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EUROPEAN COMMISSION TO STUDY EFFECTS OF MSS ON COMPETITION

BRUSSELS-The European Commission is investigating three consortia building mobile satellite systems to guage the effect those global systems will have on future competition in European Union nations.

Globalstar L.P., Iridium Inc. and Inmarsat-P have been asked by Karel Van Miert, EC commissioner in charge of competition, to respond to commission concerns.

The companies all plan to create satellite systems that will provide worldwide pocket telephone service.

MSS systems are expected to generate revenues of 10 to 20 billion European Currency Units-$13 million to $26 million-during the next decade. Indirect effects expected in related markets will be much greater.

Considering how costly such a system is to finance, launch and operate, there will be few major players, the commission said.

“Given this small number of alternatives and the potential market power of these global satellite system operators, it is particularly important that competition is maximized in the European Union for the other downstream elements of the market involving local service, distribution and equipment supply. Open non-discriminatory and fair conditions regarding partnerships and agreements also will need to be maximized,” the commission said.

The Globalstar international consortium is led by New York based-Loral Corp. and Qualcomm Inc. of San Diego. Globalstar plans to build a $2 billion network of 48 low-earth-orbiting satellites, scheduled to begin operating in early 1998.

Iridium is led by Motorola Inc. and has about 18 international investors. The group intends to launch a system of 66 low-earth-orbiting satellites, with the first launch scheduled for 1997 and commercial service in 1998. Estimated cost is $3.4 billion.

Inmarsat-P is sponsored by the International Mobile Satellite Organization. It is building a 12-satellite system at an estimated cost of $2.6 billion. Inmarsat’s largest member is Comsat Corp. of Bethesda, Md., but European signatories include Telecom Finland, Swiss Telecom and Telefonica de Espana.

The EC is assessing the impact these systems will have on the localized markets within the EU. It also will study the consortia’s distribution policies, how links will be made with cellular terrestrial networks and how the groups will handle access by competing MSS to infrastructure owned by partners in one of them.

The EC said it also is concerned about the notion of global coverage, which not only means the user can move anywhere, but that global systems can move to serve fixed areas. Consequently, such systems aren’t just aimed at the business traveler, the EC concluded in its announcement about the investigation.

“Commission studies predict that by far the greatest potential, in terms of numbers of subscribers, in the MSS market will be for communities in less developed regions of the world as a substitute for fixed service where fixed networks have yet to be rolled out or are very poor,” the commission said.

Central and Eastern Europe could provide MSS networks with an important customer base with access coming from gateways within the EU, the commission said.

MSS can be used as a substitute for cellular mobile telephony in areas where cellular networks have failed to penetrate, the commission said.

The consortia have been asked to provide comprehensive descriptions of their systems from the technical, financial and commercial point of view. The information will be examined in light of the competition rules of the EC Treaty.

The 15 nations which belong to the EU are France, Luxembourg, Belgium, Germany, Netherlands, Denmark, Great Britain, Greece, Italy, Spain, Portugal, Ireland, Austria, Finland and Sweden.

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