HOLLINGS, MARKEY QUESTION PROGRESS OF SATELLITE COMPETITION

Questions whether satellite service competition has grown since passage of Orbit Act in 2000 are being raised once again on Capitol Hill, as ranking Democrats of Senate Commerce Committee and House Telecom Subcommittee urged General Accounting office (GAO) to open new inquiry. Sen. Hollings (S.C.) and Rep. Markey (Mass.) are particularly interested in having GAO review what FCC and NTIA have done since passage of law to improve access to foreign markets by U.S. satellite companies.

Senate Armed Services Readiness & Management Subcommittee late last year began separate GAO inquiry related to Orbit Act implementation (CD Nov 21 p4), with specific focus on determining whether Intelsat received unfair share of Dept. of Defense contracts. Unrelated to that probe, Hollings and Markey now want GAO to assess extent of tax benefits that Intelsat derives from its incorporation in “tax haven” Bermuda. In letter dated Feb. 4 that began circulating on Hill this week, they asked GAO to specifically examine whether Intelsat “continues to enjoy advantages over competitors.”

Hollings asnd Markey want to determine whether Intelsat gets preferential access to foreign markets, concern that was driving force behind corrective actions in Orbit Act. GAO assessment will include determination whether Intelsat gets “preferential tax treatment” under U.S. law “for income derived from business activities in the U.S.” That review should include similar study of whether such tax benefits were derived in relation to satellite service contracts with U.S. govt.

Intelsat Senior Vp Anthony Trujillo said company started out in Bermuda before privatization plan envisioned by Congress in Orbit Act. Alleged corporate inversion therefore never took place, he said. Part of plan involved initial move of its operational hq and retention of orbital satellite locations in U.S., but eventual move to Bermuda was approved by U.S., he said.

Trujillo said he wasn’t being dismissive of concerns raised by Hollings and Markey, and pledged to work with them “and any other member of Congress with an interest in the satellite industry.” However, he said issues raised in letter to GAO reflected unsubstantiated accusations previously “raised by our competitors” in Washington arena “rather than in the marketplace… We don’t see any substantive issues here.”

Intelsat’s move to Bermuda wasn’t planned in secret, as some industry critics have asserted, Trujillo said: “It was always clear that [Intelsat] would be incorporated elsewhere.” He also emphasized that “80% of Intelsat’s revenues are generated outside of the U.S.,” and that 75% of company’s shares “are held by entities outside the U.S.”