summary
GE Americom supports U.S. licensing of the INTELSAT system, but not on the terms requested here.
As a threshold matter, the ORBIT Act requires the Commission to make a determination – prior to granting any authority to Intelsat LLC – that the Company’s entry will not harm competition in the U.S. market. The statute sets forth specific criteria for that analysis. Intelsat LLC does not meet these criteria today and has not made anything like a firm commitment to comply with them in the future. At a minimum, the Commission cannot grant even conditional authority to Intelsat LLC until the Company has presented a detailed plan for meeting the statute’s terms. The Commission must also be prepared to enforce compliance with that plan by revoking any authority granted.
The Commission must deny Intelsat LLC’s request for licensing of five new orbital positions. INTELSAT has been warehousing four of these locations for years, and Intelsat LLC’s claim that the positions are now needed to meet near-term demand is simply not credible. The request violates the Commission’s expansion rule and cannot be considered outside a processing round. Intelsat LLC’s statement that the slots will not be available for licensing by the Commission unless they are assigned to Intelsat LLC makes clear that the Company is engaged in impermissible forum shopping, but does not alter the Commission’s obligation to enforce its policies by denying Intelsat LLC’s request.
Intelsat LLC’s attempt to evade Commission two-degree spacing requirements must also be rejected. The Commission has consistently applied the requirements to both U.S. licensees and other systems like New Skies that were seeking to serve the U.S. Intelsat LLC has provided no basis for departing from those decisions here. The Company’s claims of high compliance costs are unsupported and contradicted by the use of two-degree spacing for the majority of INTELSAT satellites today.
The Commission must take steps to ensure that Intelsat LLC complies with other Commission policies. The Commission must require future Intelsat LLC spacecraft to employ linear polarization at C-band to ensure that consumers can freely choose among competing providers. New satellites should also use band edges for TT&C. Finally, the Commission must actively enforce its prohibition against exclusive arrangements to ensure Intelsat LLC’s compliance.
19
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
)
INTELSAT LLC ) File Nos. SAT-A/O-20000119-0002/18;
) SAT-AMD-20000119-00029/41;
Applications for Authority to Operate, ) SAT-LOA-20000119-00019/28
and to Construct, Launch and Operate )
C- and Ku-Band Geostationary Satellites )
in the Fixed-Satellite Service )
REPLY OF GE AMERICAN COMMUNICATIONS, INC.
GE American Communications, Inc. (“GE Americom”), by its attorneys and pursuant to Section 25.154 of the Commission’s rules, 47 C.F.R. § 25.154, hereby submits its reply regarding the above-captioned Applications of Intelsat LLC (“Intelsat LLC” or the “Company”).
GE Americom explained in its Petition to Deny or Defer that it has no per se objection to U.S. licensing of the satellites operated by the International Telecommunications Satellite Organization (“INTELSAT”). However, the Applications seek such licensing on terms that conflict with fundamental Commission policies. The Commission cannot grant licenses to Intelsat LLC unless and until there is concrete evidence that Intelsat LLC will comply with applicable competition policies. Intelsat LLC must also be subject to Commission regulatory and technical requirements. These conditions are necessary to ensure that Intelsat LLC competes with other providers on a level playing field and pursuant to applicable law.
introduction
When he signed the ORBIT Act[1] into law, President Clinton stated that the Administration’s goal is “to ensure that a privatized INTELSAT will compete fairly and fully with other international telecommunications companies.”[2] He went on to emphasize that:
Fair competition requires a level playing field; INTELSAT must not retain advantages that result from its former inter-governmental status or that are unavailable to other satellite competitors, including any preferential access to orbital slots or foreign markets. Id.
GE Americom agrees that privatization of INTELSAT will achieve substantial public interest benefits if it leads to the creation of an independent entity that competes without any special advantages. We also support U.S. licensing of INTELSAT satellites because the Commission has developed a framework of regulatory policies designed to promote open market access and fair competition.
However, GE Americom demonstrated in its Petition that the instant Applications seek U.S. licensing on terms that are unacceptable. Intelsat LLC asks the Commission to prejudge the outcome of the privatization process by granting licenses now, before the steps necessary to establish the Company’s independence from INTELSAT have been either determined or implemented. Furthermore, Intelsat LLC seeks preferential treatment from the Commission in a number of areas. It asks for assignment of new orbital locations in contravention of the Commission’s anti-warehousing policies and processing round requirements. Intelsat LLC also seeks a unique exemption from the two-degree spacing rules applied to all other U.S. service providers, and open-ended waivers of other Commission technical standards.
Intelsat LLC fails to justify these requests for special treatment in its Opposition to GE Americom’s Petition. In fact, the Opposition is more telling for what it does not say than for what it does. For example, Intelsat LLC’s pleading refers to the ORBIT Act, which was awaiting the President’s signature at the time the Opposition was filed. Opposition at 6. However, Intelsat LLC does not commit to compliance with the statute’s requirements, or even clarify whether it still intends to pursue its Applications – INTELSAT representatives had previously threatened to expel the U.S. from the organization and move elsewhere if S.376 became law.[3]
Similarly, Intelsat LLC attempts to defend its request for five new orbital locations, claiming that grant would be consistent with Commission policy against warehousing. Opposition at 22-27. Yet Intelsat LLC does not even
acknowledge the fact that the original ITU registrations for four of the five slots date back to 1983 – clearly indicating that the slots have already been warehoused for seventeen years.
The same pattern applies to Intelsat LLC’s attempt to evade Commission requirements regarding two degree spacing. The Company continues to insist that its situation is unique because it is seeking licensing for an existing system. Opposition at 15. However, Intelsat LLC studiously avoids mention of recent decisions in which the Commission applied two-degree requirements to New Skies and Eutelsat, both of which had operational satellite systems.
These attempts to evade Commission policies must be rejected. The Commission can grant licenses to Intelsat LLC if and only if it has evidence that the Company will meet the pro-competitive standards set forth in the ORBIT Act. Intelsat LLC’s request for new orbital locations must be denied, and Intelsat LLC must operate subject to the Commission’s technical requirements.
i. the commission cannot make a finding that granting the applications would be pro-competitive based on the record here
As a threshold matter, the record before the Commission does not permit a finding that licensing of Intelsat LLC would be consistent with applicable law. GEAmericom demonstrated in its Petition that under clear Commission policy, licenses can be granted to Intelsat LLC only if the Commission is able to determine that Intelsat LLC is independent from INTELSAT. See GE Americom Petition at 5-11. GE Americom also showed, however, that there was no factual basis on which the Commission could make the required finding because to date the steps necessary to establish Intelsat LLC’s independence from INTELSAT have not even been agreed to, much less implemented. Id. at 11-12. See also PanAmSat Petition at 6-11.
Now, of course, the Commission’s own policies designed to ensure that IGO affiliates cannot harm competition in the U.S. satellite services marketplace have been reinforced by a statutory mandate. The ORBIT Act requires the Commission to make a finding regarding the impact on competition before deciding whether to grant U.S. licenses or market access to Intelsat LLC. See ORBIT Act at §601. The applicable criteria for making this finding are set forth in Section 621, which imposes explicit requirements for separation of the ownership and control of INTELSAT and its affiliate. Id. at §601.
Intelsat LLC clearly does not satisfy these criteria. In its Petition, GEAmericom observed that if the ORBIT Act became law, Intelsat LLC would need to supplement its Applications by making a detailed showing of compliance with each of the statute’s criteria, and the Commission should in turn solicit comment on the supplemental information Intelsat LLC provided. GE Americom Petition at 8. GE Americom continues to believe that this is the appropriate procedure to be followed to address the impact of the new statute on Intelsat LLC’s Applications.[4]
Intelsat LLC, however, asserts that it has already provided sufficient information to satisfy the ORBIT Act’s provisions. Opposition at 11. This claim is frivolous on its face. Intelsat LLC does not deny that critical decisions regarding its management and ownership have not yet been made. Nor does Intelsat LLC even commit to complying with ORBIT’s terms. In fact, the Company probably lacks authority to make such a commitment pending further action by the INTELSAT Assembly of Parties.
Based on the information now before it, the Commission clearly cannot make the required findings that grant of the requested licenses would be consistent with the public interest and pro-competitive. Intelsat LLC cannot show that it complies with any of the ORBIT Act’s requirements. The company is wholly-owned and controlled by INTELSAT signatories, and nothing has been done to address the Act’s requirements for separate officers and directors or arm’s length dealings between Intelsat LLC and INTELSAT. Similarly, the bare assertion that “over time it is expected” that the ownership of Intelsat LLC by signatories of INTELSAT will be diluted (Opposition at 5) obviously cannot substitute for a demonstration of compliance with the ORBIT Act’s specific mandates regarding a public offering to dilute signatory ownership. See ORBIT Act at §621(2).
Intelsat LLC is asking the Commission to predict the future, and grant licenses now on the assumption that at the completion of the privatization process Intelsat LLC will comply with the law’s requirements. The Commission, however, is bound by statute to determine whether competition would adversely be affected before it grants licenses or market access. On the record before it, the Commission cannot rationally make such a judgment.
Intelsat LLC’s fallback position is that any uncertainty regarding the privatization process should be addressed by the imposition of conditions on Intelsat LLC’s licenses. As Intelsat LLC points out, the ORBIT Act states that the Commission can award licenses to an INTELSAT affiliate prior to completion of the privatization process, conditioned on compliance with the Act’s independence requirements. Opposition at 6 n.11, citing ORBIT Act §601(b)(1)(D). However, this statutory provision is clearly permissive. In contrast, the language of section 601 is mandatory, and requires the Commission to make a finding of absence of harm to competition prior to granting licenses or market access.
At this stage, the Commission lacks the record to make even a conditional grant to Intelsat LLC. As noted above, to date Intelsat LLC has not yet committed – and most likely cannot now commit – to meeting the terms of the ORBIT Act. At a minimum, the Commission should not consider a conditional grant of licenses to Intelsat LLC unless and until INTELSAT’s Assembly of Parties expressly confirms its intention to complete privatization pursuant to the terms set forth in the ORBIT Act. Specifically, the Commission should require Intelsat LLC to submit a detailed plan that sets forth the timetable and mechanisms for compliance with each of the Act’s provisions. The Commission should also require Intelsat LLC to file quarterly reports of its progress towards each of the plan’s objectives.[5]
Any licensing or market access authority granted to Intelsat LLC should become effective only after all the conditions have been satisfied. In addition, the Commission must make clear that failure by Intelsat LLC to meet the terms of its commitments will warrant the immediate revocation of any authority already in effect. These terms are necessary to ensure that Congress’ objectives in passing the ORBIT Act are achieved and that entry by Intelsat LLC does not harm competition in the U.S. market.
ii. intelsat llc’s request for new orbital locations is inconsistent with applicable law
Any license granted to Intelsat LLC must be limited to positions where INTELSAT has operational spacecraft; the Company’s request for authority for five new orbital locations must be denied.[6]
In its Petition, GE Americom demonstrated that grant of Intelsat LLC’s request for five new orbital locations would allow the Company to unfairly benefit from its IGO heritage and would violate the Commission’s processing round requirement and expansion rule. GE Americom Petition at 12-18; see also JSAT Petition at 2-7; PanAmSat Petition at 13-17. The orbital positions at issue here were never subjected to any regulatory oversight involving a public interest analysis or meaningful due diligence requirements and were not considered in light of competing interests of other providers. Instead, INTELSAT used its preferential access to orbital locations to register the slots and then proceeded to let them go unused for years. In these circumstances, permitting Intelsat LLC to retain the assignments would reward exactly the kind of behavior the Commission has been fighting against for years in its efforts to improve ITU due diligence requirements.
Intelsat LLC’s attempts to defend its slot grab must be rejected. First, Intelsat LLC claims that it is entitled to the new positions without the need for a waiver of the expansion rule, 25 C.F.R. §25.140(f). Intelsat LLC claims that it is entitled to two orbital locations in each ocean region, and that its request here is consistent with that limit. Opposition at 24. Intelsat LLC, however, conveniently ignores the actual language of the rule, which states that an incumbent provider can be assigned only one orbital location in each frequency band, provided that its existing spacecraft are filled and that it holds no more than two authorizations for unlaunched satellites. Intelsat LLC does not satisfy these conditions.
More fundamentally, grant of the authority Intelsat LLC requests would directly contravene the purposes of the rule – to prevent warehousing or the assignment of an excessive number of orbital locations to one operator. In its Opposition, Intelsat LLC repeats its claim that these locations are needed to meet near-term demand and asserts that “the concept of warehousing has no applicability” here. Opposition at 24-25. The facts, however, show that Intelsat LLC has allowed these locations to lay fallow for years. Four out of five of the positions were registered at the ITU in 1993 – after previous unused INTELSAT registrations dating back to 1983 expired. A clearer case of warehousing is hard to imagine.