Summary

In recent years, several private companies trying to establish international communications satellite systems have raised concerns about competitive disadvantages that inhibit their entry into the market. This report (1) describes the institutional framework for providing international communications satellite services, (2) discusses elements of the framework that may hinder competition, and (3) identifies key options for resolving competitive issues.

GAO found that: (1) with the Communications Satellite Act of 1962, the United States initiated the creation of a framework for providing an international commercial satellite system; (2) the United States joined other countries to form INTELSAT and Inmarsat and establish their respective satellite systems for basic telecommunications services and safety at sea; (3) each country names a signatory, usually a telecommunications entity, to participate as an investor in the systems; (4) the signatory for the United States is COMSAT Corporation, a private corporation that was created by the 1962 act; (5) three U.S. agencies have primary responsibility for overseeing U.S. membership in the organizations and for instructing the U.S. signatory in its representational role; (6) this institutional framework creates an array of factors that may hinder competition in the market for commercial international satellite services; (7) at the same time, many signatories of INTELSAT and Inmarsat believe that their obligations to provide universal service at nondiscriminatory prices, as well as their intergovernmental structure, hinder their ability to compete in a rapidly changing market; (8) GAO's analysis showed that the development of competition differed in two primary markets for international communications services; (9) in the market for international telephone service, where separate U.S. satellite systems were largely restricted from providing service, competition emerged primarily from an alternative medium: fiber-optic cables; (10) in the market for certain types of international television/video service, such as regional broadcasting, U.S. satellite companies, as well as other international, regional, and domestic systems, have become viable competitors; (11) for other types of television/video service, such as transoceanic transmissions, INTELSAT remains dominant because of its extensive network and capacity and its access to many markets; (12) Inmarsat is currently the dominant provider of global mobile satellite communications services, with 70 percent of its business providing maritime services; (13) a variety of options for resolving the concerns about competition have been suggested, and many are being pursued; (14) changes that would eliminate the intergovernmental organizations could potentially resolve many competitive issues but are not likely to be adopted because such proposals lack support; (15) more likely are changes in the role of the intergovernmental organizations, such as the creation of one or more private companies, or affiliates, with little or no intergovernmental ownership; and (16) these proposals have the potential to address many of the concerns about competition held by both the other satellite companies and the intergovernmental organizations.