[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Rules and Regulations]
[Pages 54561-54564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26148]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter 1

[IB Docket No. 98-192; FCC 99-236]


In the Matter of Direct Access to the INTELSAT System

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission adopts a policy to permit 
Level 3 direct access to the International Telecommunications Satellite 
Organization (``INTELSAT'') satellite system from earth stations within 
the United States, for the purpose of providing international satellite 
services. As a result of this decision, U.S. carriers and users of 
INTELSAT may enter into contractual agreements with INTELSAT for 
ordering, receiving, and paying for services at the same rates INTELSAT 
charges its Signatories, in lieu of having to go exclusively through 
Comsat, the U.S. Signatory to INTELSAT. Comsat is permitted, however, 
to file a tariff with the Commission that requires Level 3 direct 
access customers to reimburse it for certain costs incurred in its 
unique role as the U.S. Signatory to INTELSAT. The document denies 
requests made by telecommunications carriers for ``fresh look'' at 
their long-term contracts with Comsat and ``portability'' of the 
INTELSAT space segment capacity they use that is held by Comsat. 
Finally, the document limits involvement by dominant foreign INTELSAT 
Signatories under a specific circumstance and requires that INTELSAT 
waive its immunities under certain limited circumstances. With this 
decision, the United States joins 94 other INTELSAT signatory countries 
that already permit direct access to INTELSAT from earth stations 
within their countries. Implementing direct access from the United 
States will lower prices, enhance competition, and lead to greater 
efficiency and flexibility in the use of INTELSAT space segment 
capacity.

DATES: Effective December 6, 1999.

FOR FURTHER INFORMATION CONTACT: Michael McCoin, International Bureau, 
Satellite Policy Branch, (202) 418-0774, or email at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order in IB Docket No. 98-192, FCC 99-236, adopted September 15, 
1999, and released September 16, 1999. The complete text of this 
Commission Report and Order is available for inspection and copying 
during the weekday hours of 9:00 a.m. to 4:30 p.m. in the Commission's 
Reference Information Center, Room CY-A257, 445 Twelfth Street, S.W., 
Washington, D.C., or may be purchased from the Commission's duplicating 
contractor, International Transcription Service, (202) 857-3800, 2131 M 
Street, N.W., Washington, D.C. 20036. The complete text is also 
available under the file name

[[Page 54562]]

fcc99236.wp on the Commission's internet site at http://www.fcc.gov/
Bureaus/International/Orders/1999.

Summary of the Report and Order

    1. This Report and Order permits Level 3 direct access to the 
INTELSAT satellite system from earth stations in the United States for 
the provision of international satellite services, subject to certain 
conditions and limitations. The Report and Order affirms the 
Commission's tentative conclusions in the Notice \1\ that the 
Commission has authority under the Communications Satellite Act of 1962 
(``Satellite Act'') to permit Level 3 direct access and that such 
action would not be a ``taking'' of private property without ``just 
compensation'' under the Fifth Amendment to the United States 
Constitution. The document concludes that direct access is in the 
public interest. Specifically, the Commission finds that direct access 
will result in (1) cost savings, greater efficiency, flexibility, and 
control over facility use by U.S. customers; (2) competitive pressure 
on Comsat rates and the rates of competing satellite operators; and (3) 
enhance the ability of U.S. carriers to compete globally with foreign 
counterparts that already may obtain satellite capacity directly from 
INTELSAT.
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    \1\ In the Matter of Direct Access to the INTELSAT System, IB 
Docket No. 98-192, File No. 60-SAT-ISP-97, Report and Order, 63 FR 
58755, (November 5, 1998) (``Notice'').
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    2. INTELSAT is a 143 member intergovernmental organization that 
owns and operates a global system of satellites. It is located in 
Washington, D.C. and is a key provider of satellite transmission 
capacity for both U.S. commercial and governmental use. In 1992, 
INTELSAT developed procedures for non-Signatories to obtain space 
segment capacity directly from INTELSAT rather than requiring access 
through the national Signatory. Level 3 direct access requires a 
customer to enter into a service agreement with INTELSAT that sets 
forth the general terms and conditions for INTELSAT supply of its space 
segment capacity. Through the service agreement, a customer is able to 
access INTELSAT space segment directly at INTELSAT tariff rates, known 
as INTELSAT Utilization Charges (``IUC''). Level 3 direct access 
customers have no investment obligations in the INTELSAT system and no 
governance rights within the organization. A Signatory, such as Comsat, 
permitting Level 3 direct access would still earn a return on its 
investment in proportion to space segment capacity used by a Level 3 
direct access customer in its country (currently between 14 and 18 
percent).\2\
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    \2\ Under the INTELSAT Operating Agreement, the Board of 
Governors establishes a target rate of compensation (return) for 
shareholders' (``Signatories'') invested capital. All shareholders 
are entitled to the target rate of return, which is periodically 
adjusted by the INTELSAT Board of Governors. See INTELSAT Operation 
Agreement, Article 8.
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    3. The Commission initiated this proceeding as a result of requests 
in an earlier proceeding by United States carriers and other users of 
INTELSAT to permit direct access to the INTELSAT system as a condition 
for granting Comsat non-dominant status in its provision of INTELSAT 
services.\3\ Although the Commission did not require that direct access 
be permitted as a condition to granting Comsat non-dominant status, it 
committed to initiating this proceeding ``expeditiously to explore the 
legal, economic, and policy ramifications of direct access.'' \4\ In 
the Notice, the Commission tentatively concluded that the Commission 
has authority under the Satellite Act and the Communications Act of 
1934 (``Communications Act'') to permit United States carriers and 
other users to obtain Level 3 direct access to the INTELSAT system. The 
Notice requested comment on whether Level 3 direct access would result 
in benefits to carriers, other users, and end users, and whether it 
would enhance competition.
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    \3\ 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, FCC 98-78, 63 FR 25811, (May 11, 1998) (``Comast 
Non-Dominant Order'').
    \4\ Comsat Non-Dominant Order, 63 FR 25811.
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    4. In adopting this policy, the Commission concludes that Level 3 
direct access will benefit U.S. INTELSAT customers in the form of a 
cost savings of between 10 and 71 percent off Comsat tariff rates. The 
document notes, however, that because Comsat must continue to incur 
expenses in its role as the U.S. Signatory to INTELSAT, the Commission 
will allow it to require that direct access customers pay Comsat a 
surcharge to recover certain Signatory expenses. The Commission finds 
that a 5.58 percent surcharge to be reasonable based on the record 
before us. Comsat will be allowed to file a tariff with the Commission 
to collect the surcharge.
    5. To guard against unfair competitive distortions in the U.S. 
market, the Commission limits in the United States direct access 
participation of INTELSAT Signatories or affiliates that control 50 
percent or more of all the INTELSAT capacity consumed in that Signatory 
or affiliate's respective home market. These Signatories, however, will 
still be allowed Level 3 direct access from the United States to 
locations other than these markets. The Report and Order states that 
this limitation will remove the incentive for Signatories to support 
the lowering of INTELSAT tariff rates to uneconomic levels--levels that 
do not reflect INTELSAT's full costs of providing direct access in the 
U.S. market.
    6. The Commission also states that it would expect INTELSAT to 
voluntarily waive its immunity from suit and process to cover any 
direct marketing of services and any negotiation of agreements with 
U.S. carriers that would lead to the provision of services and rates 
not included in the INTELSAT IUC or pursuant to service agreements 
different from what INTELSAT generally offers under Level 3 direct 
access.
    7. The Commission does not grant the requests of carriers seeking 
fresh look at their long term carrier contracts with Comsat for 
INTELSAT space segment capacity. The Report and Order concludes that 
the carriers had not met the standard for fresh look and that the 
circumstances surrounding the consummation of these contracts supports 
leaving them as is. This Commission also did not act on carriers 
requests for portability of their INTELSAT capacity, obtained through 
Comsat, because the current record is insufficient. Specifically, the 
Report and Order noted that there is no evidence that INTELSAT capacity 
will not be available due to Comsat's control of INTELSAT spectrum 
capacity from the United States. The Commission, however, said it would 
consider the issue of portability if direct access customers 
demonstrate that Comsat's control of space segment capacity prevents 
realization of direct access benefits, and commercial solutions do not 
appear available.

Final Regulatory Flexibility Analysis

    8. As required by section 603 of the Regulatory Flexibility Act 
(``RFA''), an Initial Regulatory Flexibility Analysis (``IRFA'') was 
incorporated in the Notice to this Report and Order. See 5 U.S.C. 603. 
The RFA, see 5 U.S.C. 601 et seq., has been amended by the Contract 
With America Advancement Act of 1996, Public Law 104-121, 110 Stat. 847 
(1996) (``CWAAA''). Title II of the CWAAA is the Small Business 
Regulatory Enforcement Fairness Act of 1996 (``SBREFA''). See In the 
Matter of Direct Access to the INTELSAT System, IB Docket No. 98-192, 
File No. 60 SAT-ISP-97, Notice of Proposed Rulemaking,

[[Page 54563]]

13 FCC Rcd 22013, 22052-54 (1998). The Commission then sought written 
public comment in that proceeding, including comments on the IRFA. No 
party filed comments in response to the IRFA. This Report and Order 
promulgates no new rules and our action here does not affect the 
previous analysis in the Notice. The Commission certifies that there 
will be no significant effect on a substantial number of small 
entities.

A. Need for and Objectives of Rules

    9. In this Report and Order, the Commission permits direct access 
to the INTELSAT satellite system, in lieu of users having to obtain 
service through Comsat Corporation. This will result in a variety of 
benefits to users and ultimately consumers including: cost savings of 
between 10-71 percent over Comsat rates, greater efficiency, and 
flexibility and control over facility use. In addition, this action 
will place competitive pressure on the current rates for satellite 
capacity and enable U.S. carriers to compete more effectively globally.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the Regulatory Flexibility Analysis

    10. No comments were submitted in direct response to the RFA.

C. Description and Estimates of the Number of Small Entities to Which 
the Rules Will Apply

    11. The RFA generally defines the term ``small entity'' as having 
the same meaning as the terms ``small business'', ``small 
organization'', and ``small governmental jurisdiction''. See 5 U.S.C. 
601(6). The RFA has been amended by the Contract With America 
Advancement Act of 1996, Public Law 104-121, 110 Stat. 847 (1996) 
(``CWAAA''). See 5 U.S.C. 601 et seq. Title II of the CWAAA is the 
Small Business Regulatory Enforcement Fairness Act of 1996 
(``SBREFA''). In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. See 5 U.S.C. 601(3) (incorporating by reference the definition of 
``small business concern'' in 15 U.S.C. 632). Pursuant to the RFA, the 
statutory definition of a small business applies ``unless an agency, 
after consultation with the Office of Advocacy of the Small Business 
Administration and after opportunity for public comment, establishes 
one or more definitions of such term which are appropriate to the 
activities of the agency and publishes such definition(s) in the 
Federal Register.'' 5 U.S.C. 601(3). A small business concern is one 
which (1) is independently owned and operated, (2) is not dominant in 
its field of operation, and (3) satisfies any additional criteria 
established by the Small Business Administration (``SBA'').
    12. The Commission has not developed a definition of small entities 
specifically applicable to this situation. Therefore, the applicable 
definition of small entity is the definition under the SBA rules 
applicable to Communications Services, ``Not Elsewhere Classified.'' 
This definition provides that a small entity is one with no more than 
$11 million annual receipts. 13 CFR 121.201, Standard Industrial 
Classification (SIC) Code 4899. According to the Census Bureau data, 
there were a total of 848 communications services in operation in 1992 
that fall under the category of Communications Services, Not Elsewhere 
Classified. Of those, approximately 775 reported annual receipts of 
$9.999 million or less and qualify as small entities. 1992 Economic 
Census Industry and Enterprise Receipts Size Report, Table 2D, SIC 4899 
(U.S. Bureau of the Census data under contract to the Office of 
Advocacy of the U.S. Small Business Administration). The census report 
does not provide more precise data. Comsat Corporation and Lockheed 
Martin would be the only business affected by the policy enacted in 
this Report and Order. Each of their annual receipts are in excess of 
$11.0 million and, therefore, cannot be classified as a ``small 
business.'' Accordingly, the number of small businesses impacted by the 
policy change here is zero.

D. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements

    13. The procedures for implementing Level 3 direct access to the 
INTELSAT system from the United States, including the surcharge 
element, will consist of several elements. Subsequent to release and 
publication in the Federal Register, the International Bureau shall 
issue a Public Notice establishing a 21-day period (from the date of 
the public notice) for eligible carriers and users to notify the 
Commission in writing that they want Level 3 direct access to INTELSAT. 
The public notice also will specify the name and address for filing any 
such notification. The International Bureau will forward the names of 
all the eligible U.S. carriers and users to Comsat. Comsat shall be 
required to inform INTELSAT within ten days of receiving these eligible 
names that they are authorized to obtain Level 3 direct access from 
INTELSAT without further approval of the U.S. Signatory--Comsat--
consistent with the procedures established by INTELSAT that permits 
``blanket authorizations'' for Level 3 direct access. Any eligible 
carriers and users, not part of the initial ``blanket authorization'' 
request sent to INTELSAT, may request that Comsat add them to the list 
of carriers and users eligible for Level 3 direct access ``blanket 
authorizations.'' Comsat will be required to inform INTELSAT within ten 
days of receiving each such subsequent request. Within 60 days after 
publication in the Federal Register of this Report and Order, Comsat 
may file, on one day's notice, a tariff of the terms and conditions of 
surcharges applicable to U.S. Level 3 direct access customers, 
consistent with the findings in this Report and Order. The carriers and 
users obtaining Level 3 direct access from INTELSAT shall pay Comsat 
the surcharge specified in Comsat's effective tariff that is applicable 
to the services obtained from INTELSAT. Finally, Comsat may establish 
reporting mechanisms with INTELSAT for the limited purpose of assuring 
that Comsat can identify the appropriate surcharge that U.S. direct 
access customers must pay Comsat upon receipt of service from INTELSAT 
under Level 3 direct access. Comsat may take appropriate steps through 
INTELSAT to terminate a customer's Level 3 direct access status for 
failure to pay the appropriate surcharge.

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

    14. This Report and Order promulgates no new rules or policies that 
would effect small business concerns. The policies it does advance, 
however, should positively impact competition in the satellite services 
market.

Report to Congress

    15. The Commission shall send a copy of this Report and Order, 
including the status of the FRFA in a report to Congress pursuant to 
the Small Business Regulatory Enforcement Fairness Act of 1996, 5 
U.S.C. 801(a)(1)(A). Since this Report and Order promulgates no new 
rules and does not affect the IRFA in the Notice, it is not necessary 
to publish an FRFA in the Federal Register.

Ordering Clauses

    16. Accordingly, it is ordered, that, pursuant to Sections 102 and 
201(c)(2), (7) and (11) of the Communications Satellite Act of 1962, as 
amended, 47 U.S.C. 701 and 721(c)(2), (7) and (11),

[[Page 54564]]

and 1, 2, 4(c), 201, 202, 214, 301, 303, 307, 308 and 309, of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(c), 
201, 202, 214, 301, 303, 307, 308 and 309 that on December 6, 1999 
Level 3 direct access to INTELSAT shall be available to carriers and 
users authorized to obtain INTELSAT space segment capacity for the 
provision of telecommunications services to and from the United States 
in accordance with the terms and conditions of this Report and Order 
and those established by INTELSAT to implement Level 3 direct access.
    17. It is further ordered that, following publication in the 
Federal Register of this Report and Order, the International Bureau 
shall release a Public Notice requesting authorized carriers and users 
desiring to obtain Level 3 direct access to INTELSAT to so inform the 
Commission within 21 days of the release of the Public Notice.
    18. It is further ordered, that, in its capacity as the U.S. 
Signatory to INTELSAT, and in accordance with procedures established by 
INTELSAT permitting ``blanket authorizations'' for Level 3 direct 
access, Comsat shall inform INTELSAT in writing within ten calendar 
days of receiving the information from the International Bureau that 
the identified authorized carriers and users responding to the Public 
Notice may obtain Level 3 direct access from INTELSAT on the effective 
date of this Report and Order, as provided in paragraphs 206 and 216, 
without further approval of the U.S. Signatory.
    19. It is further ordered, that, authorized carriers and users, not 
identified as part of the initial ``blanket authorization'' sent to 
INTELSAT by Comsat, may request Comsat to request adding them to the 
list of named carriers and users eligible for Level 3 direct access and 
Comsat shall so inform INTELSAT within ten days of receiving each such 
subsequent request.
    20. It is further ordered, that, within 60 days of publication in 
the Federal Register of this Report and Order, Comsat may file, on one 
day's notice, a tariff of the terms and conditions of the surcharge 
applicable to U.S. Level 3 direct access customers which shall be 
consistent with findings in the Report and Order.
    21. It is further ordered, that, authorized carriers and users 
obtaining Level 3 direct access from INTELSAT shall pay Comsat the 
surcharge specified in Comsat's effective tariff that is applicable to 
the services obtained from INTELSAT.
    22. It is further ordered, that, in its role as the U.S. Signatory, 
Comsat may establish reporting mechanisms with INTELSAT for the limited 
purpose of assuring that Comsat can identify the appropriate surcharge 
that U.S. direct access customers must pay Comsat upon receipt of 
service from INTELSAT under Level 3 direct access.
    23. It is further ordered, that, Comsat's tariff may provide that 
failure to pay the appropriate surcharge will result in loss of a 
customer's Level 3 direct access privileges.
    24. It is further ordered, that the Comsat Corporation MOTION TO 
STRIKE the ex parte filing submitted by counsel for the Satellite Users 
Coalition, IS DENIED.\5\
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    \5\ Comsat moves to strike the filing on September 9, 1999 by 
the Satellite Users Coalition giving notice of an ex parte 
presentation it made to Commission staff the previous day, prior to 
release of the Sunshine Notice. See Letter from Comsat Corporation 
to the Secretary, Federal Communications Commission, dated September 
9, 1999. See also Opposition to Motion to Strike by Satellite Users 
Coalition, IB Docket No. 98-192, File No. 60-SAT-ISP-97 (Sept. 13, 
1999). See also Comsat Reply to Opposition to Motion to Strike, IB 
Docket No. 98-192, File No. 60-SAT-ISP-97 (Sept. 14, 1999). Comsat 
contends that receipt of this required filing the following day, by 
staff not present at the September 8, 1999 meeting, constituted a 
violation of our ex parte rules which prohibits presentations to 
decision-makers on matters listed on the Commission's Agenda. See 47 
CFR 1.1203(a). However, the oral and other information provided by 
the Satellite Users Coalition on September 8, 1999, was 
constructively available to all Commission decision-makers on that 
date. In addition, the Satellite Users Coalition was required to 
file this information for the public record by the end of the next 
day in accordance with Section 1.1206(b) of our rules. 47 CFR 
1.1206(b). As a result, service on decision-makers not present at 
the September 8 meeting did not constitute a violation of 
Commission's rules.
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    25. It is further ordered, that, the Commission's Office of 
Managing Director shall send a copy of this Report and Order, including 
Final Regulatory, Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.
    26. It is further ordered, that policies and requirements 
established in this Report and Order shall take effect December 6, 
1999, or in accordance with the requirements of 5 U.S.C. 801(a)(3) and 
44 U.S.C. 3507, whichever occurs later.

List of Subjects in 47 CFR Chapter 1

    Communications common carriers, Telecommunications.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-26148 Filed 10-6-99; 8:45 am]
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