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International Telecommunications Satellite Organization
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Communication breakdown?: The future of global connectivity after the privatization of INTELSAT.
ABSTRACT
In 1971, eighty-five nations (including the United States) formed the International Telecommunications Satellite Organization (INTELSAT), a public intergovernmental treaty organization. INTELSAT was charged with operating the world's first global telecommunications satellite system, to guarantee the interconnectedness of the world's communications systems and the availability of international telecommunications service to every nation on earth. By the late 1980s, however, INTELSAT's operations began to experience substantial competition from the private sector. In 2000, the proliferation of privately-owned telecommunications satellites and transoceanic fiber-optic cables led the U.S. Congress to mandate the privatization of INTELSAT. That privatization process began in 2001, and was substantially completed on April 8, 2005, when the Federal Communications Commission approved the $5 billion sale of INTELSAT'S former satellite system to private investors. The privatization of INTELSAT has been said to threaten universal global connectivity, the continuation of international telecommunications service to developing countries, or both. Are the legal safeguards instituted during the privatization (which include the maintenance of a residual treaty organization) sufficient to dispel such economic and political threats? Economically, the privatized satellite system is now legally obligated to serve developing countries at rates no higher than those charged prior to privatization. It likely will remain capable of honoring this legal commitment. Even if its business operations fail, however, this commitment would survive bankruptcy. Politically, the privatized satellite system has been rendered subject to U.S. law, including U.S. international trade policies. Current U.S. law, however, strongly protects the satellite system's ability to serve every country on earth. Congress, of course, retains power to amend U.S. law. But certain political safeguards, including U.S. participation in the World Trade Organization, would interpose significant obstacles to any Congressional attempt to implement telecommunications sanctions as a means of advancing U.S. foreign policy. Accordingly, the privatization of INTELSAT is unlikely to undermine the universal global connectivity of the world's communications systems. TABLE OF CONTENTS I. INTRODUCTION II. INTELSAT's FORMATION AND STRUCTURE III. CALLS FOR INTELSAT's DISSOLUTION A. Calls From Without B. Calls From Within IV. INTELSAT PRIVATIZATION A. The ORBIT ACT of 2000 B. Transfer of INTELSAT's Assets to a Private U.S.-Licensed Successor Entity C. Establishment of Residual Treaty Organization ITSO V. DOES INTELSAT's PRIVATIZATION THREATEN GLOBAL UNIVERSAL SERVICE? A. Economic Threats to ITSO's "Public Service" Mission 1. Can Lifeline Countries be Charged Rates Higher than the Average Rates Paid by High-Volume Users? 2. Are the LCO Eligibility Criteria So Stringent that They Fail to Protect Underserved "Lower-Middle-Income" Nation? 3. Have Implicit Subsidies to Underserved Nations Been Eliminated, Without Being Replaced by Explicit Subsidies? 4. Will Global Connectivity Survive the Possible Retirement in 2013 of the Residual Treaty Organization ITSO? 5. What Will Happen if Intelsat Ltd. Goes Bankrupt? B. Political or Legal Threats to ITSO's "Public Service" Mission 1. Is Intelsat Ltd. Violating Current U.S. Law by Providing Service to Countries that Are Subject to U.S. Trade Sanctions?. 2. Does the U.S. Administration Have Authority to Promulgate New U.S.-International Trade Sanctions that Might Threaten Intelsat Ltd.'s Ability to Maintain Global Connectivity? ... 3. Does the U.S. Congress Have Authority to Enact New U.S.-International Trade Sanctions that Might Prevent Intelsat Ltd. from Maintaining the Global Connectivity of the Satellite Fleet Formerly Operated by INTELSAT? 4. If the U.S. Congress Enacts New U.S.-International Trade Sanctions that Hinder Intelsat Ltd.'s Ability to Maintain Global Connectivity, Would Intelsat Ltd.'s Non-U.S.-Licensed Satellites be Required to Comply with the Sanctions? 5. Does the United States Now Have the Ability to Disrupt the Universal Global Connectivity of the World's Communications Systems or Remove Individual Countries from the World's Communications Infrastructure? VI. CONCLUSION I. INTRODUCTION On January 28, 2005, a consortium of private investors paid $5 billion to purchase a global fleet of thirty commercial communications satellites used to transmit a variety of types of mass communication--television, radio, internet, and domestic and international telephone calls--to virtually every country or territory on earth. Despite its large price tag, the sale of these satellites passed largely unnoticed by the U.S. media. The transaction, however, marked the final major step in a remarkable four-year process in which the International Telecommunications Satellite Organization (INT...See the full content of this document
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