Summary

At the initiative of the United States, the International Telecommunications Satellite Organization (INTELSAT) was created in 1964 to provide telephone and data services. The International Maritime Satellite Organization was formed in 1979 to provide maritime communications. These treaty organizations faced little, if any, competition for years after their establishment. Now, technological advances, such as enhancements in satellite capacity and capabilities, as well as new applications and rising demand, have made it economically feasible for private companies to provide satellite-based services and expand the range of services being offered, including new video broadcast and mobile telephone services. Although some believe that the organizations may no longer be needed, others contend that the organizations are still necessary to guarantee safety at sea and services such as telephone and data transmission, especially for developing countries. This report describes the potential competitive impact of (1) different approaches to reforming the organizations; (2) an Inmarsat affiliate company, formed in 1994 to provide new services; and (3) proposals for restructuring INTELSAT.

GAO found that: (1) there is widespread belief that changes are necessary in the structure and functions of INTELSAT and Inmarsat; (2) many satellite companies believe that private competitors already offer or will offer better global services at lower rates to the developing world; (3) most member governments and signatories in developing countries are concerned that their access to certain basic telecommunications services may be threatened without the presence of treaty organizations; (4) although most of the options for restructuring the organizations favor enhancing competition by dismantling the organizations or creating affiliates, the competitive impact of these options depends on how these organizations are structured, the number of entities created, and the degree of parent organization ownership; (5) the new Inmarsat affiliate may have competitive advantages over other potential competitors; (6) although the United States originally supported the creation of the Inmarsat affiliate, the United States and its signatory are pursuing action to ensure that it adheres to certain principles that favor competition; (7) restructuring INTELSAT into two entities and limiting the amount of signatory ownership in those entities to 20 percent could improve the competitiveness of the global telecommunications market; (8) another proposal supported by a coalition of U.S. satellite firms favors establishing two new private companies in addition to a scaled-down parent organization; (9) the effect on competition of either proposal depends on whether INTELSAT market dominance can be reduced and new companies are allowed to gain entrance into foreign telecommunications markets; and (10) changing the present structure of the treaty organizations would likely depend on reaching a consensus among world member nations that have broad perspectives and interests.