COMPANY FOR COMSAT A tiny upstart wants a piece of the international communications business.
By - C.C.Carter

(FORTUNE Magazine) – THOUGH AT&T now has lots of company in the U.S. telephone business, satellite communications with the rest of the world have largely remained the preserve of Washington-based Communications Satellite Corp., known as Comsat. But that could change if the Federal Communications Commission approves a proposal to remove barriers to U.S. satellite companies that want to compete for international business. The big winners would be television broadcasters, large banks, multinationals, and other major users of satellites. Since the 1960s, the international satellite market has been dominated by Intelsat, a consortium of 109 member countries, including the U.S. With 15 satellites in its vast space network, Intelsat has beamed such popular TV programming as the 1984 Olympics and Britain's 1981 royal wedding around the world. About two-thirds of all international telephone calls are handled on the Intelsat system. Under the Intelsat accord each country agrees to channel its satellite communications through Intelsat. U.S. customers get to Intelsat through Comsat. Enter Orion Satellite Corp., a fledgling Washington outfit with neither satellites nor customers. In early 1983 Orion shook up the communications universe by petitioning the FCC for approval to bypass Intelsat with a separate satellite network. Set up by a couple of Washington lawyers, Thomas McKnight, 39, who was on the FCC staff, and Christopher Vizas, 34, Orion hopes to sign up TV networks, Hollywood programmers, and large banks and multinationals that have sometimes felt Intelsat was so dedicated to telephone traffic that it didn't have the capacity or inclination to meet their particular needs. After Orion jumped in, the FCC got four other applications, including one from RCA. In late November the challengers got a big boost when President Reagan reversed long-standing U.S. policy, declaring that separate satellite systems are ''in the national interest.'' Commerce Secretary Malcolm Baldrige and Secretary of State George Shultz sent a joint letter to the FCC declaring that, if handled right, competing satellite systems needn't cause ''significant economic harm'' to Intelsat. Still, FCC approval of an Orion- like application is sure to touch off a major foreign policy row. Already some 55 countries have protested to the FCC that separate satellite systems would threaten Intelsat's goal of providing reliable, low-cost service around the world. They argue that if the new systems siphon off business from Intelsat, particularly over the lucrative New York to Europe route, Intelsat rates could be driven up, possibly forcing some Third World countries off the network. Even if Orion and the others win the battle at the FCC, Intelsat won't be easy to challenge in the marketplace. To get to the launching pad, the new space entrepreneurs will need to raise between $200 million and $250 million, hardly a cinch for such a speculative enterprise. Given the threat of new competition, Intelsat has expanded its video and data transmission capabilities--and if Orion does lift off, Intelsat would probably try to get its members to agree to let it lower some rates. Meanwhile, fiber-optic cable will soon be laid across the Atlantic by a consortium led by AT&T to grab the same business. The international market is growing fast, but not as fast as the number of applicants who want to serve it.