[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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\6\ INTELSAT is an acronym for the International
Telecommunications Satellite Organization.
---------------------------------------------------------------------------
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
[[Page 59758]]
established by the Small Business Administration.7
---------------------------------------------------------------------------
\7\ See 15 U.S.C. 632.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\8\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4899.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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]
BILLING CODE 6712-01-P