105th Congress: Democratic Perspectives House Committee on Energy and Commerce Democrats Welcome Page
DISSENTING VIEWS
OF
MR. DINGELL, MR. KLINK, MR. RUSH,
MR. WYNN, AND MR. BROWN
On its face H.R. 1872 aims at a worthwhile objective. All agree that more competition is better, whether it is in the satellite industry, the long distance business, local telephone networks or cable TV. We have no argument with this worthy goal. The crux of the problem with this bill is that it will not achieve what it sets out to do. In fact, it will accomplish precisely the opposite. Less competition and higher prices are the unfortunate, but inevitable outcomes of H.R. 1872.
Where does this well-intentioned bill jump the track? We can point to one simple, but false premise underlying this bill that is responsible for all the infirmities that naturally flow from it. H.R. 1872 starts with the assumption that COMSAT is a monopoly, and, as such, is deserving of all evils that may be bestowed upon it.
The simple truth is that COMSAT is not a monopoly. Yes, it is true that the Government granted COMSAT an exclusive franchise to provide satellite services using INTELSAT and Inmarsat facilities. But, that is not where the story ends. Today scores of satellite systems compete head to head with INTELSAT and Inmarsat. COMSAT is not the only game in town by a long shot.
In 1984, President Reagan issued an executive order that put an end to COMSAT's monopoly by authorizing competition in the satellite market. Today COMSAT faces more than 20 highly effective competitors that have combined investments in satellites totaling over $14 billion. In the past four years alone, Wall Street has tripled the value of these competitors' stocks, and their owners now enjoy a combined market value of more than $40 billion. Clearly, investors believe these companies are not shackled on the sidelines, unable to compete against an entrenched monopolist.
If you choose not to believe the investors, then look at COMSAT's share of the market. These numbers positively refute any lingering doubt that the days of COMSAT's monopoly status have long since passed. Since 1988, COMSAT's market share for voice traffic has plummeted from 70% to 21%. Its share of the video market has dropped precipitously since 1993 from 80% to 42%. If COMSAT is a monopoly, it certainly isn't a very good one.
This is not to say that the satellite industry should not compete on an even playing field in the international marketplace. If INTELSAT and Inmarsat have any competitive advantages, whether it be in obtaining orbital slots or exclusive access to foreign markets, the correct approach should be to put pressure on the international community to eliminate those advantages. Unfortunately, H.R. 1872 takes the opposite approach and places the burden on COMSAT to correct the ills of the rest of the world, and punishes COMSAT if it doesn't succeed. The fallacy with that approach is that COMSAT has no control over the actions of 141 foreign countries. Hence, the goal of the bill is doomed from the start.
Worse, if COMSAT is punished for its inability to bring home the gold, the goal of stimulating more competition is compromised even further. By the terms of this bill, COMSAT would be restricted from providing "non-core" services, which are defined as just about everything COMSAT provides today to remain a viable competitor in the market. The curtailment of services dictated by this bill would turn the clock back 30 years to a time when COMSAT was mainly in the business of carrying international telephone calls. Most of the so- called "core" services COMSAT would be permitted to offer have since migrated from satellites to fiber optic cable.
As a result, COMSAT would be turned into a dinosaur overnight. While it is easy to see how this would benefit COMSAT's competitors, we are at a loss to understand how it would increase competition. To the contrary, the effect would be to remove a competitor from the marketplace. Less competition inevitably leads to higher prices, precisely the opposite goal of the bill.
If this weren't bad enough, COMSAT would have a legitimate claim for damages against the U.S. Government. The punitive service restrictions contained in this bill are tantamount to the Government imposing capital punishment on COMSAT for a crime committed by somebody else. Through no fault of its own, COMSAT's investment in satellites would be rendered virtually worthless.
Based on specific instructions from the Government, and in reliance on a reasonable expectation of an investment return, COMSAT's shareholders have staked billions of dollars on assets orbiting the sky solely for the purpose of generating revenues now and into the future. When the service restrictions contained in this bill kick in, and they surely will, those stranded assets will be looking for a home. And, of course, U.S. taxpayers will be forced to take them in. The resulting taxpayer liability could run well into the billions of dollars.
A more extensive discussion of the Government "takings" claim is contained in the "Additional Views of Mr. Tauzin," Chairman of the Subcommittee on Telecommunications, Trade, and Consumer Protection, included with this report. While that discussion focuses on taxpayer liability stemming from the bill's "fresh look" provisions, which permit the abrogation of private contracts, the arguments contained there are equally relevant to the imposition of service restrictions addressed in these views. An attempt to remove the punitive "fresh look" provisions was narrowly defeated by a 20-23 vote of the Committee.
The punitive measures on COMSAT, its customers, and the U.S. taxpayers should be eliminated from H.R. 1872. The punishment should be redirected where it belongs: on foreign countries that impede progress towards privatization. The notion that this Committee would put the financial viability of a U.S. company at risk based solely on the actions of a group of foreign countries is simply beyond comprehension. But that is precisely what H.R. 1872, as reported, would accomplish.
JOHN D. DINGELL
RON KLINK
BOBBY L. RUSH
ALBERT R. WYNN
SHERROD BROWN
105th Congress: Democratic Perspectives
House Committee on Energy and Commerce Democrats Welcome Page