Attachment 1997Reply of STARSYS

1997Reply of STARSYS

REPLY submitted by STARSYS

Reply

1991-07-01

This document pretains to SAT-AMD-19900529-00041 for Amended Filing on a Satellite Space Stations filing.

IBFS_SATAMD1990052900041_1060214

                                                                                         RECEIVED
                                                                                           JUL —1 1997
                                      Before the
            FEDERAL COMMUNICATIONS COMMIss1ON®                                            HHMMXIES
                                                                                                ommsso
                              Washington, D.C. 20554




In the Matter of Authorization of




                                        LC "th "th h. "th h h d
STARSYS GLOBAL                                                    File Nos.   33—DSS—P—90(24)
POSITIONING, INC.                                                             42—DSS—AMEND—90
                                                                              7—DSS—AMEND—94
To Construct, Launch and Operate a                                            31—DSS—AMEND—94
Non—Voice, Non—Geostationary                                                  32—DSS—LA—94
Mobile Satellite System                                                       135—SAT—AMEND—95


              REPLY OF STARSYS GLOBAL POSITIONING, INC.

             Starsys Global Positioning, Inc. ("Starsys"), by its attorneys, hereby

submits this reply to the "Opposition to Request for Confidential Treatment"

("Opposition") filed by Leo One USA Corporation ("Leo One").

                                    BACKGROUND

             Leo One‘s position in this matter is completely without merit. Leo One

seeks access to a confidential contract between Starsys and Alcatel based solely on

a bare a]legation that Starsys may not have met the Commission‘s milestone

condition in the Starsys authorization. As explained below, Leo One‘s position is

inconsistent with Commission precedent and laws protecting trade secrets and

other proprietary information provided to government agencies. 1/ Under Leo



1/    As Leo One knows, the contract here is covered by the Trade Secrets Act,
which prohibits a government officer or employee from disclosing information that
"concerns or relates to the trade secrets, processes, operations, style of work or
apparatus." 18 U.S.C. § 1905. An exception exists, and sanctions do not apply,
where the disclosure is "authorized by law," in particular the Freedom of


One‘s broad argument, a party could obtain access to the most sensitive information

of its competitor merely by raising an unsupported claim regardirig compliance with

Commission policy or rules. Once it thereby puts an allegation "in play," according

to Leo One, the party is entitled to access to all information that the Commission

collects to evaluate the merits of the compliance allegation.

                This novel theory is inconsistent with the law protecting proprietary

information provided to the Commission. Adoption of the new Leo One approach

would discourage parties from providing information to the Commission in the

future, and encourage other competitors to seek access to contracts and similar

documents under the cloak of a compliance complaint.

                Furthermore, and most importantly, disclosure here would harm

Starsys and the public interest by chilling the process by which satellite operators

and vendors contract for and build spacecraft (and secondarily how vendors

subcontract elements of a project). That is why, while Starsys has no objection to

Commission review of the terms of its contract, it opposes as a matter of principle

third party access to that contract. Satellite vendors and operators routinely enter

into strict non—disclosure agreements before they begin substantive contract

negotiations.     Satellite contracts also restrict Qisclosure of contract information to

third parties. The construction contract here contains such a provision. These




Information Act °FOIA"). But this assumes that the FOIA, including its
exemptions from disclosure, are properly implemented to protect the rights of the
party supplying proprietary information. See Chryslerv. Brown, 441 U.S. 281
(1979).


understandings serve the public interest by encouraging operators and vendors to

work freely and privately to negotiate and then build the best possible spacecraft

without concern that proprietary information would leak to competing companies

(whether other operators or other manufacturers). In contrast, if satellite vendors

believed that operators would not resist disclosure of construction contracts, they

could be less willing to negotiate favorable terms in the future. And if operators

feared that their construction contracts could become public, they would have less

incentive to innovate and compete in the satellite market itself.

             For the reasons set forth in more detail below, the Bureau should deny

Leo One access to the Starsys—Alcatel contract. Leo One has not met its burden to

justify access to this highly proprietary document.

I.    THE STARSYS CONSTRUCTION CONTRACT IS EXEMPT FROM
      DISCLOSURE.

             First of all, there is no question that the construction contract between

Starsys and Alcatel is among the "records not routinely available for public

inspection" as provided in Section 0.457 of the Commission‘s rules. Specifically,

Section 0.457(d), implementing FOIA Exemption 4, authorizes the Commission to

withhold from public inspection “materials which would not customarily be released

to the public" by the person submitting them. The rules further provide that if "the

materials contain trade sécrets or commercial, financial or technical data which

would customarily be guarded from competitors, the materials will not be made

routinely available for inspection; and a persuasive showing as to the reasons for

inspection will be required" in these circumstances. 47 C.F.R. § 459(d)(2)@G).


              This is a very high standard. The Commission recently observed that

it has exercised its discretion to release FOIA Exemption 4 information only in very

limited circumstances, such as where a party placed its financial condition at issue

in a Commission proceeding or where the Commission has identified a compelling

public interest in disclosure." 2/

             The contract between Starsys and Alcatel clearly falls within the

ambit of Exemption 4. 3/ It contains the very most sensitive information

concerning the design of the Starsys system, the cost of the system, the schedule for

implementation of the system, and other related matters. 4/ The contract expressly

provides that neither party is permitted to disclose proprietary contract information

publicly to third parties in any respect. As noted above, Starsys believes as a




2/    Notice of Inquiry and Notice of Proposed Rulemaking, Examination of
Current Policy Concerning the Treatment of Confidential Information Submitted to
the Commission, 11 FCC Red 12406, para. 21 (1996) (emphasis added).

3/     Leo One complains that Starsys did not adequately support its request for
confidential treatment at the time that it supplied the contract. However, Starsys
did not anticipate that any party would contest that the terms of a construction
contract are clearly within the scope of Exemption 4. See also Western Union
Telegraph Co., 2 FCC Red 4485, 4486, para. 9 (1987)(not rigorously enforcing
showingrequirement when submissions contain data that would ordinarily be
considered confidential).

4/    Thus, this situation is entirely different from those cited by Leo One where
the Commission granted disclosure to aggregated information. See AT&T Corp., 11
FCC Red 2425, para. 11 (1996) (no competitive harm to AT&T and its vendors from
aggregate figures in an application making cost projections); New York Telephone
Co., 5 FCC Red 874 (1990) (access granted in part because report contains
information in summary form, which "diminishes significantly the likelihood" of
competitive injury). Id. at para. 4.


matter of principle that the confidentiality of construction contracts must be

protecfied to the maximum extent. 5/

             Leo One does not even begin to meet its burden for obtaining access to

this confidential information. This is not a case where, as referenced above, a‘party

has put its own financial position at issue to justify denial of another party‘s

application. Leo One attempts to rely on such precedent. 6/ But in these cases the

Commission concluded only that, if a party has raised its financials as a sword, the

other party is entitled to review those financials. But that is hardly this case. Here

it is Leo One that is raising bare allegations regarding Starsys, and using them as a

lever to try and gain access to our contract.




5/    For that reason, Starsys would have contested the Commission‘s request for
submission of the contract if it had foreseen any possibility that a competitor might
be granted access to it. Exemption 4 is provided in part to eliminate the need for
disputes among the Commission and parties over the scope of information requests.
But grant of Leo One‘s request here would undercut that important policy goal.
See.e.g.. Western Union Telegraph, supra, 2 FCC Red at 4486, paras. 10—12.

6/     Leo One cites Knoxville Broadcasting Corp., 87 FCC2d 1103 (1981), where
the Commission found that disclosure of financial information was appropriate only
because "by raising the issue of its financial condition the submitter of the reports
has determined that the benefits it may gain by participating in the Commission‘s
proceedings outweigh any possible competitive harm it might expect from release of
the information." Id. at para. 8. Even there the Commission gave the filer the
option of abandoning its argument to protect itself from disclosure. Leo One also
cites Classical Radio for Connecticut, Inc., 69 FCC2d 1517 (1978). But there too
disclosure rested on the fact that "the party filing the reports place{[d] its own
financial condition in issue." Id. at para 10.


 II.   A BARE COMPLIANCE ALLEGATION IS NOT A "PERSUASIVE"
       SHOWING JUSTIFYING DISCLOSURE.

              Furthermore, Leo One has hardly demonstrated that this case falls

 into the category where there is a "compelling public interest in disclosure." 7/

 This matter is akin to an enforcement proceeding in which a party has made a bare

 allegation that another party has violated the terms of its authorization. That

 allegation is the foundation of Leo One‘s request here. Leo One began this process

 by alleging that Starsys may not have met its construction commencement

 milestone. Leo One‘s allegations rested on hearsay in a newspaper article. In

 response, the Commission staff asked Starsys to provide it with an attested copy of

 the contract. Starsys did so.

              Significantly, Starsys also has placed in the public record and served

 Leo One with a letter answering the allegations that Starsys did not meet its

—milestone last November. That letter, signed by a Starsys officer, states that: the

 Starsys contract with Alcatel was executed on November 27, 1996, amending and

 restating a contingent contract that the parties entered into in June 1996 to remove

 the contingency; the contract contains no material contingencies; and Alcatel is

 committed to complete construction of the first two satellites of its system within

 the deadline specified in the Starsys authorization. 8/ Leo One has not presented

 any foundation for challenging these simple facts. Its interests are more than




7/     Notice of Inquiry and Notice of Proposed Rulemaking, supra.

 8/    See Letter of Philip V. Otero to Thomas Tycz (June 3, 1997).


protected by the fact that the Commission can verify them by direct referencg to the

contract.

             Thus, this is far from being one of the "very limited circumstances"

where disclosure of Exemption 4 materials is justified. Again, this proceeding is

akin to an enforcement action in which the Commussion is examining Leo One‘s

bare allegations to determine if further action is needed. In a similar proceeding

the Commission protected confidential information provided by the party against

whom a complaint was lodged from disclosure of that information to the

complainant. In that case the Common Carrier Bureau decided that the complaint

had no merit, decided not to pursue the investigation further, and took no action.

The complainant then argued that it should be granted access to the confidential

information simply because the information was relevant to the allegations

"squarely at issue" in the proceeding that the complainant itself had opened by

filing its complaint. But the Commission disagreed, emphasizing that, "[wlith

limited exceptions, the Commuission generally has not disclosed confidential

commercial or financial information, even where that data has been an integral

part of a formal or an informal investigation." 9/ Noting "the strong Congressional

policy against unauthorized disclosure of confidential commercial data expressed"

in the Trade Secrets Act and Exemption 4 of the FOIA, the Commission denied

access to the proprietary information. 10/


9/    Leesburg Communications and Answering Service, Inc., 89 FCC 2d 119,
para. 8 (1982).

10/   Id.


               Leo One is essentially engaged in a similar bootstrapping exercise. It

  is claiming that because it raised an unsupported allegation regarding Starsys

  compliance, it is entitled to access that competitor‘s proprietary construction

  contract. And Leo One is making this claim even after that Starsys has rebutted

  the allegation through direct statements supported by a confidential filing of the

  contract with the Commission staff. 11/ The Commission staff, in its enforcement

  capacity, can clearly find that Leo One‘s arguments are without merit, and

  terminate this proceeding now.

  III.   NON—DISCLOSURE IS WARRANTED UNDER BOTH PRONGS OF
         THE NATIONAL PARKS TEST.

               Leo One‘s "compliance" argument must be rejected, not only for the

 prejudice it would cause Starsys, but also for the harmful precedent that it would

  set for the future. The Starsys—Alcatel contract is protected under both prongs of

_ the National Parks test: disclosure would both directly impair the ability of the

 FCC to collect necessary information regarding contracts or other proprietary

 information in the future, and cause substantial harm to the competitive position of




 11/   Of course, Leo One is not entitled to the contract simply because it shaped its
 complaint in the form of a "petition to revoke." Leo One has made an allegation.
 The Commission has made an inquiry in response to that allegation. Starsys has
 responded. The Commission is free to take no further action given that no violation
 has occurred.

        Any other result would put form over substance. It would encourage parties
 to attack their competitors by alleging violations in the form of a revocation petition
 rather than a complaint. But FOIA exemption 4 is equally applicable in either
 circumstance.


Starsys. 12/ Satellite operators (and others) would necessarily be reluctant to

provide such data if disclosure could be achieved based on a mere allegation of a

violation. The Bureau would be encouraging other parties to bring complaints

against their competitors in order to obtain access to proprietary information,

knowing that simply making an allegation is sufficient to put an issue "in play" and

thereby secure access to relevant confidential documents.

             Furthermore, as discussed above, Starsys would clearly suffer

prejudice from release of contractual information to a competitor. Disclosure of the

trade secrets and proprietary information in the contract would prejudice Starsys‘s

position in the competitive market for data messaging and positioning. Leo One

(and potentially others) would learn sensitive information regarding Starsys system

cost, technology, design and operational parameters. Disclosure also could chill the

. willingness of Alcatel or other manufacturers to cooperate with Starsys on further

system refinements and other changes in construction plans by virtue of the fact

that such changes might be publicly disclosed. Current and potential Alcatel

subcontractors also could be discouraged by the possibility that their construction

activities would be subject to public disclosure and scrutiny by a competing NVNG

MSS operator.




12/    See National Parks and Conservation Ass‘n v. Morton, 498 F.2d 765, 770
(D.C. Cir. 1974); accord, Critical Mass Energy v. Nuclear Regulatory Commission,
975 F.2d 871 (D.C. Cir. 1992), cert. denied, 113 S.Ct. 1579 (1993); Western Union
Telegraph Co., supra, 2 FCC Red at 4485.


               Starsys recognizes that sometimes the Commission faces hard

decisions in balancing confidentiality interests with the interest in expanding a

record. However, this is not one of those hard cases. The Commission (and Leo

One) have all the information they need to find that Starsys met its construction

commencement deadline. Unsupported allegations and complaints by Leo One

cannot justify its request to see a competitor‘s contracts. That is what the Trade

Secrets Act and Exemption 4 of the FOILA are all about.

                                       Respectfully submitted,

                                       STARSYS GLOBAL POSITIONING, INC.



                                       ,, e pit—
                                              Peter A. Rohrbach
                                              Karis A. Hastings
                                              Cindy D. Jackson
                                              Hogan & Hartson L.L.P.
                                              555 13th Street, NW.
                                              Washington, D.C. 20004
July 1, 1997




                                         10


                           CERTIFICATE OF SERVICE



             I hereby certify that a true and correct copy of the foregoing Reply of

Starsys Global Positioning, Inc. was sent by first—class mail, postage prepaid, this

1st day of July, 1997, to each of the following:



                           * Chairman Reed E. Hundt
                             Federal Communications Commuission
                             1919 M Street, NW., Room 814
                             Washington, D.C. 20554

                           * Commissioner James H. Quello
                            Federal Communications Commission
                            1919 M Street, N.W., Room 802
                            Washington, D.C. 20554

                           * Commissioner Rachelle B. Chong
                            Federal Communications Commission
                            1919 M Street, N.W., Room 844
                            Washington, D.C. 20554

                           * Commissioner Susan Ness
                             Federal Communications Commission
                             1919 M Street, NW., Room 832
                            Washington, D.C. 20554

                           * Mr. Peter Cowhey
                            Chief, International Bureau
                            Federal Communications Commission
                            2000 M Street, NW., Room 830
                            Washington, D.C. 20554

                          * Mr. Thomas S. Tycz
                            Division Chief, Satellite &
                             Radiocommunication Division
                            International Bureau
                            Federal Communications Commission
                            2000 M Street, NW., Room 520
                            Washington, D.C. 20554


* Ms. Fern Jarmulnek
 Chief, Satellite Policy Branch
 Satellite Radiocommunication Division
 International Bureau
 Federal Communications Commission
 2000 M Street, NW., Room 518
 Washington, D.C. 20554

* Ms. Ruth Milkman
 Assistant Bureau Chief
 International Bureau
 Federal Communications Commission
 2000 M Street, N.W., Room 821
 Washington, D.C. 20554

* Mr. Daniel Connors
  International Bureau
  Federal Communications Commission
  2000 M Street, N.W., Room 506—A
 Washington, D.C. 20554

* Mr. Harold Ng
  Engineering Advisor
  Satellite & Radiocommunication Division
 International Bureau
 Federal Communications Commission
 2000 M Street, N.W., Room 801
 Washington, D.C. 20554

* Ms. Cassandra Thomas
  International Bureau
  Federal Communications Commission
  2000 M Street, N.W., Room 810
 Washington, D.C. 20554
              bo


                       Robert A. Mazer, Esq.
                       Vinson & Elkins L.L.P.
                       1455 Pennsylvania Avenue, N.W.
                       Washington, D.C. 20004
                          Counsel for Leo One USA
                          Corporation




                                        fl%{kmflAlrso
                                        Patricia A. Green




*
    By Hand Delivery



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Document Modified: 2014-08-27 15:37:15

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