[Text only of letters sent from the Commerce Committee Democrats]
Mr. William E. Kennard
Chairman
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554
Dear Mr. Chairman:
I am writing to you with respect to the petition for forbearance and reclassification as a non-dominant carrier filed by COMSAT Corporation last April, pursuant to Section 10 of the Communications Act of 1934 (47 U.S.C. 160). As you know, Congress imposed a 12-month limitation on the Commission to consider Section 10 petitions, with one 90 day extension permitted if necessary.
Last July, in response to a direct question from Senator Breaux during a Senate Communications Subcommittee hearing, the Commission committed to issuing a decision "within a few months." Two months later, in testimony before the House Subcommittee on Telecommunications, the International Bureau Chief again stated that action would be forthcoming in "a few months." I am not aware of any indication that action on this matter is imminent in the nearly six months since the first commitment was made to Congress. In light of this prior FCC testimony, please advise me by January 5 of the agency's schedule for issuing its decision on COMSAT's Section 10 petition.
I am aware that bills have been introduced in both the House and Senate that address international satellite issues, including several issues that have also been raised by the COMSAT petition. The single issue now before the FCC is whether COMSAT, given its exclusive access to INTELSAT, has market power in the provision of international transmission capacity. While the Commission is obligated to follow the laws enacted by Congress (i.e., Section 10 of the Communications Act), it would be unwise for the Commission to delay its decision on the COMSAT petition based on an expectation that either of these proposed bills will be enacted in substantially their same form at some point in the future. I would remind the Commissioners that the landmark Telecommunications Act of 1996 was preceded by several efforts, in both the House and Senate, to update the Communications Act. In fact, one such bill was introduced in 1993; it was approved by the full House in 1994, but died in the Senate. The Commission must rule on the petition based on the law as it currently exists, and within the time period enacted by Congress. I am very concerned that abuses in the legislative process would occur if the mere act of introducing a bill by any Member of Congress could prevent a regulatory agency from fulfilling obligations already imposed by law.
Beyond my procedural concerns, I have rarely seen a case for non-dominance and forbearance from regulation as compelling as this. Since 1988, COMSAT's market share has declined from 70% to 21% for switched voice and private line telephone services (and is only 12% on U.S.-European and Asian routes), and from 80% to 45% for video transmission services to and from the U.S. Indeed, COMSAT's market share is substantially below that of AT&T when the Commission found AT&T to be non-dominant in the international facilities marketplace. At that time, AT&T's market share in the international transmission market was between 60-70%.
As the Commission has repeatedly acknowledged, COMSAT currently competes against an array of undersea cables and other satellite systems. Yet it must comply with a regulatory regime that was designed under entirely different market conditions. It is incumbent upon the Commission to revise its regulation to take into account changes in the marketplace. Section 10 was designed to institutionalize that process.
It is my understanding that COMSAT is the only international common carrier that remains subject to rate base/rate of return regulation. A decade ago, the Commission ended rate of return regulation of AT&T and the larger local exchange carriers, and substituted instead its "price caps" regime, both to protect consumers and to end the perverse incentives that accompany rate of return. Continuing to subject COMSAT to this antiquated form of regulation designed in an era of monopoly pricing imposes substantial costs and inefficiencies on one company that are avoided entirely by its competitors. In fact, none of COMSAT's satellite competitors is subject to any FCC common carrier regulation. The asymmetry of this treatment is as unfair as it is obvious and, more importantly, harms consumers by denying them the full benefit of robust competition.
It has come to my attention that the Commission may attempt to "link" its decision on the COMSAT Section 10 petition to the resolution of two unrelated issues. Those issues -- "direct access" and COMSAT's so-called "privileges and immunities" -- are highly complicated. To the extent that the Commission wants to address these issues, the proper way to proceed is to draft a Notice of Proposed Rulemaking outlining the Commission's preliminary thinking on "direct access" and COMSAT's so-called "privileges and immunities;" permit interested members of the public to comment upon the proposed rules; and reach a decision based on the record before it. The disposition of the Section 10 petition should not be held hostage to the resolution of these two unrelated issues, neither of which has been properly framed in an NPRM, and upon which the public has been denied an adequate opportunity to comment.
Moreover, each of these extraneous issues implicates the scope of the Commission's jurisdiction, and its ability to reform current policies in either case. With respect to "direct access," for example, COMSAT's exclusive franchise to offer INTELSAT services in the U.S. is derived from the Communications Satellite Act of 1962. Any change in that policy will have to be enacted by Congress. For the Commission to arrogate to itself authority to impose direct access absent an act of Congress would be an act of extraordinary effrontery, something that I am sure the Commission will want to avoid.
Similarly, COMSAT's so-called "privileges and immunities" present both procedural questions and treaty-related issues regarding the scope of the Commission's jurisdiction. When COMSAT competes in the marketplace for customers against other satellite system operators and carrier-owners of undersea cables, it has no antitrust immunity. The courts have held that its immunity extends only to its role as the U.S. Signatory to INTELSAT, where it is subject to the U.S. Government's instructional agency process by the Departments of State and Commerce, and the Federal Communications Commission. The wisdom of subjecting a private company to antitrust liability in cases where it is following the instructions of the United States Government is questionable, and ought to be subject to public comment. Further, given the antitrust liability implications for COMSAT if it follows the instructions of Government agencies, any such reform proposal ought to be of particular interest to the Government agencies that issue such instructions.
Further, as you are no doubt aware, the Telecommunications Act of 1996 eliminated the Commission's authority over antitrust immunities, transferring that authority to the Department of Justice, and thereby calling into question the ability of the Commission to act in this area.
Of course, the rapid drop in COMSAT's market share, to which I referred earlier, provides ample evidence that neither COMSAT's exclusive franchise nor its so-called "privileges and immunities" has conferred any competitive advantage whatsoever. Based on this fact alone, the Commission would do well to avoid raising these extraneous issues in the context of the Section 10 petition.
Finally, it is my understanding that at least one competitor to COMSAT is seeking to convince the Commission to abrogate unilaterally long-term contracts voluntarily entered into between COMSAT and various other carriers. It would appear that this effort is an attempt by one competitor to secure for itself an opportunity to rebid for traffic on which it had previously bid, and failed to win, in a competitive bidding process. As you may recall, the Commission performed a detailed review of these contracts and concluded that they were in the public interest.
The Constitutional problems that the Commission would face if it unilaterally set aside contracts voluntarily entered into by private parties are self-evident. While these problems ought to be sufficient to deter the Commission from such an unwise course of action, I would add my hope that the Commission would have the same respect for the competitive bidding procedures used by private parties as it does for its own competitive bidding procedures used to award licenses, as evidenced by its September decision regarding C-block licensees in the Personal Communications Service.
It is my understanding that you have articulated three principles that will guide your decision-making at the Commission: competition, community, and common sense. I commend you for this. In my view, each of these principles should guide the Commission to grant the COMSAT petition forthwith. I urge you to do so.
I ask that a copy of this letter, together with your response, be made part of the Commission's record in this proceeding. I look forward to receiving your prompt response to the questions and issues that I have raised, and a timely decision on the petition that is the subject of this letter.
With every good wish.
Sincerely,
JOHN D. DINGELL
RANKING MEMBER
cc: The Honorable Tom Bliley
Commissioner Harold Furschgott-Roth
Commissioner Susan Ness
Commissioner Michael Powell
Commissioner Gloria Tristani
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