*Pages 1--26 from Microsoft Word - 49385.doc* ________________ Federal Communications Commission_____________ FCC 05- 127 FCC REPORT TO CONGRESS AS REQUIRED BY THE ORBIT ACT Adopted: June 13, 2005 Released: June 15, 2005 1 ________________ Federal Communications Commission_____________ FCC 05- 127 1 FCC REPORT TO CONGRESS AS REQUIRED BY THE ORBIT ACT SIXTH REPORT This report is submitted in accordance with Section 646 of the Open- Market Reorganization for the Betterment of International Telecommunications Act (the “ORBIT Act”). 1 Section 646 states: (a) ANNUAL REPORTS - The President and the Commission shall report to the Committees on Commerce and International Relations of the House of Representatives and the Committees on Commerce, Science, and Transportation and Foreign Relations of the Senate within 90 calendar days of the enactment of this title, and not less than annually thereafter, on the progress made to achieve the objectives and carry out the purposes and provisions of this title. Such reports shall be made available immediately to the public. (b) CONTENTS OF REPORTS - The reports submitted pursuant to subsection (a) shall include the following: (1) Progress with respect to each objective since the most recent preceding report. (2) Views of the Parties with respect to privatization. (3) Views of the industry and consumers on privatization. (4) Impact privatization has had on United States industry, United States jobs, and United States industry’s access to the global marketplace. I. Progress as to Objectives and Purposes The purpose of the ORBIT Act is “to promote a fully competitive global market for satellite communication services for the benefit of consumers and providers of satellite services and equipment by fully privatizing the intergovernmental satellite organizations, INTELSAT and Inmarsat.” 2 The ORBIT Act, as originally passed in 2000: (1) mandates the privatization of INTELSAT and Inmarsat; (2) establishes criteria to ensure a pro- competitive privatization; (3) requires the Commission to determine whether INTELSAT, Inmarsat, and the INTELSAT spin- off, New Skies Satellites N. V. (“ New Skies”), have been privatized in a manner that will harm competition in the United States; (4) requires the Commission to use the privatization criteria specified in the ORBIT Act as a basis for making its competition determination; and (5) directs the Commission to “limit 1 47 U. S. C. § 765e (2000). 2 47 U. S. C. § 761 NOTE. 2 ________________ Federal Communications Commission_____________ FCC 05- 127 2 through conditions or deny” applications or requests to provide “non- core” services to, from, or within the United States if it finds that competition will be harmed. 3 It provides for certain exceptions to limitations on non- core services in the event of such a determination. The Act also prohibits the Commission from authorizing certain “additional” services pending privatization consistent with the criteria in the Act. 4 In addition, the Act directs the Commission to undertake a rulemaking proceeding to assure U. S. users the opportunity for direct access to the INTELSAT system. In October 2004, Congress amended the ORBIT Act, adding Sections 621( 5)( F) and (G), to provide a certification process as an alternative to the IPO requirements under Sections 621( 5)( A) and (B). 5 The Commission made its first report to Congress on its actions to implement the ORBIT Act on June 15, 2000, following enactment of the Act on March 17, 2000. 6 The Commission made its second report on June 15, 2001, 7 its third report on June 14, 2002, 8 its fourth report on June 11, 2003, 9 and its fifth report on June 15, 2004. 10 In anticipation of this sixth report, the Commission issued a Public Notice on March 25, 2005 inviting public comment appropriate to its development. 11 Comments were filed by: Inmarsat Group Holdings, Limited (“ Inmarsat”) and Intelsat LLC (“ Intelsat”). No reply comments were filed. A. Commission Actions and Activities The Commission has undertaken a number of actions required by the ORBIT Act, or related to its objectives and purposes. The Commission has taken the actions described below to ensure that INTELSAT, Inmarsat, and New Skies have been privatized in a procompetitive 3 The Act defines “non- core” services as “services other than public- switched network voice telephony and occasional- use television” with respect to INTELSAT, and as “services other than global maritime distress and safety services or other existing maritime or aeronautical services for which there are not alternative providers” with respect to Inmarsat. 47 U. S. C. § 769( a)( 11). 4 The Act defines “additional” services as “direct- to- home” (“ DTH”) or direct broadcast satellite (“ DBS”) video services, or services in the Ka or V bands” for INTELSAT and as “those non- maritime or non-aeronautical mobile services in the 1.5 and 1.6 GHz band on planned satellites or the 2 GHz band” for Inmarsat. 47 U. S. C. § 769( a)( 12). 5 Public Law No. 108- 371, 118 Stat. 1752 (October 25, 2004). 6 FCC Report to Congress as Required by the ORBIT Act, 15 FCC Rcd 11288 (2000). 7 FCC Report to Congress as Required by the ORBIT Act, 16 FCC Rcd 12810 (2001). 8 FCC Report to Congress as Required by the ORBIT Act, 17 FCC Rcd 11458 (2002). 9 FCC Report to Congress as Required by the ORBIT Act, 18 FCC Rcd 12525 (2003). 10 FCC Report to Congress as Required by the ORBIT Act, 19 FCC Rcd 10891 (2004). 11 Public Notice, Report No. SPB- 211, March 25, 2005. 3 ________________ Federal Communications Commission_____________ FCC 05- 127 13 requirements of the Securities Exchange Act of 1934, as amended. Accordingly, Intelsat is required to file with the U. S. Securities and Exchange Commission an annual report on Form 20- F within six months after the end of each fiscal year. Intelsat last filed a Form 20- F on March 15, 2005, for the fiscal year ended December 31, 2004. As previously noted, on December 22, 2004, the Commission authorized the transfer of control of Intelsat’s licenses and authorizations to Zeus, and the transaction was consummated in January 2005. Intelsat filed a Certification pursuant to Section 621( 5)( F) of the ORBIT Act, and on April 8, 2005, the Commission determined that Intelsat’s certification was in compliance with Sections 621( 5)( F) and 621( 5)( G) of the ORBIT Act, and that Intelsat could forgo the requirement for an IPO and public listing of securities. Intelsat is no longer subject to the provisions of Section 602 that prohibited Intelsat from providing “additional services” in the United States. II. Views of INTELSAT Parties on Privatization The Commission, in response to the Public Notice for this Report to Congress, has not received any views from INTELSAT Parties 65 regarding privatization. III. Views of Industry and Consumers on Privatization As previously noted, Inmarsat and Intelsat responded to the Commission’s public notice inviting comments related to the development of this Report to Congress. No reply comments were filed. Intelsat Privatization Comments Intelsat maintains that it is continuing to respond to market forces. Intelsat notes that, since it last filed comments, it had acquired customer contracts and other assets of COMSAT General Corporation, which it maintains enhanced Intelsat’s competitive position in providing U. S. government and NATO customers with satellite capacity and services. Intelsat also noted that it consummated the transaction by which it was indirectly acquired by Zeus Holdings Limited, a consortium of private investors, and that with that transaction, Intelsat would be in compliance with Section 621( 5)( F) of the ORBIT Act. 66 Intelsat further stated that its privatization has had a positive impact on the marketplace for communications services, and that Intelsat has been able to offer expanded communications services, thereby promoting competition and benefits for consumers. Inmarsat Privatization Comments Inmarsat notes that in October 2001, the Commission determined that Inmarsat’s privatization was consistent with the non- IPO criteria specified in Sections 621 and 624 of the 65 The INTELSAT Parties are nations for which the INTELSAT agreement has entered into force. 47 U. S. C. § 769( a)( 4)( A). 66 Intelsat Comments at 2. 14 ________________ Federal Communications Commission_____________ FCC 05- 127 14 ORBIT Act. Inmarsat also notes that, with the October 2004 amendment to the ORBIT Act, Inmarsat could satisfy the remaining requirements by complying with a certification process. Inmarsat states that it submitted a Request for Declaratory Ruling and a certification on November 15, 2004. In that submission, Inmarsat indicated that a majority of the equity interest were acquired by new, non- signatory shareholders. 67 Inmarsat also notes that on March 11, 2005, it launched the first satellite in its next generation satellite system, Inmarsat- 4, and was undergoing in- orbit testing at the time of its filing. The second spacecraft is scheduled for launch in Fall 2005. The third spacecraft, designated as a ground spare, is fully manufactured and undergoing pre- launch testing. Inmarsat states that this next generation network will be capable of providing enhanced mobile satellite service (“ MSS”) to the United States. Its broadband MSS service, referred to as Broadband Global Area Network (“ BGAN”), will be deployed on its network of Inmarsat- 4 satellites. Inmarsat further states that these satellites are more spectrum efficient than previous satellites. 68 Inmarsat points out that its services have been of critical importance to public safety, military, governmental, humanitarian, and commercial users, and that its importance to these users will continue with the new Inmarsat- 4 network. Inmarsat also states that the Inmarsat- 4 system is expected to provide support for long- range vessel tracking and container monitoring systems that are to be developed in compliance with the Maritime Transportation Security Act. IV. Impact of Privatization Section 646 requires that the Commission report on the impact of privatization on U. S. industry, jobs, and industry access to the global market. INTELSAT’s privatization was designed to allow Intelsat LLC to continue to operate and provide services in a manner that meets U. S. commercial and governmental, including national security, needs. Privatization has enabled Intelsat to compete freely for all U. S. satellite business opportunities, thereby increasing competition in the U. S. market and encouraging the development of service offerings to U. S. customers. 69 Further, the geographic location of Intelsat service and licensing companies in the United States contribute to jobs and productivity increases in the United States. Inmarsat’s privatization also appears to have had a positive impact on the domestic U. S. market. 70 Privatization has provided Inmarsat the opportunity to develop new services for the U. S. market that potentially will result in the expansion of service options and providers for U. S. customers. This also promises to lead to increased industry competition. As a result of privatization and Commission authorization, distributors were given access rights to distribute Inmarsat services in the United States. 67 Inmarsat Comments at 2 and Inmarsat Certification. 68 Inmarsat Comments at 3. 69 For example, Intelsat has begun providing services other than its traditional space segment services. Intelsat recently launched its North American video fiber network which offers broadcasters an enhanced opportunity to reliably transmit video content to, from and within North America using a global terrestrial and satellite infrastructure, Intelsat Comments at 2. 70 Inmarsat Comments at 4- 5. 15 ________________ Federal Communications Commission_____________ FCC 05- 127 15 Inmarsat maintains that its services promote economic growth and job development in the U. S. Inmarsat describes the use of Inmarsat’s system in the Deere Company’s precision farming service, and the use of Inmarsat’s system for ship operations and crew calling by U. S.- flag vessels. Inmarsat also points to use of its system in managing the sustainability of fisheries, and the use of portable terminals in remote regions by U. S. companies in energy, mining exploration, construction and journalism activities. In its capacity as Notifying Administration to the ITU for Intelsat’s fixed satellite service C- and Ku- band frequency assignments transferred at privatization, the Commission has participated in a number of international coordination negotiations as Intelsat’s licensing administration. Since the 2004 Report to Congress, the Commission has participated in coordination meetings with Brazil and Russia on behalf of Intelsat and a number of other U. S. licensees. In fact, a coordination agreement has been concluded with Brazil. The United States has, in place, a coordination process whereby operators may reach operational arrangements with operators of other administrations. These arrangements are then submitted to the operators’ respective Administrations for approval. Once approved by both administrations, the operational arrangements become, or form the basis for, a coordination agreement between the Administrations under the ITU procedures. Since the 2004 Report to Congress, Intelsat has participated in meetings with operators from Brazil and Russia as part of this process. In addition, Intelsat has concluded operational arrangements by correspondence with Argentina and Belarus. In due course, this will lead to coordination agreements between the United States and these foreign administrations. Finally, both Inmarsat’s and INTELSAT’s privatization appears to have had a positive impact on the global marketplace for communications services by ensuring increased competition and increased access. Inmarsat and Intelsat have placed a priority on continued provision of service to all portions of the globe. Inmarsat is committed to support global maritime distress and safety services (“ GMDSS”) 71 and the INTELSAT Assembly of Parties determined that Intelsat LLC should be contractually bound under a Public Service Agreement with the International Telecommunications Satellite Organization to ensure continued global connectivity -- particularly to countries dependent on Intelsat LLC’s satellite services. 72 V. Summary The Commission has undertaken a number of proceedings required by or related to the ORBIT Act. The Commission will continue to implement and enforce the requirements of the ORBIT Act. On the whole, we believe that U. S. policy goals regarding the promotion of a fully competitive global market for satellite communications services are being met in accordance with the ORBIT Act. The Commission will continue to inform Congress of the actions it takes to implement the requirements of the ORBIT Act and the impact of those actions in its next annual report. 71 Inmarsat Finance plc. Offering Circular for 7 5/ 8% Senior Notes, January 27, 2004, p. 114. 72 Intelsat, Amendment 2 to F- 1 Registration Statement, p. 35. For example, since Deere & Company’s StarFire receivers were authorized to receive Inmarsat signals in the U. S., the improved accuracy on its farming equipment resulted in increased farming equipment capabilities and product demand. See, Reply Comments of Deere & Company in the Inmarsat Ventures Limited proceeding (File No. SAT- MSC-20040210- 00027) filed April 20, 2004, at 2. 16 ________________ Federal Communications Commission_____________ FCC 05- 127 16 Enclosures: Comments received in response to the Commission’s Public Notice. 17 ________________ Federal Communications Commission_____________ FCC 05- 127 17 ATTACHMENTS: Comments, April 8, 2005 Comments of Inmarsat Group Holdings Limited Comments of Intelsat LLC 18 ________________ Federal Communications Commission_____________ FCC 05- 127 18 19 ________________ Federal Communications Commission_____________ FCC 05- 127 19 20 ________________ Federal Communications Commission_____________ FCC 05- 127 20 21 ________________ Federal Communications Commission_____________ FCC 05- 127 21 22 ________________ Federal Communications Commission_____________ FCC 05- 127 22 23 ________________ Federal Communications Commission_____________ FCC 05- 127 23 24 ________________ Federal Communications Commission_____________ FCC 05- 127 24 25 ________________ Federal Communications Commission_____________ FCC 05- 127 25 26