The Future of INTELSAT in a Competitive Environment

by Leland Johnson

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The International Telecommunications Satellite Organization (INTELSAT) has been an important instrument of U.S. foreign policy because it has spread the benefits of advanced telecommunications technology to nations — especially developing nations — throughout the world. With the growing number of competing satellite systems, and the installation of transoceanic fiber optic cables, concerns have arisen about INTELSAT's ability to continue its role as global provider of service. This study projects and assesses possible financial futures faced by INTELSAT in this increasingly competitive environment, and suggests appropriate INTELSAT pricing strategies. The findings suggest that under a wide range of plausible assumptions INTELSAT will face financial stress because of competitive pressures. The author recommends that, in response, INTELSAT abandon its global cost averaging as the basis for setting prices and move to more flexible pricing that takes into account competitive alternatives in certain ocean basins and routes.

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