S 376 IS (106th Congress).
Re: satellite privatization.
Sponsor: Sen. Conrad Burns (R-MT).
Date introduced: February 4, 1999.
Source: Library of Congress.

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

IN THE SENATE OF THE UNITED STATES

February 4, 1999

Mr. BURNS (for himself, Mr. MCCAIN, Mr. DORGAN, Mr. BRYAN, Mr. BROWNBACK, and Mr. CLELAND) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation

A BILL

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

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

SECTION 1. SHORT TITLE.

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

SEC. 2. PURPOSE.

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

SEC. 3. FINDINGS.

The Congress finds that:

(1) International satellite communications services constitute a critical component of global voice, video and data services, play a vital role in the integration of all nations into the global economy and contribute toward the ability of developing countries to achieve sustainable development.

(2) The United States played a pivotal role in stimulating the development of international satellite communications services by enactment of the Communications Satellite Act of 1962 (47 U.S.C. 701-744; hereinafter the `Satellite Act'), and by its critical contributions, through its signatory, COMSAT Corporation (hereinafter `COMSAT'), in the establishment of INTELSAT, which has successfully established global satellite networks to provide member countries with worldwide access to telecommunications services, including critical lifeline services to the developing world.

(3) By statute, COMSAT, a publicly traded corporation, is the sole United States signatory to INTELSAT and, as such, is responsible for carrying out United States commitments under the INTELSAT Agreement and the INTELSAT Operating Agreement. Pursuant to a binding Headquarters Agreement, the United States, as a Party to INTELSAT, has satisfied many of its obligations under the INTELSAT Agreement.

(4) In the 37 years since enactment of the Satellite Act, satellite technology has advanced dramatically, large-scale financing options have improved immensely and international telecommunications policies have shifted from those of natural monopolies to those based on market forces, resulting in multiple private commercial companies around the world providing, or preparing to provide, the domestic, regional, and global satellite telecommunications services that only INTELSAT had previously had the capabilities to offer.

(5) Private commercial satellite communications systems now offer the latest telecommunications services to more and more countries of the world with declining costs, making satellite communications an attractive complement as well as alternative to terrestrial communications systems, particularly in lesser developed countries.

(6) To enable consumers to realize optimum benefits from international satellite communications services, and to enable these systems to be competitive with other international telecommunication systems, such as fiber optic cable, the global trade and regulatory environment must support vigorous and robust competition.

(7) In particular, all satellite systems should have unimpeded access to the markets that they are capable of serving, and the ability to compete in a fair and meaningful way within those markets.

(8) Transforming INTELSAT from an intergovernmental organization into a conventional satellite services company is a key element in bringing about the emergence of a fully competitive global environment for satellite services.

(9) Consistent with United States obligations under the WTO Basic Agreement on Telecommunications Services and to prevent the potential distortion of competition in the United States market, a pro-competitive privatization of INTELSAT is an appropriate prerequisite to granting INTELSAT direct access to users in the United States market.

(10) It is in the interest of the United States to remove, by January 1, 2002, the reservation in the Fourth Protocol to the General Agreement on Trade in Services regarding INTELSAT's access to the United States market through COMSAT, but such reservation cannot be removed without adequate assurance that the U.S. market for satellite services will not be disrupted by such INTELSAT access.

(11) The Satellite Act, and other applicable United States laws, need to be updated to encourage the pro-competitive privatization of INTELSAT to update the domestic United States regulatory regime governing COMSAT, and to ensure a competitively neutral United States framework for the provision of domestic and international telecommunications services via satellite systems.

SEC. 4. REVISION OF COMMUNICATIONS SATELLITE ACT OF 1962.

(a) CREATION OF CORPORATION- Section 301 of the Communications Satellite Act of 1962 (47 U.S.C. 731) is amended to read as follows:

`SEC. 301. CREATION OF CORPORATION.

`The Corporation shall be subject to the provisions of this Act. The right to repeal, alter, or amend this Act at any time is expressly reserved.'.

(b) SATELLITE SERVICES COMPETITION AND PRIVATIZATION- The Communications Satellite Act of 1962 (47 U.S.C. 701) is amended by adding at the end the following:

`TITLE VI--SATELLITE SERVICES COMPETITION AND PRIVATIZATION

`Subtitle A--Transition to a Privatized INTELSAT

`SEC. 601. POLICY OF THE UNITED STATES.

`It is the policy of the United States to--

`(1) encourage INTELSAT to privatize in a pro-competitive manner as soon as possible, but not later than January 1, 2002, recognizing the need for a reasonable transition and process to achieve a full, pro-competitive restructuring; and

`(2) work constructively with its international partners in INTELSAT, and with INTELSAT itself, to bring about a prompt restructuring that will ensure fair competition, both in the United States as well as in the global markets served by the INTELSAT system.

`SEC. 602. ROLE OF COMSAT.

`(a) ADVOCACY- As the sole United States signatory to INTELSAT, COMSAT shall act as an advocate of pro-competitive privatization of INTELSAT, and shall exercise its voting rights with INTELSAT consistent with that mission and the United States instructional process.

`(b) ANNUAL REPORTS- COMSAT shall report annually to the Committee on Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate on the progress being made by INTELSAT to privatize in a pro-competitive manner.

`SEC. 603. RESTRICTIONS PENDING PRIVATIZATION.

`(a) INTELSAT ACCESS TO UNITED STATES MARKET- INTELSAT shall be prohibited from entering the United States market directly to provide any satellite communications services or space segment capacity to carriers (other than the United States signatory, COMSAT) or end users in the United States prior to achieving a pro-competitive privatization certified by the President pursuant to section 612.

`(b) SERVICE RESTRICTIONS- Until the President makes a certification pursuant to section 612, the following services provided by the INTELSAT system shall not be authorized in the United States by the Federal Communications Commission: direct-to-home satellite services, direct broadcast satellite services, satellite digital audio radio services, and satellite communications services in the Ka Band. The preceding sentence may be waived by the President if the President finds that the provision of such service would enhance national security or serve a vital public interest. This provision is not intended to disrupt or otherwise jeopardize the continuing provision of existing authorized services in the United States via the INTELSAT system.

`Subtitle B--Privatization of INTELSAT

`SEC. 611. PRIVATIZATION.

`The President shall secure a pro-competitive privatization of INTELSAT as soon as practicable, but no later than January 1, 2002. Such privatization shall be confirmed by a final decision of the INTELSAT Assembly of Parties.

`SEC. 612. PROVISION OF SERVICES IN THE UNITED STATES BY INTERGOVERNMENTAL SATELLITE ORGANIZATION AFFILIATES.

`(a) IN GENERAL- In order to achieve the objectives and carry out the purposes of the Open-market Reorganization for the Betterment of International Telecommunications Act, the Commission--

`(1) shall apply a presumption in favor of entry to an IGO affiliate licensed by a WTO Member for services covered by U.S. commitments under the WTO Basic Telecom Agreement;

`(2) may attach conditions to any grant of authority to an IGO affiliate that raises the potential for competitive harm; or

`(3) shall in the exceptional case in which an application by an IGO affiliate would pose a very high risk to competition in the U.S. satellite market, deny the application.

`(b) DETERMINATION FACTORS- In determining whether an application to serve the United States market by an IGO affiliate raises the potential for competitive harm under (a)(2), the FCC shall consider any potential anti-competitive or market distorting consequences of continued relationships or connections between an IGO and its affiliates, including:

`(1) whether the affiliate is structured to prevent practices such as collusive behavior or cross-subsidization;

`(2) the degree of affiliation between the IGO and its affiliate;

`(3) whether the affiliate can directly or indirectly benefit from IGO privileges and immunities;

`(4) the ownership structure of the affiliate and the effect of IGO and other Signatory ownership;

`(5) the existence of clearly defined arm's-length conditions governing the affiliate-IGO relationship including separate officers, directors, employees, and accounting systems;

`(6) the existence of fair market valuing for permissible business transactions between an IGO and its affiliate that is verifiable by an independent audit and consistent with normal commercial practice;

`(7) the existence of common marketing;

`(8) the availability of recourse to IGO assets for credit or capital; and

`(9) whether an IGO registers or coordinates spectrum or orbital locations on behalf of its affiliate.

`(c) SUNSET- The provisions of this section shall cease to have effect upon the certification by the President pursuant to section 613(b).

`SEC. 613. CERTIFICATION.

`(a) APPLICATION- Upon a final decision of the INTELSAT Assembly of Parties creating the legal structure and characteristics of the privatized INTELSAT, INTELSAT shall file a request with the President for certification that the privatized INTELSAT's entry into the United States market for satellite services will not distort competition in that market.

`(b) CERTIFICATION- Upon application by INTELSAT, the President shall make such determination in accordance with the pro-competitive criteria in subsection (c), and shall take into consideration all other relevant competitive factors, including factors related to other competitors in the United States and global market for satellite services.

`(c) CRITERIA- In making a determination pursuant to subsection (b), the President shall determine that a privatized INTELSAT--

`(1) has no privileges or immunities limiting legal accountability, commercial transparency or taxation;

`(2) has submitted to the jurisdiction of competition and independent regulatory authorities of a nation that is a signatory to the World Trade Organization Agreement on Basic Telecommunications and that has implemented or accepted the agreement's reference paper on regulatory principles;

`(3) can offer assurance of an arm's-length relationship in all respects between itself and any affiliate, including New Skies, and in particular with respect to technical, financial, and management contracts;

`(4) can demonstrate that the valuation of assets to be transferred post-privatization is in accordance with generally accepted accounting principles;

`(5) has access to orbital locations and associated spectrum post-privatization in accordance with the same regulatory processes applicable to other commercial satellite systems;

`(6) conducts technical coordinations post-privatization under normal, established ITU procedures;

`(7) has an ownership structure in the form of a stock corporation or other similar and accepted commercial mechanism, and a commitment to a timely initial public offering has been established for the sale or purchase of company shares;

`(8) does not enter into agreements or arrangements to secure exclusive access to any national telecommunications market; and

`(9) will have accomplished a privatization consistent with the criteria listed in this subsection at the earliest possible date, but not later than January 1, 2002.

`SEC. 614. FCC REVIEW OF LICENSE APPLICATIONS.

`(a) APPLICATION- If the President makes such a certification pursuant to section 613, the following applications and Letters of Intent to provide satellite communications services by or via the privatized INTELSAT, internationally or within the domestic United States, otherwise permitted by law, may be filed with the Commission provided that no instrument of authorization may be granted prior to the implementation of the certified privatization:

`(1) Applications for a satellite Earth station or space station under title III of the Communications Act of 1934 (47 U.S.C. 301 et seq.).

`(2) Letters of Intent to provide service in the United States via non-U.S.-licensed space segment.

`(3) Applications under section 214 of the Communications Act of 1934 (47 U.S.C. 214).

`(b) PUBLIC INTEREST DETERMINATION- Except as provided in subsection (c), nothing in this Act shall restrict or expand the Commission's ability to make a public interest determination concerning any application pertaining to a privatized INTELSAT's entry into the United States market.

`(c) EFFECT OF PRESIDENTIAL CERTIFICATION ON COMMISSION DELIBERATIONS- The Commission shall be bound by the President's privatization certification made pursuant to section 613 for purposes of any license application, including space segment and Earth station applications, pending before the Federal Communications Commission which pertains to a privatized INTELSAT's entry into the United States market.

`SEC. 614. FAILURE TO PRIVATIZE IN A TIMELY MANNER.

`(a) REPORT- In the event that INTELSAT fails to fully privatize as provided in sections 611 and 612 by January 1, 2002, the President shall--

(1) immediately commence deliberations to determine what additional measures should be implemented to ensure the rapid privatization of INTELSAT;

(2) no later than March 31, 2002, issue a report delineating such measures to the Committee on Commerce of the House of Representatives, and Committee on Commerce, Science, and Transportation of the Senate; and

(3) withdraw as a Party from INTELSAT.

`(b) RESERVATION CLAUSE- The President may determine that, in consideration of progress made, it is in the national interest of the United States to provide a reasonable extension of time for completion of privatization.

`Subtitle C--COMSAT Governance and Operation

`SEC. 621. ELIMINATION OF PRIVILEGES AND IMMUNITIES.

`(a) IN GENERAL- COMSAT shall not have any privilege or immunity on the basis of its status as a signatory or a representative of the Party to INTELSAT, except that COMSAT retains its privileges and immunities--

`(1) for those actions taken in its role as the United States signatory to INTELSAT upon instruction of the United States Government;

`(2) for actions taken when acting as the United States signatory in fulfilling obligations under the INTELSAT Operating Agreement;

`(3) for INTELSAT signatory activities which COMSAT does not support; and

`(4) in accordance with any other exceptions as the President shall make in accordance with subsection (b).

`(b) EXCEPTIONS- The President, or the President's designee, shall ensure that any action authorized by the exception is consistent with the purposes of this Act and COMSAT's responsibilities as the United States signatory.

`(c) NO JOINT OR SEVERAL LIABILITY- If COMSAT is found liable for any action taken in its status as a signatory or a representative of the Party to INTELSAT, any such liability shall be limited to the portion of the judgment that corresponds to COMSAT's percentage of the responsibility, as determined by the trier of fact.

`(d) PROSPECTIVE EFFECT OF ELIMINATION- The elimination of privileges and immunities contained in this section shall apply only to actions or decisions taken by COMSAT after the date of enactment of this section.

`SEC 622. ABROGATION OF CONTRACTS PROHIBITED.

`Nothing in this Act or the Communications Act of 1934 (47 U.S.C. 151 et seq.) shall be construed to modify or invalidate any contract or agreement involving COMSAT, INTELSAT, or any terms or conditions of such agreement in force on the date of enactment of the Open-market Reorganization for the Betterment of International Telecommunications Act, or to give the Commission authority, by rule-making or any other means, to invalidate any such contract or agreement, or any terms and conditions of such contract or agreement.

`SEC. 623. PERMITTED COMSAT INVESTMENT.

`Nothing in this Act shall be construed as precluding COMSAT from investing in or owning satellites or other facilities independent from INTELSAT, or from providing services through reselling capacity over the facilities of satellite systems independent from INTELSAT. This section 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.

`Subtitle D--General Provisions

`SEC. 631. PROMOTION OF EFFICIENT USE OF ORBITAL SLOTS AND SPECTRUM.

`All satellite system operators authorized to access the United States market shall make efficient and timely use of orbital and spectrum resources in order to ensure that these resources are not warehoused to the detriment of other new or existing satellite system operators. Where these assurances cannot be provided, satellite system operators shall relinquish their rights to these resources.

`SEC. 632. PROHIBITION ON PROCUREMENT PREFERENCES.

`Nothing in this title or the Communications Act of 1934 (47 U.S.C. 151 et seq.) shall be construed to authorize or require any preference in Federal Government procurement of telecommunications services, for the satellite space segment provided by INTELSAT, nor shall anything in this title or the Communications Act of 1934 be construed to result in a bias against the use of INTELSAT through existing or future contract awards.

`SEC. 633. SATELLITE AUCTIONS.

`Notwithstanding any other provision of law, the Commission shall not 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 Telecommunications 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.

`SEC. 634. RELATIONSHIPS TO OTHER LAWS.

`Whenever the application of the provisions of this Act is inconsistent with the provisions of the Communications Act of 1934, the provisions of this Act shall govern.

`Subtitle E--Definitions

`SEC. 641. DEFINITIONS.

`(a) IN GENERAL- 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) COMSAT- The term `COMSAT' means the corporation established pursuant to title III of this Act.

`(3) SIGNATORY- The term `signatory' means a Party, or the telecommunications entity designed 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.

`(4) PARTY- The term `Party' means, in the case of INTELSAT, a nation for which the INTELSAT agreement has entered into force or been provisionally applied.

`(5) COMMISSION- The term `Commission' means the Federal Communications Commission.

`(6) INTERNATIONAL TELECOMMUNICATION UNION- The term `International Telecommunication Union' (ITU) 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 orbital arc.

`(7) PRIVATIZED INTELSAT- The term `privatized INTELSAT' means any entity created from the privatization of INTELSAT from the assets of INTELSAT.

`(8) ORBITAL LOCATION- The term `orbital location' means the location for placement of a satellite in geostationary orbits as defined in the International Telecommunication Union Radio Regulations.

`(9) 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.

`(10) INTELSAT AGREEMENT- The term `INTELSAT agreement' means the agreement relating to the International Telecommunications Satellite Organization (`INTELSAT'), including all of its annexes (TIAS 7532, 23 UST 3813).

`(11) OPERATING AGREEMENT- The term `operating agreement' means, 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.

`(12) HEADQUARTERS AGREEMENT- The term `headquarters agreement' means the binding international agreement, dated November 24, 1976, between the United States and INTELSAT covering privileges, exemptions, and immunities with respect to the location of INTELSAT's headquarters in Washington, D.C.

`(13) DIRECT-TO-HOME SATELLITE SERVICES- The term `direct-to-home satellite services' means the distribution or broadcasting of programming or services by satellite directly to the subscriber's premises without the use of ground receiving or distribution equipment, except at the subscriber's premises or in the uplink process to the satellite.

`(14) SATELLITE DIGITAL AUDIO RADIO SERVICE- The term `satellite digital audio radio service' means a radiocommunication service in which audio programming is digitally transmitted by one or more space stations directly to fixed, mobile, or portable earth stations, and which may involve complementary repeating terrestrial transmitters, telemetry, tracking and control facilities.

`(15) DIRECT BROADCAST SATELLITE SERVICE- The term `direct broadcast satellite service' means a radiocommunication service in which signals transmitted or retransmitted by space stations are intended for direct reception by the general public. In the Direct Broadcast Satellite Service the term `direct reception' shall encompass both individual reception and community reception.

`(16) EXISTING AUTHORIZED SERVICES- All services authorized to be provided by COMSAT via the INTELSAT system as of January 1, 1999.

`(17) IGO- The term `IGO' means the Intergovernmental Satellite organizations, INTELSAT and INMARSAT.

`(18) IGO AFFILIATE- The term `IGO affiliate' means any entity in which an IGO owns an equity interest of 10 percent or more.

`(b) COMMON TERMS- Except as otherwise provided in subsection (a), terms used in this title that are defined in section 3 of the Communications Act of 1934 (47 U.S.C. 153) have the meaning provided in such section.'.

SEC. 5. REPEAL OF OWNERSHIP AND STRUCTURAL PROVISIONS.

Effective as of the date of the enactment of this Act, the following provisions of the Communications Satellite Act of 1962 (47 U.S.C. 701 et seq.) shall cease to be effective:

(1) Subsections (a) and (b) of section 201.

(2) Paragraphs (1) through (10) of section 201(c).

(3) Sections 302, 303, and 304.

(4) Section 305(c).

(5) Section 402.

(6) Section 403(a).

(7) Section 404.

SEC. 6. INTERNATIONAL MARITIME SATELLITE TELECOMMUNICATIONS ACT AMENDMENTS.

(a) Continuing Provision of Global Satellite Safety Services After Privatization of Business Operations of International Mobile Satellite Organization-

(1) AUTHORITY- The International Maritime Satellite Telecommunications Act (47 U.S.C. 751 et seq.) is amended by adding at the end the following:

`SEC. 506. GLOBAL SATELLITE SAFETY SERVICES AFTER PRIVATIZATION OF BUSINESS OPERATIONS OF INMARSAT.

`In order to ensure the continued provision of global maritime distress and safety satellite telecommunications services after privatization of the business operations of INMARSAT, the President may maintain on behalf of the United States membership in the International Mobile Satellite Organization.'.

(b) Repeal of Superseded Authority-

(1) REPEAL- That Act is further amended by striking sections 502, 503, 504, and 505 (47 U.S.C. 751, 752, 753, and 757).

(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall take effect on the date on which the International Mobile Satellite Organization ceases to operate directly a global mobile satellite system.