CENTER URGES ADMINISTRATION TO SUBJECT COMSAT MONOPOLY TO CASE-BY-CASE REVIEW

(Washington, D.C.): Tomorrow, an
inter-agency Presidential Coordinating
Committee (PCC) will meet to develop the
Bush Administration’s position on one of
the most important decisions affecting
U.S. economic and national security
interests in the field of international
telecommunications in recent memory: Should
COMSAT, together with INTELSAT, be
permitted to retain their present
monopoly over the international satellite
carriage of all U.S. telecommunications
traffic that connects to the public
switched network (PSN)?

U.S. policy currently prohibits such
traffic from being carried by
international satellite systems that
compete with INTELSAT; COMSAT is the
monopoly “gateway” for access
to INTELSAT. The Reagan Administration
did authorize the establishment of
international satellite systems to
compete with INTELSAT in 1985. In so
doing, however, such satellite systems
were prohibited from carrying PSN traffic
to protect COMSAT/INTELSAT from
competition. This policy is a unique and
unilateral one; no other nation
has chosen to impose such a blanket
restriction. The question now is
whether the United States should continue
to do so.

If economic considerations alone were
determinative, the choice facing the PCC
would presumably be a relatively easy
one: The interests of both the American
consumer and the U.S. telecommunications
industry would be far better served by
ending the present arrangement. COMSAT’s
sweetheart deal permits it to dictate
rates for its services far higher than
would be sustainable in the face of
competition. Moreover, prohibiting market
forces from operating with respect to
international satellite services
utilizing the PSN network has a
deleterious effect on one of the few
remaining fields of decided American
technological advantage —
telecommunications.

What is more, the U.S. commitment to
promoting democratic forces and
institutions overseas is a goal that
would be immeasurably assisted by the
proliferation of inexpensive
communication mechanisms. Insofar as this
would be one of many positive by-products
should monopolistic access to the
American publicly switched network system
be ended, foreign policy considerations
also argue that the present COMSAT
arrangement be modified.

Important national security equities
are involved as well, however.
COMSAT/INTELSAT was created nearly three
decades ago out of a recognition of the
vital role that a sound and reliable
international telecommunications system
would play in safeguarding U.S. and
Western interests. Indeed, the system has
proven over the years to be of immense
value; as a national security-minded
organization, the Center for Security
Policy strongly believes that the
COMSAT/INTELSAT system should not be
altered casually — let alone seriously
jeopardized.

The Center, nonetheless, judges that
the powerful economic and industrial
competitiveness considerations —
combined with a recognition of the
irresistible changes in international
telecommunications technology (notably,
the proliferation of fiber optic and
non-U.S. satellite systems) — argue
powerfully for a modification of the
present, blanket prohibition on
non-COMSAT users of the international PSN
network for voice and data transmissions
originating in the United States. The
Center accordingly recommends that
American policy be revised to allow
alternative suppliers to provide such
services — subject to a case-by-case
determination by the Federal
Communications Commission (acting on
behalf of and in coordination with the
entire federal government) that both
national security and economic interests
would be advanced should the requisite
licenses be approved.

The Center urges the PCC and the
senior-level Deputies Committee — the
group to whom the PCC’s recommendations
will be referred for the decision when it
meets on this subject early next week —
to give favorable consideration to the
case-by-case approach. Should it do so,
the U.S. government may be able to end an
outdated, expensive and monopolistic
arrangement without endangering
legitimate national security equities.

A copy
of a recent editorial published by the Wall
Street Journal concerning this issue
is attached.