Intelsat Direct Access
 
December 1, 1999
 
Eric Fishman - New York

In September, the FCC took the historic step of permitting U.S. carriers and users to obtain contractual, or Level 3, direct access to the INTELSAT system from the United States. This initiative marks a major departure in the means by which capacity on the international satellite system can be obtained, and should open opportunities to new competitors.

Level 3 Direct Access

Level 3 direct access permits a customer to enter into a contractual agreement with INTELSAT for the purpose of ordering, receiving and paying for INTELSAT space segment capacity at the same rates that INTELSAT charges its signatories. Such access is currently available in 65 countries. In reaching its decision to require Level 3 direct access to U.S. customers, the Commission concluded that the public interest would be served by improving responsiveness to customer requirements; fostering competition; reducing costs; ensuring greater control over service quality, performance costs, connectivity, redundancy and earth station capabilities; and providing greater flexibility in tailoring services in terms of bandwidth, time duration, performance standard, redundancy and service applications. The Commission's order permits Level 3 direct access only for services to and from the United States.

Comsat Tariff

Pursuant to this action, the Commission has directed Comsat, as the U.S. signatory to INTELSAT, to inform INTELSAT that Level 3 direct access is available to U.S. carriers and users. The Commission has recognized, however, that INTELSAT Utilization Charges (IUC rates) do not reflect certain costs which INTELSAT will continue to incur on behalf of Level 3 direct access customers. In order to reimburse INTELSAT for these expenses, the Commission will permit Comsat to file a tariff that requires Level 3 direct access customers to pay a surcharge of 5.58% of the IUC rate.--1

Procedure

The procedures for implementing direct access to the INTELSAT system from the United States will consist of several elements. In mid-October the International Bureau issued a Public Notice establishing a 21-day period for eligible carriers and users to notify the Commission in writing that they want Level 3 direct access to INTELSAT. The Bureau will forward the names of all eligible U.S. carriers and users to Comsat, and Comsat will be required to inform INTELSAT within 10 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 INTELSAT procedures. Any eligible carriers and users not part of this initial blanket authorization will follow a similar procedure.

In the near future, Comsat also will be required to file, on one-day's notice, a tariff of the terms and conditions of surcharges applicable to Level 3 direct access customers. Level 3 direct access customers will be required to pay this surcharge upon commencement of service. Comsat may take appropriate steps through INTELSAT to terminate a customer's Level 3 direct access status for failure to pay the appropriate surcharge. If a Comsat customer believes that the surcharge is unreasonable, it may file a complaint with the Commission. The Commission has also concluded that Comsat's initial surcharge rates should be in effect for no more than one year, after which Comsat may file a tariff revision reflecting a new surcharge that reflects the Commission's mandate.

Direct Access by Dominant INTELSAT Signatories

In order to prevent anticompetitive conduct by dominant INTELSAT signatories, the Commission has concluded that it will not authorize any signatory, other than Comsat, to purchase direct access in the United States for services to or from any specific country in which the signatory itself uses 50% or more of all INTELSAT capacity consumed in that country. This restriction will also apply to affiliates that are more than 50% owned by the respective signatory.

Immunity

INTELSAT and its signatories, including Comsat, enjoy three categories of immunity: immunity from jurisdiction, which prevents courts from considering lawsuits of any type against INTELSAT; archival and testimonial immunity, which protects INTELSAT from being compelled to provide documents or testimony of its employees; and immunity of assets, which prevents courts from enforcing monetary judgments against INTELSAT. The Commission has held that, where INTELSAT engages in additional commercial activities, such as marketing to U.S. carriers services outside the terms of IUC rates, it may be required to waive these immunities.

Fresh Look

The Commission has rejected the requests by various parties to permit a "fresh look" at long-term carrier contracts between Comsat and AT&T and MCI WorldCom for the acquisition of INTELSAT space capacity. A fresh look would have allowed those carriers to either renegotiate or terminate those contracts in view of the availability of direct access to INTELSAT.

Portability

The Commission declined at this time to require "portability" of the INTELSAT space segment capacity controlled by Comsat - i.e., to allow a current customer of Comsat to obtain the transponder capacity it now receives through Comsat and use it under a direct access to the INTELSAT regime. The Commission indicated, however, that it might revisit this issue if there is evidence of insufficient capacity available to direct access customers or that Comsat is using its signatory status to buy future or additional INTELSAT space segment capacity without any U.S. customer requirements.

Conclusion

The Commission's direct access promises to benefit emerging international carriers and customers whose rates for international service have thus far been artificially inflated. For further information on how you might benefit from this initiative, please contact our offices at 1-888-688-8500.

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--1. Although the Commission has determined that a 5.58% surcharge is reasonable, it has not prescribed this rate, and will allow Comsat to file a tariff for a different surcharge, provided its proposed surcharge is just and reasonable, i.e., that the surcharge will not recover more than the share of its expenses for the direct signatory-related expenses that Comsat reasonably incurs as a result of its role as a U.S. signatory to INTELSAT.