------------------------
    Legislation that is intended to deregulate the satellite 
market is an inappropriate vehicle to reregulate the long-
distance market, even in the unlikely event that such 
reregulation was necessary. Accordingly, we strongly urge that 
these provisions of the ``Dingell amendment'' be stripped from 
the bill at some point in the legislative process, and barring 
that, we urge the Commission to employ the forbearance 
authority granted it under Section 10 of the Communications Act 
(47 U.S.C. 160) to refrain from applying the requirements of 
641(1)(A)(iii) and 641(2)(A)(iii). Given the many 
responsibilities facing the Commission, and its limited 
resources, it would be an inappropriate use of resources for 
the FCC to spend any time implementing these unnecessary and 
counterproductive provisions.

                                   Michael G. Oxley,
                                   John Shimkus,
                                   Tom A. Coburn,
                                   Nathan Deal,
                                   Rick White,
                                   Richard Burr.

                            DISSENTING VIEWS

    On its face H.R. 1872 aims at a worthwhile objective. All 
agree that more competition is better, whether it is in the 
satellite industry, the long distance business, local telephone 
networks or cable TV. We have no argument with this worthy 
goal. The crux of the problem with this bill is that it will 
not achieve what it sets out to do. In fact, it will accomplish 
precisely the opposite. Less competition and higher prices are 
the unfortunate, but inevitable outcomes of H.R. 1872.
    Where does this well-intentioned bill jump the track? We 
can point to one simple, but false premise underlying this bill 
that is responsible for all the infirmities that naturally flow 
from it. H.R. 1872 starts with the assumption that COMSAT is a 
monopoly, and, as such, is deserving of all evils that may be 
bestowed upon it.
    The simple truth is that COMSAT is not a monopoly. Yes, it 
is true that the Government granted COMSAT an exclusive 
franchise to provide satellite services using INSTELSAT and 
Inmarsat facilities. But, that is not where the story ends. 
Today scores of satellite systems compete head to head with 
INTELSAT and Inmarsat. COMSAT is not the only game in town by a 
long shot.
    In 1984, President Reagan issued an executive order that 
put an end to COMSAT's monopoly by authorizing competition in 
the satellite market. Today COMSAT faces more than 20 highly 
effective competitors that have combined investments in 
satellites totaling over $14 billion. In the past four years 
alone, Wall Street has tripled the value of these competitors' 
stocks, and their owners now enjoy a combined market value of 
more than $40 billion. Clearly, investors believe these 
companies are not shackled on the sidelines, unable to compete 
against an entrenched monopolist.
    If you choose not to believe the investors, then look at 
COMSAT's share of the market. These numbers positively refute 
any lingering doubt that the days of COMSAT's monopoly status 
have long since passed. Since 1988, COMSAT's market share for 
voice traffic has plummeted from 70% to 21%. Its share of the 
video market has dropped precipitously since 1993 from 80% to 
42%. If COMSAT is a monopoly, it certainly isn't a very good 
one.
    This is not to say that the satellite industry should not 
compete on an even playing field in the international 
marketplace. if INTELSAT and Inmarsat have any competitive 
advantages, whether it be in obtaining orbital slots or 
exclusive access to foreign markets, the correct approach 
should be to put pressure on the international community to 
eliminate those advantages. Unfortunately, H.R. 1872 takes the 
opposite approach and places the burden on COMSAT to correct 
the ills of the rest of the world, and punishes COMSAT if it 
doesn't succeed. The fallacy with that approach is that COMSAT 
has no control over the actions of 141 foreign countries. 
Hence, the goal of the bill is doomed from the start.
    Worse, if COMSAT is punished for its inability to bring 
home the gold, the goal of stimulating more competition is 
compromised even further. By the terms of this bill, COMSAT 
would be restricted from providing ``non-core'' services, which 
are defined as just about everything COMSAT provides today to 
remain a viable competitor in the market. The curtailment of 
services dictated by this bill would turn the clock back 30 
years to a time when COMSAT was mainly in the business of 
carrying international telephone calls. Most of the so-called 
``core'' services COMSAT would be permitted to offer have since 
migrated from satellites to fiber optic cable.
    As a result, COMSAT would be turned into a dinosaur 
overnight. While it is easy to see how this would benefit 
COMSAT's competitors, we are at a loss to understand how it 
would increase competition. To the contrary, the effect would 
be to remove a competitor from the marketplace. Less 
competition inevitably leads to higher prices, precisely the 
opposite goal of the bill.
    If this weren't bad enough, COMSAT would have a legitimate 
claim for damages against the U.S. Government. The punitive 
service restrictions contained in this bill are tantamount to 
the Government imposing capital punishment on COMSAT for a 
crime committed by somebody else. Through no fault of its own, 
COMSAT's investment in satellites would be rendered virtually 
worthless.
    Based on specific instructions from the Government, and in 
reliance on a reasonable expectation of an investment return, 
COMSAT's shareholders have staked billions of dollars on assets 
orbiting the sky solely for the purpose of generating revenues 
now and into the future. When the service restrictions 
contained in this bill kick in, and they surely will, those 
stranded assets will be looking for a home, And, of course, 
U.S. taxpayers will be forced to take them in. The resulting 
taxpayer liability could run well into the billions of dollars.
    A more extensive discussion of the Government ``takings'' 
claim is contained in the ``Additional Views of Mr. Tauzin,'' 
Chairman of the Subcommittee on Telecommunications, Trade, and 
Consumer Protection, included with this report. While that 
discussion focuses on taxpayer liability stemming from the 
bill's ``fresh look'' provisions, which permit the abrogation 
of private contracts, the arguments contained there are equally 
relevant to the imposition of service restrictions addressed in 
these views. An attempt to remove the punitive ``fresh look'' 
provisions was narrowly defeated by a 20-23 vote of the 
Committee.
    The punitive measures on COMSAT, its customers, and the 
U.S. taxpayers should be eliminated from H.R. 1872. The 
punishment should be redirected where it belongs: on foreign 
countries that impede progress toward privatization. The notion 
that this Committee would put the financial viability of a U.S. 
company at risk based solely on the actions of a group of 
foreign countries is simply beyond comprehension. But that is 
precisely what H.R. 1872, as reported, would accomplish.

                                   John D. Dingell,
                                   Ron Klink,
                                   Bobby L. Rush,
                                   Albert R. Wynn,
                                   Sherrod Brown.

                                
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