[Federal Register Volume 63, Number 214 (Thursday, November 5, 1998)]
[Proposed Rules]
[Pages 59755-59758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29572]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[IB Docket No. 98-192, FCC 98-280]


Direct Access to the INTELSAT System

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is seeking comment on the legal, economic, and 
policy ramifications of permitting direct access to the INTELSAT system 
in the United States. Direct access to INTELSAT would enable U.S. 
carriers and users to obtain space segment capacity directly from 
INTELSAT rather than through Comsat, the U.S. Signatory to INTELSAT. 
The Commission tentatively concludes that the Communications Satellite 
Act of 1962 and the Communications Act give it discretion to permit 
U.S. carriers and users the option of obtaining contractual, or Level 
3, direct access to the INTELSAT system. The Commission does not, 
however, reach tentative conclusions as to whether and under what 
circumstances the Commission may permit direct access. On this issue, 
the Commission is seeking comments on: What are the potential benefits 
of direct access?; what competitive concerns are raised by direct 
access?; how would direct access affect U.S. efforts to privatize 
INTELSAT?

DATES: Comments must be submitted on or before December 18, 1998; reply 
comments must be submitted on or before January 8, 1999.

ADDRESSES: Magalie Roman Salas, Office of the Secretary, Federal 
Communications Commission, 445 12th Street, SW, Washington, D.C. 20554. 
Also, comments should also be filed with: Kathleen A. Campbell, 
International Bureau, 2000 M Street, N.W., Suite 800, Washington, D.C. 
20554.

FOR FURTHER INFORMATION CONTACT: Jim Ball at (202) 418-0427 or Sande 
Taxali at (202) 418-7586.

SUPPLEMENTARY INFORMATION: This is a summary of the commission's Notice 
of Proposed Rulemaking in IB Docket No. 98-192; FCC 98-280, adopted 
October 22, 1998 and released October 28, 1998. The complete text of 
this Notice of Proposed Rulemaking is available for inspection and 
copying during normal business hours in the FCC Reference Center (Room 
239), 1919 M Street, NW., Washington, DC and also may be purchased from 
the commission's copy contractor, International Transcription Service, 
1231 20th Street, N.W., Washington, DC 20036, phone: (202) 857-3800, 
fax: (202) 857-3805.
    To file formally in this proceeding, comments may be filed using 
the Commission's Electronic Comment Filing System (ECFS). See 
Electronic Filing of Documents in Rulemaking Proceedings (63 FR 24121, 
May 1, 1998). Comments filed through the ECFS can be sent as an 
electronic file via the Internet to <http://www.fcc.gov/

[[Page 59756]]

ecfs.html>. Generally, only one copy of an electronic submission must 
be filed. If multiple docket or rulemaking numbers appear in the 
caption of this proceeding, however, commenters must transmit one 
electronic copy of the comments to each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, 
commenters should include their full name, Postal Service mailing 
address, and the applicable docket or rulemaking number. Parties may 
also submit an electronic comment by Internet e-mail. To get filing 
instructions for e-mail comments, commenters should send an e-mail to 
[email protected], and should include the following words in the body of the 
message, ``get form .'' A sample form and 
directions will be sent in reply.
    Parties may also choose to file comments by paper. To file by 
paper, parties must file an original and four copies of each filing. If 
more than one docket or rulemaking number appear in the caption of this 
proceeding, commenters must submit two additional copies for each 
additional docket or rulemaking number. All filings must be sent to the 
Commission's Secretary, Magalie Roman Salas, Office of the Secretary, 
Federal Communications Commission, 445 12th Street, SW, Washington, 
D.C. 20554. Paper filings will be received at a designated counter 
located at TW-A325 in the 12th street lobby. In addition, comments 
should be filed with: Kathleen A. Campbell, International Bureau, 2000 
M Street, N.W., Suite 800, Washington, D.C. 20554. The Commission 
expects to complete its relocation to The Portals within the next six 
months. During the transition period, paper filings also will be 
accepted at 1919 M Street, NW, Room 222, but only between the hours of 
4:00pm to 5:30pm.

Summary of Notice of Proposed Rulemaking

    1. On April 29, 1998, the Commission granted Comsat's petition for 
reclassification as a non-dominant carrier in competitive product 
markets and denied its petition for reclassification in non-competitive 
product markets.1 For non-competitive markets where Comsat 
remains dominant the Commission denied Comsat's request for forbearance 
under Section 10 of the Communications Act. The Commission stated it 
would consider favorably in its analysis of any forbearance request 
certain actions that Comsat might undertake to promote competitive 
market conditions, including, for example, the provision of direct 
access and a waiver of privileges and immunities. The Commission said 
that it would expeditiously initiate a proceeding to explore the legal, 
economic, and policy ramifications of direct access.
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    \1\ Comsat Corporation Petition pursuant to Section 10(c) of the 
Communications Act of 1939, as amended, for forbearance from 
Dominant Carrier Regulation and for Reclassification as a Non-
Dominant Carrier, Comsat Non-Dominant Order, and Notice of Proposed 
Rulemaking, FCC 98-78, (released April 28, 1998) (Comsat Non-
Dominant Order).
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    2. The Commission previously considered direct access to the 
INTELSAT system in 1984.2 At that time, the Commission 
concluded that the specific direct access alternatives then under 
consideration would result in little savings to end users and would not 
be in the public interest. The Commission did, however, indicate that 
it would be amenable to reconsider the issue of direct access at a 
future date.
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    \2\ Regulatory Policies Concerning Direct Access to INTELSAT 
Space Segment for the U.S. International Service Carriers (1984 
Direct Access Order) 97 FCC 2d 296 (1984), Western Union 
International, Inc. v FCC 814 F.2d 1280 (D.C. Cir. 1986).
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    3. Beginning in 1992, INTELSAT developed procedures for non-
Signatory carriers and users to obtain space segment capacity directly 
from INTELSAT rather than through Signatories. INTELSAT now offers to 
non-Signatories four types or ``levels'' of direct access. The first 
two levels involve access to information.3 The third and 
fourth levels involve access to communication services: (a) Level 3 
direct access permits a customer to enter into a contractual agreement 
with INTELSAT for ordering, receiving and paying for INTELSAT space 
segment capacity at the same rate that INTELSAT charges its 
Signatories; and (b) Level 4 direct access permits a customer to make a 
capital investment in INTELSAT in proportion to its customers' 
utilization of the INTELSAT system at INTELSAT tariff rates.
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    \3\ Level 1 direct access permits a customer to receive 
operational and technical information and attend global traffic 
meetings as an operations representative. Level 2 direct access 
permits a customer to meet with INTELSAT management and staff 
regarding capacity availability, commercial and INTELSAT tariff 
matters.
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    4. For both Level 3 and Level 4 direct access, a customer is 
required to enter into a service agreement with INTELSAT that sets 
forth the general terms and conditions for INTELSAT supply of its space 
segment capacity. So long as the service agreement remains in effect, a 
customer is able to access INTELSAT space segment directly. Level 3 
customers would benefit from INTELSAT rates lower than Signatory 
``marked up'' rates, and would have no investment obligations in the 
system. A Signatory permitting Level 3 direct access, however, will 
earn a return on its investment in space segment capacity used by a 
Level 3 customer (currently up to 21 percent as established by the 
INTELSAT Board of Governors).4 A Level 4 customer undertakes 
all of the financial obligations under the INTELSAT Operating Agreement 
that are applicable to Signatories and thus is entitled to earn on its 
investment (but is not entitled to participate in the INTELSAT 
governance process absent special arrangements with the Party and 
Signatory of its country).
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    \4\ Under the INTELSAT Operating Agreement, the Board of 
Governors establishes a target rate of compensation (return) on 
shareholders (Signatories) invested capital. All shareholders are 
entitled to the target rate of return. See INTELSAT Operating 
Agreement, Article 8; See also INTELSAT Annual Report, 1996, 
``Report of Independent Public Accountants, Arthur Anderson LLP'' at 
p. 36.
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    5. INTELSAT offers direct access only in countries where it is 
authorized by the Signatory. Currently 94 countries permit either Level 
3 or Level 4 direct access. Seventy-six countries permit contractual 
Level 3 direct access and 18 countries permit Level 4 direct access to 
INTELSAT. Comsat has not authorized direct access in the United States.
    6. The Commission tentatively concludes that the Commission has 
authority under the Communications Satellite Act of 1962 to permit 
Level 3 direct access but not level 4 direct access. The Satellite Act 
requires Comsat to be the sole U.S. participant in INTELSAT. This 
requirement is satisfied under Level 3 direct access because Comsat 
continues to be the only U.S. investor in INTELSAT and the only U.S. 
representative within the governing bodies of INTELSAT. This 
requirement is not satisfied under Level 4 direct access which would 
involve investment in INTELSAT by U.S. direct access customers. 
Further, nothing in the Satellite Act requires Comsat to be the only 
provider of INTELSAT services in the U.S. and the Commission 
tentatively concludes that the Satellite Act gives the Commission 
discretion to mandate Level 3 direct access. The Commission tentatively 
concludes that permitting level 3 direct access would not violate the 
Fifth Amendment to the Constitution. The Commission seeks comment on 
these tentative conclusions and corresponding analysis.
    7. The Commission does not reach tentative conclusions as to 
whether and under what circumstances it may permit direct access in the 
United States. The Commission seeks comment on (1) What are the 
potential benefits of direct

[[Page 59757]]

access? (2) what competitive concerns are raised by direct access? and 
(3) how would direct access affect efforts to privatize INTELSAT?
    8. On the issue of potential benefits of direct access, the 
Commission compared the differences between prices Comsat offers to 
customers and services providers and INTELSAT tariffs, the latter which 
reflect substantially lower prices in most instances. It noted the 
potential for greater customer choice and cost savings from direct 
access. It requests comment on the desirability of allowing direct 
access to INTELSAT with respect to all product and geographic markets 
including those markets that are competitive and for which Comsat is 
non-dominant. The Commission requests comments on whether direct access 
to all markets would further increase the level of competition to the 
extent that prices to consumers would be likely to fall, even in 
competitive markets. The Commission also requests, however, comment on 
whether Comsat would be able to recover its costs under a Level 3 
direct access scheme and asks whether Comsat, as a matter of law and 
policy, must be allowed to recoup its costs and the Commission requests 
comment on whether circumstances have changed since the Commission's 
1984 Direct Access Order. Further, it asks carriers seeking direct 
access to comment on how cost savings would be passed on to their 
customers.
    9. Finally, on the question of competitive concerns, the Commission 
asks for comment on whether permitting direct access in the United 
States would result in a concentration of control of cable and 
satellite facilities by U.S. carriers, and whether INTELSAT should be 
allowed to compete in the U.S. market free from FCC jurisdiction over 
rates and under cover of immunity from suit and process. As to INTELSAT 
privatization, the Commission requests comment on whether permitting 
direct access in the U.S. will reinforce U.S. efforts to promote 
competition and privatize INTELSAT. The Commission noted that, in the 
Comsat Non-Dominant Order, it determined that Level 3 direct access 
would neither dilute Comsat's voting power on the INTELSAT Board of 
Governors nor give direct access customers any right to participate in 
the INTELSAT governance process. The Commission, therefore, then found 
no basis to find that direct access would undermine U.S. efforts to 
privatize INTELSAT in a pro-competitive manner.

Administrative Matters

    10. This is a non-restricted notice and comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided they are disclosed as provided in the 
Commission's rules. See generally 47 CFR 1.1202, 1.203 and 1.206(a). 
The Sunshine Agenda period is the period of time that commences with 
the release of public notice that a matter has been placed on the 
Sunshine Agenda and terminates when the Commission (1) releases the 
text of a decision or order in the matter, (2) issues a public notice 
stating that the matter has been deleted from the Sunshine Agenda; or 
(3) issues a public notice stating that the matter has been returned to 
the staff for further consideration, whichever occurs first 47 CFR 
1.202(f). During the Sunshine Agenda period, no presentations, ex parte 
or otherwise, are permitted unless specifically exempted (47 CFR 1.203. 
Pursuant to applicable procedures set forth in Secs. 1.415 and 1.419 of 
the Commission's Rules, interested parties may file comments on or 
before December 18, 1998 and reply comments on or before January 8, 
1999. To file formally in this proceeding, you must file an original 
and five copies of all comments, reply comments and supporting 
comments. If you want each Commissioner to receive a personal copy of 
your comments, send additional copies to Office of the Secretary, 
Federal Communications Commission, 445 12th Street, SW., Washington, DC 
20554. Comments and reply comments will be available for public 
inspection during regular business hours in the Federal Communications 
Commission Reference Center, Room 239, 1919 M Street, NW., Washington, 
DC 20554. For further information concerning this rulemaking, contact 
Jim Ball at (202) 418-0427 or Sande Taxali at (202) 418-7586.

Initial Regulatory Flexibility Analysis

    11. As required by the Regulatory Flexibility Act, (``RFA''), 
5 the Commission has prepared an Initial Regulatory 
Flexibility Analysis (``IRFA'') of the expected significant economic 
impact on small entities by the rules proposed in this Notice of 
Proposed Rulemaking (``NPRM''). Written public comments are requested 
on the IRFA. Comments must be identified as responses to the IRFA and 
must be filed by the deadlines for comments set forth in paragraph 65 
of the NPRM. The Commission will send a copy of the NPRM, including 
this IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. See 5 U.S.C. Sec. 603(a).
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    \5\ See 5 U.S.C. Sec. 603. The RFA, see 5 U.S.C. Sec. 601 et 
seq., has been amended by the Contract with America Advancement Act 
of 1996, Public L. 104-121, 110 Stat. 847 (1996) (``CWAAA''). Title 
II of the CWAAA is The Small Business Regulatory Enforcement 
Fairness Act of 1996.
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Need for, and Objectives of, the Proposed Rules

    12. The purposes of the NPRM are to initiate a notice and comment 
proceeding that explores the legal, economic and policy ramifications 
of permitting direct access to the INTELSAT 6 system in the 
United States and to propose rules for permitting U.S. carriers and 
users to obtain non-discriminatory direct access to INTELSAT's 
satellites. ``Direct access'' is a term used to refer to the means by 
which users of the INTELSAT satellite system obtain service directly 
from INTELSAT rather than through INTELSAT's Signatories.
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    \6\ INTELSAT is an acronym for the International 
Telecommunications Satellite Organization.
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    13. The NPRM tentatively concludes that (a) the Commission has 
authority under applicable statutes to permit U.S. carriers and users 
to obtain services from INTELSAT directly at the same rates that 
INTELSAT charges its Signatories; and (b) direct access presents the 
opportunity to introduce competition in markets where competition does 
not exist and enhance competition in markets where it does exist. 
Consistent with these tentative conclusions, the NPRM proposes rules 
that would permit U.S. carriers and users to obtain direct access to 
INTELSAT. The NPRM invites interested parties to comment on these 
tentative conclusions and related proposed rules. If commenters believe 
that the proposed rules discussed in the NPRM require additional RFA 
analysis, they should include a discussion of this in their comments.

Legal Basis

    14. The authority for the NPRM is the Administrative Procedure Act, 
5 U.S.C. 553; and sections 4(i) and 201(b) of the Communications Act of 
1934, as amended, 47 U.S.C. 154(i) and 201(b), and sections 201(c)(5) 
and (c)(11) of the Communications Satellite Act of 1962, 47 U.S.C. 
721(c)(5), (c)(11) and 741.
    15. Description and Estimate of the Number of Small Entities to 
Which Proposed Rule Will Apply Under the Small Business Act, a ``small 
business concern'' is one that: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; (3) meets any 
additional criteria

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established by the Small Business Administration.7
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    \7\ See 15 U.S.C. 632.
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    16. The Commission has not developed a definition of small entities 
applicable to satellite service licensees. Therefore, the applicable 
definition of small entity is the definition under the Small Business 
Administration (``SBA'') rules applicable to Communications Services 
``Not Elsewhere Classified.'' This definition provides that a small 
entity is one with $11 million or less in annual receipts.8
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    \8\ 13 CFR 121.201, Standard Industrial Classification (SIC) 
Code 4899.
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    17. If the Commission adopts the proposed rules permitting U.S. 
carriers and users to obtain direct access to INTELSAT, the Commission 
would require Comsat Corporation (``Comsat'') to take appropriate 
actions within INTELSAT to give effect to these rules. Comsat's 1996 
revenues were in excess of $11 million. Thus, Comsat does not qualify 
as a small entity under the SBA's definition. U.S. carriers and users 
that may benefit from the Commission's adoption of the proposed rules, 
may include small entities that offer communications services. 
According to the SBA, the Census Bureau estimates that there are 
approximately 848 entities providing communications services, not 
elsewhere classified. Of those, approximately 775 reported annual 
receipts of less than $9.999 million or less and would qualify as small 
entities subject to the proposed rules.9 More precise data 
is not available.
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    \9\ U.S. Bureau of the Census, U.S. Department of Commerce, 1992 
Census of Transportation, Communications, and Utilities, UC92-S-1, 
Subject Series, Establishment and Firm Size, Table D, Employment 
Size of Firms: 1992, SIC Code 4899 (May 1995).
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Description of Projected Reporting, Recordkeeping or Other 
Compliance Requirements

    18. The proposals in the NPRM are not expected to result in any 
additional reporting, recordkeeping and other compliance.

Steps Taken To Minimize Significant Economic Burden on Small 
Entities, and Significant Alternatives Considered

    19. The NPRM considers two alternatives for U.S. carriers and users 
to obtain direct access to INTELSAT: Level 3 direct access and Level 4 
direct access. Level 3 direct access permits a customer to enter into a 
contractual agreement with INTELSAT for ordering, receiving and paying 
for INTELSAT space segment capacity at the same rate that INTELSAT 
charges its Signatories. Level 4 direct access permits a customer to 
make a capital investment in INTELSAT in proportion to its customers' 
utilization of the INTELSAT system at INTELSAT tariff rates. The NPRM 
proposes rules that would permit U.S. carriers and users to obtain 
Level 3 direct access to INTELSAT. The NPRM does not propose a rule 
permitting Level 4 direct access to INTELSAT because the NPRM 
tentatively concludes that such a rule would contravene the requirement 
under the Communications Satellite Act of 1962 that Comsat be the sole 
U.S. participant in INTELSAT. The proposed rules would permit small 
entities to obtain Level 3 direct access to INTELSAT, however, as a 
Level 3 direct access customer of INTELSAT, such small entities would 
not be required to undertake any of the financial obligations or be 
entitled to participate in the INTELSAT governance process as are 
Signatories. We believe that the proposed rules will permit authorized 
carriers and users, including small entities, to benefit from direct 
access through greater choice and lower rates in connection with use of 
the INTELSAT system and we seek comment on these and other benefits 
that may result from direct access. We recognize that other issues not 
raised in the NPRM may be significant to carriers and users, including 
small entities, and we also request comment on issues relating to 
direct access that are not raised in the NPRM. We do not expect the 
proposed rules to cause any economic burden to small entities, and seek 
comment on any issues pertinent to this.

Federal Rules That Overlap, Duplicate, or Conflict With These 
Proposed Rules

    20. None.

Ordering Clauses

    21. Accordingly, it is ordered that pursuant to the authority 
contained in sections 4(i), 4(j) 201, 214, 301 et seq., and 403, and 
sections 201(c)(5) and (c)(11) and 401 of the Communications Satellite 
Act of 1962, 47 U.S.C. 721(c)(5) and (c)(11) and 741 of the applicable 
procedures set forth in sections 1.415 and 1.3-419 of the Commission's 
rules, 47 CFR 1.415 and 1.419 that this Notice of Proposed Rulemaking 
is hereby adopted.
    22. It is further ordered that interested parties may comment until 
December 18, 1998 and file reply comments until January 8, 1999.
    23. It is further ordered that the Commission's Office of Public 
Affairs Reference Operations Division shall send a copy of this Notice 
of Proposed Rulemaking, including the Initial Regulatory Flexibility 
Analysis, to Chief Counsel for Advocacy of the Small Business 
Administration.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-29572 Filed 11-4-98; 8:45 am]
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