Congress Should Uplink Competition
Deregulation of domestic air travel, trucking and telecommunications in the '80s unleashed competition and innovation. Now new trustbusters in Congress want to do the same for the international satellite market. It's about time.
Prompted by the U.S., 11 countries joined forces in '64 to create the International Telecommunications Satellite Organization to foster peaceful international communications. Today, IntelSat's 142 member nations share 26 satellites.
But since IntelSat's founding, the enlightened bureaucrat has given way to the entrepreneur. Government planners 30 years ago may not have imagined that profit-seekers would build their own worldwide satellite communications system. Today, 180 commercial satellites orbit the earth, calling into question the need for this outdated international bureaucracy.
The system is complex by design. IntelSat is chartered by sovereign nations but owned by its signatories -mostly government monopolies.
Comsat Corp., an investor-owned corporation, is the U.S. signatory. It owns 18% of IntelSat. To gain access to IntelSat's phone, TV and other services, American firms must go through Comsat, which customers liken to a troll on a toll bridge, marking up satellite time as much as 68%.
President Reagan planted the seeds for privatizing the satellite business in '84 with a directive letting U.S. companies compete with IntelSat. That same year, Rene Anselmo founded PanAmSat Corp. Anselmo was familiar with the Comsat/IntelSat system's high rates and poor service from his days running the first Spanish-language TV network in the U.S. He launched the first international commercial satellite in '88.
The global telecommunications revolution has made IntelSat obsolete. But it survives, mostly on the strength of feeble arguments.
For example, IntelSat has long claimed that it benefits poor Third World nations by creating a communications economy of scale. But PanAmSat CEO Frederick A. Landman says his company "will provide any present IntelSat service to any lesser-developed country and offer it at a rate that is at or below IntelSat's current rate." Even the Federal Communications Commission admits there's no longer a need for IntelSat to serve the Third World.
But IntelSat still enjoys privileges and protections denied private firms. That means higher prices for consumers.
Like real estate, the key to the satellite business is location. IntelSat gets preferential treatment in securing orbital slots. Competitors allege its choices are often predatory.
Equally frustrating is the behavior of many IntelSat national signatories. Because signatories get a kickback from IntelSat's profits, each of them has a financial interest in IntelSat's success. Companies are often denied access to markets in some 80 countries unless they use IntelSat.
Attempting to bring some competition to this market, House Commerce Committee Chairman Thomas J. Bliley, R-Va., and ranking minority member Edward J. Markey, D-Mass., are sponsoring a bill to end Comsat's monopoly access to IntelSat's network, allowing such companies as AT&T Corp., MCI Corp., Sprint Corp. and WorldCom Inc. to purchase services directly from IntelSat. Bliley and Markey want to privatize IntelSat by 2002.
The bill would leverage access to the U.S. market, encouraging IntelSat's signatories to break up their self-serving monopoly.
Under pressure from such alternative technologies as fiber-optic cable, IntelSat in recent years has expanded offerings. Trying to keep up its profits, it now provides such noncore services as Internet access and high- speed data transmission. The Bliley-Markey bill would bar IntelSat from providing such services or offering new ones to new customers in the U.S. unless it's privatized by 2002.
While these steps are minor, and certainly fair, no monopolist—especially one that thinks itself an international benefactor—goes quietly into the good night.
But it's important that Congress put IntelSat to bed. A study commissioned by the companies that use IntelSat predicts that U.S. consumers stand to save $2.9 billion over the next 10 years from a private satellite market. Americans no more need IntelSat in its current form than we need a government-run telephone company, airline or overnight package-delivery service.
