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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Amendment of the Commission's Regulatory Policies to Allow Non-U.S. Licensed Space Stations to Provide Domestic and International Satellite Service in the United States Amendment of Section 25.131 of the Commission's Rules and Regulations to Eliminate the Licensing Requirement for Certain International Receive-Only Earth Stations COMMUNICATIONS SATELLITE CORPORATION Request for Waiver of Section 25.131(j)(1) of the Commission's Rules as it Applies to Services Provided via the INTELSAT K Satellite IB Docket No. 96-111 CC Docket No. 93-23 RM-7931 File No. ISP-92-007 REPORT AND ORDER Adopted: November 25, 1997 Released: November 26, 1997 By the Commission: Chairman Kennard issuing a statement. TABLE OF CONTENTS Para. No. I. INTRODUCTION AND SUMMARY A. Introduction . . . . . 1 - 9 B. Summary . . . . . . . . . . . . . . . . . . . . . . . .10 - 16 II. BACKGROUND A. Notice of Proposed Rulemaking . . . . . . . . . . . . . . .17 - 18 B. The WTO Basic Telecom Agreement. . . . . . . . . . . . . . .19 - 27 C. Further Notice of Proposed Rulemaking. . . . . . . . . . . . . . 28 III. DISCUSSION A. General Framework . . . . . . . . . . . . . . . . . . . . . . . 29 B. Public Interest Analysis 1. Competition Considerations a. WTO-Member Satellites providing WTO-Covered Services (1) Presumption in Favor of Entry . . . . . . . . .30 - 49 (2) Determining a Satellite System's WTO Status. . .50 - 54 (3) Route Markets. . . . . . . . . . . . . . . . . .55 - 67 b. Non-WTO Member Satellites providing WTO-Covered Services (1) General Framework . . . . . . . . . . . . . . .68 - 75 (2) Home Markets . . . . . . . . . . . . . . . . . .76 - 77 (3) Route Markets. . . . . . . . . . . . . . . . . .78 - 88 (4) Satellite Service Distinctions . . . . . . . . .89 - 93 c. Non-WTO Covered Services . . . . . . . . . . . . . 94 - 101 d. Intergovernmental Satellite Organizations and IGO Affiliates (1) Introduction . . . . . . . . . . . . . . . . .102 - 107 (2) Intergovernmental Satellite Organizations . .108 - 128 (3) IGO Affiliates . . . . . . . . . . . . . . . .129 - 140 e. Bilateral Agreements . . . . . . . . . . . . . .141 - 147 2. Spectrum Availability. . . . . . . . . . . . . . . . .148 - 152 3. Eligibility Requirements a. Foreign Ownership. . . . . . . . . . . . . . . . . . . .153 b. Legal, Technical, and Financial Qualifications . .154 - 161 4. Operating Requirements . . . . . . . . . . . . . . . . . . .162 a. Prohibition Against Exclusionary Arrangements . .163 - 169 b. Other Service Rules. . . . . . . . . . . . . . . .170 - 176 5. Foreign and Domestic Policy Factors. . . . . . . . . .177 - 184 C. Access Procedures 1. Framework. . . . . . . . . . . . . . . . . . . . . . .185 - 190 2. Information Requirements . . . . . . . . . . . . . . .191 - 194 3. Licensing and Coordination Status of Non-U.S. Satellites . 195 - 198 4 Receive-Only Earth Stations. . . . . . . . . . . . . .199 - 207 5. Changes to Application Form . . . . . . . . . . . . .208 - 211 6. Global Mobile Personal Communications Systems. . . . .212 - 214 D. Enforcement . . . . . . . . . . . . . . . . . . . . . . .215 - 216 E. Consistency with GATS Obligations. . . . . . . . . . . . .217 - 220 IV. ADMINISTRATIVE REQUIREMENTS A. Regulatory Flexibility Act . . . . . . . . . . . . . . . . . . .221 B. Paperwork Reduction Act. . . . . . . . . . . . . . . . . . . . .222 V. CONCLUSION 223 VI. ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . . . .224 - 227 APPENDIX A -- Commenters on the Notice APPENDIX B -- Commenters on the Further Notice APPENDIX C -- Rule Changes APPENDIX D -- Final Regulatory Flexibility Analysis APPENDIX E -- FCC Form 312 I. INTRODUCTION AND SUMMARY A. Introduction 1. Today, we take an historic step by implementing the market opening commitments made by the United States in the World Trade Organization (WTO) Agreement on Basic Telecommunications Services (WTO Basic Telecom Agreement). The WTO Basic Telecom Agreement, which will take effect on January 1, 1998, is the culmination of the efforts of the United States and 68 other WTO Members to bring competition to global markets for telecommunications services, including satellite services. The WTO Basic Telecom Agreement is centered on the principles of open markets, private investment, and competition. It covers nations that account for 90 percent of worldwide telecommunications services revenues. By opening markets worldwide, the WTO Basic Telecom Agreement will allow new entrants to deploy innovative, cost-effective technologies, and thereby advance the growth of satellite services around the globe. 2. We are optimistic that global implementation of the WTO Basic Telecom Agreement will result in significant worldwide benefits to consumers and providers. At the same time, we recognize that much work needs to be done to ensure that the promise of the WTO Basic Telecom Agreement is fulfilled. With this Report and Order and the companion Foreign Participation in the U.S. Telecommunications Market Report and Order, which we also adopt today, we have implemented the letter and the spirit of the market-opening commitments made by the United States. We expect that foreign entities will begin to enter and compete in the U.S. market soon after January 1, 1998. We also expect that U.S. providers will likewise be able to enter and compete in previously-closed foreign markets. 3. Under the terms of the WTO Basic Telecom Agreement, the United States has committed to allow foreign suppliers to provide a broad range of basic telecommunications services, including satellite services, in the United States. In return, most of the world's major trading nations have made binding commitments to move from monopoly provision of basic telecommunications services to open entry and procompetitive regulation of these services. In this Report and Order, we implement the U.S. Government's commitments to provide access to the U.S. market for satellite services by establishing a framework for assessing applications by foreign satellite systems to serve the United States. 4. The common sense policies and rules we adopt will produce substantial public interest benefits for U.S. consumers. First, they will facilitate greater competition in the U.S. satellite services market. Enhanced competition in the U.S. market, in turn, will provide users more alternatives in choosing communications providers and services, as well as reduce prices and facilitate technological innovation. In addition to encouraging a more competitive satellite market in the United States, this new environment will spur development of broader, more global satellite systems. These advancements will foster greater global community benefits by providing users increased access to people, places, information, and ideas worldwide. 5. In our companion Foreign Participation Order, we take parallel steps to carry out the market opening commitments made by the United States in the WTO Basic Telecom Agreement. That order establishes a framework for facilitating entry into the U.S. market by foreign entities for provision of telecommunications services (other than satellite services). As in our companion order, in this Report and Order we adopt for satellite services an approach that encourages foreign entry. Both decisions are guided by the common objective of promoting competition in the U.S. market, and achieving a more competitive global market for all basic telecommunications services. 6. While the United States was negotiating the WTO Basic Telecom Agreement, the Federal Communications Commission (Commission) was exploring measures to increase opportunities for foreign entry in the United States satellite services market. The Commission began this proceeding in May 1996 by issuing a Notice of Proposed Rulemaking. As described more fully below, the Notice proposed a uniform framework for permitting foreign-licensed satellite systems to serve the United States. Adopted when only a few of the world's satellite markets were open to competition by U.S. providers, the Notice proposed to evaluate the effective competitive opportunities (ECO) in the country in which the foreign satellite was licensed (the ECO-Sat test) prior to granting an application to serve the United States. After the conclusion of the WTO Basic Telecom Agreement, the Commission issued a Further Notice of Proposed Rulemaking revising its proposals based on the market-opening changes that will result from the Agreement. Both the Notice and the Further Notice reflect our continuing goal to foster development of innovative satellite communications services for U.S. consumers through fair and vigorous competition among multiple service providers, including foreign-licensed satellites. 7. Specifically, today we adopt a framework under which we will consider requests for access by non-U.S. licensed satellites into the United States. As required by Title III of the Communications Act of 1934, as amended (Communications Act), we will examine all requests to determine whether grant of authority is consistent with the public interest, convenience and necessity. In making this determination, we will consider public interest factors such as the effect on competition in the United States, spectrum availability, eligibility and operating requirements, as well as national security, law enforcement, and trade and foreign policy concerns. We adopt a presumption that entry by WTO Member satellite systems will promote competition in the U.S. satellite services market. Opposing parties may rebut the presumption by showing that granting the application would cause competitive harm in the U.S. satellite services market. Although we find that license conditions will almost always provide sufficient protection against anticompetitive conduct, we recognize the possibility that circumstances might arise in which conditions might not adequately constrain the potential for anticompetitive harm in the U.S. market. In such an exceptional case, where grant would pose a very high risk to competition that cannot be cured by license conditions, the Commission reserves the right to deny an application. 8. We also will apply the presumption in favor of entry to affiliates of intergovernmental satellite organizations (IGO) licensed by WTO Members. For applications from COMSAT to provide U.S. domestic service via INTELSAT or Inmarsat satellites, we will require COMSAT to waive its immunity from suit and demonstrate that the service will enhance competition in the U.S. market. For satellites licensed by non-WTO Members and for all satellites providing Direct-to-Home (DTH), Direct Broadcasting Satellite (DBS), and Digital Audio Radio Services (DARS), we will examine whether U.S. satellites have effective competitive opportunities in the relevant foreign markets to determine whether allowing the foreign-licensed satellite to serve the United States would satisfy the competition component of the public interest analysis. 9. The new structure we establish today is based on consideration of over 100 comments submitted from parties around the world over the course of more than a year and is grounded in the public interest requirements of the Communications Act and the procompetitive principles of the WTO Basic Telecommunications Agreement. It sets forth criteria for entry into the United States by various types of non-U.S. satellites, delineates the Commission rules that will apply, and describes in detail the procedures for applications to provide service in the United States using a non-U.S. licensed satellite. This framework will largely replace the Commission's current approach of reviewing applications involving foreign-licensed satellites based on the individual circumstances before it. We expect that our new framework will encourage and ease entry by non-U.S. satellites into the U.S. market and that the occasional request we receive today involving a foreign-licensed satellite will become more common. We plan to look carefully at market opening measures enacted by the rest of the world. B. Executive Summary 10. Policy Objectives. The purpose of this Report and Order is to establish a new framework to facilitate competitive entry in the U.S. satellite services market by foreign-licensed satellites to implement the WTO Basic Telecom Agreement. Providing opportunities for foreign-licensed satellites to deliver services in this country should bring U.S. consumers the benefits of enhanced competition and afford greater opportunities for U.S. companies to enter previously closed foreign markets, thereby stimulating a more competitive global satellite services market. 11. WTO Members. We adopt an open entry standard for applicants seeking to access satellite systems licensed by WTO Members to provide satellite services covered by the U.S. commitments under the WTO Basic Telecom Agreement. An open entry policy will enable U.S. consumers to enjoy the benefits of increased competition in U.S. markets. We presume that entry will enhance competition in light of the commitments of so many WTO Members to lift entry restrictions and adopt competitive safeguards. Where necessary to constrain the potential for anticompetitive harm in the U.S. market for satellite services, we reserve the right to attach conditions to a grant of authority, and in the exceptional case in which an application poses a very high risk to competition, to deny an application. 12. Non-WTO Members. We continue to be concerned about effective competitive opportunities for U.S. satellite systems (ECO-Sat) in non-WTO Member markets. We find that the market conditions that existed when the Commission proposed to adopt an ECO-Sat test have not changed sufficiently with respect to countries that are not members of the WTO. We therefore find that it will serve the goals of our international satellite policy to apply the ECO-Sat test in the context of applications from non-WTO Member entities and encourage such countries to open their markets to competition. 13. Services Not Covered by the U.S. Commitments Under the WTO Basic Telecom Agreement. We find that circumstances that existed when the Commission proposed to adopt an ECO-Sat test have not changed sufficiently with respect to Direct-to-Home (DTH) services, Direct Broadcast Satellite (DBS) services, and Digital Audio Radio Services (DARS). Commitments made as part of the WTO Basic Telecom Agreement were not sufficient to enable us to adopt a presumption of entry for these services. We will apply the ECO-Sat test to applications to provide these services through all foreign satellite systems, whether or not they are systems of WTO Members. 14. Intergovernmental Satellite Organizations (IGOs) and IGO Affiliates. Prior to acting on any application from COMSAT to provide domestic service via INTELSAT or Inmarsat, we will require COMSAT to make an appropriate waiver of its immunity from suit, including suit under the U.S. antitrust laws. We will then look to COMSAT to show that entry into the domestic market would promote competition and would otherwise be in the public interest. We will treat IGO affiliates that are licensed by WTO Members as we would similar systems licensed by WTO Members. In evaluating the competition component of an application involving an IGO affiliate, we will consider any potential anticompetitive or market distorting consequences of a continued relationship or connection between an IGO and its affiliate. 15. Additional Public Interest Factors and Operating Requirements. In evaluating requests to serve the United States using a non-U.S. satellite, we also will consider additional public interest factors, including spectrum availability, eligibility requirements such as legal, technical and financial qualifications, operating requirements, and national security, law enforcement, foreign policy and trade policy concerns, as appropriate. In applying these factors, we will treat non-U.S. satellites and U.S. satellites alike. Thus, non-U.S. systems will be required to comply with the same financial, technical and legal qualifications, observe the prohibition against exclusive service arrangements, and comply with other general service rules applicable to U.S. systems. 16. Access Procedures. In implementing this framework, we will not require space stations licensed by another country or administration to obtain separate and duplicative U.S. space station licenses. Rather, we will license earth stations located in the United States to operate with these satellites. Further, we will permit operators of existing or planned non-U.S. space stations to participate in U.S. space station processing rounds, where we consider competing applications to operate space stations that will offer a specific satellite service in particular frequency bands. In addition, earth station entities may file an earth station application either in a processing round or separately where the non-U.S. satellite is already in orbit. II. BACKGROUND A. Notice of Proposed Rulemaking 17. As explained above, in the Notice that commenced this proceeding, the Commission proposed a public interest framework for permitting non-U.S. satellite systems to serve the United States. Specifically, the Commission proposed to evaluate applications involving non-U.S. satellites by determining whether U.S. satellite operators have effective competitive opportunities in the satellite service market of the foreign licensing or coordinating administration. The Commission also proposed to consider whether such opportunities exist on the route markets that the applicant seeks to serve from earth stations in the United States. In making this evaluation, the Commission proposed to examine both de jure and de facto constraints on entry in the foreign market by U.S. satellite operators. The Notice also proposed alternative regulatory approaches for considering whether to permit access to the U.S. domestic market by INTELSAT and Inmarsat or any IGO affiliate. 18. The Notice also asked whether the ECO-Sat test was adaptable to all satellite services. The Commission recognized that, with certain global communications systems, such as mobile satellite systems, landline facilities may be used in the United States, instead of satellite links. For example, a call originating in an office in the United States to a mobile- satellite service (MSS) handset in Asia could travel to Asia by landline before any satellite communication occurs. In that case, there would not be an earth station application or other vehicle to trigger an ECO-Sat analysis. Consequently, the Commission proposed to analyze effective competitive opportunities in the MSS market by measuring whether some critical mass of foreign markets is open to U.S.-licensed MSS systems before we would permit a non-U.S. MSS system to provide any service in the United States. Finally, the Commission proposed to consider any other public interest concerns relevant to the decision to permit access by non-U.S. systems, including spectrum availability, legal and operating requirements, and, with guidance from the Executive Branch when appropriate, issues of national security, law enforcement, foreign policy, and trade policy. B. The WTO Basic Telecom Agreement 19. The WTO Basic Telecom Agreement was completed after issuance of the Notice. It was concluded under the framework established by the General Agreement on Trade in Service (GATS), which is one of the agreements negotiated in conjunction with the creation of the WTO. Under the WTO Basic Telecom Agreement, 69 WTO Members, including the United States, committed to provide each other market access in some or all of their basic telecommunications sectors. Forty-nine WTO Members, including the United States, committed to open their markets to foreign competition in satellite services, either on January 1, 1998, or on a phased-in basis. 20. The GATS is composed of three major components. The first component is the general obligations and disciplines that apply to all WTO Members. The second component is the specific commitments relating to market access, national treatment and other commitments that are identified in individual WTO Member Schedules of Specific Commitments. The final component is exemptions from the general obligations that are contained in Lists of Article II (Most-Favored-Nation (MFN)) Exemptions. 21. Because all WTO Members are party to the GATS, they are obligated to comply with the GATS' general obligations regardless of whether they participated in the WTO basic telecommunications services negotiations or made market access commitments. Under Article II of the GATS, all WTO Members must provide MFN treatment to like services and service suppliers of all other WTO Members. In addition to the MFN obligation, all WTO Members must comply with the transparency obligations of Article III of the GATS, which requires prompt publication of all laws and regulations applicable to the provision of services. 22. In the WTO Basic Telecom Agreement, many WTO Members, including the United States, undertook specific commitments with respect to market access and national treatment. GATS Article XVI (Market Access) requires WTO Members to refrain from imposing certain types of quantitative restrictions, economic needs test, or local incorporation requirements, in those sectors where the WTO Member has undertaken specific commitments. This means that a WTO Member may not maintain limits, such as a cap on the number of service suppliers or the corporate form in which a service can be provided, unless the WTO Member has specifically listed such limitations in its Schedule. Article XVII (National Treatment) is a nondiscrimination rule that requires a WTO Member to treat like services and service suppliers from other WTO Members no less favorably than it treats its own services and service suppliers. Treatment of domestic and foreign service suppliers need not be identical to accord MFN or national treatment. Rather, the critical aspect of an MFN or national treatment analysis is whether the treatment accorded modifies the conditions of competition in favor of certain foreign or domestic suppliers. Thus, even identical treatment can be inconsistent with MFN or national treatment obligations if it puts the foreign supplier at a competitive disadvantage to another foreign supplier or a domestic supplier. 23. Those WTO Members that undertook market access commitments in basic telecommunications services also become subject to the requirements relating to domestic regulation of those services contained in Article VI (Domestic Regulation). Pursuant to Article VI(1), in sectors where specific commitments are undertaken, domestic regulation must be administered in a reasonable, objective, and impartial manner. Article VI(4) states further that a WTO Member could be in contravention of its commitments if it applies measures that are not based on objective and transparent criteria, are more burdensome than necessary, or that restrict the supply of the service. A WTO Member arguing, however, that a measure contravenes Article VI(4) also must show that application of the measures could not have been reasonably expected at the time specific commitments were made. 24. Finally, the United States and 54 other countries undertook additional specific commitments regarding procompetitive regulatory principles contained in the "Reference Paper." The Reference Paper contains principles relating to competition safeguards, interconnection, universal service, transparency of licensing criteria, independence of the regulator and allocation of scarce frequencies. 25. The United States committed to provide market access to all basic telecommunications services and national treatment to service suppliers of WTO Members. The United States maintained limits on direct access to INTELSAT and Inmarsat for COMSAT for the provision of basic telecommunications services. The United States also maintained a limit of 20 percent on direct foreign ownership of common carrier radio licenses, but agreed to permit 100 percent indirect foreign ownership. In addition, the United States made no market access or national treatment commitments for DTH, DBS, and DARS, and took an exception from MFN for those services. 26. The GATS also allows for exceptions to a WTO Member's obligations. Where these exceptions apply, a WTO Member may act inconsistently with its MFN, national treatment or market access commitments or any other GATS obligation. Article XIV (General Exceptions) establishes a limited set of general exceptions, for measures necessary to protect public morals and order, protect human and animal health or secure compliance with nondiscriminatory laws and regulations. Article XIV bis (Security Exceptions) permits a WTO Member to deviate from its GATS obligations in order to protect national security interests or to carry out any obligations under the U.N. Charter to maintain international peace and security. 27. The commitments of the WTO Basic Telecom Agreement can be enforced through WTO dispute settlement. If a WTO Member fails to give a U.S. carrier market access consistent with that WTO Member's commitments or fails to implement the regulatory principles it adopted, the United States may enforce those commitments through the dispute settlement process at the WTO. The remedies available if the United States prevails include first an obligation by the losing WTO Member to fulfill its market access commitments or implement the necessary regulatory principles. If the losing WTO Member fails to do so, it is required to compensate the United States in trade terms or else the United States may take compensatory trade action. The United States would be required initially to withdraw concessions in the services sector, but if sufficient compensatory trade action is not available in the services sector, then the United States would be authorized to take compensatory action in the goods sector. Thus, if a WTO Member that has committed to allow market access to provide satellite services but denies a license to a U.S. provider on the grounds of its nationality, the United States would have the right to take a dispute against that WTO Member in the WTO. While companies from the defendant WTO Member might not be interested in entering the U.S. telecommunications market, its industry likely would have substantial volumes of trade with the United States in a variety of other goods and services sectors. Thus, if the United States prevails in a dispute, the losing WTO Member would most likely agree to fulfill its market access or regulatory principles commitments rather than accept compensatory trade action in other services or goods sectors. C. Further Notice of Proposed Rulemaking 28. After conclusion of the WTO Basic Telecom Agreement, we issued a Further Notice of Proposed Rulemaking requesting comment on how best to open U.S. markets consistent with our commitments under the new agreement and our goal of promoting a competitive satellite market in the United States. We sought comment on whether, and to what extent, the proposals in the Notice should be changed both with respect to countries and services covered by the WTO Basic Telecom Agreement and those that are not. We proposed to establish a presumption that as a result of the agreement and the obligations of the GATS, competition will be promoted, and therefore, no ECO-Sat analysis is required, in evaluating whether to permit satellites licensed by WTO Members to provide covered services within the United States and between the United States and other WTO Members. We also proposed to allow opposing parties to show that grant of a license would pose a very high risk to competition in the U.S. satellite market that could not be cured by license conditions. We proposed to retain the ECO- Sat test for satellites licensed by non-WTO countries and noncovered services (DTH, DBS, and DARS). With respect to IGOs and their affiliates and consideration of other public interest factors, the Further Notice repeated proposals contained in the Notice. III. DISCUSSION A. General Framework 29. As proposed in the Notice and Further Notice, in order to be approved, each request for access to the United States by a non-U.S. satellite system must be in the public interest. A public interest analysis is required by the Communications Act, is a valid exercise of U.S. domestic regulatory authority, and, as discussed more fully below, is consistent with U.S. obligations under the GATS. Where a non-U.S. satellite licensed by a WTO Member and a WTO-covered satellite service are involved, we will presume that foreign entry would promote competition in the United States. In cases involving satellites licensed by non-WTO countries or noncovered services, we will apply an ECO-Sat test. For every request, we also will consider spectrum availability, eligibility requirements and operating requirements, and national security, law enforcement, foreign policy, and trade issues. B. Public Interest Analysis 1. Competition Considerations a. WTO-Member Satellites Providing WTO-Covered Services (1) Presumption in Favor of Entry Background 30. The United States satellite commitments under the WTO Basic Telecom Agreement cover fixed satellite services (FSS) and mobile satellite services (MSS) (WTO- covered services). In the Further Notice, the Commission proposed that, in evaluating requests to access non-U.S. satellites licensed by WTO Members to provide WTO-covered services within the United States or between the United States and other WTO Members, we would apply a presumption in favor of entry. The Commission based this proposal on its view that the general obligations of all WTO Members under the GATS, as well as the satellite market access commitments of 49 countries under the WTO Basic Telecom Agreement, would enhance competition in the U.S. satellite services market. Specifically, the Commission proposed not to apply the ECO-Sat test, which had been proposed prior to the WTO Basic Telecom Agreement, to satellites licensed by WTO Members providing covered services. 31. The Commission also proposed to forego the ECO-Sat test for all WTO Members, including those that did not make specific commitments for satellite services. The Commission proposed this because these WTO Members are bound to extend MFN treatment to services or service suppliers of other WTO Members, unless a specific limitation has been taken, and are subject to the dispute resolution process contained in the GATS. 32. In addition, in the Further Notice, the Commission proposed to permit parties opposing an application to serve the United States from a non-U.S. satellite system licensed by a WTO Member to demonstrate that grant would pose a "very high risk to competition in the United States satellite market that could not be addressed by placing a condition on the authorization," in order to rebut the presumption of competitive entry. The Commission stated that if the opposing party meets this burden, it may deny access to the United States, and noted that, independent of any comments, it could make its own such determination. 33. The Commission also sought comment on the types of license conditions it could impose to minimize the likelihood of anticompetitive behavior. The Commission noted, for example, that for systems to which access already has been authorized, it could condition authorization of additional earth stations on the absence of factors that we have identified as being anticompetitive in that particular case. Alternatively, the Commission could impose stricter reporting requirements in authorizing systems for which there is a greater likelihood of competitive harm. Finally, the Commission requested that commenters address specific benefits or disadvantages of these or any other proposals for minimizing anticompetitive behavior in accessing non-U.S. satellite systems, focusing particularly on the principles delineated in the Reference Paper. Positions of the Parties 34. The parties overwhelmingly support our proposal to forego the ECO-Sat test for satellites licensed by WTO Members for covered services and evaluate requests based on a presumption in favor of entry. Numerous commenters, including Deutsche Telekom, GE Americom, COMSAT, AirTouch, the Networks, ICO (an affiliate of Inmarsat), and Motorola support the Commission's view that the WTO Basic Telecom Agreement will enhance competition in the satellite services market. Deutsche Telekom, ICO, and Hughes argue that application of an ECO-Sat test to WTO Members would violate the national treatment and MFN obligations of the WTO Basic Telecom Agreement. 35. Qualcomm asserts that we should apply the presumption in favor of entry to all WTO Members, including those that did not make market access commitments for satellite services. It contends that the general competitive obligations of the GATS are sufficient to presume that service in the United States by such WTO Members will foster competition. Hughes asserts that in negotiating the WTO Basic Telecom Agreement, the Executive Branch was aware that the commitments of WTO Members would vary, but concluded that the Agreement would create significant overall benefits for U.S. satellite service providers and that the U.S. policy should be to promote competition from foreign-licensed satellites. 36. Some commenters argue that applicants should bear the burden of demonstrating that their entry will pose no risk to competition. AMSC, for example, asserts that the proposed presumption for satellite systems from WTO Members is not required by the WTO Basic Telecom Agreement and is contrary to the burden the Commission normally establishes on applicants to demonstrate compliance with the Communications Act. According to AMSC, there should be a "heavy burden on the proponent to establish grounds for such a reversal of Commission policy." Loral argues in fact that this standard effectively treats non-U.S. satellites more favorably than U.S. applicants. 37. Most commenters support the Commission's proposal to allow opposing parties to rebut the presumption that entry by a non-U.S. satellite would promote competition only by demonstrating that service to the United States by a satellite licensed by a WTO Member would create a very high risk of competitive harm that could not be cured by license conditions. Orion anticipates that most applications for WTO-covered services between the United States and a WTO Member destination will present "little, if any, such risk." PanAmSat argues that the burden must "necessarily be high," and, if met, the Commission "must," rather than "may," deny the request. AT&T asserts that the "very high risk to competition" standard should instead be "substantial risk" to competition. COMSAT contends that denying or delaying access to the U.S. market, or imposing unreasonable or unnecessary safeguards, not only would violate national treatment, but likely would lead other countries to impose similar obstacles for U.S.- licensed systems, thus jeopardizing the benefits of the WTO Basic Telecom Agreement. Space Communications advocates that we require that risks to competition be "highly likely to have a broad-based impact in the relevant market." It cites, for example: market concentration, discrimination, below average variable cost pricing, exclusionary effects of exclusive arrangements and monopoly supply of service. ICO recommends denial of applications involving non-U.S. satellites only "where the applicant has market power and will use that power to raise prices and limit output in the U.S. satellite market." 38. USTR states that the GATS does not prohibit the regulatory standard we adopt. Other parties, however, challenge the proposal based on alleged inconsistencies with the GATS and some offer recommendations for implementing the standard consistent with the GATS. A few commenters raise MFN and national treatment objections. The European Commission, the Government of Japan, and Japan Satellite Systems argue that the proposed competitive harm standard is too vague. The European Commission claims that if adopted, the proposal would erect additional burdens for foreign companies wishing to enter the U.S. satellite market. The Government of Japan requests that we make publicly available the detailed criteria that we would employ and apply our rules consistent with the GATS. France Telecom contends that Commission action under the guise of competition could contradict market access commitments. Deutsche Telekom claims that the proposed presumption is vague and incompatible with the GATS because the U.S. Schedule of Specific Commitments does not contain a rebuttable presumption for market access where there is a "very high risk to competition." GlobeCast contends that the proposal creates a "loop-hole for the Commission to abrogate the WTO Basic Telecom Agreement at its sole discretion, whenever it decides that a non-U.S. licensed satellite is a competitive threat." ICO argues that the GATS requires WTO Members to use the WTO dispute settlement mechanism, rather than exclusion from domestic markets, as a means of resolving claims that the markets of other WTO Members are not sufficiently open to competition. In addition, it states that the Commission may not take the level of a Member's commitments into account in the absence of a specific reservation to that effect. Discussion 39. We adopt our proposal to apply a presumption in favor of entry in considering applications to access non-U.S. satellites licensed by WTO Members to provide services covered by the U.S. commitments under the WTO Basic Telecom Agreement. Specifically, we will presume that satellite systems licensed by WTO Members providing WTO-covered services satisfy the competition component of the public interest analysis. As discussed in the Further Notice, and supported by the parties to this proceeding, market access commitments made by WTO Members under the WTO Basic Telecom Agreement and the procompetitive obligations of the GATS and the Reference Paper, will help ensure the presence and advancement of competition in the satellite services market and yield the benefits of a competitive marketplace to consumers in the United States and other countries. These benefits include greater availability of satellite services from a larger number of providers, more efficient and innovative services, lower prices, higher quality, and, overall, more choices for users and consumers in the selection of satellite services. Thus, these benefits will further the Commission's goal of promoting a competitive satellite services market in the United States. 40. We find that adopting the Commission's proposal to replace the ECO-Sat test with a presumption in favor of entry will best balance the concerns articulated by the parties. The changes resulting from implementation of the commitments of WTO Members, along with new, more global satellite system designs, will open foreign markets and increase competition in the worldwide satellite services market. We therefore will not conduct an ECO-Sat test with respect to non-U.S. satellite systems licensed by WTO Members and, instead, will presume that entry will promote competition. This approach will have significant public interest benefits. First, it will facilitate entry by the 130 Members of the WTO, including our major trading partners. Second, it will avoid detailed, fact-intensive ECO-Sat analyses by the applicant and the Commission, thereby expediting the entry process. The opportunity to serve the U.S. market under a presumption in favor of entry, coupled with the procedural ease of the framework we adopt today, will advance entry of new competitors and services into the U.S. satellite services market. By enhancing competition, this approach will provide U.S. consumers with additional choices among providers, reduce prices, and increase the quality and variety of services. 41. We also adopt the proposal to allow parties to rebut the presumption of entry by showing that grant of an application by a non-U.S. satellite system licensed by a WTO Member would cause competitive harm in the United States satellite market. In most cases, our rule prohibiting exclusive arrangements will adequately address competition concerns. It is possible, however, that this prohibition would be insufficient to prevent anticompetitive harm in the United States. Where necessary to constrain the potential for anticompetitive harm in the U.S. market for satellite services, we reserve the right to attach additional conditions to a grant of authority, or, in the exceptional case in which grant would pose a very high risk to competition, to deny an application. Prospective circumstances that could give rise to competition concerns include some of those identified by the parties: market concentration, discrimination, below average variable cost pricing, monopoly supply of service, as Space Communications states, or where the applicant has market power and could use that power to raise prices and limit output in the U.S. satellite market, as ICO suggests. Based on the development of the satellite market thus far, it has not been necessary to devise or impose competitive safeguards other than the rule against exclusive arrangements. Should such a need arise, the Commission would devise and apply appropriate conditions. 42. We also are concerned with the impact of granting an authorization to an applicant that is unlikely to abide by the Commission's rules and policies. The past behavior of an applicant may indicate that it would fail to comply with the Commission's rules and, as a result, could damage competition in the U.S. market and otherwise negatively impact the public interest. The public interest may therefore require, in a particular case, that we deny the application of an earth station applicant or space station operator that has engaged in adjudicated violations of Commission rules, U.S. antitrust or other competition laws, or in demonstrated fraudulent or other criminal conduct. This approach is consistent with our treatment of U.S. applicants. We find that such conduct demonstrates that an entity is likely to evade our rules and thus may pose a very high risk to competition. 43. We expect that, given the procompetitive changes in the global satellite services market resulting from the WTO Basic Telecom Agreement, and our ability to impose license conditions, it would be necessary to deny an application involving a non-U.S. satellite licensed by a WTO Member on competition grounds only in exceptional circumstances. This approach is consistent with our statutory requirement to grant licenses that serve the public interest, as well as with our obligations under the WTO Basic Telecom Agreement. 44. As proposed, we will apply the rebuttable presumption paradigm to a satellite system licensed by any WTO Member, including Members that did not make specific market access commitments for satellite services. We do so for three reasons. First, we find that the general obligations of the GATS provide some protection against discriminatory conduct. As described above, all WTO Members are governed by the GATS and must comply with the GATS obligations of MFN and transparency. Consequently, a WTO Member that did not make a market access commitment for satellite services must nonetheless afford no less favorable treatment to a U.S. satellite system than it does to a system licensed in any other country if the WTO Member decides to open its market. In addition, all WTO Members must make public all their measures relating to services. Second, the increased competitive environment for global satellite and telecommunications services resulting from the WTO Basic Telecom Agreement, coupled with the regulatory mechanisms available to us and our trading partners to guard against anticompetitive consequences, will help prevent harm to competition in the U.S. market. Third, we find that to exclude WTO Members that did not make market access commitments, or distinguish among those based on the quality of their WTO commitment or the extent of the implementation of their commitment, could be interpreted by other WTO Members as discriminating among "like" service suppliers, and could therefore raise an MFN issue. Thus, adopting such a policy could negatively affect relations with our trading partners or discourage open entry policies in countries that also are implementing the WTO Basic Telecom Agreement. The success of the WTO Basic Telecom Agreement depends on prompt, effective implementation of U.S. commitments, as well as those of our trading partners. 45. We disagree with AT&T that the test should be "substantial risk," rather than "very high risk" to competition. AT&T's standard would undercut the presumption in favor of entry by making it easier to oppose entry. As explained above, the commitments and obligations of countries bound by the GATS and the WTO Basic Telecom Agreement will generally enhance competition in the United States satellite services market. If adopted, AT&T's suggestion would undermine the commitments made under the WTO Basic Telecom Agreement and the good faith efforts of the WTO Members to implement their commitments. As noted, we expect that only in exceptional cases will we deny applications based on competition grounds. 46. We find unpersuasive the European Commission's position that the Commission may not review or deny applications in order to protect competition in the U.S. market. The GATS does not specify a single mechanism for addressing potential anticompetitive practices in the telecom services sector. The United States has traditionally relied on regulatory enforcement and antitrust actions, and remains free to do so. Analyzing competitive impact is an integral part of the Commission's public interest analysis. The Communications Act charges the Commission with "regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible . . . a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges ... ." In carrying out that charge for over 60 years, the Commission has sought to promote competition in the U.S. market. Indeed, we have consistently considered competition issues when authorizing U.S. satellite companies to serve the United States. When the United States entered into the WTO Basic Telecom Agreement, it did so with the understanding that its obligations would be carried out consistent with U.S. law. 47. We also do not agree with those parties that argue that the standard under which we could deny an application involving a non-U.S. WTO-licensed satellite is vague, erects additional barriers for foreign entities, or violates our national treatment obligations. First, we have provided guidance in the discussion above regarding application of the standard. Second, we expect denial of such applications for competitive reasons to occur only in exceptional circumstances. Third, because we also consider competition factors in evaluating entry by U.S. companies, this approach does not treat U.S.-licensed satellite systems more favorably than foreign systems. Similarly, the standard of entry does not discriminate impermissibly among foreign providers in a manner inconsistent with our MFN obligations, as Deutsche Telekom argues. Whether a measure accords less favorable treatment within the meaning of GATS Article II (MFN) must be decided on a case-by-case basis by considering whether the services or service suppliers are like, and then analyzing the structure and application of the measures. The analysis focuses not on whether the treatment of like foreign or like domestic suppliers is identical, but rather whether the treatment modifies the conditions of competition in favor of foreign service suppliers of a particular origin or domestic service suppliers. In this case, we are not discriminating among like service suppliers. Rather, we are treating all carriers that have the ability to distort competition similarly, while treating carriers that do not have that ability similarly. 48. In addition, we are not persuaded by Deutsche Telekom's and ICO's argument that we may not consider competition because we have not scheduled such consideration in the U.S. Schedule of Specific Commitments. We note USTR's comment that the negotiating history of the GATS shows that, rather than prohibiting all domestic regulation of basic telecommunications services, Article XVI only prohibits WTO Members from maintaining or adopting the types of quantitative or economic-needs based limitations and measures listed in Article XVI (unless such limitations are included in a WTO Member's Schedule of Specific Commitments). The standard of review we adopt is not the type of limitation prohibited by Article XVI. Therefore, there is no need for the United States to have included the competition analysis as a limitation on its market access commitments in its Schedule of Specific Commitments. 49. We do not accept the notion that we should depend on other countries' implementation of their commitments and the WTO dispute mechanism in lieu of applying competition factors in our regulatory process. There is nothing in the GATS that requires us to refrain from regulating because other WTO Members have an obligation to regulate. Access to WTO dispute settlement does not eliminate the need for and the appropriateness of our regulation of telecommunications services in order to safeguard competitive opportunities. WTO dispute settlement is an effective remedy, but one that takes some time to obtain. In addition, it is not a remedy that the Commission can seek directly, but depends on Executive Branch action. We have a separate statutory obligation to regulate and enforce our rules that cannot be stayed while the Executive Branch seeks relief in an international tribunal. (2) Determining a Satellite's WTO Status Background 50. In the Notice, the Commission proposed to evaluate whether U.S. satellite operators have effective competitive opportunities in the market of the administration licensing or coordinating the non-U.S. satellite ("home market") before allowing that satellite access to the U.S. market. As discussed above, the Commission, in the Further Notice, proposed to apply a presumption of entry with respect to satellites licensed by WTO Members. This raises the possibility that satellite operators from non-WTO countries might seek to obtain a satellite license from a WTO Member -- an incentive we do not wish to create. Positions of the Parties 51. Lockheed Martin advocates that the test to determine whether a satellite system qualifies for WTO status should be an applicant's "home market." According to Lockheed Martin, an applicant's "home market" should be its principal place of business because that is where the operator is likely to have the most direct economic ties and to participate in the domestic process. Orion recommends that we consider the home markets of each of the major investors in the foreign-licensed system. 52. Columbia argues that the presumption in favor of entry for satellites licensed by WTO Members should not apply where the satellite is U.S.-owned. Columbia's concern is that U.S. companies may acquire licenses in WTO Members to avoid the U.S. regulatory process. To prevent this possibility, Columbia recommends that we require U.S. companies seeking to offer new service in the U.S. market (excluding legitimate joint ventures with existing operators) to obtain a U.S. license to initiate service, regardless of whether a non-U.S. licensee would be permitted into the market based on such a license. It claims that this approach would not disadvantage non-U.S. companies vis-a-vis domestic operators, and thus, would not violate the spirit of the WTO Basic Telecom Agreement. GE Americom disagrees. It argues that the parity that it and others have advocated in this proceeding adequately assures that foreign- licensed carriers, whether U.S. entities or not, will be treated no more favorably than U.S. entities seeking U.S. licenses to provide carriage in the United States. Discussion 53. We adopt the proposal to determine the WTO status of a space station based on the country or administration that grants the license or is responsible for coordinating the system internationally. We find that this approach is the most relevant and practical way of determining WTO status for purposes of applying the presumption in favor of entry. As explained in the Notice, it is almost always true that the nationality of the satellite owner is the same as that of the licensing country or administration of the system and that the primary service supplier's principal place of business will be located where the satellite is licensed or coordinated. We recognize that a satellite system licensed by a WTO Member may have majority investment from a non- WTO country, but do not expect this situation to be common enough to justify a departure from the predictable and administratively simple rule we proposed. In addition, we recognize that in rare situations a satellite's licensing administration simply may be a "flag of convenience" used to circumvent an ECO-Sat analysis. The U.S. obligations under the WTO Basic Telecom Agreement relate only to services and service suppliers of WTO Members; it does not relate to those of non-WTO countries. Thus, in appropriate cases, we would consider, as Lockheed Martin suggests, a system operator's principal place of business, and other relevant factors, and would not limit our inquiry to the licensing administration only. 54. We decline to adopt Columbia's proposal that we not apply the presumption in favor of competition for satellites licensed in WTO Members where the satellite is U.S.-owned. Columbia's concern that some U.S. companies might acquire licenses in WTO countries to avoid the U.S. regulatory process is misplaced. Any U.S. company that obtains a license in another country and later seeks to provide satellite services in the United States will be subject to the same rules and requirements as any other applicant. For example, a U.S. company that owns a foreign-licensed satellite will be required to demonstrate compliance with all Commission technical and qualification rules before we will permit it to serve the United States. Furthermore, adoption of Columbia's suggestion would restrict U.S. satellite operators' rights to obtain satellite licenses in any country of their choice, thereby infringing on independent business strategies and decisions. Finally, Columbia or any other entity will be free to demonstrate that provision of service in the United States by a U.S. owned, but not U.S.-licensed satellite would cause competitive harm in the United States. (3) Route Markets Background 55. In the Notice, the Commission proposed to consider the "route market" -- that is, the country where the satellite transmission will originate or terminate -- when determining whether to grant a non-U.S. satellite access to the United States. For example, if a non-U.S. satellite licensed in Country X proposes to provide service between the United States and Countries A and B, the Commission would perform an ECO-Sat test on Countries X, A, and B. If Country B fails, service between the United States and Country B would be prohibited. The rationale for this proposal is that, if the non-U.S. applicant were permitted to serve Country B, it would have a competitive advantage over U.S. providers unable to serve that market. Such an approach also would provide no incentive for Country B to open its market to U.S. operators. 56. In refining the route proposals after the WTO Basic Telecom Agreement, the Commission proposed that it would not need to perform an ECO-Sat analysis on route markets originating or terminating in WTO Members' territories (WTO route market). It recognized, however, that there may be cases where an earth station applicant will want to access a WTO Member satellite to provide WTO-covered services between the United States and non-WTO markets. The Commission stated that applying an ECO-Sat test to the non-WTO route markets would allow us to promote effective competition through broader market access. The Commission's rationale was that a non-WTO country has no obligation to open its telecommunications markets to the United States or any other country. Thus, applying an ECO- Sat test to non-WTO route markets would allow us to open U.S. markets in a manner consistent with the objective of promoting a competitive satellite market in the United States. 57. At the same time, however, the Commission recognized that this proposal could have negative implications regarding U.S.-licensed satellites. It would be contrary to the policy adopted in an earlier Commission decision allowing any satellite licensed in the United States to provide service to any foreign country without additional Commission authorization. If the Commission applied an ECO-Sat test to a non-WTO route, it might have to apply it to U.S. satellites seeking to serve non-WTO routes because of national treatment concerns, which would limit the flexibility of those licensees. 58. As an alternative, the Commission proposed not to apply an ECO-Sat test in cases involving satellites licensed to WTO Members serving non-WTO routes, so as to afford these satellites the same flexibility as U.S. satellites. In addition, it stated that concern regarding competition in non-WTO routes possibly could be remedied by prohibiting non-U.S. licensed satellites from entering into exclusive arrangements with the country in which they wish to operate -- a prohibition currently imposed on most U.S. licensed systems. Positions of the Parties 59. Most parties commenting on the Further Notice argue that the ECO-Sat test should not apply when a WTO satellite is serving a non-WTO route. Generally, these commenters agree that if we were to apply the ECO-Sat test to non-U.S. satellites under the U.S. national treatment obligation, we might be obligated to apply the same test to U.S. companies -- a result the commenters oppose because it would defeat the objective of DISCO I and burden U.S. licensed systems serving non-WTO routes. The Government of Japan requests that, with a view toward promoting multilateral liberalization and expanding the telecommunications market worldwide, we should ensure GATS consistency, especially national treatment, and not apply the ECO-Sat test in this context. 60. Commenters generally advocate that instead of the ECO-Sat test, we should apply the presumption in favor of entry where a WTO-licensed satellite seeks to provide service to or from the United States, regardless of whether the route is a WTO Member or not. Teledesic contends that, although it is theoretically possible for a foreign operator to gain a competitive advantage over U.S. operators by entering non-WTO routes that are closed to U.S. operators, based on the number and scope of the market access commitments in the WTO Basic Telecom Agreement, the likelihood is "insufficient to justify the re-regulation of international satellite services." COMSAT specifically advocates that the corresponding burden on the opposing party to demonstrate a very high risk to competition apply as well. 61. Columbia contends that, where a satellite is licensed by a WTO Member, and the entity that controls the satellite is from a non-WTO country that is the route market to be served, we should apply an ECO-Sat test to the non-WTO route market. According to Columbia, a company from a country not subject to WTO requirements and dispute resolution procedures should not be able to avoid the ECO-Sat test simply by obtaining a license from a WTO Member. Columbia asserts that this approach should help deter forum shopping by companies that benefit in their actual home markets from restrictive entry policies. It claims that this approach would not violate national treatment because the same test would be applied if the foreign-controlled company sought a U.S. license directly to serve its non-WTO market. Hughes disagrees, arguing that national treatment requires the Commission to afford all foreign- licensed satellites providing covered services the same opportunities that U.S. satellites are afforded under DISCO I. 62. Some parties suggest methods for guarding against market distortions that could result from service to a non-WTO country by a WTO-licensed satellite. COMSAT states that we should grant such applications absent a demonstration that authorizing service between the United States and a non-WTO country would pose a very high risk to competition in the U.S. satellite market that could not be addressed by conditions on the grant of the authorization. Several other parties suggest extension of the rule prohibiting U.S.-licensed satellites from entering into exclusive arrangements with non-U.S. satellites. This would ensure that no satellite system of a WTO Member that provides service in the United States can gain an unfair advantage in any foreign market. GE Americom points out, however, that in some markets, a de facto policy of exclusivity may exist even in the absence of an exclusive route agreement with the satellite services provider, and suggests that we consider this possibility in evaluating whether service to a given non-WTO route creates a risk to competition. 63. PanAmSat supports not applying the ECO-Sat test to avoid creating a procedure "for a problem that may prove non-existent." PanAmSat also recommends, however, that the Commission reconsider applying the ECO-Sat test to the route market if competitive disparities arise between U.S. licensees and other WTO Member licensees. GE Americom, Orion, and COMSAT concur. PanAmSat suggests further that if we were to apply the ECO-Sat test, we could employ a rebuttable presumption that the provision of service between the United States and a non-WTO route market by both U.S.-licensed satellites and other WTO Member satellites is in the public interest. The presumption then could be overcome regarding a particular non-WTO route market upon a demonstration that U.S. licensees are not afforded access to such market. According to PanAmSat, if service to the non-WTO route market would not serve the public interest, then neither U.S.-licensed satellites, nor satellites licensed by other WTO Members, would be permitted to serve the route. PanAmSat contends that because the presumption would apply equally to U.S. licensed satellites and other WTO Member-licensed satellites, it would satisfy national treatment. Discussion 64. As suggested in the Further Notice, and overwhelmingly endorsed in the record, we will not evaluate the effective competitive opportunities in the route market for non- U.S. satellites licensed by a WTO Member providing WTO-covered services. Thus, we will not perform an ECO-Sat test on any route, whether a WTO route market or a non-WTO route market. We take this approach for two reasons. 65. First, we do not currently evaluate the route markets served by U.S.-licensed satellite systems. In DISCO I, we permitted U.S. satellites to provide both domestic and international services according to their business plans, regardless of the route. The purpose of this approach was to provide licensees flexibility in system offerings and encourage development of global, innovative services for the benefit of U.S. consumers. That policy is equally compelling today and we will continue to follow it. Furthermore, as the majority of parties asserted, applying a route market analysis to non-U.S. satellites licensed by WTO Members providing WTO-covered services, while not doing so for U.S.-licensed satellites, could raise national treatment concerns. We find that we can further our procompetitive objectives and at the same time address any potential anticompetitive concerns resulting from service on a non- WTO route by prohibiting a non-U.S. licensed satellite from entering an exclusive arrangement with the country it wishes to serve, a restriction that currently applies to U.S.-licensed satellites as well. Moreover, parties are free to raise concerns that entry by the WTO satellite will create anticompetitive consequences in the U.S. market because of a closed route market. 66. Our second consideration relates to the GATS and the benefits of the WTO Basic Telecom Agreement. As described above, because all WTO Members are governed by the general obligations of the GATS, including MFN and transparency, the GATS provides some protection against discriminatory conduct on a route. In addition, increased competition in the global satellite market resulting from commitments in the WTO Basic Telecom Agreement, and the regulatory mechanisms available to us and our trading partners to guard against anticompetitive consequences, will help prevent harm to competition in the U.S. market. 67. Further, we find it unnecessary to adopt Columbia's suggestion that we apply an ECO-Sat analysis to a non-WTO route market where the satellite is licensed by a WTO Member and the controlling entity is from a non-WTO route market. As previously discussed, we will look to the ownership of the satellite, rather than to the licensing administration, if we are presented with evidence that the licensing administration is simply a "flag of convenience" used to circumvent an ECO-Sat analysis. Finally, we do not adopt a rule requiring us to apply an ECO-Sat analysis to the route market where competitive disparities arise between U.S. licensees and other WTO Members, as PanAmSat suggests, or a rule requiring us to consider de facto exclusivity in the absence of an exclusive route agreement, as GE Americom suggests. In all cases, where the presumption in favor of entry applies and we do not conduct an ECO-Sat analysis, opponents may demonstrate that entry will nevertheless pose a risk to competition in the United States, and in the exceptional case in which grant would pose a very high risk that cannot be cured by conditions placed on the license, we will deny the application. We will thus examine whatever potential competitive harms exist in this context, which is consistent with international agreements and should satisfy both PanAmSat's and GE Americom's concerns. b. Non-WTO Member Satellites Providing WTO-Covered Services (1) General Framework Background 68. In the Notice, the Commission proposed to examine "effective competitive opportunities" in both the foreign "home market" of the non-U.S. satellite and "route markets" to which service from a U.S. earth station is proposed. Thereafter, in the Further Notice, the Commission tentatively concluded that an ECO-Sat test should be applied with respect to the home markets of satellites licensed by non-WTO countries, regardless of whether the route market is a WTO Member country or not. Further, the Commission proposed to apply a separate ECO-Sat test to the route market when the route market is a different non-WTO country. The Commission proposed to continue to apply an ECO-Sat test in these circumstances because non- WTO countries have assumed no obligations under the WTO Basic Telecom Agreement specifically or under the GATS generally. They have made no binding commitments to open their satellite services markets or to abide by procompetitive regulatory principles. Thus, reasoned the Commission, allowing non-U.S. satellites licensed by non-WTO countries to serve the United States could adversely affect competition in the United States by giving the non-U.S. operator a competitive advantage over its U.S. counterparts. Positions of the Parties 69. The commenters generally support implementation of an ECO-Sat analysis in this context. Many contend that, absent a home market analysis, the Commission would have no relevant basis for evaluating the accessibility of a non-WTO market or for exercising any leverage to persuade those countries with closed markets to open them. 70. Some commenters argue that application of the ECO-Sat test may harm U.S. licensed systems seeking access to foreign markets and may result in retaliatory measures from other countries. CC/Networks claim that they rely on satellite technology for overseas video and associated audio transmissions and consider transoceanic fiber less efficient regarding cost, connectivity, technical performance, and operational flexibility. They argue that limiting broadcast and cable operators' use of satellite capacity will hinder their ability to provide television coverage of international events, especially fast-breaking news. To the contrary, Columbia argues that we should apply the ECO-Sat test to all types of services in a fair and even- handed manner. It maintains that Networks's need for transmission capacity can best be met by considering, as part of the general public interest inquiry, whether U.S. satellites are available to provide this transmission capacity. 71. A few commenters favor a less rigid ECO-Sat test, which would permit each applicant to demonstrate whether a home market test, route market test, or critical mass test, is appropriate for its proposal. In order to remedy concerns about foreclosing competitive entry by U.S.-licensed satellites into foreign markets, Hughes proposes that we generally allow entry of foreign-licensed satellites into the United States to compete in the provision of satellite services, absent a showing that the licensing administration imposes significant protectionist barriers that shield its satellite industry from competition. Hughes argues that, by applying the ECO-Sat test in this flexible manner, the Commission can best demonstrate to foreign administrations the benefits of implementing a procompetitive satellite regulatory policy. Hughes notes that none of the parties disputed its proposal for a modified ECO-Sat test. In addition, Hughes argues that none of the parties deny that a strict reciprocity test will undermine the Commission's goal of opening foreign markets to competition if foreign administrations impose equally rigid reciprocity tests to evaluate the entry by U.S.-licensed satellites. Discussion 72. We adopt the proposal to apply the ECO-Sat test to non-U.S. satellites licensed by non-WTO countries. This approach is necessary to ensure that participants in the global satellite services market are on equal footing and that applicants from non-WTO countries are not able to distort competition to the detriment of U.S. operators. Fair and vigorous competition among multiple providers leads to lower prices and more innovative service offerings for satellite communications users in the United States and throughout the world. Applying the ECO-Sat test will confirm that foreign markets do not have de jure or de facto barriers that impede opportunities for U.S. providers to enter and compete in those markets prior to permitting operators from such countries to compete in the United States. Unlike WTO Members, including those that have not made specific commitments of market access, non-WTO countries are not subject to the general obligations of the GATS. Most non-WTO countries have made little progress toward promoting competition and opening their markets. To the extent that some have allowed foreign entry and have begun to liberalize their markets, they are not obliged under the GATS to refrain from discriminating against U.S.-licensed satellite operators. Thus, the potential for anticompetitive conduct continues to exist with respect to applicants from non- WTO countries. 73. For these reasons, we are not persuaded by the commenters' arguments against applying the ECO-Sat test to non-U.S. satellites licensed by non-WTO countries. In response to some commenters' concerns about possible negative effects of this rule on the efforts of U.S.- licensed systems to access foreign markets, we point out that our primary focus is on increasing competition in the United States market, and on realizing the benefits of such competition for U.S. users here. If this policy causes other countries to adopt an ECO-Sat test for U.S. satellite operators seeking to provide service in that country, we find it, on balance, a minimal burden when compared to the possibility that unrestricted entry by foreign-licensed satellite systems would distort competition in the U.S. market. Hughes's proposed test would not suffice because, for example, Country X may permit some foreign satellites to serve its market while blocking U.S. satellites, falling short of Hughes's "significant protectionist barrier" measure. If we permit a satellite licensed by Country X to serve the U.S. market, that operator could have a competitive advantage in the United States because of its more comprehensive service offerings. Indeed, competition could be distorted in the United States even if a foreign country does allow entry by U.S. satellites if that country erects obstacles that prevent such competition from being effective as a practical matter, such as government subsidization of the non-U.S. system. In this case, the non-U.S. operator could have a competitive advantage in the United States because of an ability to offer lower-cost service. Consequently, we find that our proposed test for determining whether U.S. operators have effective competitive opportunities in a foreign country provides an even-handed approach that allows the greatest degree of access to non-U.S. systems consistent with the public interest. In addition, we reject Hughes's suggested ECO-Sat test. It is equally necessary to examine both de jure and de facto barriers because de facto barriers can be as impeding as de jure barriers and more difficult to detect. Hence, the applicant should bear the burden to demonstrate the absence of both. 74. We recognize the Networks' concern that our policy could inhibit the coverage of fast-breaking news or other special events. We point out, however, that we will not apply an ECO-Sat test in the vast majority of cases where the Networks will be receiving foreign video transmissions. In particular, we will not apply an ECO-Sat test when the satellite relaying the foreign transmissions into the United States is licensed by a WTO Member, or, as discussed below, is operated by an IGO affiliate satellite or an IGO satellite providing international service. We will apply the ECO-Sat test only where the satellite is licensed by a non-WTO country. In these cases, an ECO-Sat test is a minimal burden compared to the market distorting impact and competitive harm in the United States that may result if a U.S.-licensed system is denied access in the relevant foreign market. Further, the Networks may apply for an earth station license to communicate with specified non-WTO satellites. In considering whether to grant that application, we could consider, regardless of the outcome of the ECO-Sat analysis, whether other satellites are available to provide this transmission capacity. An earth station license carries a ten-year license term; no further applications will be necessary for the Networks to access that non-WTO satellite once a license is granted. 75. In applying the ECO-Sat test, we will examine whether the country in which the non-U.S. satellite is licensed provides effective competitive opportunities for U.S.-licensed satellites to serve the foreign market. We will look at de jure barriers to entry, such as statutory or regulatory prohibitions against service by U.S. providers, as well as de facto barriers. For example, a country may permit U.S. entities to provide FSS service, but impose more stringent technical requirements on U.S. providers than on its own providers. (2) Home Markets Background 76. In the Notice, the Commission proposed to look first at the country of license, or the "home market," when evaluating effective competitive opportunities for U.S. providers. For example, if a satellite licensed by Country X seeks to serve the U.S. market, the first step would be to determine whether U.S.-licensed satellites may provide analogous services to, from, or within Country X. The Commission recognized, however, that the country of license approach had two shortcomings. First, if the Commission were to look only at the licensing country, satellite operators from closed markets might seek to obtain a satellite license from a country with an open market. In effect, such satellite operators could forum shop to find an administration that would most likely pass the ECO-Sat test. The Commission therefore sought comment on the possibility of looking at ownership in addition to the country of license, for example, evaluating each investor's home country or those of the most substantial investors. Positions of the Parties and Discussion 77. Commenters supporting application of an ECO-Sat test uniformly support applying this test to the "home market" of the satellite. Some question, however, whether the "home market" should be the country that licenses a satellite or the administration that coordinates it or some other measure, such as the nationality or principal place of business of the owner. For reasons discussed above in determining the WTO status of the satellite in question, we will look to the licensing country or coordinating administration to determine the home market. In determining the home market, we will, however, entertain requests to consider other factors, such as the nationality or principal place of business of the owner. (3) Route Markets Background 78. In the Notice, the Commission proposed to conduct a separate ECO-Sat analysis of the "route market" or markets if different from the home market. It defined the route market as the market in which the satellite transmission originates or terminates. The Commission stated that applying an ECO-Sat test to the non-WTO route markets would allow it to promote effective competition through broader market access. Specifically, because some countries may offer landing rights to satellites from certain foreign countries but not others, U.S. satellites may have opportunities to compete in some route markets but not others. Making a decision on market access for a non-U.S. system based solely on the openness of that system's home market would therefore leave open the possibility that the non-U.S. satellite, once it entered the U.S. market, might be able to serve some routes on which U.S. satellites are prevented from competing. This result would distort competition in the United States. Consequently, in the Further Notice, the Commission proposed that when a non-WTO satellite provides service involving a different non-WTO market, it would apply two separate ECO-Sat tests: the first test would be applied on the non-WTO home market as discussed above; the second ECO-Sat test would be conducted on the non-WTO route market. If the non-WTO route market did not provide U.S. operators with effective competitive opportunities to serve that market, the Commission would not permit the non-U.S. satellite to provide any service between the United States and that route market. Positions of the Parties 79. Most commenters agree that a route market ECO-Sat test is necessary to avoid distortion of competition. They contend that a separate ECO-Sat test should be applied to each non-WTO route market. Some commenters, however, argue that the ECO-Sat test should not be applied in cases where, as a practical matter, only non-WTO satellites can access the route market. Qualcomm, for example, argues that application of the ECO-Sat test would only delay the implementation of innovative satellite services where effective competitive opportunities for U.S.-licensed or other WTO Member satellites cannot effectively exist. 80. Lockheed Martin, on the other hand, does not endorse the application of an ECO- Sat test to route markets. Lockheed Martin believes that if a satellite operator is subject to competition in its home market then it is significantly less likely to have market distorting capabilities in other route markets that its serves. 81. Other commenters, while not opposing a route market analysis in theory, argue that route markets are difficult to define or that a route market test is insufficient because, in certain situations, de facto barriers may be difficult to prove. CC/Networks recommends that the Commission allow all U.S.-authorized earth station licensees to access non-U.S. satellites immediately for specified route markets once a non-U.S. satellite has satisfied the ECO-Sat test requirements. Further, ICO argues that a route market analysis would be impractical with global satellite systems, such as mobile satellite service (MSS) systems, that could conceivably serve over 200 countries. COMSAT agrees that applying an ECO-Sat test in these circumstances could, in fact, impede the development of the global MSS market. Discussion 82. We adopt the following rules regarding non-U.S. satellites licensed by non-WTO Members: We will not apply an ECO-Sat test to WTO Member route markets served by non- U.S. satellites licensed by non-WTO countries. We will, however, apply an ECO-Sat test to all non-WTO route markets served by non-U.S. satellites licensed by non-WTO countries. If a non- WTO satellite serves one or more different non-WTO route markets, we will apply an ECO-Sat test to the non-WTO home market, as well as an ECO-Sat test to each non-WTO route market. Discussion of each rule follows. 83. First, as to WTO routes, we will not apply an ECO-Sat test here for the same reasons discussed above regarding WTO-Member-licensed satellites . As stated, all WTO Members are governed by the general obligations of the GATS. The GATS provides some protection against discriminatory conduct on a WTO route. In addition, increased competition in the global satellite market resulting from commitments under the WTO Basic Telecom Agreement and the regulatory mechanisms available to us and our trading partners to guard against anticompetitive consequences, will help prevent harm to competition in the U.S. market. 84. Second, as to non-WTO routes, it is necessary to apply an ECO-Sat test to all routes because the home market inquiry is, by itself, insufficient to protect U.S. satellite operators from distortion in the U.S. satellite market. Each satellite typically covers many different countries and a satellite's point-to-multipoint capability makes it possible for the same satellite to be used simultaneously for transmissions between other countries and the United States. U.S. satellite operators must obtain an authorization from all countries in which they seek to provide service. It is possible that certain non-WTO countries may prohibit access by U.S. satellites, while allowing access by satellites from other countries. In this scenario, the non-U.S. satellite granted access to that market would have a competitive advantage over U.S. systems by virtue of its broader service area. We cannot ignore this potential competitive distortion. 85. We recognize that applying an ECO-Sat analysis to each non-WTO route market served by a global satellite system, such as a low-earth orbit MSS or a fixed-satellite service system, will be cumbersome. An alternative would be to determine whether there is some critical mass of route markets open to U.S. satellite systems to satisfy us that effective competition will not be distorted in the United States. If so, we could dispense with a route-by- route analysis for global systems altogether. The commenters' positions varied on what would constitute a critical mass of open route markets, and on how to determine whether a critical mass has been reached. 86. We find that there is no single method to measure whether a critical mass has been reached that would work in every case. This is because, from a provider's perspective, critical mass depends in large part upon its individual business plans. For example, a company intending to provide global service may be satisfied that a critical mass has been achieved if a majority of the world's largest markets are open to U.S. satellite services. A country targeting the Asian market could, in contrast, legitimately argue in the same environment that a critical mass has not been reached if several of the world's closed markets are in Asia. Consequently, we cannot devise a critical mass test that would uniformly apply to all satellite services. We also are concerned that a critical mass test would not encourage countries to open closed markets to U.S. satellite services, to the detriment of U.S. consumers. We conclude that the most practical approach, and the most appropriate and forceful way to promote competition in the United States and around the world, is to look at each of the actual routes that will be served. Thus, we will apply an ECO-Sat test to each non-WTO route market served by a non-WTO satellite. 87. We disagree with Lockheed Martin, the only party that opposes generally applying a route market ECO-Sat analysis, which argues that the test is not necessary because competition in the route market is not likely to be distorted if the satellite operator is subject to competition in its home market. Contrary to that position, our route market analysis is designed to promote competitive conditions in the United States by addressing a non-U.S. system's ability to serve markets not open to U.S operators. 88. In response to Qualcomm's suggestion that we not apply the ECO-Sat test where only non-WTO countries are able to serve a route market, we point out that we will consider such circumstances in applying the ECO-Sat test. For example, if U.S. operators are not serving a particular route market because they do not have satellites with coverage areas allowing them to serve that route, the non-WTO satellite providing service to that route market would not fail the ECO-Sat test on that basis. In that case, we would not preclude a non-U.S. satellite from providing service between the United States and that market. In applying the ECO-Sat test, we are looking for artificial barriers blocking access to that market by U.S. operators. (4) Satellite Service Distinctions Background 89. In applying the ECO-Sat test, the Commission proposed in the Notice to focus on the specific satellite service that the non-U.S. system seeks to provide in the United States and determine whether U.S. satellite systems would be permitted to provide the same type of service in the relevant foreign country. For example, if there were a request to provide mobile-satellite service (MSS) in the United States using a satellite licensed by non-WTO Country X, the ECO- Sat analysis would focus on whether a U.S. satellite could provide MSS in Country X. The Commission proposed to look at three service categories in making this analysis: DTH (including DBS service), Fixed Satellite Service (FSS) and MSS. The Commission noted, however, that if another country draws finer distinctions when considering whether to allow U.S. satellites to provide services (such as distinguishing between Very Small Aperture Terminal (VSAT) and voice fixed-satellite services), it might consider applying the same distinctions when considering a request involving a satellite licensed in that country. 90. Nevertheless, the Commission recognized in the Notice that this basic approach may not be adaptable to all satellite services in all instances. For example, an MSS system providing service between the United States and another country could consist of satellite transmissions that do not involve earth stations in the United States. By illustration, a telephone call could travel via an MSS system link from a telephone in the United States by cable to Poland, and then from there by satellite to China, where it could be received by a handheld telephone (earth station). The Commission pointed out that because the earth station is in a foreign country and would be licensed by that country, there would be no vehicle by which to apply an ECO-Sat analysis. Given this, it proposed to evaluate effective competitive opportunities for MSS providers on a global basis by considering whether some critical mass of foreign markets is open to U.S. licensed systems before a non-U.S. system could provide any service in the United States. Positions of the Parties 91. Most commenters support our proposal to adopt a service-by-service approach in applying the ECO-Sat test so as to ensure effective competition regarding each service. Indeed, DirecTV asks us to consider new services as they evolve. Columbia suggests that we further subdivide service categories to include video, voice, and data services. AirTouch objects to the critical mass alternative to cover satellite service systems that do not have a satellite component in the United States. AirTouch asserts that the critical mass approach would be burdensome to administer because it would be difficult to determine which markets are relevant and sufficiently open to warrant regulatory streamlining, and that the approach would create too much uncertainty for foreign providers trying to plan their businesses. Discussion 92. We adopt the proposal to apply the ECO-Sat test, when applicable, on a satellite- service-specific basis. As recognized in the Notice, we may find that a particular country permits U.S. satellites to provide some, but not all, satellite services. We agree with the commenters that in these cases the public interest would be best served by permitting satellites licensed by such a country to enter the U.S. market to provide those services that can be competitively offered by U.S. satellites in that country, but not for other satellite services. We also adopt the proposal to specify DTH (including DBS service), FSS, and MSS as our service categories in applying the ECO-Sat test. Consistent with our treatment of voice and non-voice MSS in the same service category for ECO-Sat purposes, we will consider DARS, an audio satellite service established after the Notice was issued that provides service directly to consumers, in the same category as DTH. We may further subdivide these categories, as Columbia suggests, if another country makes such distinctions in deciding whether to allow U.S. satellite systems to serve its market. We find, however, that it will be sufficient and administratively simpler to apply the three broader service categories as a rule of thumb. 93. We will not adopt the proposal to require some critical mass of foreign markets to be open to U.S. satellite operators before we would permit a non-WTO MSS system to provide the landline portion of its service in the United States. As previously discussed, there is no objective way in which to define a critical mass and such a standard would not, in any case, further our goals of opening markets and promoting global competition. Rather, we will rely on the policies and rules adopted in our companion Foreign Participation Report and Order to govern foreign entry through terrestrial facilities. c. Non-WTO Covered Services Background 94. As discussed above, the U.S. Schedule of Specific Commitments to the WTO Basic Telecommunications Agreement excludes DTH, DBS, and DARS. Many other WTO Members, including many of the United States' major trading partners, did not include these services in their market access commitments, creating a potential market imbalance. To resolve this imbalance, the United States made no market access or national treatment commitments and took an MFN exemption for these services. 95. Thus, because the WTO Basic Telecom Agreement will not do as much to advance our goal of promoting a competitive satellite marketplace for these services, in the Further Notice, the Commission proposed to apply the ECO-Sat test to all requests for access by non-U.S. satellite systems for delivery of DTH, DBS, and DARS services into the United States. In conducting an ECO-Sat test, the Commission proposed to evaluate both de jure and de facto constraints on entry by U.S. satellite operators. The Commission sought comment on the continuing need to encourage open markets for these services, and on the application of an ECO-Sat test to achieve that goal. Positions of the Parties 96. Several commenters support the proposal to use an ECO-Sat test for non-covered services. MPAA recommends, however, that the Commission include in its rules provision for eliminating the ECO-Sat test should future GATS negotiations yield market access commitments by WTO Members that provide an open, competitive global environment with respect to DTH, DBS, and DARS services, allowing the United States to remove its MFN exemptions in these services. Hughes further argues that the ECO-Sat test should bar entry only where a foreign country imposes significant protectionist barriers against U.S.-licensed satellites. 97. Many commenters, however, object to applying the ECO-Sat test to these non- covered services. Specifically, the European Commission argues that the U.S. MFN- exemption might negatively impact the economic viability of non-U.S.-licensed satellite systems, since satellite systems normally provide both telecommunications and DTH-DBS transmission services. The scope and economic impact of the U.S. MFN exemption, the European Commission contends, depend on the "precise definition of DTH and DBS television services, and of digital audio services," which the European Commission urges us to define. The European Commission also claims that these services are broadcast services and therefore the United States is required to provide market access and MFN treatment under its 1994 WTO commitments on audio visual services. Discussion 98. We will apply the ECO-Sat test to requests involving provision of DTH, DBS, and DARS by non-U.S. satellites. Specifically, we will apply the test to the home market of the non-U.S. satellite, as well as to all routes that the non-U.S. satellite proposes to serve. The ECO- Sat test is necessary because of the continuing need to encourage open markets for these services and to avoid anticompetitive conduct in the U.S. market. 99. In applying the ECO-Sat test, we will examine effective competitive opportunities for U.S.-licensed satellites to serve the foreign markets. We will look at de jure barriers to entry, such as statutory or regulatory prohibitions against service by U.S. providers. These could include absolute or partial bars, as well as direct or indirect ones. For example, a foreign country could prohibit outright U.S. satellites from providing any home programming services by U.S. entities or could prohibit any indirect U.S. ownership. It also could prohibit video, but not audio services. By contrast, de facto barriers would constitute barriers that are not per se prohibitions, nor not necessarily formally adopted by the country's government, but that exist and, in practice, act as impediments to entry. For example, a country may permit U.S. entities to provide DTH service, but may impose more stringent technical or programming requirements or higher fees on U.S. providers than on its own providers. By discriminating against U.S. providers, any such de facto barriers would severely curtail, if not wholly eliminate, the ability of U.S. satellite entities to do business in the foreign market. As a result, the companies in the home market of the foreign-licensed satellite would be able to serve a market closed, in whole or in part, to U.S. companies. Denying competitive opportunities to U.S. entities in the foreign market, while allowing them for the country's own companies, would give the foreign-licensed satellite a competitive advantage over U.S. entities, causing competitive distortions. 100. Furthermore, we find that Hughes's proposed modified ECO-Sat test does not adequately address our concern that any artificial entry barriers foreign administrations place on traffic to or from the United States, even those not arising to the level of "significant protectionist barriers," could distort competition in the United States. 101. We disagree with the European Commission that these services are broadcasting services. The Commission has specifically concluded that it will not regulate DTH and DBS as broadcasting services. Rather, the Commission regulates these services as basic telecommunications services. As such, the U.S. exclusion of these services from market access commitments and the MFN exemption taken during the WTO basic telecommunications negotiations are valid. Therefore, applying the ECO-Sat test to non-WTO covered services is fully consistent with our GATS obligations. With respect to Deutsche Telekom's concern about applications to provide both WTO-covered and non-WTO covered services over a non-U.S. satellite, we clarify that we will address such requests separately, under the rules we adopt for each situation. d. Intergovernmental Satellite Organizations and Their Affiliates (1) Introduction Background 102. In the Notice and Further Notice, the Commission addressed issues relating to opening the U.S. domestic satellite market to INTELSAT and Inmarsat, and their affiliates. INTELSAT and Inmarsat are treaty-based, intergovernmental organizations (IGOs) designed to ensure world-wide satellite communications. These organizations have certain privileges and immunities that provide them competitive advantages over competing satellite providers. For example, they are immune to suits in court (with limited exceptions for commercial contracts), including jurisdictional, discovery and asset immunity from antitrust laws. They also enjoy tax- free status. For example, they are exempt from income, corporate and property taxes, and customs and other duties in the host countries and other member states. Their size and the fact that their members are the primary, if not exclusive, providers of fixed and mobile maritime services in most major markets gives them a special, and possibly dominant, position in the global market. Further, COMSAT, by virtue of the Communications Satellite Act of 1962 and the 1978 International Maritime Satellite Telecommunications Act, is the U.S. signatory to the IGOs. COMSAT provides INTELSAT and Inmarsat space segment capacity to users in the United States. COMSAT pays taxes, but as we discuss below, indirectly benefits from IGO immunity from suit, including suit based on U.S. antitrust laws. 103. In the Notice, the Commission asked whether, and under what conditions, it should permit INTELSAT and Inmarsat to serve the U.S. market, recognizing that home market and route market analyses would be analytically difficult to apply with respect to applications from these entities. In the Further Notice, the Commission asked whether the WTO Basic Telecom Agreement will result in a critical mass of open markets among IGO member countries that is sufficient to presume that the Commission can rely on competitive market forces and forego an ECO-Sat analysis. The Commission also proposed to treat IGO affiliates as it would treat any other non-U.S. satellite system. That is, the Commission would not apply an ECO-Sat test if the IGO affiliate is a satellite system licensed by a WTO Member and providing covered services. Position of the Parties 104. Several commenters argue initially that we should not address access to the U.S. market by INTELSAT, Inmarsat, or IGO affiliates in this proceeding, and that instead we must establish a new proceeding in which to do so. GE Americom points out that there is no need to complete consideration of entry questions involving IGOs prior to January 1, 1998, when the WTO Basic Telecom Agreement goes into force, because IGOs do not derive benefits from the Agreement. 105. Orion, for example, argues that a new proceeding is necessary because IGOs present significant and complex factual and legal issues that have not been sufficiently aired. These commenters also assert that a new proceeding is particularly appropriate to address access by IGO affiliates, given pending proposals for restructuring and privatization. Loral contends that a new proceeding regarding the affiliates would examine questions relating to: the proper level of ownership by IGOs, signatories and predecessors; which IGO assets and how many may be transferred without unduly disadvantaging competition; what level of government financing of an IGO affiliate is anticompetitive; and what opportunities for cross-subsidization and non- arm's length transactions exist in the IGO affiliate context and what steps need to be taken to prevent each. 106. COMSAT, in contrast, opposes a new proceeding, noting that this rulemaking was established to address entry by non-U.S. satellites into the U.S. market, including IGOs and their affiliates. COMSAT notes that the Further Notice specifically asked for comment related to the IGOs and their affiliates. ICO objects to inclusion of ICO in any future proceeding, arguing that it should be treated like satellites from other WTO Members and that any such proceeding should addresss only future IGO affiliates. Discussion 107. We find that a new proceeding is not needed -- neither for the IGOs nor IGO affiliates -- because we are only setting a framework for entry here. The Notice and Further Notice specifically addressed the unique competitive concerns relevant to entry by IGOs and IGO affiliates, and specifically requested comment on the standard to be applied for access to these satellite systems. We recognize that issues related to restructuring or privatization of INTELSAT and Inmarsat currently are the subject of international negotiations and that the issue of ICO independence from Inmarsat is currently before this Commission. Any specific concerns about whether, and to what extent, entry by a particular IGO or IGO affiliate would be anticompetitive are more appropriate in the context of a specific license application. As discussed below, the outcome of pending proceedings could be taken into account in conducting a public interest determination regarding a particular application. We therefore conclude that a separate proceeding is unnecessary and turn to the substantive issues of what entry test to apply to IGOs and IGO affiliates. (2) Intergovernmental Satellite Organizations Background 108. In the Notice, the Commission noted that IGOs present certain analytical issues within the framework it was proposing to apply to non-U.S. satellites. First, IGOs have no single home market, unlike private satellite operators, which are incorporated in and licensed by an individual country. Second, the Commission recognized that because IGOs were created to provide ubiquitous service and serve virtually every country from the United States, it may be difficult to apply a route market analysis to an application involving an IGO. The Commission proposed several alternative standards for deciding whether earth stations could access an IGO satellite for the provision of U.S. domestic service: (1) The degree of openness of all various route markets served by the IGO (or at least all the markets of the IGO's members); (2) The degree of openness of the number of countries constituting the minimum level of concurrence required for any official act of an IGO; or (3) A determination of whether the IGO, as result of its intergovernmental status and global dominance, would be in a position to diminish effective competition in the United States. 109. As to provision of international service involving the United States, the Commission tentatively concluded that it would not be in the public interest to apply the ECO- Sat test. The Commission reasoned that there are still many nations in the world that are connected to the United States only by satellite, and any policy that makes it more difficult to reach these points would unduly constrain the already limited service to them. The Commission also stated that such an approach might be inconsistent with the statutes governing U.S. participation in INTELSAT and Inmarsat and established U.S. policy for use of those systems for certain international services. As a result, the Commission proposed to continue licensing international communications over INTELSAT and Inmarsat without applying an ECO-Sat test. 110. In the Further Notice, the Commission revisited these proposals in light of the successful conclusion of the WTO Basic Telecom Agreement. Initially, the Commission noted that because IGOs are intergovernmental treaty organizations, they do not benefit from that Agreement, which covers only services or service suppliers of WTO Members. Consequently, the Commission noted that the United States owes no market access, national treatment or MFN obligations to the IGOs. 111. The Commission asked, however, whether the commitments made under the WTO Basic Telecom Agreement constitute a critical mass of open satellite markets sufficient to presume that allowing entry by IGOs for provision of U.S. domestic service would enhance competition in the United States. In that regard, the Commission noted that 51 of the 141 INTELSAT members made full or partial market access commitments in basic telecom services under the WTO; these 51 members, including the United States, own 80% of the shares of INTELSAT. In addition, 49 of the 80 Inmarsat members made commitments on basic telecommunications services. All 30 countries that made market access commitments for mobile satellite services in the WTO Basic Telecom Agreement are Inmarsat members. Position of the Parties 112. Space Communications, Motorola, and PanAmSat support applying some form of ECO-Sat test to all or particular IGOs seeking entry to provide domestic service in the United States. PanAmSat strongly opposes allowing U.S. earth stations to use INTELSAT capacity for the provision of U.S. domestic services because of enormous competitive advantages the IGOs derive from their privileges and immunities. Some parties assert that IGOs are not covered by the WTO Basic Telecom Agreement, while PanAmSat specifically claims that IGOs should not be treated as if they were WTO satellites because access by the IGOs was discussed in detail during the WTO basic telecommunications negotiations and rejected by the negotiators. 113. Other commenters recommend that we not impose an ECO-Sat test either on IGOs in general or with regard to specific IGO services. INTELSAT asserts that the ECO-Sat test is ineffective when applied to IGOs, because IGOs have no control over the domestic policies of its sovereign members. Furthermore, INTELSAT and COMSAT argue that a test imposed on IGOs does not motivate foreign countries to open their markets to U.S. satellite systems, as many countries do not seek access to the U.S. market. BTNA claims that it is unnecessary to subject traditional Inmarsat domestic services to a competitive entry test while COMSAT contends that no test is necessary for INTELSAT or Inmarsat. Lockheed Martin proposes that the core treaty-based services offered by INTELSAT and Inmarsat not be subject to any ECO-Sat analysis and instead continue to be authorized in the same manner as they have been in the past. COMSAT also argues in the alternative that the Commission should apply the same treatment to provision of service using INTELSAT and Inmarsat satellites as the Commission proposes for satellites licensed by WTO Members. 114. The Networks argue that an ECO-Sat test should not be applied to transmission of video services using INTELSAT because of a shortage of capacity. In response, Columbia states that the networks have not made a sufficient case for special treatment of video services. It notes that shortage of capacity can be a factor considered in application of the ECO-Sat test and, where there are no other options, override the absence of effective competitive opportunities. GE Americom disagrees that there is a shortage of capacity, noting the recent launching of a new GE Americom satellite. 115. Deutsche Telekom objects to a route market analysis because it would allow the Commission to deny entry if only one of the IGO's route markets is not open. In addition, Deutsche Telekom notes that the route market analysis ignores the fact that many IGO member countries made satellite commitments as a result of the WTO basic telecommunications negotiations. In contrast, Space Communications suggests that the route market analysis would be effective in ensuring INTELSAT does not discriminate in various route markets. 116. With respect to our critical mass proposal, Deutsche Telekom and OrbComm suggest that the critical mass test would not be appropriate because of the difficulty of determining what number of countries constitute a critical mass. The Networks and COMSAT argue that a critical mass of markets has been reached as a result of the WTO basic telecommunications commitments. In contrast, PanAmSat argues that a critical mass has not been reached. It further argues that a critical mass test would allow INTELSAT to discriminate in markets in which it has market power and to cross-subsidize its service offerings in markets in which it does not. Space Communications agrees that the critical mass test would enable INTELSAT to discriminate in many markets. AT&T argues that the Commission should examine the openness of all the various route markets served by the IGO. ORBCOMM believes that the Commission should use a combination of both the critical mass test and the effect on competition to determine whether IGO entry is appropriate. The critical mass analysis would be the initial hurdle, which, if passed, would be followed by an analysis of the effect on competition. 117. Some commenters support the Commission's proposal to evaluate service over an IGO satellite on the basis of whether the service would diminish effective competition in the U.S. market for satellite services. COMSAT states that, if an entry test is necessary, it should be limited to determining whether the proposed service would diminish effective competition in the United States. Loral disapproves of such a test because it represents no improvement from a critical mass test and does not create incentives to open markets. Lockheed Martin, however, favors a test involving whether the entrance of an IGO provides additional market advantages to an entity that has the ability to distort competition. OrbComm supports a combination of the effect on competition and critical mass approaches. AMSC urges the Commission to examine carefully the impact that IGO access to the United States has on the international frequency coordination process and the ability of regional and domestic systems to compete. GE Americom suggests the Commission adopt the proposals in legislation currently pending before Congress. Discussion 118. As an initial matter, we find unpersuasive suggestions that no standard for review should be established for IGOs until a final decision is made concerning their privatization. We are not ruling on applications to provide domestic service in this Report and Order. Rather, we are establishing the standard that we will use to judge license applications when we receive them. We share the concerns expressed by many commenters about the special advantages accorded IGOs as a result of their treaty-based status. The test that we establish today is designed to take those special advantages into account in determining whether service may be provided through an IGO in the U.S. domestic market. Since COMSAT is currently the sole provider of INTELSAT and Inmarsat capacity in the United States and the U.S. has no obligation to allow access under the WTO Basic Telecom Agreement, the entry standard we set out is limited to applications from COMSAT. 119. We reaffirm our conclusion that we have no WTO obligation to allow the IGOs access to the U.S. market. As an organization created by treaty, an IGO is not a service supplier of a WTO Member and therefore does not derive any benefits from the WTO Basic Telecom Agreement. Thus, we find no merit in COMSAT's argument that we should treat IGOs as if they were service suppliers of a WTO Member. As PanAmSat, AMSC and Orion correctly point out, participants in the WTO basic telecommunications negotiations were unanimous that IGOs were not service suppliers of a WTO Member. Therefore, we agree with AMSC that we have no obligation under the WTO Basic Telecom Agreement to treat IGOs as if they were licensed by WTO Members. 120. We find unconvincing BTNA's argument that the United States has an obligation to provide WTO Member companies direct access to Inmarsat. This argument is premised on BTNA's incorrect conclusion that the U.S. Schedule of Specific Commitments only limits access to INTELSAT and Inmarsat with respect to international service and not U.S. domestic service. The U.S. Schedule of Specific Commitments makes no such distinction; rather it maintains access to INTELSAT and Inmarsat satellites through COMSAT for the provision of any service, domestic or international. 121. Although we are free to apply an ECO-Sat test to IGO provision of domestic services, we agree with Columbia that there is no reasonable means of applying such a test to IGOs. We confirm the conclusion in the Notice that the IGOs have no home market. As we stated in the Notice, INTELSAT and Inmarsat are headquartered in the United States and United Kingdom, respectively, and the United States and United Kingdom forward these organizations' space station information to the ITU for registration and coordination purposes. However, the highest authority in each organization is national governments. It is unrealistic to treat the United States or the United Kingdom, respectively, as the home market, or to treat any single nation as the home market. 122. We conclude that a route market test will not achieve our objective of promoting competition in the United States or opening foreign satellite markets. In the Notice, one of the alternative approaches that the Commission proposed to look at was the openness of all the various route markets served by an IGO -- or at least the markets of its Signatories. This would require us to evaluate whether all of an IGO's Signatories allow U.S. satellite systems to provide domestic services in the Signatories' markets prior to granting COMSAT authority to provide domestic service via that IGO. We find that this sets an unnaturally high barrier because the existence of market barriers in a small number of countries would preclude approval of COMSAT's application. It also does not make sense because many of the smaller Signatories may not have policies in place or a need to establish policies to regulate domestic satellite services. 123. We also conclude that a critical mass test is not appropriate. As we noted in our discussion of critical mass in relation to non-WTO satellite systems, there is the question of what constitutes critical mass and whether it has been reached. Furthermore, the existence of a critical mass depends on the market plans of individual satellite systems and cannot devise a critical mass test that would uniformly apply to all satellite services. Even if we were able to determine what constituted a critical mass, as PanAmSat notes, a critical mass test would not prevent an IGO from engaging in cross-subsidization or otherwise taking advantage of its special status. In addition, we are concerned that applying the critical mass test would not encourage the opening of foreign markets to U.S. satellite services. A "critical mass" concept implies that all countries need not open their markets. Allowing countries with closed markets to serve the United States because a critical mass of open markets in other countries has been achieved, would provide no incentives for the closed market to open. 124. The fact that there is no appropriate way of applying an ECO-Sat test to IGOs does not mean that we will allow IGOs free access to the U.S. domestic market. We conclude that we will adopt the third alternative proposed in the Notice -- an examination of the competitive effect of IGO entry. 125. We agree with Columbia that IGOs have unique characteristics as treaty-based organizations that could enable them to distort competition. Among these characteristics is the immunity INTELSAT and Inmarsat enjoy from suit, including suit under the U.S. antitrust laws. COMSAT, in its role as the U.S. Signatory to INTELSAT and Inmarsat, also benefits from these immunities. We conclude that INTELSAT, Inmarsat, and COMSAT should be subject to the same rules as their competitors before COMSAT will be allowed to provide domestic service via INTELSAT or Inmarsat. COMSAT states that it has never claimed immunity as a common carrier and argues that it would enjoy no special advantages over other providers of satellite services in the United States. These arguments, however, overlook the benefits that COMSAT derives in its signatory capacity from the IGOs' immunities. In that capacity, COMSAT participates in business and commercial decisions protected by this immunity. The courts have held that COMSAT, acting in its capacity as U.S. Signatory to INTELSAT and Inmarsat, has immunity from liability under the U.S. antitrust laws. We find that this extension of immunity provides COMSAT a competitive advantage. It allows commercial decisions and activities to be conducted under a cloak of immunity unavailable to COMSAT's competitors. Because of concern over potential harm to the U.S. market for satellite services, we conclude that this is not a situation that we are willing to extend to the U.S. domestic satellite market. 126. As a result, we will require COMSAT to make an appropriate waiver of immunity from any suit as part of its application to provide domestic services via INTELSAT or Inmarsat. If COMSAT makes an appropriate waiver, we will look to COMSAT to show that entry into the United States domestic market by an INTELSAT or Inmarsat satellite would promote competition and is otherwise in the public interest. Prospective circumstances that could give rise to competition concerns include market concentration, discrimination, and below average variable cost pricing. If there is no other way to address the competitive risks, we may deny the application. If there is a shortage of video transmission capacity, as the Networks argue, we would take this into account in considering whether access to INTELSAT or Inmarsat would distort competition in the U.S. market. 127. We adopt the tentative conclusion in the Notice that we will evaluate access requests involving international communications over INTELSAT and Inmarsat without applying the ECO-Sat test. Instead, we will treat applications from COMSAT to provide international services via INTELSAT or Inmarsat on a case-by-case basis as we have done in the past. In ruling on these applications, we are fully prepared to address questions about foreign market access or competition issues in the course of an application proceeding. Use of these satellite systems for international services is provided for under the Satellite Act, the Maritime Act, and previous Commission authorizations, and is well-established as a matter of practice. As stated in the Notice, there are many nations in the world that are connected to the United States only by satellite, and any policy that makes it more difficult to reach these points over INTELSAT would unduly constrain the already limited service to these points. Similarly, Inmarsat remains the only two-way satellite communications system recognized today by the International Maritime Organization as a Global Maritime Distress and Safety System provider, and we believe international services over Inmarsat should remain robust until global maritime and distress and safety services are provided by multiple private systems. For both domestic and international services applications, we will also consider spectrum and other appropriate considerations discussed in Section III.B.2-5. 128. We also conclude that we will not apply an ECO-Sat test to other IGOs, such as Eutelsat or Palapsat, that seek to serve the U.S. market, either for domestic or international services. We agree with Lockheed Martin that the competitive concerns related to INTELSAT and Inmarsat do not apply to these smaller satellite organizations. These entities do not have the same global coverage, market power or breadth of membership as INTELSAT and Inmarsat. As a result, we will presume that entry by these entities is procompetitive. If grant would pose a risk to competition (either through the existence of immunities or other conditions) in the U.S. satellite market, we may impose conditions on the authorization. If conditions would not suffice, we may deny the application. (3) IGO Affiliates Background 129. In the Notice, the Commission acknowledged that the IGOs were studying various proposals to streamline their organizations to enable them to respond better and faster to competitive pressures. The Commission noted that if the IGOs are to provide services in competitive markets, they cannot be permitted to leverage the benefits of their intergovernmental status to distort competition unfairly. The Commission also recognized that any IGO affiliate may be able to take advantage of these privileges if it were not truly independent. For these reasons, the Commission asked whether affiliates of IGOs should be treated as inter- governmental or private entities. 130. In addition, the Commission proposed to treat IGO affiliate satellites like any other non-U.S. satellite seeking access to the U.S. market, although the Commission proposed to scrutinize, as part of the public interest analysis, the affiliate's independence from any IGO or its Signatories. Thus, in the Notice, the Commission proposed to apply an ECO-Sat test, as well as other public interest factors. The Commission stated that any views expressed by the Executive Branch regarding the extent to which the affiliate's structure is consistent with U.S. policy would be a prominent part of the analysis. Finally, the Commission proposed to apply this standard of review to any request to transfer existing IGO licenses to an affiliate and to new services via an affiliate. 131. In light of the WTO Basic Telecom Agreement, in the Further Notice, the Commission proposed that IGO affiliate satellites from WTO Members would be accorded the same treatment as any satellite system of a WTO Member. Therefore, the Commission proposed not to apply an ECO-Sat test to IGO affiliate satellites licensed by a WTO Member. The Commission reiterated its concern, however, that the unique relationship between an IGO and its affiliate could pose a very high risk to competition in satellite services to, from and within the United States. The Commission noted that in the WTO Basic Telecom Agreement, the United States had preserved its ability to protect competition in the U.S. market, including the possibility of not granting market access to a future IGO affiliate satellite. In support of this position, the Commission cited the U.S. Trade Representative's statement that the United States has no obligation to permit market access to a future privatized affiliate, subsidiary, or other IGO spinoff that would likely lead to anticompetitive results. As a result, the Commission proposed not to apply an ECO-Sat test to IGO affiliate satellites of WTO member countries, but to review the affiliate's relationship to its IGO parent to ensure that grant would not pose a very high risk to competition in the U.S. satellite market, through, for example, collusive behavior, cross- subsidization, denial of market access, and directly or indirectly benefitting from IGO privileges and immunities. Finally, the Commission noted that this test would apply to evaluation of requests to use satellites of future IGO affiliates. Position of the Parties 132. A number of commenters agree that IGO affiliate satellites should be treated the same as other non-U.S. satellites. USTR states that application of the ECO-SAT test should be governed by whether the licensing authority is a WTO Member. Deutsche Telekom argues that the Commission has to grant the same rights and privileges to IGO affiliates licensed by WTO Members as it does to other satellite systems licensed by WTO Members. COMSAT states that the competitive review envisioned for all non-U.S. satellites should be sufficient to detect any affiliate relationships or structures that pose a risk to competition. It argues that any further inquiry would set a bad precedent for other countries. Lockheed Martin agrees, stating that the Commission would need to consider any potential anticompetitive or market distorting consequences of a continued relationship between an IGO and its affiliate. France Telecom states that if an entry test is necessary, any conditions should be narrowly crafted so as to avoid hampering the ability of the affiliate to compete fairly and effectively. Furthermore, direct or indirect government ownership of an IGO affiliate should not prevent it from obtaining a license. 133. Others argue that IGO affiliate satellites should be subject to more rigorous scrutiny than other satellite systems from WTO Members. Orion argues that the Commission must aggressively police IGO affiliate satellites to ensure that only bona fide independent affiliates are permitted into the U.S. market. Orion urges us to adopt a broad definition of affiliates, not limited to those entities under common ownership or control, and asks us to look at any preferential contractual arrangements between an IGO affiliate and IGO signatory administrations that would enable it to act in an anticompetitive manner. P