Congress Seeks to Privatize Global Satellite Operators

After attempting to shake up the U.S. telecommunications industry in recent years, Congress now wants to take on an equally controversial target: the global commercial satellite industry.

Key lawmakers are pushing bills that call for privatizing the powerful international satellite consortiums Intelsat and Inmarsat, hoping that they will slash telephone and video costs for U.S. consumers by nearly $3 billion during the next decade.

The effort also aims to break the monopoly held by Comsat Corp., the U.S. corporation that wields enormous power in handling U.S. phone and video transmissions that go through both Intelsat and Inmarsat’s systems.

Despite the potential savings envisioned by sponsors of the reforms, the idea is getting a cool reception abroad by nations that are far more dependent than the U.S. on Intelsat and Inmarsat.

The organizations were established in the early days of the satellite industry and despite their low profile have continued to dominate their markets, even while the domestic U.S. industry has undergone several rounds of legislative and court-ordered restructurings.

Reforms, the legislation’s supporters say, will reduce international calling rates and spur innovation in an industry still insulated from competition by U.S. policies that haven’t changed much since the Cold War.

“The pro-competitive reforms sought by [our bill] will yield substantial benefits to the U.S. and global economies through consumers savings, taxpayers savings, increased competition and job growth,” wrote Reps. Edward J. Markey (D-Mass.) and Thomas J. Bliley (R-Va.) in a March 16 letter to their colleagues.

Founded in 1962, Washington-based Intelsat is the world’s largest commercial satellite operator. Its 24 satellites carry nearly 50% of all international phone traffic and virtually all transoceanic television signals. Each of Intelsat’s 142 member nations has a voice in its operation.

Its smaller sibling, Inmarsat, was established in 1979 to provide worldwide satellite communications for the maritime industry. Inmarsat has been doing brisk business providing telephone links to passengers in airplanes and cruise ships, as well as to workers on oil rigs. Inmarsat now has about 80 member countries and, like Intelsat, it pledges to sell time to virtually all comers.

The catch is that in the United States, users for both organizations’ satellites must go through Comsat, a federally created, publicly owned company. The Bethesda, Md.-based company was granted a franchise to negotiate with Intelsat and Inmarsat on behalf of U.S. companies needing satellite services.

Congress cannot, of course, unilaterally force privatization on Inmarsat and Intelsat, which are controlled by member nations around the globe and are parties to international treaties that influence the pricing and availability of satellite communications services.

And despite strong support in the U.S., the reforms face an uphill battle overseas. Many small and developing nations fear privatization would mean that Inmarsat and Intelsat would abandon them in pursuit of more lucrative markets in industrialized nations.

“Intelsat is a multinational organization and no single country can unilaterally mandate the kind of privatization that is contained in this bill,” said Tony Trujillo, a spokesman for Intelsat. “What this bill does is put the United States in a bad light. It would cause serious damage to U.S. commercial interests overseas.”

But the Satellite User’s Coalition, a group made up of Worldcom Inc. and the three major long-distance telephone carriers, estimates that U.S. consumers would save $2.9 billion over the next 10 years if Inmarsat and Intelsat were fully privatized.

A recent study by the Federal Communications Commission found that U.S. satellite customers could save 17% to 35% if Intelsat and Inmarsat were forced to compete with private enterprises instead of being protected by international treaties from competition.

The reforms are backed by a diverse coalition, ranging from the National Assn. of Latino Elected and Appointed Officials to big satellite users such as AT&T; Corp.

Some skeptics, however, say satellite users such as AT&T; will probably pocket savings rather than pass them on to consumers. Nevertheless, reform supporters predict their bill could have a huge impact on global communications.

Intelsat and Inmarsat compete against satellite operators such as Greenwich, Conn.-based PanAmSat Corp. and Columbia Communications Inc. of Bethesda, Md., as well as purveyors of high-capacity, fiber-optic cables crisscrossing the planet.

“Comsat is a private company and the only one currently authorized to buy satellite capacity from Intelsat; they are nothing more than a middleman marking up the price,” said Henry Goldberg, a Washington lawyer who represents Comsat’s main rival, PanAmSat.

Officials of Comsat, which holds a 20% ownership interest in Intelsat and Inmarsat, insist they aren’t opposed to more competition or privatization of the two satellite organizations. But they say that the Bliley-Markey legislation would unfairly place restrictions on Comsat that would not apply to rivals such as PanAmSat.

Under the Bliley-Markey measure, U.S. satellite users would be free to negotiate directly with Intelsat and Inmarsat for communications services. The bill also encourages global satellite privatization by blocking access to the lucrative U.S. satellite market to those countries that do not open their markets and support privatization of Intelsat.

The bill would also prohibit Comsat, which operates no satellites of its own, from providing new services, such as high-speed data connections to new customers. That, critics say, would leave the once-proud company with little market clout since its customers would be free to deal directly with Intelsat and Inmarsat.

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Times staff writer Jube Shiver can be reached at jube.shiver@latimes.com