******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** FCC 97-422 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) COMSAT CORPORATION ) Maritime Telecommunications Network, ) 1-SAT-ISP-96 Inc., and William L. Whitely Petitions ) for Reconsideration ) PanAmSat Corporation Application ) 99-SAT-ISP-96 for Review ) Comsat Corporation Notification of ) 31-SAT-ISP-97 Corporate Reorganization ) Comsat Corporation Notification of ) 196-SAT-ISP-97 Corporate Reorganization ) ) WILLIAM L. WHITELY ) Request for Declaratory Ruling ) 117-SAT-DR-96 ) WILLIAM J. HALLENBECK ) Request for Declaratory Ruling ) 118-SAT-DR-96 ) COMMITTEE TO RESTRUCTURE ) THE INTERNATIONAL SATELLITE ) ORGANIZATIONS ) Petition to Enjoin Comsat Payment of ) 64-SAT-DR-97 Dividends from Retained Earnings, as amended ) Emergency Petition to Enjoin Comsat ) 65-SAT-DR-97 from Using Legal Process, as amended ) ) BELCOM MINORITY SHAREHOLDERS ) AND CLAIMANTS COMMITTEE ) Petition for Investigation and Issuance of a ) 73-SAT-DR-97 Declaratory Ruling ) ) PANAMSAT CORPORATION ) Petition to Reopen Changes in the Corporate ) CC Docket No. 80-634 Structure and Operations of the ) Communications Satellite Corporation ) MEMORANDUM OPINION AND ORDER Adopted: December 31, 1997 Released: February 3, 1998 By the Commission: Introduction 1. By this Memorandum Opinion and Order we address various petitions regarding COMSAT Corporation's ("Comsat") current structure and compliance with Commission rules and policies. Since 1982, the Commission has required Comsat to structurally separate its International Telecommunications Satellite Organization (INTELSAT) and International Mobile Satellite Organization (Inmarsat) ("jurisdictional") activities from its non-INTELSAT/Inmarsat ("non-jurisdictional") activities, and to notify the Commission when proposing changes to its corporate structure. This policy was adopted in order to ensure that Comsat continues to fulfill its statutory responsibilities under the Communications Satellite Act, as it pursues non-jurisdictional business opportunities. 2. Before us are ten proceedings raising issues about Comsat's compliance with Commission structural separation requirements and related issues. We address all matters raised in these proceedings in this consolidated order. Backgroun d 3. In 1980 the Commission determined that Comsat may engage in activities outside of the provision of INTELSAT and Inmarsat services so long as these activities are consistent with, do not hinder, or do not interfere with its statutory missions. The Commission recognized, however, that if Comsat were allowed to offer competitive "non- jurisdictional" services, policy concerns like the following would have to be resolved: (1) conflicts of interest between its jurisdictional and non-jurisdictional activities; (2) competitive advantages in non-jurisdictional markets and opportunities for anti-competitive behavior (due to Comsat's unique status as the U.S. Signatory to INTELSAT and Inmarsat); and (3) potential misallocation of costs between jurisdictional and non-jurisdictional activities through cross-subsidization, which would harm its jurisdictional ratepayers. 4. To address these policy concerns the Commission required structural separation of Comsat's jurisdictional activities from its non-jurisdictional activities. It also prescribed accounting procedures to properly allocate costs incurred by the respective business activities to the correct business unit, and required "arms-length" dealing between jurisdictional and non-jurisdictional activities. The Commission stated that these safeguards would not totally eliminate the incentive for Comsat to behave in an anti-competitive manner, but the benefit to the public interest through better and expanded satellite services outweighed this concern. The Commission did, however, permit Comsat to retain a very limited number of joint activities within the jurisdictional company, subject to accounting safeguards. It further required Comsat to give the Commission 90 days advance notice of any corporate reorganization. Any structural changes as a result of corporate reorganizations would automatically go into effect if the Commission did not object within the 90-day window. 5. Comsat's overall organization as of December 31, 1997 is set forth below: 6. The Board of Directors is responsible for establishing the general direction and major policy of the entire company. Comsat's President and CEO, oversees the day-to-day operations. The next organizational level includes the distinct jurisdictional and non- jurisdictional business units. This level consists of Comsat Satellite Services ("CSS") which manages all its satellite operations including Comsat World Systems ("CWS") (Comsat's INTELSAT activities); Comsat Mobile Communications ("CMC") (Comsat's Inmarsat activities, where its PLANET 1 retail project is also housed); Satellite Systems Investment Management ("SSIM"), (which includes the non-jurisdictional ICO Global Communications, Ltd ("ICO") investments); Advanced Applications Management ("AAM") (which manage new services); Comsat Government System, Inc. ("CGSI") (which holds the licenses for several domestic satellites and includes the Commercial Satellite Communications Initiative ("CSCI"), a fixed satellite service ("FSS") government service project particularly active in reselling INTELSAT service); Comsat General Corporation ("CGC") (which includes a Special Projects Office and Commercial Operations); Also on the same level as CSS is Comsat Labs (a jurisdictional unit that the Commission has allowed to serve the research needs of both jurisdictional and non-jurisdictional units, subject to accounting safeguards); Comsat RSI; Comsat International ("CI") (a non-jurisdictional subsidiary, formerly Comsat International Ventures ("CIV"), the manager of its overseas business); and Comsat International, Inc. ("CII") (formerly Comsat Investments, Inc., a holding company for Comsat's non-jurisdictional international investments, including Belcom, Inc.); To the extent there is interaction between the various jurisdictional and non-jurisdictional activities, our structural separation policy requires accounting safeguards and restrictions on information sharing. Discussion 7. In this order we reject several challenges to COMSAT Corporation structural reorganizations that allege inconsistency with the Commission's Comsat structure policy. In one instance, however, we would have required Comsat to make certain changes had its latest corporate reorganization proposal, which became effective on December 29, 1997, not solved a particular inconsistency with our policy. We also deny several petitions that seek Commission intervention in matters suited more appropriately for the courts, where remedies in corporate and commercial law are available if there is merit in the allegations raised. Certain other issues raised clearly are matters of business judgment for which Comsat management is accountable to its shareholders. We note that Comsat is a private corporation and Commission regulatory responsibilities under the Communications Satellite Act do not extend to any and all disputes someone may have with Comsat, notwithstanding its United States Signatory responsibilities. 8. We elect not to initiate a broad review of the Comsat structure policy as PanAmSat and others request. Instead, we will focus on other more timely proceedings currently before us that raise similar issues and provide advice and assistance to Congress as it reassesses the Communications Satellite Act. A. Petitions for Reconsideration (1995 Reorganization) 9. In January 1996, the International Bureau approved a Comsat corporate reorganization (proposed in October, 1995) to integrate CMC into Comsat International Communications ("CIC"), where CWS was already "housed". Subsequently, both CMC and CWS operated as separate units of CIC conducting Comsat's Inmarsat and INTELSAT businesses, respectively. Support services utilized by CMC and CWS were combined into CIC, including finance, legal, and human resources. In addition, U.S. Signatory activities involving INTELSAT and Inmarsat were consolidated into a single office for both CMC and CWS, headed by the Vice President, International Affairs. Maritime Telecommunications Network, Inc. ("MTN") filed a petition for partial reconsideration of that decision, requesting that the Bureau direct Comsat to cease and desist the cross-marketing of its mobile maritime facilities by the two jurisdictional divisions of CMC and CWS. William L. Whitely also filed a petition for reconsideration, asserting generally that Comsat's organizational structure is "contrary" to Commission policy and the public interest. Whitely does not address any specifics of the order at issue in asking for reconsideration. Rather, he only argues very generally that authority should be revoked and a comprehensive review of the Commission's Comsat Structure policy should be initiated. Comsat filed opposition to both petitions and MTN replied. 10. MTN objects only to the integration of CMC and CWS sales and marketing staffs into CIC, arguing that this would allow CIC to cross-market L-band (narrowband) maritime services (provided by way of the Inmarsat system) with C/Ku-band (wideband) mobile maritime services (provided by way of the INTELSAT system) by the same combined sales staff. MTN insists that this integrated marketing plan does not include "structural separation mechanisms or non-structural separation safeguards" and can lead to conflicts of interest. It further maintains that Section 503(a) of the Satellite Act and its legislative history allow Comsat to provide end-to-end maritime service only through Inmarsat. It argues, therefore, that use by Comsat of INTELSAT space segment for wideband maritime purposes would constitute a non-jurisdictional use, subject to our structural separation requirements. 11. In opposition, Comsat asserts that: (1) the Satellite Act and Commission structural separation policy do not prohibit the cross-marketing of the two jurisdictional services at issue here, (2) the INTELSAT and Inmarsat systems complement each other, and (3) this reorganization (as approved by the International Bureau) will allow Comsat, particularly CMC, to offer a more complete line of services to its customers. Moreover, it asserts that structural separation does exist. In regard to the Whitely petition, Comsat states that it lacks merit and insists it should be denied for failing to address any relevant issues. 12. The essence of MTN's and Whitely's objections is that Comsat's INTELSAT and Inmarsat activities must be structurally separate from each other. The Commission, however, has never required INTELSAT's and Inmarsat's jurisdictional activities to be structurally separate. Our structural separation policy is instead directed at the relationship between Comsat's jurisdictional and non-jurisdictional business activities. MTN incorrectly insists that our structural separation policy requires jurisdictional activities to be structurally separate. In any event, subsequent to MTN's petition, Comsat proposed and followed through on the elimination of CIC as a corporate division, while the individual jurisdictional business units previously directed by CIC (CMC and CWS) continue as separate subsidiaries. Therefore, to the extent MTN's petition objects to the housing of both CMC and CWS in the CIC division, that issue has been rendered moot. 13. As to MTN's contention that Comsat may not combine the sales and marketing staffs of CWS and CMC, there is no restriction against it. Comsat is not required to structurally separate jurisdictional functions. The record does not indicate whether there will now be joint marketing functions. However, if it does so, it must separately account for each jurisdictional activity in accordance with established Commission Policy. 14. Additionally, we do not share MTN's view that structural separation of Comsat's Inmarsat and INTELSAT maritime services is necessary to avoid conflicts of interest. Although we did caution against the possibility of a conflict of interest situation between Comsat's INTELSAT and Inmarsat responsibilities in the Comsat Study, we found that structural separation would not be an appropriate means of protecting against its occurrence. However, should a discernible conflict of interest situation arise between INTELSAT and Inmarsat we would not hesitate to take action to remedy the problem. Finally, we disagree with MTN that adequate notice of the proposed change was not provided. A public notice was issued, MTN responded to it, and the Commission then considered all comments before issuing its decision. B. Application for Review (1996 Reorganization) 15. On April 26, 1996, Comsat proposed the creation of a new business unit, Comsat Personal Communications ("CPC"), to be "housed" within the CIC division. CPC's role was to develop Comsat's non-jurisdictional personal mobile communication businesses, consisting of both Planet 1 (jurisdictional) and ICO Global Communications, Ltd. (non-jurisdictional) handheld services. The International Bureau notified Comsat in writing that, because it was premature for us to make a determination as to whether the reorganization complied with our structural separation requirements, Comsat could proceed with this reorganization subject to future Commission action. 16. PanAmSat Corporation ("PAS") filed an application for review asking whether the International Bureau should have allowed this reorganization to occur before determining whether it violates the Comsat Structure Orders. PAS asserts that, since Commission policy requires a substantive determination, at the time of the structural change notification, the Bureau's earlier decision was in error. It argues that our stated position here -- which allowed Comsat to proceed with this corporate reorganization due to our failure to act substantively within 90-days -- is incorrect and "violates the principle of reasoned decision making embodied in the Administrative Procedure Act." PAS, further, opposes this reorganization because housing CPC within CIC would violate our structural separation requirements. We note that PAS did not, however, explicitly oppose the combination of Planet 1 (jurisdictional) and ICO Global (non jurisdictional) within CPC. 17. In opposition, Comsat contends that PanAmSat mischaracterizes this reorganization by describing CIC as a "jurisdictional arm" of Comsat. Instead, Comsat explains, CIC would oversee and support both jurisdictional and non-jurisdictional lines of business, a role that was made clear when it gave notice to the Commission of a structural change in October 1994. PAS counters, in reply, that Comsat has failed to address the essence of its application for review. It also insists that Comsat has the burden of demonstrating whether a particular reorganization complies with our structural separation requirements and the Bureau never established whether that burden was carried. Instead, it contends, we incorrectly permitted the "90-day review period" to lapse. Furthermore, PanAmSat asserts that Comsat's combination of non-jurisdictional and jurisdictional activities (integrating CPC into CIC) is a substantive violation of the structural separation requirements and must still be addressed. 18. The First Structure Order requires Comsat to notify the Commission 90 days prior to any change in its corporate structure, which Comsat did. Comsat reorganizations may automatically go into effect after 90 days absent Commission action. Nevertheless, any Bureau action on delegated authority, including permitting or foreclosing a reorganization, is subject to future Commission review. The Bureau letter to Comsat dated July 25, 1996, clearly stated that Comsat's reorganization creating CPC was subject to Commission action at any subsequent date. Therefore, from a procedural standpoint, the Bureau correctly allowed Comsat to proceed with its reorganization following the 90-day review period. If we subsequently determine that Comsat is in violation of our structural separation policy, we have authority to require Comsat to remedy the situation. 19. The substantive issue raised by PanAmSat concerning Comsat's housing of jurisdictional and non-jurisdictional business units within the same organizational unit needs to be considered in light of Comsat's more recent structural changes that became effective in 1997, discussed below. We also will address the housing of Planet 1 and ICO Global within CPC and whether that combination complies with our structural separation requirements. C. January 1997 Notification of Reorganization 20. On January 23, 1997, Comsat filed a reorganization notification proposing the elimination of CIC as a corporate division. That reorganization became effective April 23, 1997. According to this notification, the business lines previously within CIC would continue as separate units, reporting directly to the President and CEO of Comsat, and includes CWS, CMC, and CPC. Comsat asserts that this proposed structural reorganization would make moot certain objections filed by PanAmSat Corporation, William L. Whitely, and TRW, Inc., to previous reorganizations. PAS counters that this structural change would not render previous objections moot. Below, we address Comsat's assertion that the proposed reorganization renders moot particular objections to previous corporate reorganizations. 21. Comsat insists that the "gravamen" of various previous objections is that "Comsat [can]not create a division [like CIC] which include[s] both jurisdictional and non- jurisdictional lines of business." Therefore, it asserts, since CIC had been eliminated as a corporate division, the issue is moot. Comsat further states that any direct costs for legal, human resources, and other financial support will be charged to the business unit or subsidiary benefiting from those services, just as before. 22. PAS disagrees with the assertion that these issues are now moot and states that it objects because Comsat may not provide non-jurisdictional services on a non-structurally separated basis. In response, Comsat clarifies that it never meant to suggest that absolutely all objections have been rendered moot by the elimination of CIC. Further, it asserts that the Comsat Structure Orders do not require it to adhere to strict structural separation in any and all circumstances, as is the case with Comsat Labs, and that the Comsat Structure Orders contemplated further changes by Comsat as long as it provided the Commission 90 days prior notice and the Commission did not object. 23. We agree with Comsat that the elimination of CIC renders moot the issue of housing the various jurisdictional and non-jurisdictional business units within CIC. Therefore, at least some of PanAmSat's, TRW's, and Whitley's contentions are rendered moot. The issue of CPC continuing to house both jurisdictional (PLANET 1) and non- jurisdictional (ICO Global) personal communication businesses is now rendered moot as well, however, it might have remained an issue had Comsat not reorganized its corporate structure again in late 1997. We note that Comsat had earlier explained that dealings between Planet 1 and ICO would be at "arms-length", but our policy clearly requires structural separation of these respective jurisdictional and non-jurisdictional business activities. We further note that our policy prohibits Comsat from housing jurisdictional and non-jurisdictional activities within the same division and commingling staff at will. Accounting procedures will not substitute for structural separation here. Moreover, as noted in paragraph four, not only would structural separation be required here, but "arms-length" dealings between the various subsidiaries or divisions would be required so that each entity behaves as separate businesses. This applies to the flow of INTELSAT/Inmarsat-derived information from jurisdictional to non-jurisdictional business units to assure nondiscriminatory access by other competitors. Comsat's latest reorganization, effective December 29, 1997, eliminates the problem of housing PLANET 1 and ICO within the same division. Jurisdictional PLANET 1 activities are now under CMC and non-jurisdictional ICO activities are now under SSIM. D. Declaratory Ruling Requests 24. William L. Whitely and William J. Hallenbeck ("Petitioners"), acting pro se, request a declaratory ruling that Comsat's stock acquisition of Belcom, Inc., was executed without proper authority and Comsat's corporate organization and operation in connection with Belcom violate our structural separation policy. Petitioners also contend that since Belcom is a non-jurisdictional subsidiary offering Inmarsat equipment and services, Commission precedent requires Comsat to put in place non-structural safeguards. Petitioners specifically request an immediate investigation, sanctions, and/or corrective regulations. Comsat opposes petitioners requests. For the reasons discussed below, we deny these petitions. Petitioners also state that Comsat's failure to heed requests to provide information sought by certain Belcom shareholders and a failure to inform private shareholders of the "significant [regulatory and statutory] limitations" placed on COMSAT violate the Satellite Act. This issue, however, is governed by corporate and securities law and is not relevant to the Satellite Act. The Commission has no basis from which to assert its authority here. 1. Acquisition of Belcom 25. Petitioners claim that Comsat's purchase of stock in Belcom required prior Commission approval and that Comsat violated Section 201(c)(8) of the Satellite Act in failing to obtain this approval. Comsat asserts that it was not required to secure prior Commission approval for this particular financial transaction, since its "capitalization plan" authorization had already given it the authority necessary to purchase shares of Belcom stock, including a majority interest. Petitioners contend that the capitalization plan order dealt only with the overall financing of Comsat and did not apply to transactions involving the purchase of stock. 26. We find that Comsat did not violate Section 201(c)(8) of the Communications Satellite Act by purchasing stock in Belcom. No prior Commission approval was required because the acquisition of Belcom was within the parameters of its capitalization plan. 27. Prior to 1983, the Commission reviewed Comsat stock issuances and borrowings as a requirement of its statutory responsibility under the Satellite Act. In 1983, it approved a "capitalization plan" concept to allow Comsat to take advantage of market conditions on short notice, while still providing the Commission with the means to oversee Comsat's financial activities, as required by the Satellite Act. This marked a change in the way the Commission reviewed the financial activities of Comsat. Instead of evaluating its financial transactions individually, Comsat was authorized to file more long-term capitalization plans, which were generally approved if there was no harmful impact on jurisdictional ratepayers. As a result, the Commission does not currently require Comsat to receive prior authorization for specific acquisitions of entities such as Belcom. The Belcom stock purchase falls within the parameters of the capitalization plan and Comsat's participation in Belcom is not inconsistent with its statutory mission. Petitioners also incorrectly assert that the inter-agency "instructional process" is applicable to Belcom, since foreign policy concerns arise here. The "instructional process" is a formal process by which the State Department, the National Telecommunications and Information Administration ("NTIA"), and the Federal Communications Commission ("FCC"), oversee Comsat's role as the United States Signatory to INTELSAT and Inmarsat. The issues surrounding Comsat's participation in a non-jurisdictional business such as Belcom do not fall within the purview of the instructional process. 28. Petitioners further assert that, since Belcom offers Inmarsat equipment and services, Comsat must follow the policy expressed in the Comsat General TeleSystems, Inc. ("TeleSystems") decision. However, that decision occurred in 1982, prior to the adoption of the Comsat Structure Orders which now govern this issue. Therefore, it is not directly applicable and Comsat need only comply with the Comsat Structure Orders. Accordingly, Petitioners request for declaratory ruling that Comsat's stock acquisition of Belcom was executed without proper authority is denied. 2. Compliance with Structural Separation 29. Petitioners also request a declaratory ruling that Comsat placed jurisdictional and non-jurisdictional business units within the same division, contrary to our structural separation policy. Petitioners allege that CIC controls and supervises the jurisdictional business units of CWS and CMC, as well as the non-jurisdictional business units of CIV and CII. However, as noted supra in paragraph 20, Comsat has eliminated CIC, rendering moot the issue of housing the CWS, CMC, CIV and CII business units within the same division. 30. Petitioners also charge that Comsat is illegally engaged in cross-subsidization, information transfer, providing jurisdictional staff support to Belcom, intermingling accounts and operations, and conducting business on terms that are other than "arms-length". They assert that Comsat has made a "wide range of staff personnel" available to Belcom, while never billing it for the services rendered and that there "likely" was a transfer of technology and unauthorized information, such as long-term planning information, since Comsat engineers were "likely" available for consultation with CII companies and the "opportunity" to pass along information to Belcom was available. We note that our structural separation policy permits Comsat to provide corporate support services to both jurisdictional and non- jurisdictional activities if separately accounted for at fair market value. Beyond that, Petitioners fail to support their claims with specific evidence of violations of our policy instead offering assumptions and unsupported statements. Based on the information before us, we conclude that there is no basis for further investigation, sanctions, and/or corrective actions in connection with the petition. E. Petition to Enjoin Payment of Dividends from Retained Earnings 31. The Committee to Restructure the International Satellite Organization ("Committee"), filed an additional petition on December 31, 1996, requesting that the Commission: (1) issue a permanent injunction prohibiting Comsat from paying future dividends from retained earnings; (2) undertake an audit to determine what, if any, past dividends have been paid by Comsat from retained earnings; and (3) issue a permanent injunction prohibiting Comsat from realizing direct benefits from the privatization of INTELSAT and Inmarsat. In essence, the Committee asserts that Comsat's financial activities and non-jurisdictional ventures are jeopardizing its ability to fulfill its statutory mission and it is unjustifiably relying on the capitalizationpPlan. Further, it argues that any windfall Comsat receives through the privatization of INTELSAT and Inmarsat should be directed to the U.S. Treasury, since it was Congress that established Comsat's "monopoly" status in the first place. In opposition, Comsat maintains that the Committee's petition, including its supplement and amendment, is deficient and meritless and represents an attempt to pressure Comsat into settling litigation in a pending state court proceeding. Comsat argues that both filings should be summarily rejected and Hallenbeck sanctioned for abuse of process. 32. We need not address in detail each contention of the Committee. As noted above, our Comsat structure policy permits Comsat to engage in non-jurisdictional lines of business not inconsistent with its statutory mission. The capitalization plan approval process provides the Commission with the means to assure that Comsat maintains the financial posture to fulfill its statutory missions. The Committee neither challenges Comsat's compliance with existing capitalization plans nor provides any evidence suggesting the need for further Commission investigation. 33. Congress created Comsat as a private corporation and did not intend for it to be managed by the Commission or any other federal agency. The Satellite Act provides for a Board of Directors elected by the stockholders and appropriate corporate officers appointed by the Board to make the types of decisions the Committee would have us make. The Corporation Act for the District of Columbia governs Comsat's ability to distribute retained earnings to pay dividends, notwithstanding Comsat's net earnings, presently. Comsat's Articles of Incorporation, its corporation By-Laws, relevant corporate law, and the Securities and Exchange Commission are the appropriate authorities available to discontented shareholders to address issues raised by the Committee concerning the management of Comsat. The public interest standard does not entitle us, nor would we seek, to control or manage Comsat's ordinary management operations. There are other more appropriate forums available for the Committee to redress its alleged grievances. 34. Thus, we deny the Committee's requests to issue a permanent injunction prohibiting Comsat from paying future dividends from retained earnings and to conduct an audit to determine what past dividends have been paid by Comsat from retained earnings. We also deny the Committee's April 7, 1997 supplement to its December 1996 petition asking the Commission to review Comsat's operations and take corrective actions. On April 24, 1997, it filed an amendment to this petition. In addition to the three main requests described earlier, the Committee also requests that the Commission immediately commence an investigation to determine the circumstances surrounding Comsat's cancellation and subsequent rescheduling of its 1997 annual meeting. Further, it asks us to determine the circumstances regarding Comsat's lowering of its dividend from 19.5 cents to 5 cents per share. These issues are outside the scope of Commission authority. F. Emergency Petition to Enjoin Comsat from Using Legal Process 35. For the same reasons, we deny the April 29, 1997 emergency petition filed by the Committee to enjoin Comsat's Board and management from using corporate resources to: (1) take actions before a judicial, administrative or other tribunal, against any of its shareholders seeking to exercise their rights as shareholders to contest or replace the current board or management; (2) undertake any action of a corporate governance nature, including but not limited to the adoption of By-Laws which would have the effect of diminishing the rights of shareholders to contest and/or replace the current Board and management; and (3) take any action with the direct or indirect purpose to campaign or electioneer or solicit shareholder support in the election of directors which will take place at the 1997 annual shareholders meeting. The Committee also requests that we enjoin Comsat from undertaking actions to obligate the corporation to pay benefits (ie., "golden parachutes") of any kind to directors, officers, and employees, in the event that a change of control takes place following the election of Directors. 36. The Committee's petition focuses largely on a disagreement between the corporate hierarchy and certain shareholders. This is not a matter for FCC regulatory action. Comsat's Articles of Incorporation, its corporate By-Laws, the securities law of the state of incorporation, and corporate and contract law govern the matters subject to the Committee's petition. Furthermore, Comsat has a legal right to judicial process and its exercise of that right is governed by the courts, not this agency. The Committee's emergency petition is denied. G. Petition for Investigation and Issuance of a Declaratory Ruling 37. Finally, we deny the petition filed by the Belcom Minority Shareholders and Claimants Committee on April 12, 1996 for investigation and issuance of a declaratory ruling requiring the use of arbitration or mediation to resolve disputes between Comsat and small business concerns. The petition details a number of complaints concerning the conduct of Comsat in connection with its stock interest acquisition in Belcom. It requests that we require Comsat to consent to arbitration concerning its complaints, and argues that such arbitration is compelled by Section 721(c)(1) of the Communications Satellite Act, and the general "public interest" standard of that Act. 38. The Committee's argument that the Communications Satellite Act requires Comsat to submit to arbitration or confers on the Commission authority to order arbitration is without merit. Section 721(c)(1), on which it principally relies, requires Comsat to use "competitive bidding where appropriate" and for the Commission to consult with the Small Business Administration to develop such "measures and procedures which will insure that small business concerns are given an equitable opportunity to share in the procurement program." This provision applies to procurement of equipment in connection with Comsat's participation in the INTELSAT system. It does not apply to Comsat's non-jurisdictional activities, such as Belcom, and cannot reasonably be read to grant the Commission authority to specify methods for resolving the private business disputes that are the essence of the Committee's concerns. If Congress had wished to specify such methods it could have done so specifically, as it has done in other contexts. As a general matter, the Commission does not have authority to resolve or address private contractual matters. Those matters are more appropriately resolved in the courts. Therefore, this Committee's petition is also denied. H. Petition to Reopen the Comsat Structure Orders 39. PAS has filed a petition to reopen the Comsat Structure Order proceeding. In the alternative, PAS requests that we consider its filing to be a petition for rulemaking under Section 1.401 of our rules. PAS specifically maintains that Comsat's current structural separation requirements are obsolete because of: (1) the development of other international separate satellite systems; (2) INTELSAT's "aggressive" move into competitive markets; and (3) Comsat's immunity from antitrust scrutiny for its Signatory responsibilities. It further notes that the Comsat Structure Orders assumed Comsat's jurisdictional activities would be competitive. William L. Whitely generally supports the PAS petition. He believes Comsat to be in violation of our structural separation requirements and, thus, asserts that Comsat needs to be examined more closely. 40. PAS contends that there should be a distinction between Comsat's monopoly jurisdictional services and its competitive jurisdictional services. It explains that before there was competition in the delivery of INTELSAT and Inmarsat space segment, the terms "jurisdictional" and "monopoly" were synonymous. Any activity that did not involve use of such space segment was, by definition, "non-jurisdictional" or "competitive" and, therefore, had to be provided by a structurally separate subsidiary. Today, notes PAS, there are services that are both jurisdictional -- involving the provision of INTELSAT or Inmarsat space segment -- and competitive, since separate systems offer comparable services. PAS requests that the Commission require Comsat to structurally separate its competitive jurisdictional services, which compete with separate systems, from its monopoly jurisdictional services. In support, PAS contends that structural separation of Comsat's monopoly jurisdictional and competitive jurisdictional businesses is warranted to: (1) lessen conflicts of interest; (2) distinguish between actions taken by Comsat as an INTELSAT and Inmarsat Signatory and actions taken as a common carrier (given Comsat's immunity from antitrust liability for actions it takes as the United States Signatory to INTELSAT and Inmarsat versus no immunity for actions taken as a common carrier); and (3) permit Comsat to provide these services as a non-dominant carrier. PAS asserts that reopening this proceeding will help address the change in circumstances. 41. Comsat opposes the PAS petition. It argues in its opposition that partitioning it into a jurisdictional monopoly side and a jurisdictional competitive side "would be required only if it had a legal monopoly on any telecommunications services or continued to exercise its Signatory functions." According to Comsat, CWS is already subject to competition, particularly from fiber optic cables, and the benefits of dividing CWS into "monopoly" and "competitive" organizations would be outweighed by the inefficiencies. It also argues that the "problems" PAS refers to do not exist because it cannot cross-subsidize other services with switched-voice revenues or vice versa. Comsat maintains that there is no conflict of interest between its Signatory roles and common carrier roles. If there were, the instructional process would ensure that Comsat act consistently with U.S. policy. Finally, insists Comsat, it has no antitrust immunity regarding its provision of INTELSAT space segment service in the United States so no purpose would be served by dividing that common carrier function in half. 42. Commenters generally support a broad review of Comsat, except for Brightstar Communications, Ltd., and the National Telecommunications and Information Administration ("NTIA"). Those supporting PAS's petition generally express the following: (1) the structural separation regime is no longer adequate to protect the public and national interests in a competitive international telecommunications market; (2) Comsat still requires close scrutiny by the Commission due to its monopoly position and any "casual Commission acquiescence" to less scrutiny in regard to Comsat is irresponsible; (3) Comsat's competitive services should be structurally separate from its monopoly services to prevent Comsat from using its monopoly advantage to impede competition; and (4) accounting controls and incentive-based price cap regulations are necessary to protect against cross-subsidization. 43. We dismiss PAS's petition. The petition was filed in 1992 and the record established does not take into account market developments that have taken place since that year. We agree with PAS and other commenters, that there are important issues to be addressed in order to assure the continued development of fair competition. We believe that the record recently established in response to Comsat's April 1997 request for reclassification as a non-dominant carrier is a more appropriate means to consider these types of concerns. Our action here in dismissing PanAmSat's petition is without prejudice to our considering the types of competition-related issues raised in response to that petition on the basis of a more recent record. As such, we will incorporate the comments made in the PanAmSat petition into that docket. Ordering Clauses 44. Accordingly, IT IS ORDERED that the petitions for reconsideration filed by Maritime Telecommunications Network, Inc. and William L. Whitley, File No. 1-SAT-ISP- 96, ARE DENIED and the International Bureau decision in Comsat Corporation Notification of Reorganization, DA 96-12 (January 16, 1996), IS AFFIRMED. 45. IT IS FURTHER ORDERED that Maritime Telecommunications Network, Inc's. request to direct Comsat to cease and desist the cross-marketing of its mobile maritime facilities by Comsat Mobile Communications and Comsat World Systems, File No. 1-SAT- ISP-96, IS DENIED. 46. IT IS FURTHER ORDERED that PanAmSat Corporation's application for review, File No. 99-SAT-ISP-96, IS DENIED. 47. IT IS FURTHER ORDERED that William L. Whitley's petition for a declaratory ruling, File No. 117-SAT-DR-96, IS DENIED. 48. IT IS FURTHER ORDERED that William J. Hallenbeck's petition for a declaratory ruling, File No. 118-SAT-DR-96, IS DENIED. 49. IT IS FURTHER ORDERED that William L. Whitely's and William J. Hallenbeck's request for an immediate investigation, sanctions, and/or corrective regulations in regard to Comsat Corporation's acquisition of shares of stock in Belcom, Inc., File Nos. 117-SAT-DR-96 and 118-SAT-DR-96, IS DENIED. 50. IT IS FURTHER ORDERED that the Committee to Restructure the International Satellite Organization's request for an expedited decision of its declaratory ruling request, File No. 118-SAT-DR-96, IS DENIED AS MOOT. 51. IT IS FURTHER ORDERED that the Committee to Restructure the International Satellite Organization's "conversion rights" claim and the question of relief for creditors, included with its request for an expedited decision addressed in paragraph 50, IS DENIED as a matter more appropriately reserved for the courts. 52. IT IS FURTHER ORDERED that the Committee to Restructure the International Satellite Organization's petition to permanently enjoin the payment of dividends from retained earnings, as amended, File No. 64-SAT-DR-97, IS DENIED. 53. IT IS FURTHER ORDERED that the Committee to Restructure the International Satellite Organization's request to permanently enjoin Comsat Corporation from realizing any benefit from the potential privatization of INTELSAT and Inmarsat, File No. 64-SAT-DR-97, IS DENIED. 54. IT IS FURTHER ORDERED that the Committee to Restructure the International Satellite Organization's emergency petition to enjoin Comsat Corporation from using legal process or corporate governance measures against particular shareholders, File No. 65-SAT-DR-97, IS DENIED. 55. IT IS FURTHER ORDERED that the Committee to Restructure the International Satellite Organization's request to enjoin Comsat Corporation from undertaking actions to obligate the corporation to pay benefits of any kind to directors, officers, or employees, File No. 65-SAT-DR-97, IS DENIED. 56. IT IS FURTHER ORDERED that the Belcom, Inc. Minority Shareholders and Claimants Committee petition for investigation and issuance of a declaratory ruling requiring the use of arbitration or mediation to resolve disputes between Comsat Corporation and small business concerns, File No. 73-SAT-DR-97, IS DENIED. 57. IT IS FURTHER ORDERED that the Belcom, Inc. Minority Shareholders and Claimants Committee request that we require Comsat Corporation to consent to arbitration since arbitration is compelled by Section 721(c)(1) of the Communications Satellite Act, 47 U.S.C.  721(c)(1), File No. 73-SAT-DR-97, IS DENIED. 58. IT IS FURTHER ORDERED that the petition of PanAmSat Corporation to reopen the Comsat Structure Order proceeding or institute a rulemaking, CC Docket No. 80- 634, IS DISMISSED WITHOUT PREJUDICE, as discussed in this item. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary