Withpreparing for a likely initial public stock offering, it’s easy to forget that the commercial satellite operator, the world’s largest, began as an international treaty organization charged with providing global connectivity on a nondiscriminatory basis.
As part of Intelsat’s 2001 privatization, the treaty members decided to retain the International Telecommunications Satellite Organization, now known by the acronym ITSO, to ensure that the newly created for-profit company did not lose sight of this continuing obligation.
ITSO’s original 12-year charter expires this coming July, but representatives of its roughly 150 member states agreed last year to keep the organization in place at least until 2021. The organization, with only five full-time employees, is funded from an annuity established at the time of the privatization, which in recent years has paid roughly $1.8 million annually. That arrangement expires in July, however, and ITSO and Intelsat are negotiating a new arrangement for the upcoming eight-year period.
Among José Toscano’s priorities as head of ITSO — he begins a second four-year term in July — are ensuring continued global access to the Intelsat’s fleet and educating telecom organizations around the world about satellite capabilities, particularly when it comes to delivering broadband services. He is a member of the United Nations-sanctioned Broadband Commission for Digital Development, which is dedicated to expanding broadband access worldwide.
Toscano spoke recently with SpaceNews Editor Warren Ferster.
Intelsat’s Lifeline Connectivity Obligation (LCO), which guarantees countries satellite access at prices that cannot rise but may decrease if regional commercial prices drop by 15 percent, expires in July. What’s next?
We negotiated a new program that will be available to all the existing LCO customers which is called the Special Renewal Program. This program is available to all the LCO customers where they will enjoy capacity renewal protection. Intelsat has made a commitment that capacity will be available.
There are roughly 69 LCO countries. Where are they located?
Everywhere. For example, France, Denmark and Portugal have LCO protection for their connections between their mainland and their overseas territories. Portugal has connections between the mainland and the islands of Madeira and Azores in the middle of the Atlantic, for instance. Then there are countries in Africa, Asia and Latin America and Europe.
What contract terms are available under the renewal program?
The contract will guarantee capacity protection in an amount similar to the one currently contracted under an LCO contract. However, the prices will have to be negotiated at the time the contract goes from the LCO contract to the special contract renewal. Customers will have price protection for the duration of the contract.
Will Intelsat still be required to lower prices if market rates drop below the 15 percent threshold?
No, that is no longer an obligation of Intelsat. The first concern was to ensure that there was a renewal capability and that LCO countries would be ensured capacity. The second question was to ensure that the price which was negotiated would be protected during the extension of the contract.
What kind of leverage does ITSO have in providing price protection?
Intelsat has with ITSO a Public Service Agreement, a legally binding contract signed in 2001 which establishes Intelsat’s obligations towards the organization, including mechanisms in case there is a dispute. Personally I don’t think that a dispute is a way to resolve problems. So what we have been striving for, and have managed to have, is a relationship based on mutual respect. However, in case of dispute, there is a conflict resolution mechanism. If there is a need for temporary measures we can go to the Washington, D.C., courts. The conditions and procedures are defined in the Public Service Agreement.
Have there been any such disputes?
There have been some in the past — I will call them misunderstandings — between this organization and Intelsat. I am happy to say that we didn’t need to go to the final step of resolution, which is arbitration, and we managed to come to a common understanding. I believe that every problem has a solution if there is willingness from both sides.
Do you have a role in helping Intelsat keep orbital slots being sought by other operators?
Everyone wants access to orbital slots. If Intelsat orbital slots are not being used, there is a specific provision in the treaty which obliges these orbital slots to go back to the pool of the International Telecommunication Union. In 2007, ITSO member states adopted an amendment that says if an orbital location is not being used and if there are any other satellite operators who wish to use it, they may do so if they sign public service obligations with us. If no one is interested in using it, then it goes to the International Telecommunication Union pool. This amendment is not yet in force.
The Vienna Convention on the Law of Treaties obliges amendments to be approved by two-thirds of the membership. This means our members have to send a letter to the United States, which is the depository of the treaty, saying, “We approve the amendment.”
Why is that taking so long?
It’s a mixture, with some countries not fully understanding what they have to do and internal procedures in other countries which oblige them to go through a very lengthy process. We have one country that started the process; it went to the parliament; the parliament had three readings. It was in the last reading and then the government changed and a new parliament was elected. So we had to go back. This process therefore takes time. As of today we have 73 countries which have sent the letter. We need 99 countries.
Your funding via the annuity arrangement expires July 18. What happens after then?
According to the Public Service Agreement, Intelsat will have to fund the organization on an annual basis. The amount is to be negotiated and capped at $1.8 million annually. The second aspect of the funding question is that when the Intelsat funding annuity was set aside in 2001, another amount was set aside as a contingency fund. This contingency fund was established at $500,000 and was to be used primarily for legal fees in case of disputes between the organization and Intelsat. If on July 18, 2013, the value of that fund is lower than $500,000, then Intelsat has obligations to replenish that fund with an adjustment for inflation.
Is that a roundabout way of saying you’re willing to go to court if you and Intelsat cannot reach agreement on future funding?
It’s a way of saying that I have to make sure the organization has the funds to run from July 18, 2013. This organization has obligations to its member states, its staff and to suppliers, and as director general I have to make sure that those obligations are fulfilled. If that means we have to use means that we will not like to use, we have to.
How would you characterize the future-funding negotiations with Intelsat?
We have started these negotiations, and due to the relationship that I believe is good between the organization and Intelsat, I am hopeful that an agreement may be reached in the near future. I really believe it is in the interest of both Intelsat and ITSO that this agreement is reached without recourse to other means.
What role does ITSO play in preserving coveted bandwidth for satellite use?
Today there are many policymakers and regulators who for different reasons do not fully grasp what satellites may mean for the implementation of certain of their policies. So one of my roles — I am one of the commissioners of the Broadband Commission — is to demonstrate how satellites can help, how satellite technology in some cases is cheaper than other solutions. Broadband is essential today. So our focus today is to make sure that broadband solutions are available to people. I don’t have anything against the other technologies. In some cases, terrestrial technology is the best solution. But in other cases, satellite is the better technology.
Is the proliferation of regional and national satellite operators changing your mission?
The mission has not changed. The benefit of competition for me is to create a wider choice for the user and wider choices normally means better quality and better pricing. But that does not mean you don’t need strong regulation and regulators, nor does it mean you don’t need one operator, Intelsat, with public service obligations.
Intelsat is relocating from its Washington office to Tysons Corner, Va. Will ITSO be joining them?
We know that Intelsat in its new building has space for ITSO. On the other hand we are considering the possibility to stay here. Of course this depends on the intentions of the new owners of the building and other conditions. But I think this building has a history. This building has always been associated with the international organization. A decision will be taken in the near future.