Attachment 1995O+A DA 95-2343.p

1995O+A DA 95-2343.p

ORDER & AUTHORIZATION submitted by IB, FCC

Order and Authorization DA 95-2343

1995-11-20

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

IBFS_SATAMD1990052900041_1060221

                                                                                                   DA 95—2 343
                                       Before the
                          FEDERAL COMMUNICATIONS COMMISSION
                                             Washington, D.C.


In the Matter of the Application of




                                                     ind
                                                     Ns Nus Ne Nust
STARSYS Global Positioning, Inc.                                         File Nos. _ 33—DSS—P—90(24)
                                                                                     42—DSS—AMEND—90
For Authority to Construct,                                                       7—DSS—AMEND—94
Launch and Operate a Satellite System                                             31—DSS—AMEND—94




                                                     Ne
in the Non—Voice, Non—Geostationary                                               32—DSS—LA—94




                                                     w
Mobile—Satellite Service                                                          135—SAT—AMEND—95




                                                     w
                                   ORDER AND AUTHORIZATION


        Adopted:     November 13,           1995                      Released: November 20,        1995

By the Chief. International Bureau:

                                               I. Introduction

        1. By this Order and Authorization, we authorize Starsys Global Positioning to construct.
launch, and operate a non—voice, non—geostationary ("NVNG") mobile satellite service ("MSS")
system in specific frequency bands below 1 GHz. In doing so, we conclude that GE American
Communications, Inc.‘s assumption of an 80% ownership interest in Starsys, would serve the public
interest, and that in light of these changes Starsys is fully qualified to become a Commission licensee.
In reaching this conclusion, we address comments opposing the grant of Starsys‘s application filed by
LEO One USA. Orbital Communications Corporation ("Orbcomm"), and Final Analysis. Inc.‘

                                               II. Background
          2. Starsys is one of the three applicants for a low—Earth orbiting ("LEO") MSS system in the
first NVNG processing round.        Starsys proposes a system of 24 low—Earth orbiting satellites,
operating in six equally spaced planes of four satellites each, with 53 degrees of inclination. These
satellites are designed to operate in the 148—150.05 MHz (uplink) and 137—138 MHz and 400. 15—401



   |    Orbcomm and Volunteers in Technical Assistance ("VITA") filed a petition to deny and comments.
       respectively, concerning Starsys‘s amendment filed April 25, 1994 (File Nos. 31—DSS—AMEND—94 and
       32—DSS—LA—94), and Starsys replied. SAVI Technology, Caribbean Satellite Services, Inc., Mapsys
       Computerized Mapping, Geotechnology Development, Inc., and Acer/DataStar. Inc. filed comments in
       support of the amended application. Caribbean Satellite Services, Inc., and Geotechnology
       Development Corp. also filed comments in support of Starsys‘s ownership and financial amendment
       (File No. 135—SAT—AMEND—95).        Marcor, Inc. filed comments informing the Commission that there is
       civil litigation currently pending concerning ownership of Starsys stock, specifically a suit brought by
       Starsys for a declaratory ruling that certain claims asserted to ownership rights in Starsys stock are
       without merit. Our action here is without prejudice to the potential outcomes ofthat litigation.


MHz (downlink) frequency bands, and will have a fifteen—year design life. The satellite system will
use code division multiple access ("CDMA") modulation techniques. The satellite system will
provide a variety of store—and—forward data services, including asset management and tracking.

         3. The Commission first received an application for an NVNG MSS system license in 1990,
and, in response, established a "cut—off" date for the filing of competing applications. This cut—off
date established the first NVNG processing round. At the time of the cut—off date for the filing of
applications in the first NVNG processing round, Starsys‘s application was mutually exclusive with
that of Orbcomm. In an effort to resolve this mutual exclusivity. the three first—round applicants.
Orbcomm,. Starsys, and VITA, reached agreement on a sharing program that would permit all three to
implement their systems. Subsequently, the Commission allocated spectrum to the service.‘ and
adopted final rules for the NVNG service based on the first—round applicants‘ sharing program.‘

          4. Subsequently, the Commission opened a second processing round for NVNG MSS
applications,. and received five additional applications. The five additional requests are from CTA.
Inc., Final Analysis, Inc—, GE, LEO One USA Corporation, and E—Sat. VITA and Orbcomm have
also asked for additional frequencies to add to their systems.*                                 —

         5. Issues concerning Starsys‘s ownership structure have arisen on several occasions. In
1993, we approved a change in Starsys‘s ownership structure by which Hughes STX acquired a 5%
interest and the right to appoint three of five directors." The remaining 95% of Starsys is owned by
North American CLS, Inc. ("NACLS"), a Delaware corporation. NACLS is wholly owned by
Stargos S.A., which is in turn 49.3% owned by Collecte Localisation Satellites ("CLS"). Both
Stargos S.A. and CLS are French companies. CLS is 70% owned by organizations that are directly
supported by the French government.‘ The remaining 50.7% of Stargos S.A. is owned by a number
of private companies with no affiliation to any foreign government or representatives thereof.
NACLS may not be affiliated with more than one director on the Starsys Board.

         6. Starsys sought a declaratory ruling that this ownership structure complied with Section
310(a) of the Communications Act, which prohibits the issuance of a license to a foreign government
or its representative. Starsys was allowed to defer submitting a showing regarding its financial
qualifications pending action on its request.‘ In an April 20, 1995 letter. Starsys indicated that
NACLS would reduce its 95% ownership interest to no more than 25%. We then issued a



   *   Report and Order in ET Docket No. 91—280, 8 F.C.C. Red. 1812 (1993) ("Allocation Order").

   3   Report and Order in CC Docket No. 92—76, 8 F.C.C. Red. 8450 (1993) ("NVNG Order").

   +   See Report No. DS—1484, Non—Voice, Non—Geostationary Low Earth Orbit Satellites Applications
       Accepted for Filing,   DA 94—1323 (November 25, 1994).                     '

   3   Starsys Global Positioning, 8 F.C.C. Red. 1662 (Comm. Car. Bur. 1993).


   6   Centre National d‘Etudes Spatiales ("CNES"), the French space agency, owns 55% of CLS, while
       IFREMER, a French government—supported institute devoted to sea research, owns 15%.

   7   Letter to Counsel for Starsys from the Chief, Domestic Facilities Division, Common Carrier Bureau,
       dated July 22, 1994.
                                                    b


 Declaratory Ruling in which we concluded that Section 3 10(a) did not prevent the restructured Starsys
 from holding a license because neither the French government nor NACLS would have de jure or de
 facto control of Starsys."

          7. Starsys then submitted an amendment to its pending system application to demonstrate its
 financial qualifications und to seek approval for ownership changes ancillary to its financing plan.
 Specifically, Starsy       s approval to sell 80% of its equity to GE, along with the right to elect four
 of five             Huch      CX would relinguish its 5% share, and NACLS‘s share would be diluted
 to 20% .

                                               11. Discussion




                            Under Q'c‘:"'on 25.116 of the Commussion‘s Rules, an application is
consicdes                      r a cut—off date for the filing of applications. it is amended by a major
amendment           1        meats include those which specify a substantial change in beneficial
ownership or control (de jure or de facto) of an applicant. However, the rules explicitly exempt from
treatment as a newly filed application any amendment which "reflects only a change in ownership or
control found by the Commission to be in the public interest and. for which a requested exemption
from a "cut—off" date is granted.""" Starsys seeks such an exemption.

         9. Orbcomm argues that there is a substantial and material question whether Starsys‘s
.pmposed restructuring constitutes the type of trafficking in applications that would bc contrary to the
 public interest. it notes that Hughes apparently acquired its interest in Starsys for $1.00, but is
relinquishing that interest for 81 million. It observes that Starsys has submitted no showing that this
amount corresponds to expenses incurred in connection with Starsys‘s application. Starsys responds
that Hughes acquired its interest in Starsys as part of, and incidental to. its acquisition of the assets of
ST Systems Corporation ("STSC"), then valued in excess of $25 million,. a transaction which the
Commission approved."
                 i          Starsys argues that the circumstances in which Hughes relinquishes its
interest in Starsys —— ownership restructuring to comply with the Declaratory Ruling —— also indicate
that Hughes h s no inteni to traffic. Starsys observes that Hug!ies has provided significant technical
and administra« e support for Starsys on an ongoing basis since it acquired its interest.

        18. da zf;if Sigral International, Inc.. the Commission addressed a request for an exemption
from a cut—of? ruile virtusly ‘Lemual to the satellite cut—off rule in Section 25.i 16. The exemption,


    *   (1 F.C.C. Red. 9392 (dint‘l. Bur. 1995).. Orbcomm filed application for review of this decsision.
          hich is penoding. This Order and Authorization is without prejudice to Commussion action on the
        issues raised in Orbcomm‘s 'IDplicz\[ion for review. In the event Orbcomim conciludes that this Order
        and Authorization does not adequately address its objections based on the current record, it may seek
        review.
                  7
              T



                      .




        Siarsus Global Positioning. 8 F.C.C. Red. 1662 (Comm. Car. Bur. 1993..
                                                       J


which was granted, involved a major change in ownership occasioned by the acquisition of an
applicant‘s shareholder as an incidental part of a larger corporate acquisition. The Commission
concluded that such acquisitions are clearly for "an independent business purpose, and not primarily
for acquiring pending applications."" The Commission has also found major ownership changes to
be in the public interest under the satellite cut—off rule, even though not incidental to acquisition of an
applicant‘s shareholder or shareholders and clearly directed at acquiring an interest in an application."
Although not directly at issue in that case, the Commission indicated in Air Signal that such changes
may be permissible if they are the types of "ownership or control changes which tend to effect
changes in business or financial factors overlaying the technical proposal.""

         11. We conclude that the ownership changes proposed by Starsys serve the public interest,
and that an exemption from the satellite cut—off rule is therefore warranted. The proposed ownership
changes serve legitimate regulatory and business purposes, specifically facilitating compliance with
Section 310(a) of the Communications Act and securing financial backing sufficient to facilitate
prompt implementation of a competitive NVNG MSS system. These purposes are particularly
relevant with respect to satellite systems, which typically have large capital requirements and
substantial developmental costs.      Furthermore, although trafficking is clearly a relevant concern, we
conclude that no further inquiry is warranted in this case. Although the nominal price Hughes paid to
acquire its interest in Starsys was $1.00, we think it reasonable to conclude that STSC had made
expenditures in excess of that amount in pursuit of Starsys‘s proposal, and that the $1.00 figure was
not meant to be dispositive of the value allocated by Hughes to STSC‘s interest in Starsys." The
relatively modest amount of the payment to Hughes, given the substantial developmental costs
associated with these new systems and the fact that the transaction involves the commitment of in
excess of $50 million to construct, launch, and operate the system, is not unreasonable. Nor does it
provide the type of incentive that might lead to speculative filings in the satellite services."

         12. Effect on GE‘s Second—Round Application. GE, Leo One USA, and Final Analysis
are applicants in the Commission‘s "second—round" NVNG MSS processing group. The applications
in this group will be processed once initial processing of the "first—round" NVNG MSS applications is
completed. GE indicates that it will continue to pursue its second round application regardless of
whether its acquisition of Starsys, a first—round applicant, is approved. Leo One USA and Final
Analysis argue that allowing GE to acquire a first—round applicant, while still pursuing its second—
round application, does not serve the public interest. They request that any license granted to Starsys



   "    Air Signal International, Inc.; 81 F.C.C.2d 472, 475 (1980) (waiving the cut—off rule in Part 22 of the
        Commission‘s Rules where Xerox had acquired Air Signal‘s parent, WUI, Inc.).

   3    See Satellite CD Radio. Inc., 9 F.C.C. Red. 2569 (Comm. Carr. Bur. 1994).

   "!   Air Signal, 81 F.C.C.2d at 474 (citations omitted).

   5    See Starsys Global Positioning, 8 F.C.C. Red. 1662, n.13 (Comm.Car. Bur. 1993) (observing that the
        nominal price for acquisition of Starsys indicated the acquisition was clearly part of a larger
        transaction).

   ‘*   In this regard, we note that the strict application in satellite services of financial qualification
        requirements, construction milestones, and other due diligence requirements lessens our concern that
        the satellite licensing process may aftract applicants filing for purely speculative purposes.

                                                      4


be conditioned on GE relinquishing its second round application.

         13. We agree with Starsys that these requests are premature. and are more appropriately
addressed in connection with the second processing round. The Commission has not addressed how
selections will be made among applicants in the second processing round, if such selections become
necessary. It would be imprudent at this time, therefore, to adopt a limit on the number of systems
that could potentially be licensed in the second round.   In the event selections among the competing
second—round applicants are necessary, however, Leo One USA. Final Analysis. and other second—
round applicants will have a full opportunity to address what criteria the Commission should apply.
including whether licensees from the first round should be disqualified from or given a lower priorit
in second—round licensing.

         14. Compliance with Section 310(a). Orbcomm, in its application for review of the
Declaratory Ruling" and in its comments on Starsys‘s amendment. argues that Starsys‘s ownership
structure does not adequately address concerns that the French government will unduly influence
Starsys, or take governmental actions to favor Starsys to Orbcomm‘s detriment. In particular.
Orbcomm observes that the French government has taken a number of actions detrimental to
Orbcomm in connection with the International Telecommunication Union‘s satellite system
coordination and registration process. and suggests that even the reduced interest held by companies
supported by the French government provides an incentive to disadvantage Orbcomm improperly. It
also observes that NACLS‘s ownership interest remains substantial, and that Starsys‘s system design
and engineering could well continue to be performed by CNES. It suggests that the French
government may be subsidizing Starsys‘s system. Orbcomm asks that we impose insulation and
nondiscrimination safeguards on Starsys to address these concerns.

        15. Starsys‘s ownership structure, as proposed to be modified. fully complies with Section
310(a) of the Communications Act. GE‘s 80% stock interest, and concomitant Board representation.
are extremely strong indicia of control by an unquestionably and fundamentaily American company.
In the absence of evidence,. of which there is none, of other agreements or arrangements that call into
question the reliability of these indicia of control. we will not engage in speculation us to how forefen
control might come about. Furthermore. with respect to Orbcomin‘s speculation that NACLS‘L 2
ownership interest provides an incentive for improperly disadvantaging Orbcomm. there is no
indication from our experience in the international coordination process that Stursys of any uf its
shareholders has sought to improperly influence the position ofthe French government in the [TUV
coordination process, nor is there any indication that the French government has raised concerns
regarding Orbcomm‘s system solely in order to disadvantage Starsys‘s commercial rivals. If there
were such indications, the full range of Commission authority would be available to address these
concerns. However, such concerns are entirely speculative at this juncture.‘""
                                          s




        10 F.C.C. Red. 9392 (1995).

   *   The Commission is engaged in ongoing discussions with the French government concerning
       coordination of Orbcomm‘s system.
                                                    Un


    B.        Technical Qualifications.

             16. Efficiency. Orbcomm and CTA argue that Starsys is not technically qualified. They
    assert that Starsys‘s system is technically flawed because the CDMA technology it uses is inefficient.
    The Commission concluded in the NVNG Order that it would not impose an efficiency standard on
    NVNG systems." Furthermore, in the Allocation Order the Commission declined to require use uf
    CDMA or any other access technology in bands allocated to NVNG systems." Accordingly, no
    further discussion on this point is warranted.

             17. Major Amendment. Starsys‘s amendment, filed April 25. 1994. after the cut—off date
    for filing applications in the first NVNG processing round, proposed for the first time to use the
    149.9—150.05 MHz frequency band. Section 25.116 of the Commission‘s Rules states that an
    amendment will be considered a "major" amendment if it "increases the potential for interference, or
    changes the proposed frequencies . . . to be used." Starsys‘s amendment changes the frequencies it
    proposes to use, and, therefore, is a major amendment. Under Section 25.116(c) of the
    Commission‘s Rules, an application amended by a major amendment is to be treated as newly filed,
    unless it "resolves frequency conflicts with authorized stations or other pending applications but does
    not create new or increased frequency conflicts" or "does not create newor increased frequency
    conflicts, and is demonstrably necessitated by events which the applicant could not have reasonably
    foreseen at the time of filing." We also indicated in the NVNG Order that major amendments
    "necessary" because of "obligations that we have imposed upon applicants after the cut—off date"
    would be permitted without treating the application as newly filed, even if the amendment does not
    otherwise comply with Section 25.116(c) of the rules. NVNG Order at 8457.

.             18. Starsys argues both that its amendment is necessary to conform with the new rules, and
    that it falls within the established exceptions to the requirement that its application be treated as newly
    filed. Orbcomm objects. Orbcomm states that it did not apply for use of this band in the first
    processing round because of a concern that the Commission would treat the specification of entirely
    new frequencies as a major amendment. Instead, Orbcomm and other applicants filed in the second
    processing round requesting use of the 149.9—150.05 MHz band.

         19. Starsys has not shown that any Commission—imposed obligation required the filing of its
request to use the 149.9—150.05 MHz band. In the Allocation Order, the Commussion stated that
"{ulntil the TRANSIT—SAT radionavigation system is discontinued, we also will permit the 149.9—
150.05 MHz band to be used for MSS ‘gateways‘ (connections with other communications systems
such as the Public Switched Telephone Network) on a secondary basis." Id, at 1816. However, the
Allocation Order did not impose an obligation on applicants after the cut—off date to use the 149.9—
150.05 MHz band. Nor can we conclude that either the Joint Sharing Agreement, which did not
mention the 149.9—150.05 MHz band, or the rules adopted in the NVNG Order, in any way require
Starsys. or any other party, to use that band. Therefore, we deem the amendment major and address
    it under Section 25.116(c).

                20. With regard to subsection 25.116(c)(1), Starsys‘s amendment does not resolve frequency



         !?     NVNG Order at €4 22—23.

         ‘"     Allocation Order at § 32.


conflicts with Orbcomm or VITA. The existing licensees (and Starsys) have agreed to a Joint Sharing
Agreement that by its own terms demonstrates that there are no remaining domestic frequency
conflicts between them. Further, the 149.9—150.05 MHz band has been applied for by second—round
applicants and may be needed to permit additional competitors to provide services. and therefore the
amendment may increasé frequency conflicts. As to subsection 25.116(c)(4), while Starsys may not
have foreseen the availability of the 149.9—150.05 MHz band at the time it filed its original
application, the Joint Sharing Agreement shows that Starsys is able to operate its system within the
existing bands, f.e., without using the 149.9—150.05 MHz band. Under these circumstances, we
cannot find that the NVNG Order presents "demonstrably necessary events" that require Starsys‘s use
of the 149.9—150.05 MHz band.

         21. We will not., however, treat the entire Starsys application as newly filed. At this time
in the NVNG MSS licensing process,. and in view ofthe advanced state of international negotiations
that include Starsys, VITA, and Orbcomm, we do not believe the public interest would be served by
deferring Starsys‘s entire application to the second processing round. We will instead grant Starsys a
license consistent with the terms of the Joint Sharing Agreement and its amendment, except insofar as
that amendment requests use of the 149.9—150.05 MHz band. We will defer that request for treatment
as a modification of its system in the second NVNG processing round. We view the portion of the
amendment requesting those frequencies as protecting Starsys‘s right to request expansion frequencies
in the second processing round, and conclude that this request is intended to enhance but not alter
Starsys‘s first—round system proposal."‘

         22. License Condition. LEO One USA argues that any grant of Starsys‘s application should
be conditioned so as to prevent technical changes that may undermine the negotiations embodied in
the joint sharing arrangement, or prejudice the ability of other NVNG MSS applicants to obtain an
authorization. To the extent this request is not addressed by our other actions in this Order and
Authorization, LEO One USA requests action that is more appropriate in connection with second—
round processing, and is therefore premature.

C. Financial    Qualifications.

        23. Section 25.142(a)(4) of the Commission‘s Rules sets forth the financial qualifications that
NVNG MSS applicants must satisfy prior to grant of a license." Specifically. an applicant must
demonstrate that it has current assets or non—contingent financing sufficient to meet construction,
launch, and first—year operating costs for the first two space stations of its proposed system. Starsys
estimates that these expenses will total $52.5 million. It submits a letter from the Chairman and
Chief Executive Officer of GE American Communications, Inc., describing GE‘s commitment to
expend the necessary funds. It also submits GE‘s 1994 Annual Report, which includes a balance
sheet showing cash and equivalents in excess of $2.5 billion. Based on this information, we find
Starsys financially qualified.




   *‘   See Volunteers in Technical Assistance, DA 95—1630, ( 7 (released July 21. 1995).

   2    47 C.F.R. § 25.142(a)(4).   Section 25.142(a)(4) also reference sections 25.140(c).(d) and (e). which
        specify the financial information that must be submitted.

                                                       7


                                            IV. Conclusion

        24. Grant of Starsys‘s application, as amended, will serve the public interest.
 Implementation of this system will provide competitive NVNG communication services to U.S.
 consumers, and the world. Starsys is legally, financially, and technically qualified to be a
 Commission licensee.

                                          V. Ordering Clauses

         25. Accordingly. IT IS ORDERED that Application File Nos. 33—DSS—P—90(24), 31—DSS—
AMEND—94, AND 32—DSS—LA—94 ARE GRANTED to the extent indicated in this Order and
Authorization, and Starsys Global Positioning, Inc. IS AUTHORIZED to construct a NVNG
mobile—satellite service system capable of operating in the 148—149.9 MHz, 400.15—401MHz and 137—
138 MHz frequency bands, in accordance with the terms, conditions and technical specifications set
forth in its application, as amended.

        26. IT IS FURTHER ORDERED that Starsys Global Positioning IS AUTHORIZED to
launch and operate 24 low—Earth orbiting space stations, and to launch technically identical
replacement satellites during the license term, in the non—voice, non—geostationary. mobile satellite
service in accordance with its application, and the relevant terms of any previous orders concerning
the operation of space stations in this service.

        27. IT IS FURTHER ORDERED that Starsys Global Positioning IS AUTHORIZED to offer
space segment capacity on its satellite system on a private carriage basis.

        28. IT IS FURTHER ORDERED that, unless extended by the Commission for good cause
shown, this authorization shall become null and void in the event that the space station is not
constructed, launched, and successfully placed into operation in accordance with the technical
parameters and terms and conditions of the authorization by the following dates:

                                        Construction         Construction
                                        Commenced            Completed          Launch
First two system satellites             November 1996        April 1999         November 1999
Remaining system satellites             November 1999        April 2001         November 2001


        29. IT IS FURTHER ORDERED that this authorization is subject to the completion of
consultations under Article XIV of the INTELSAT Agreement and Article 8 of the Inmarsat
Convention.. Upon completion of these consultations, and notification by the Department of State that
the United States has fulfilled its international obligations with respect to INTELSAT and Inmarsat,
no further action by this Commission will be required.

        30. IT IS FURTHER ORDERED that the temporary assignment of any orbital planes. or of
any particular frequencies, to Starsys Global Positioning. Inc. is subject to change by summary order
of the Commission on 30 days notice and does not confer any permanent right to use the orbit and
spectrum. Neither this authorization nor any right granted by this authorization. shall be transferred.
assigned, or disposed ofin any manner, voluntarily or involuntarily. or by transfer of control of ans
corporation holding this authorization. to any person except upon application to the Comuppuiss <~ 0

                                                   8


upon a finding by the Commussion that the public interest, convenience and necessity will be serv ..
thereby.

       31. IT IS .FURTHER ORDERED that the "Petition to Deny" filed by Leo One USA
Corporation IS DENIED.

     32. IT IS FURTHER ORDERED that this Order and Authorization IS EFFECTIVE UPON
ADOPTION this 13th day of November, 1995.

                                           FEDERAL COMMUNICATIONS COMMISSION


                                            S QOT"PM??
                                           Scott Blake Harmis
                                           Chief, International Bureau



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Document Modified: 2014-08-27 15:17:41

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