Attachment app for review

app for review

APPLICATION FOR REVIEW submitted by Final Analysis

app for review

2004-04-20

This document pretains to SAT-AMD-19960223-00031 for Amended Filing on a Satellite Space Stations filing.

IBFS_SATAMD1996022300031_370027

8
                                                                                   0 R IGlNAL
                                         Before the
                              Federal Communications Commission
                                     Washington, D.C. 20554



    In the Matter of
                                                 1
    FINAL ANALYSIS COMMUNICATION                 )    File Nos. 25-SAT-P/LA-95
    SERVICES, INC.                               1              76-SAT-AMEND-96
                                                 )              79-SAT-AMEND-96
    Authorization to Construct, Launch and        1             151-SAT-AMEND-96
    Operate a Non-Voice, Non-Geostationary        1             7-SAT-AMEND-97
    Mobile Satellite System in the 148-150.5 MHz, )             SAT-MOD-20020329-000245
    400.14-401 MHz, and 137-138 MHz Bands         )             SAT-AMD-20030606-00 112

    To: The Commission


                                 APPLICATION FOR REVIEW
                                                                           Apu 2   o   2004




                                              FINALANALYSIS
                                                         COMMUNICATION
                                                                    SERVICES,
                                                                           INC.

                                              Randall W. Sifers
                                              KELLEYDRYE& WARRENLLP
                                              1200 19th Street, N.W., Suite 500
                                              Washington, D.C. 20036
                                              (202) 955-9606

                                              Its Attorney




    April 16,2004


                                                    TABLE OF CONTENTS
                                                                                                                                           Page

SUMMARY.. ................................................................................................................................. I1
INTRODUCTION .........................................................................................................................       2
I.        THE BUREAU ERRED IN FINDING THAT FACS FAILED TO
          DEMONSTRATE INTENTION TO PROCEED ..............................................................                                    5
          A.         FACS’s Demonstration of Intention to Proceed is Consistent with
                     Governing Precedent ..............................................................................................      7
          B.         The Bureau Erred By Not Giving Due Consideration to FACS’s WRC-03
                     Activities in Ascertaining Progress Toward System Implementation ...................9
          C.         The Bureau Improperly Adopted a New Standard for Demonstrating Intent
                     to Proceed in Violation of the APA .....................................................................               10
11.       THE BUREAU ERRED BY NOT PROPERLY.CONSIDERING THE
          INVOLUNTARY BANKRUPTCY OF FA1 (FACS’S FORMER PARENT AND
          PRIME CONTRACTOR) AS JUSTIFICATION FOR AN EXTENSION .....................                                                         11
111.      THE BUREAU ERRED BY NOT PROPERLY CONSIDERING THE NEED TO
          OBTAIN APPROVAL FOR THE TECHNICAL ASSISTANCE AGREEMENT
          (“TAA”) AS JUSTIFICATION FOR AN EXTENSION AND BY
          MISINTERPRETING RULES ON ITAR LICENSING REQUIREMENTS ................. 16
IV.       THE BUREAU’S CLAIM THAT ENTRY INTO THE MARKET HAS BEEN
          PRECLUDED IS REFUTED BY THE RECORD ..........................................................                                     19
V.       THE BUREAU ERRED BY FAILING TO ADEQUATELY CONSIDER THE
         PUBLIC INTEREST REASONS OFFERED FOR GRANTING FACS’S
         REQUEST........................................................................................................................    20
CONCLUSION..............................................................................................                                    22




                                                                       1


                                          SUMMARY

        In this Application for Review, Final Analysis Communication Services, Inc. (“FACS”)

 asks the Commission to reinstate FACS’s authorization to construct, launch and operate a Little

LEO system, grant FACS’s request to extend the time to complete construction and launch of its

 system, and reverse the recent decision by the International Bureau that revoked FACS’s license.

        A series of intertwined and unseverable events - having nothing to do with the financial

stability or business decisions of FACS   -   that were unforeseeable and entirely beyond FACS’s

legal control interrupted progress toward the construction and launch of FACS’s first two

satellites, making it necessary for FACS to ask for an extension of its milestones. These events

included (a) the initiation by creditors of an involuntary Chapter 7 bankruptcy proceeding against

FAC’s former parent and then-prime contractor, (b) the time necessary thereafter to receive

Bureau approval to transfer control of FACS to its new parent, and (c) the time necessary after

the Bureau acted to register with and obtain State Department approval of a replacement

Technical Assistance Agreement to permit FACS to engage in technical discussions with its

foreign spacecraft bus manufacturer.

       FACS demonstrates in this Application that the Bureau erred in finding that FACS had

not made sufficient progress on system implementation to demonstrate an “intention to proceed”

under settled precedent. Indeed, the Bureau improperly developed and applied, for the first time,

a new standard for intent to proceed that violates the APA. The Bureau also failed to address the

bulk of FACS’s arguments, and misconstrued the law and misstated the factual record, raising

serious questions whether the Bureau adequately and fairly considered the reasons offered by

FACS to justify its extension.




                                                 ..
                                                 11


                                             Before The
                                Federal Communications Commission
                                      Washington, D.C. 20554


    In the Matter of                               )   Call Sign S2150
                                                   )
    FINAL ANALYSIS COMMUNICATION                   )   File Nos. 25-SAT-P/LA-95
    SERVICES, INC.                                 1             76-SAT-AMEND-96
                                                   1             79-SAT-AMEND-96
    Authorization to Construct, Launch and        )              151-SAT-AMEND-96
    Operate a Non-Voice, Non-Geostationary        1              7-SAT-AMEND-97
    Mobile Satellite System in the 148-150.5 MHz, )              SAT-MOD-20020329-000245
    400.14-401 MHz, and 137-138 MHz Bands         )              SAT-AMD-20030606-00112

    To: The Commission


                                   APPLICATION FOR REVIEW

           Final Analysis Communication Services, Inc. (“FACS”), by its attorneys, submits this

Application for Review pursuant to Section 1.115(d) of the Commission’s Rules, 47 C.F.R.

    0 1.115(d).   FACS demonstrates herein that under settled, long-standing precedent and for

substantial, compelling public policy considerations, the Commission must reinstate FACS’s

authorization to construct, launch and operate a non-voice, non-geostationary mobile satellite

service system in low Earth orbit (“Little LEO”),’ grant FACS’s request to extend the time to

complete construction and launch of its system, and accordingly reverse the March 17, 2004

Memorandum Opinion and Order2 adopted on delegated authority by the International Bureau

(the “Bureau”) in the above-referenced proceeding.



1
       Final Analysis Communication Services, Inc. Application for Authorization to Construct, Launch
and Operate a Non-Voice, Non-Geostationary Mobile Satellite System in the 148-150.05 MHz, 400.15-
401 MHz and 137-138 MHz Bands, Order and Authorization, 13 FCC Rcd 6618 (Int’l Bur. 1998);
Memorandum Opinion and Order, 16 FCC Rcd 2 1463 (200 1) (“FACS License”).
2
        Final Analysis Communication Services, Inc., Memorandum Opinion and Order, DA 04-727
(released Mar. 17,2004) (“FACS Order”).


                                           INTRODUCTION

           The FACS license     -   one of five licenses for Little LEO systems issued by the

    Commission in 1998 - required that construction of the first two commercial satellites in the

    FACS constellation be completed by March 2002 and launched by September 2002. The FACS

License declared that the license would become null and void if FACS failed to meet the

milestone schedule, unless the Commission were to extend the schedule for good cause shown.3

Recognizing that it would not be able to meet these milestones, FACS informed the Bureau that

it would seek an extension4 and promptly thereafter petitioned for a waiver of the milestone

schedule in 2002.’

          Section 25.117(e) of the Rules permits extension of a required date for milestone

completion when the licensee demonstrates either that (1) additional time is required due to

“unforeseeable circumstances” beyond the licensee’s control, or (2) there are unique and

overriding “public interest concerns” that justify an extension.6 The FACS request explained

that the need for an extension arose because of a series of intertwined and unseverable events


3
          See FACS License, 13 FCC Rcd 6618,6649 (7 93).
4
        The Order implies that the 2002 waiver request was somehow tardy and came as a surprise to the
Commission. FACS Order 7 7. However, representatives of FACS met with Bureau staff on January 17,
2002, to discuss the sale, assignment and transfer of the assets and properties of FAI, the former parent of
FACS and then-prime contractor, to New York Satellite Industries, LLC. (The transfer of control was
subsequently granted.) During that meeting, FACS informed the Bureau of its need to submit a request to
obtain an extension of its milestones.
5
        Final Analysis Communication Services, Inc. Petition for Waiver, SAT-MOD-20020329-00245
(filed Mar. 29, 2002) (“Milestone Extension Request”). FACS amended the Milestone Extension Request
in June 2003, clarifying its reasons for requesting an extension of time to complete construction and
launch of the system. Final Analysis Communications Services, Inc. Amendment to Petition for Waiver
and Modification to Extend Milestones, SAT-AMD-20030606-00112 (filed Jun. 6, 2003)
(“Amendment”).
6
        47 C.F.R. 5 27.117(e). In 2003, the Commission renumbered Section 25.117(e) as Section
25.1 17(c). Amendment of the Commission’s Space Station Licensing Rules and Policies and Mitigation
of Orbital Debris, Third Report and Order and Further Notice of Proposed Rulemaking, 18 FCC Rcd
13486 (2003). To avoid confusion with earlier citations in the record, the subsection will continue to be
referenced as Section 25.1 17(e).

                                                   -2-


 that were unforeseeable and entirely beyond FACS’s legal control - having nothing to do with

 the financial stability or business decisions of FACS      -   which in combination interrupted

 progress toward construction and launch of the first two satellites for a period of more than 20

months.      These events included (a) the initiation by creditors of involuntary Chapter 7

bankruptcy dissolution proceedings against FACS’s former parent and then-prime contractor,

Final Analysis Inc. (“FAI”), (b) the time necessary thereafter to obtain Bureau approval to

transfer control of FACS to its new parent, and (c) the time necessary after the Bureau finally

acted to register with and obtain State Department approval of a replacement Technical

Assistance Agreement (“TAA”) to permit FACS (rather than the bankrupt FAT) to engage in

technical discussions with its foreign spacecraft bus manufacturer (Polyot of Russia).

        These roadblocks entirely prevented FACS, as both a legal and practical matter, from

proceeding with system construction from September 2001 through May 2003. During this

period, FACS nonetheless continued its efforts toward system implementation by actively

participating in WRC-03 activities to obtain additional global allocations, which were successful.

On March 17, 2004, however, the Bureau denied the extension request and revoked the FACS

license. In the FACS Order, the Bureau concluded that FACS failed to demonstrate an intention

to proceed with construction of its system, that the reasons offered by FACS were neither

unforeseeable nor beyond its control, and that FACS had not justified a waiver of the milestone

deadlines.

       For the reasons demonstrated in detail below, the Bureau erred in finding that FACS had

not made sufficient progress on system implementation to demonstrate an “intention to proceed”

under the Commission’s settled precedent. Indeed, the Bureau has developed and applied, for

the first time in this proceeding, a standard for intent to proceed that requires licensees to have


                                               -3-


 completed satellite construction and launch prior to the milestone date in order to qualify for an

 extension. Such a rule is not only irrational, because it presumes away the need for an extension,

but violates the Administrative Procedure Act because it was adopted without prior notice and

cannot be reconciled with the Commission’s past milestone extension decisions. The Bureau

also failed to address the bulk of FACS’s arguments, misconstrued or misrepresented the law,

and misstated the factual record, calling into question whether the Bureau fairly considered the

reasons offered by FACS to justify its extension.

        In sum, since it was awarded a license, FACS has worked ceaselessly to develop and

implement its system, despite a series of interrelated, cascading legal impediments. These

roadblocks were initiated by a bankruptcy proceeding not of FACS, the licensee, but of its parent

company, and not a voluntary Chapter 11 reorganization but an involuntary Chapter 7

proceeding wherein the Trustee was charged with dissolving FA1 and selling-off its assets. The

Bureau’s analogy of this situation to a bankruptcy reorganization initiated because of financial

mismanagement or any other sort of voluntary business strategy is therefore flatly wrong as a

matter of both fact and law. Furthermore, the Bureau’s analysis of the resulting delays, such as

the issue of issuance of a new TAA by the State Department, is likewise flatly wrong, legally and

factually.

       But perhaps the Bureau’s most serious error was in treating these several issues seriatim,

without recognizing or analyzing the connections between them. Each of what the Bureau

considers to be separate issues were, in fact, component parts of what is properly viewed as a

single “unforeseeable circumstance” beyond FACS’s control that justifies the extension. These




                                              -4-


      include the need to obtain Bureau approval to transfer control of FACS to its new parent7 and to

     register with and obtain State Department approval of a new TAA to permit FACS to engage in

     technical discussions with its foreign spacecrafi bus manufacturer and launch services provider.

     The delay from these legal impediments was exacerbated by the legal requirement that

     Commission approval for the transfer of control and the State Department registration and TAA

     approval had to be obtained sequentially.

             Viewed in isolation, it may be that none of these impediments arose from requirements

     that were unusual, nor did any of them individually take an extraordinarily long time to

     complete. Under the unique circumstances of this complex situation, however, it simply is not

     defensible to consider these legal impediments as independent and severable events. Indeed, it is

     clear that in denying the extension, the Bureau misunderstood the undeniable fact that FACS

     would not have been required to obtain any of these approvals at the points in the system

     implementation process ut which they became necessary absent the FA1 involuntary bankruptcy.

     This critical fact makes these connected events an unforeseeable circumstance outside FACS’s

     control, manifestly justifying an extension of the milestone schedule.

     I.     THE BUREAU ERRED IN FINDING THAT FACS FAILED TO
            DEMONSTRATE INTENTION TO PROCEED

            The F‘CS    Order recognizes that in every prior instance where the Commission has

 denied a milestone extension request, construction of the satellites either had not begun or was




~~           ~     ~




7
        Although the need to obtain Commission approval for transfer of control of a license obviously is
a foreseeable event, what was not foreseeable that it would take seven months for the Bureau to grant the
pro forma request occasioned by the involuntary bankruptcy of the licensee’s parent. See Part I1 infia.
Moreover, until the transfer was approved by the FCC, FACS could not register with, let alone seek
approval of, a new TAA from the State Department so that FACS could engage in technical discussions
with Polyot.

                                                   -5-


    not continuing, thus raising questions regarding the licensee’s intention to proceed.’ That is

    plainly not the situation here. Yet rather than apply this settled “intention to proceed” standard

    to FACS’s request, the Bureau instead focused exclusively in this case on whether actual

    construction occurred (disregarding that ground stations have been constructed and a launch

    services agreement has been executed).’ While actual system construction is a factor that can

    indicate intention to proceed, it has never been deemed a mandatory requirement under

    governing precedent. Indeed, decisions show that the Commission looks much more broadly to

    determine whether a licensee has indicated a commitment, i.e., an “intention,” to proceed with

    system construction and implementation.

           Numerous decisions identify the kinds of efforts that have been found to be sufficient for

purposes of a milestone extension request to demonstrate concrete progress toward construction

and operation of a satellite system, in other words, a licensee’s intention to proceed.           For

example, in the Advanced Order, the Commission found that arranging for financing for

completion and launch of the system, contracting with suppliers for user terminal equipment, and

contracting for satellite launch services were the kinds of efforts that would justify an extension

request.” In the AMSC Order, the Commission found that construction and implementation was

proceeding sufficient to warrant an extension after finding that a construction contract had been

signed for procurement of the satellite, that basic technical parameters had been finalized and

that the licensee had actively participated in the international coordination process for its


8
      FAG‘S Order 7 18, citing GE American Communications, Inc., Order and Authorization, 16 FCC
Rcd 11038, 11041 (7 10) (Int’l Bur. 2001); AMSC Subsidiary Corp., Memorandum Opinion and Order, 8
FCC Rcd 4040,4042 (7 13) (1 993) (‘AMSC Order”).
9
          FACS Order 7 35.
IO
          Advanced Communications Corp., Memorandum Opinion and Order, 11 FCC Rcd 3399, 3412
(77 32-33) ( 1 995) (“Advanced Order”).

                                                 -6-


 satellite.”        In the GE Americom Order, the Commission found that the licensee had

 demonstrated intention to proceed despite the fact that design of the satellite had not been

 finalized.   **   In the 2000 Earth Watch Order, the Commission found intention to proceed through

 its reliance on the licensee’s representations made in the extension request.13 The Commission

 also has held that a licensee demonstrates intention to proceed sufficient to warrant a milestone

 extension merely by signing of a non-contingent contract for construction of the ~ystern.’~

         A.          FACS’s Demonstration of Intention to Proceed is Consistent with Governing
                     Precedent

         In this case, the record is replete with evidence showing that FACS made substantial

progress on system development that amply demonstrates, pursuant to governing precedent,

intention to proceed in a far more concrete way than executing a construction contract.




11
         AMSC Subsidiary Corp., Memorandum Opinion and Order, 8 FCC Rcd 4040,4042 (7 14) (1993)
(“AMSC Order”) (emphasis added). AMSC had requested extensions of the construction completion and
launch dates for a satellite. The Commission noted that “AMSC is proceeding with construction of
AMSC-1 and its plans for the satellite, while continuing to undergo some refinement, are essentially
completed.” Id. 7 10. However, the Commission granted AMSC’s request to construct the AMSC-1
satellite with operational capability in additional frequency bands, which required AMSC to complete
additional design work. Thus, the Order makes clear that design of the AMSC-1 satellite was not at post-
CDR stage. The Commission granted AMSC an 18-month extension of its construction completion
milestone, finding that, in addition to other reasons, an extension was justified because it was continuing
to construct its satellites, and because extension furthered the public interest by making new and needed
mobile satellite services available. Id. 114.
12
        GE American Communications, Memorandum Opinion and Order, 7 FCC Rcd 5 169,5 169 (175,
8) (1992) (“GE Americom”).
13
         In the 2000 Earth Watch Order, the Bureau relied on representations made by the licensee in its
extension request to find that there was no basis for questioning whether the licensee intended to proceed
with its system. Earthwatch Incorporated, Order and Authorization, 15 FCC Rcd 13594, 13597-98 (7 10)
(2000) (“2000 Earth Watch Order”).
14
       See, e.g., Columbia Communications Corp., Memorandum Opinion and Order, 15 FCC Rcd
15566, 15572 (7 16) (Int’l Bur. 2000) (once a licensee has met its construction commencement milestone,
the Commission can be more certain that it will proceed with its proposed system); Norris Satellite
Communications, Inc., Memorandum Opinion and Order, 12 FCC Rcd 22299, 22306 (7 17) (by failing to
commence construction or request extension within milestone deadline, licensee did not demonstrate a
commitment to proceed with its proposed system); GE Americom, 7 FCC Rcd at 5169 n.7. (the signing of
a noncontingent construction contract satisfies the commencement of construction milestone).

                                                  -7-


         0    First, FACS has represented that it commenced construction of its first two
              sate11ites.l~

         0    Second, FACS previously demonstrated that it had met its commencement of
              construction milestone,I6 which, as discussed above, the Commission has found
              demonstrates a licensee’s commitment to proceed with its proposed system.

        0     Third, FACS has expended considerable time and in excess of $70 million on its
              commercial system implementation,” including making significant progress on
              spacecraft desi and construction, ground station implementationi8 and launch
              arrangements. ,$

        In view of this evidence, the Bureau’s conclusion that there is no basis to conclude that

 the expenditures represent progress toward system implementationZo raises serious questions

 whether the Bureau adequately and fairly considered the record. FACS voluntarily elected to

 submit additional documentation as evidence illustrating the demonstrable progress it had made

on system implementation, including evidence of construction efforts at CDR stage.’l

Nevertheless, despite this documentation, the fact that operational ground stations had been

IS
        Milestone Extension Request at 3.
16
        Id.
        Milestone Extension Request at i. To eliminate doubt that these expenditures were for
implementation of its licensed commercial system, FACS provides with this Application a letter from its
forensic auditor, Thomas J. Raffa, to confirm that approximately $77 million (in payments of
approximately $21 million in cash and $56 million in stock transfers) were expended on the design,
development, construction and launch of the FACS system. The disbursements do not include costs
associated with R&D programs or with domestic and international regulatory efforts or other legal costs.
See Exhibit 1.
18
         The record shows that FACS has constructed and continues to maintain fully implemented and
operational ground systems, including ground stations in Logan, Utah, and a ground station and control
center in Lanham, Maryland. Milestone Extension Request at 12. FACS stated that the launch services
agreement included four dedicated Cosmos launch vehicles. Moreover, during its May 8, 2003 ex parte
presentation to Bureau staff, FACS made a PowerPoint presentation that included a video clip with
footage showing the actual launch vehicles, with the Final Analysis logos painted on each side. The
presentation was made for the express purpose of visually demonstrating specific progress on system
implementation.
        It is undisputed that FACS entered into a final, non-contingent launch services agreement for the
launch of its commercially licensed constellation.
2o
       FACS Order 7 15 .
21
         The documents were not submitted to show that the design of any particular system was at a
certain stage because such showing is not required.

                                                 -8-


 constructed, and the fact that certain components had been built to permit testing so that studies

 could be completed for submission to WRC-03, the Bureau found that “construction efforts

 never advanced to the preliminary design review (“PDR”) stage, much less to critical design

 review (“CDR’) or to actual construction work.”22 Yet, as discussed above, it is settled that the

 stage of design is not dispositive of progress on system implernentati~n.~~
                                                                         Moreover, FACS met

 with Bureau staff on numerous occasions to respond to questions Bureau staff might have

 regarding its request and the record. The Bureau never indicated that it had any questions about

 FACS’s intent to proceed, and, in fact, refused to answer questions about what concerns, if any,

 it may have been harboring. Given the importance of this issue, as a matter of basic procedural

 fairness the Bureau should have made FACS aware of its concerns so that any lingering

questions could have been answered and the Bureau’s misinterpretations of the record avoided.

        At bottom, given this unequivocal evidence, the Bureau’s findings that the record is

devoid of any construction efforts and that implementation never got to the stage where “metal

was being bent’y24are both incredible and irrelevant. Accordingly, there is no basis on this

record for questioning whether FACS intends to proceed with its Little LEO satellite system.

        B.      The Bureau Erred By Not Giving Due Consideration to FACS’s WRC-03
                Activities in Ascertaining Progress Toward System Implementation

        The Bureau erred in concluding that the basis for adopting the rule giving FACS first

priority to apply for additional internationally allocated spectrum was merely because of


22      FACS Order fi 13.
23
        The Bureau also erred in finding that “most of the documents were undated and unsigned.” In
fact, most of the documents are dated. That some documents are not signed is irrelevant. That finding is
refuted by Document #34 (dated Jan. 16, 2001), which states that design varies between pre-PDR and
CDR and specifies that many systems were, in fact, at CDR stage. As further example of design work
that had passed the CDR-stage, FACS attaches hereto as Exhibit 2, a signed statement, dated September
16, 2002, certifying that the Earth Horizon Sensor Subsystem had satisfied CDR requirements.
24     FACS Order fi 14.

                                                 -9-


 agreement reached among the other second processing round              applicant^.'^   That the FACS

 license was issued without sufficient spectrum is beyond dispute.26 Consequently, FACS takes

 strong exception to the Bureau’s ad hominem conclusion that the FACS expenditures dedicated

 to pursuing an international spectrum allocation were “a misallocation of         resource^.^'^^   Given

 that the Commission specifically recognized that FACS would need to obtain additional

 spectrum to “complete system implementation,” it was not only appropriate, but essential, that

FACS expend resources to seek additional global allocations. Accordingly, the Bureau’s refusal

to consider FACS’s efforts at WRC-03 to obtain additional spectrum allocations in determining

whether FACS was proceeding to implement its system undercuts any claim that the Bureau has

adequately considered the facts of this case.28

        C.      The Bureau Improperly Adopted a New Standard for Demonstrating Intent
                to Proceed in Violation of the APA

        Rather than deciding whether FACS had demonstrated intention to proceed under

governing precedent, the Bureau adopted and applied a new standard that would effectively

2s      FACS Order 7 17.
26
        See Amendment of Part 25 of the Commission’s Rules to Establish Rules and Policies Pertaining
to the Second Processing Round of the Non-Voice, Non-Geostationary Mobile Satellite Service, Report
and Order, 13 FCC Rcd 9111, 9126 (paras. 35-36) (1997) (“Second Processing Round Order”) (In
explaining why it adopted a rule granting System 2 a first priority to apply for and use a limited amount
of future allocated spectrum, the Commission stated: “[mlaking available a limited amount of future
downlink spectrum allocated for the Little LEO service solely to System 2 for the purpose of completing
the implementation of its second round system is likely to result in three large systems capable of
providing a wide range of Little LEO services.”).
21
        Id.
28
         The only rational explanation for why a small company would expend resources for the purpose
of being able to obtain access to that spectrum is that the company was demonstrating its intention to
proceed. Moreover, given that the Bureau was a partner with FACS in the WRC-03 activities, it is
unconscionable that the Bureau disregard those efforts in the calculus of intent to proceed. In addition,
the U.S. Government accepted four delegates to WRC-03, which FACS paid for, who were used to
further U.S. positions, and now the Bureau has the audacity to claim it was a misallocation of resources.
Finally, FACS observes that WRC-03 represented the first occasion since 1992, that additional spectrum
had been globally allocated to LEO systems. The Bureau’s refusal to give due consideration to FACS’s
WRC-03 activities in ascertaining progress toward system implementation is a slap in the face,
particularly in light of these efforts.

                                                 - 10-


 preclude the grant of any request to extend construction completion and launch milestones under

 any circumstance. Specifically, the Bureau announced that the only way in which FACS could

 establish intent to proceed would be “by completing construction of the first two commercial

 system satellites and launching those satellites into orbit.”29 The Bureau did not provide any

 rationale for applying the new standard, which as explained above directly conflicts with

 Commission precedent. It is also self-evident that if FACS had built and launched the first two

 satellites, no extension would be required, so that the new standard is circular and inconsistent

 with the basic purpose of a milestone extension. Moreover, applying the new standard to

 FACS’s request constitutes retroactive rulemaking, disapproved by the Supreme Court in Bowen,

 and violates the notice requirements of the                 Indeed, the Commission itself recently

 affirmed that it is obligated not to apply newly-announced policies retr~actively.~’

11.     THE BUREAU ERRED BY NOT PROPERLY CONSIDERING THE
        INVOLUNTARY BANKRUPTCY OF FA1 (FACS’S FORMER PARENT AND
        PRIME CONTRACTOR) AS JUSTIFICATION FOR AN EXTENSION

        The Bureau’s analysis of the bankruptcy issues presented in this case, involving the

Chapter 7 bankruptcy of a parent of the licensee, initiated involuntarily, is erroneous as a matter

of law. The FACS Order is wrong because it (a) confuses FACS and FAI, (b) assumes a

different set of facts than those in the record, (c) misstates the arguments advanced by FACS as

to how the FA1 bankruptcy legally prevented FACS from proceeding with system


29      FACS Order 7 35.
30
        Bowen v. Georgetown Univ. Hosp., 488 U.S. 209, 219-20 (1988); 5 U.S.C. § 553(b)(3), (c). The
Commission recently adopted new milestones and certain standards for determining milestone
compliance in the First Space Station Reform Order, 18 FCC Rcd 10760, 10827-38 (2003). However,
the new rules and standards apply to all satellite licensees on a going-forward basis, see id. at 10833 (7
189), including NGSO licenses granted after September 11, 2003; see also 68 Fed. Reg. 51499, 51507
(Aug. 27,2003). Accordingly, the new standards do not govern the FACS extension request.
3’
       See Complaints Against Various Broadcast Licensees Regarding Their Airing of the “Golden
Globe Awards” Program, Memorandum Opinion and Order, FCC 04-43,Y 15 (released Mar. 18,2004).

                                                 - 11 -


 implementation, and (d) misinterpreted bankruptcy law and the Chapter 7 Trustee’s

     instruction^.^^
            First, the Bureau erred in citing to the Globalstar Order as precedent for a legal analysis

 rejecting bankruptcy as a justification for milestone extensions that was not discussed in that

 decision.33 Globalstar did not claim that it needed an extension based on its bankruptcy.34

 Moreover, the Bureau did not base its decision to deny Globalstar’s request on the rationale that

 bankruptcy was not a justification for failure to meet     milestone^.^^
            Second, the Bureau’s reliance on the Iridium and IC0 b a n k r ~ p t c i e sis
                                                                                         ~ ~inapposite

because, to the best of FACS’s knowledge, neither company sought a milestone extension. In

neither case was the Bureau ever confronted with having to make a decision on extending

milestones, nor was a record developed that would have enabled the Bureau to do


32
        FACS is engaged in litigation against General Dynamics Corp. (“GD”) in which FACS alleges
that GD and one of its affiliates breached two “strategic partnership” contracts requiring substantial equity
investments (more than $30 million in stock purchases) in FACS in 1999 and 2000, prior to the FAI
bankruptcy. Final Analysis Communication Services, Inc. v. General Dynamics Corp., et al., No. PJM
03-307 (D. Md.). The expressed objective of this relationship was to provide strategic capital to FACS in
order to support a $150 million bond offering originally planned for the fourth quarter of 1999. FACS
has not raised these financial issues, or the resulting damage to its capital position and financing
opportunities, in the milestone extension proceedings before the Commission because it is apparent that
such business relations do not qualify for regulatory purposes as unforeseeable circumstances warranting
a milestone extension.
33
       Globalstar, L.P., Memorandum Opinion and Order, 18 FCC Rcd 1249 (Int’l Bur. 2003)
(“Globalstar Order”).
34
        The Bureau explained that “[iln summary, Globalstar seeks an extension because, in evaluating
the lower than expected subscriber levels and MSS business generally, it has modified its business plan in
an effort to avoid a ‘substantial premature expansion of the capacity [that] would be uneconomic and
wasteful of resources.”’ Globalstar Order, 18 FCC Rcd at 1252 (7 7).
35
           Id. at 1252 (7 8).
36         FACS Order 17 22-23.
37
         It is disingenuous and highly inappropriate for the Bureau to infer that it had reached any decision
on extending a particular licensee’s milestones based on the bankruptcy of the licensee’s parent when, in
fact, no extension request has been made. Moreover, the statements that “the Bureau held licensees to
their implementation milestone deadlines despite ongoing bankruptcy proceedings” and “[tlhese recent
International Bureau decisions are consistent with earlier Commission decisions involving Commission
licensees in federal bankruptcy proceedings,” FACS Order 7 24, are misplaced because neither case

                                                   - 12 -


         Third, the Bureau erred in relying on the G e o ~ t a rJET-TEL,39
                                                                 ,~~       and Nextwave4’ cases as

 precedent for rejecting FACS’s claim that the bankruptcy of FACS’s parent, FAI, was part of an

 unforeseeable circumstance beyond FACS’s control. In Geostar, the Common Carrier Bureau

 did not address the bankruptcy issue as it related to the milestone extension request. In stark

 contrast to the Bureau’s claim here that Geostar’s “bankruptcy was not considered a justification

 for its failure to meet its m i l e ~ t o n e s , ”the
                                                     ~ ~ Common Carrier Bureau had dismissed Geostar’s

 extension request as moot because the extension had been sought in conjunction with

 applications seeking to make major modifications to the licensee’s satellite system, which had

 been denied.42 In fact, Geostar had not missed any milestones.

        The JET-TEL case also is inapposite because, unlike FACS, JET-TEL had argued that the

bankruptcy of its principal financing source created an economic hardship that impeded JET-

TEL’s ability to meet its construction milestones. To be clear, FACS was not part of the FAI

bankruptcy and was not insolvent.43 And, the Bureau’s reliance on the Nextwave case to

FACS’s request is equally unavailing given that NextWave is limited to cases where an agency

has revoked a license for non-payment of a debt that is dischargeable in bankruptcy. There is no

debt at issue here.

concerns the impact of bankruptcy on a milestone extension request. In fact, in both cases the Bureau was
addressing bankruptcy in the context of applications for assignment and transfer of control.
38
        Geostar Positioning Corp., Memorandum Opinion and Order, 6 FCC Rcd 2276 (Comm. Car. Bur.
1991) (“Geostar”).
39
       JET-TEL Group Limited Partnership Air-Ground Station KNKG802, Order, 11 FCC Rcd 2 1215
(Wireless Bur. 1996) (“JET-TEL”).
40
       FCC v. Next Wave Personal Communications, Inc., 537 U.S. 293 (2003) (“NextWave”).
4’     FACS Order 7 24.
42
       Geostar, 6 FCC Rcd at 2278 (7 17).
43
         Indeed, the Bureau’s remark that JET-TEL stands for the proposition that “lack of financing
cannot be used as a basis for granting an extension of time to construct,” FACS Order 7 25, clearly
demonstrates the Bureau’s failure to comprehend and address the actual arguments made in FACS’s
request.

                                                 -13-


        Fourth, the Bureau has misunderstood and misstated key facts, misinterpreted bankruptcy

 law as it applies to this case, and misconstrued the Trustee’s instructions directing FACS not to

 take any action outside the “normal course of business.” With regard to misunderstanding key

 facts, the Bureau failed to distinguish between FACS and FA1 when it made critical findings

 about FACS’s ability to control the course of the FA1 bankruptcy proceeding. For example,

 while the Bureau correctly notes that in a Chapter 7 proceeding, the debtor has the right to

 oppose the petition when it is filed and has a one-time right to convert the case into a Chapter 11

 reorganization at any time,44 its finding that “the decision to resort to bankruptcy, or to fail to

 contest a bankruptcy initiated by creditors is a business decision’’45 makes clear that it has

 mistakenly identified FACS as the debtor.46 Further evidence of the Bureau’s confusion as to

 FACS’s identity is the statement that “debtors cannot use bankruptcy to obtain a competitive

advantage by exempting themselves from regulatory obligations that their competitors must

bear.”47 FACS was not the debtor. The Bureau’s inference, therefore, is inappropriate and

misplaced.

        The Bureau’s complete disregard of the fact that FACS and FA1 are and were distinct

legal entities is evident from its misinterpretation of the Trustee’s specific instructions. FACS

had argued that it was prohibited by the bankruptcy Trustee from taking actions to further

implement its system and provided documentary evidence showing that the Trustee directed

FACS not to take any action outside the normal course of business and, in fact, had threatened to



44     FACS Order 1128-29.
45
       FA CS Order 7 3 0.
46
       As explained in the record, equal ownership of FA1 created a decision-making deadlock which
prevented FA1 from opposing the bankruptcy. See FACS Order 7 4.
47     FACS Order 7 3 6 .

                                              - 14-


 institute legal proceedings in the event that FACS took such actions.48 The Bureau concluded

 that this was not a “reasonable interpretation” of the Trustee’s instructions because it mistakenly

 thought that     the ordinary       course of FACS’s business was to               construct and launch

 communications      satellite^.^'   But it was FAI, the bankrupt entity and the prime contractor, that

 was the party responsible for constructing and launching satellites - not FACS. The Bureau then

 opines that FACS should have done more, including asking the court to intervene and overrule

 the Trustee’s judgrnent~.~’

         Given that through persistent efforts, FACS was able to convince the Trustee, despite

significant opposition, to expedite the sale of the FA1 assets in a remarkably three short

 month^,^'   the Bureau’s speculation about what FACS “should have” or “could have” done is

unavailing, particularly given that the institution of additional legal proceedings against the

Trustee undoubtedly would have caused further delay. In any event, the Bureau’s unilateral



48
         Amendment at p.12. Moreover, the Bureau misinterpreted bankruptcy law when it found that the
automatic stay in the parent’s bankruptcy does not apply to “actions by” a subsidiary. FACS Order fi 30.
The cited case, In re Winer, restates the bright-line principle that the automatic stay does proscribe actions
“brought against” a nondebtor affiliate of a bankrupt entity. In re Winer, 158 B.R. 736,743 (Bank. N.D.
111. 1993) (the automatic stay “does not proscribe actions brought against nondebtor entities”). In other
words, for example, a nonbankrupt subsidiary of a bankrupt parent cannot use the automatic stay (which
protects the parent against third party actions) to protect the subsidiary from actions brought by third
parties. However, that principle does not apply to or otherwise affect or relate to actions by the
subsidiary. For further background on the FA1 Chapter 7 bankruptcy and the impact of that bankruptcy
on FACS’s ability to operate its business, including the execution of new contracts while the bankruptcy
was pending, see the May 15, 2003 ex parte Letter from Patricia J. Paoletta, counsel to New York
Satellite Industries, LLC to Marlene H. Dortch, Secretary, Federal Communications Commission.
49
        FACS Order fi 33. Indeed, the Bureau’s finding completely disregards the fact that the reason
that the Trustee found it necessary to send written instructions to FACS was precisely in response to
FACS attempts to move system implementation forward during the pendency of the FA1 bankruptcy. The
Bureau’s conclusion also disregards the fact that the principal contracts were held by FAI, not FACS.
5o      FACS Order fi 33.
51
         The FACS Order simply fails to acknowledge record evidence demonstrating that FACS moved
swiftly to convince the Trustee to expedite the sale of the FA1 assets, precisely to preserve the value of the
FACS license. See January 28, 2004 ex parte Letter from Patricia J. Paoletta, counsel to New York
Satellite Industries, LLC, to Marlene H. Dortch, Secretary, Federal Communications Commission.

                                                   - 15-


 interpretation of the applicability of bankruptcy law to this case and its construction of the

 Trustee’s instructions is not dispositive and, more importantly, is controverted by the record.52

 111.    THE BUREAU ERRED BY NOT PROPERLY CONSIDERING THE NEED TO
         OBTAIN APPROVAL FOR THE TECHNICAL ASSISTANCE AGREEMENT
         (“TAA”) AS JUSTIFICATION FOR AN EXTENSION AND BY
         MISINTERPRETING RULES ON ITAR LICENSING REQUIREMENTS

         In light of the undeniable need for FACS to register with and obtain approval from the

 State Department for a new TAA, necessary only due to the involuntary bankruptcy against FAI,

 the Bureau erred by treating it as a discrete and severable event. FAI, as prime contractor,

 already had obtained approval for a TAA years earlier. Accordingly, that FACS would ever

need approval for a TAA was not a circumstance that was reasonably foreseeable and certainly

not within its control. It was therefore improper for the Bureau to examine the need to obtain

approval for a new TAA separately from the chain of events which, in combination, created the

unforeseeable circumstance beyond the control of FACS.53

        Apart from its error in treating the TAA matter separately as justification for a milestone

extension, the Bureau’s conclusion that the events related to needing approval for a TAA in the

first instance (ie.,due to the nationality of the spacecraft bus manufacturer) resulted from a

business decision, which cannot be used to justify a milestone extension, is flawed.54 The

Bureau’s flawed conclusion is based, in part, on its misinterpretation of the International Traffic

in Arms Regulations (“ITAR”) requirements and, in part, on a logical fallacy.



52
         The Bureau’s statement that “there is no support for this view in the record,” FACS Order 7 12, is
particularly bizarre, given that FACS’s view is the only view supported by the record.
53
       That it took seven and one-half months to get approval for the new TAA is not in dispute. See
FACS Order 11.98. The fact that approval for a new TAA would not have become necessary but for the
bankruptcy of FAI is what is relevant because that makes it part of the unforeseeable circumstance, not
the length of time needed to obtain the approval.
54      FACS Order 7 40.

                                                    - 16-


           First, the Bureau’s conclusion “that the ITAR requirements do not apply to trade with

 North Atlantic Treaty Organization allies or major non-NATO allies of the United States”55 is

 false. A license is required for export of all items on the United States Munitions List, including

     satellite^,^^ regardless of country destination, unless a license exception applies. License
 exceptions are most commonly permitted, for example, for exports to Canada or exports to the

 U.S. military abroad. Thus, unless FA1 or FACS had made arrangements with a Canadian entity

 for launch services57and to manufacture the spacecraft bus and an exception received, approval

 of a TAA would have been required. In addition, Section 124.15(a) of the ITAR                 provides

that exports of certain satellites or related items to a non-NATO country or a country that is not a

major non-NATO ally require “special export controls,” which the Bureau correctly notes.

However, the special export controls, which include making arrangements with the DOD to

monitor satellite exports and acquiring National Security Agency (“NSA”) approval for a

technology transfer control plan, are in addition to the regular licensing requirements required by

ITAR, including approval for a TAA. In other words, while FACS or FA1 might have avoided

the need for special export controls by arranging for launch services and the manufacture of the

spacecraft bus with a company from a NATO country, it still would have been required to obtain

approval for a TAA to export technical data to a company in a NATO country or a major non-

NATO ally of the U.S. The Bureau’s conclusion that “the converse is that the ITAR

requirements do not apply to trade with the North Atlantic Treaty Organization allies or major




55        FACS Order 7 39.
56
          See 22 C.F.R. 7 121.1.
57
          To the best of FACS’s knowledge, there is no Canadian company that provides launch services.
58        22 C.F.R. 5 124.15(a).

                                                  - 17-


 non-NATO allies of the United States,” is simply incorrect and does not follow from the

 statement in the preceding ~ e n t e n c e . ’ ~

         Second, the Bureau engages in a logical fallacy as a basis for disallowing the need to

 obtain approval for a new TAA as justification for a milestone extension. The Bureau argues

 that if it is reasonable to assume that the decision to make arrangements with a company in a

 foreign country that is subject to ITAR requirements6’ is a business decision (which, under

 Commission precedent, cannot be used to justify a milestone extension), then it is reasonable to

 assume that the need to obtain approval for a new TAA is also a business decision. The fallacy

 with this argument is that the events relating to the need to obtain approval for a new TAA were

not based on any business decision by FACS. To the contrary, the events that led to the need for

approval of a new TAA were the initiation of the involuntary bankruptcy proceeding against FA1

and the subsequent requirement to obtain Bureau approval to transfer control of FACS from the

bankruptcy Trustee to its new parent. Indeed, the FACS Order explicitly makes such avowal.61


59
        Moreover, pursuant to Section 124.15(c) of the ITAR rules, 22 C.F.R. 8 124.15(c), although
application of “special export controls” to NATO and major non-NATO allies is not required, “such
export controls may nonetheless be applied, in addition to any other export controls required under this
subchapter, as appropriate in furtherance of the security and foreign policy of the United States. Further,
the export of any article or defense service controlled under this subchapter to any destination may also
require that the special export controls identified in paragraphs (a)(l) and (a)(2) of this category be
applied in furtherance of the security and foreign policy of the United States.” Therefore, even if FA1 or
FACS had made arrangements for launch services and manufacture of the spacecraft bus with a company
in a NATO country or major non-NATO ally, transfer of its satellite-related technical data to that
company could have been subjected to export controls equivalent to those required by export to Polyot.
6o
         Additionally, FACS takes exception to the apparent inference in the FACS Order that FACS
would not have encountered a large part of the delay had it not made arrangements with a Russian
company. FACS Order ff 39-40. FACS notes that its decision to use a Russian company for launch
services and to manufacture the spacecraft bus is consistent with U.S. policy. For example, the U.S.
Civilian Research and Development Foundation (“CDRF”), a nonprofit organization that the U.S.
Department of Defense helped establish, seeks to advance the transition of foreign weapons scientists to
civilian work and to avoid proliferation by fostering collaborative research and development projects
between the U.S. and the Newly Independent States through a variety of programs, including linking U.S.
businesses with NIS counterparts to pursue commercial ventures. See www.crdf.org/mission.html.
61
          See FACS Order f 38, stating that “[albsent the bankruptcy proceeding, the State Department’s
first technical assistance agreement would not have expired until late 2005.”

                                                    - 18-


     IV.        THE BUREAU’S CLAIM THAT ENTRY INTO THE MARKET HAS BEEN
                PRECLUDED IS REFUTED BY THE RECORD
                Contrary to the Bureau’s claim,62FACS’s failure to meet its milestones has not precluded

     new entrants into the market. The following facts support this conclusion. First, no comments

     were filed in response to FACS’s extension request.63 Second, while FACS filed its Milestone

     Extension Request on March 29,2002, the Bureau did not place it on public notice until June 30,

     2003.64 Third, although the System 1 licensee filed a request to extend its milestones on

     February 28, 2002, the Bureau never placed the System 1 request on public notice. On March

     19, 2004, the System 1 licensee voluntarily submitted its license for ~ a n c e l l a t i o nand
                                                                                                   ~ ~ the

     Bureau subsequently cancelled the license.66 Fourth, on April 23, 2003, the Bureau issued an

     order denying E-SAT, Inc.’s request to extend its milestones and declaring the E-SAT license

     null and void.67 Fifth, to the best of FACS’s knowledge, the Bureau has not received nor acted

     upon any applications seeking authority to use the E-SAT or other Little LEO spectrum.

               The above facts strongly support the conclusion that parties were not interested in using

     the Little LEO spectrum. Such interest would be evidenced by the Bureau acting promptly to put

     the extension requests on public notice and then taking action, and by comments filed in

 response to the extension requests. Certainly, if such interest existed, the Bureau would not have

waited so long to put the requests on public notice and to act (indeed, more than two years in the

~~         ~




62
               See, e.g., FACS Order fi 45.
63             FACS Order fi 7.
64
               Public Notice, Report No. SAT-00154 (released Jun. 30, 2003).
65
        Letter from Robert A. Mazer, counsel for Leo One USA Corporation, to Marlene H. Dortch,
Secretary, Federal Communications Commission (filed Mar. 19, 2004).
66
               Leo One Worldwide, Inc., Memorandum Opinion and Order, DA 04-792 (released Mar. 25,
2004)
67
          E-SAT, Inc., Memorandurn Opinion and Order, 18 FCC Rcd 7662 (2003). No comments were
filed in response to E-SAT’Smilestone extension request. Id. at 7 5 .

                                                       -   19-


 case of System 1). Such interest also would be evidenced by parties filing applications to use the

 E-SAT spectrum. However, such interest apparently does not exist. Accordingly, based on the

 above facts, it is reasonable to conclude that, in this instance, warehousing of spectrum has not

 occurred. In fact, how can there be warehousing if there is no interest?

        It is clear that both the Big LEO and Little LEO industries never developed as the Bureau

 had originally envisioned. In the meantime, the market has changed dramatically. Apparently,

 there has been little, if any, interest in putting the Little LEO spectrum to use. However, as

 demonstrated by its efforts discussed herein, FACS is very interested in putting this spectrum to

 use. Yet the Bureau insists that the only way that FACS can now follow through on that interest

is submitting a completely new application, which will cause FACS to incur substantial

additional expense, including a substantial processing fee (more than $320,000) and a bond in

the amount of $7.5 million.68 In light of the above, denying FACS’s milestone request would

only result in FACS incurring significant and unnecessary additional expense without any

countervailing benefits.

V.      THE BUREAU ERRED BY FAILING TO ADEQUATELY CONSIDER THE
        PUBLIC INTEREST REASONS OFFERED FOR GRANTING FACS’S REQUEST

        The Bureau also could have granted FACS’s request for extension under Section

25.1 17(e)(2) of the Rules by finding that FACS had demonstrated unique and overriding public

interest concerns to justify the extension. Alternatively, the Bureau could have concluded that

FACS had shown good cause for a waiver of its milestone schedule.69 Waiver is appropriate


       FACS Order f 47.
69
        See Section 1.3 of the Commission’s Rules, 47 C.F.R. 0 1.3. See also WAIT Radio v. FCC, 418
F.2d 1153 (D.C. Cir. 1969) (WAIT Radio); GE American Communications Inc., 16 FCC Rcd 11038,
11041 (Int’l Bur. 2001). Generally, the Commission grants a waiver of its rules only if the relief
requested would not undermine the policy objectives of the rule in question, and would otherwise serve
the public interest. WAITRadio, 418 F.2d at 1157.

                                               - 20 -


 where special circumstances warrant a deviation from the rules, and where such deviation would

 better serve the public interest than strict adherence to the general             Circumstances that

 justify a waiver include considerations of hardship, equity, or more effective implementation of

 overall p o ~ i c y . ~ ’

          However, the Bureau gave inadequate consideration to the public interest reasons offered

 for granting FACS’s request. For example, the Bureau rejected FACS’s assertion that the public

 interest in competitive, affordable data services justified FACS’s extension, citing to its NEXSAT

 decision.72 However, the Bureau’s reliance on NEXSAT is misplaced because, unlike FACS ,

NEXSAT had argued that milestones were a barrier to entry for small corn petit or^.^^ Moreover,

in NEXSAT, the Bureau determined that active competition already existed in the marketplace.

In contrast, FACS argued that if milestones were strictly enforced in this instance, then there

only would be one operational Little LEO system. Moreover, FACS argued that granting its

extension was the most effective way to ensure a competitive Little LEO industry. Commission

precedent provides support for FACS’s assertion.          In the Second Earth Watch Modification

Order, the Bureau granted a request to extend the dates for completing satellite construction

launch by two years after finding that grant of the request “is likely to promote competition in

the market” and that given the early stages of develop of the industry, “a more lenient approach

[to the extension request] was a p p r ~ p r i a t e . ” ~Similar
                                                           ~      circumstances exist here. In fact, the

Commission has determined that the Little LEO service provides a variety of valuable low cost


70
         See Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1166 (D.C. Cir. 1990).
71
         WAITRadio, 418 F.2d at 1159.
l2       FACS Order 7 42.
73
         NEXSAT, 7 FCC Rcd at1991 (7 10).
14
        Earthwatch Incorporated, Order and Authorization, 12 FCC Rcd 19556, 19559 (7 10) (Int’l Bur.
1997) (“Second Earth Watch Modification Order”).

                                                -21 -


 data service to the public and that the public interest in availability of such services would best

 be served by a competitive industry. To date, there is only one operational Little LEO system in

 the market. FACS wants to succeed in achieving the Commission’s goal of providing a truly

 competitive industry. With the problems causing delay behind it, and with so much progress

 already made, it would be contrary to all notions of equity, as well as to the public interest to

 deny FACS’s request and eliminate the opportunity for FACS to ~ucceed.’~

         Second, failure to extend FACS’s milestones will critically undermine the credibility of

U.S. positions at future WRCs.           Many administrations, particularly those from developing

countries, supported the U.S. position seeking additional allocations for Little LEOS at the last

three WRCs. These countries believed that Little LEO service was viable and would provide

substantial benefits to their respective countries at low cost, based in large part on the strength of

U.S. advocacy. Revoking the license of the commercial party that fought hardest and had first

priority to apply for the spectrum, at best, will be viewed as inconsistent, and more likely, as a

betrayal. The practical impact will be to adversely effect the ability of the U.S. to obtain support

in the future for U.S. positions.

                                             CONCLUSION

        In view of the considerable effort and money expended to establish its system, the

progress attained, and the overall success that FACS drove at WRC-03 toward securing

additional international spectrum allocations, the compelling interest of service to the public

argues for granting the requested extension. Moreover, extending FACS’s milestone schedule

would also serve important Commission objectives, including advancing competition in the

75
        This is further underscored bv the fact that FACS will be able to provide competitive service as
soon as its first commercial satellites are successfully place in orbit. Due to the technical characteristics
of Little LEO operations and the nature of the services offered, service may be initiated, and the public
may enjoy the benefits of competition, even before the entire constellation is deployed.

                                                   - 22 -


 Little LEO market, consistent with the mandate of Section 10 of the Communications           and

 ensuring that U.S. positions at future WRCs are treated with credibility.

        For all the reasons stated in this Application for Review, FACS respectfully requests that

 the Commission reverse the Memorandum Opinion and Order released by the International

 Bureau (the “Bureau”) in the above-referenced proceeding, to reinstate FACS’s authorization to

construct, launch and operate a non-voice, non-geostationary mobile satellite service system in

low Earth orbit (“Little LEO”), and to grant FACS’s request to extend the time to complete

construction and launch of its system.

                                              Respectfully submitted,

                                              FINALANALYSIS
                                                         COMMUNICATION
                                                                    SERVICES,
                                                                           INC.



                                              By:
                                                    Randall W. Sifers
                                                    KELLEY   DRYE& WARREN      LLP
                                                     1200 19th Street, N.W., Suite 500
                                                    Washington, D.C. 20036
                                                    (202) 955-9606
                                                    Its Attorney

April 16,2004




’‘     47 U.S.C.   5   160.

                                              - 23 -


                                      DECLARATION


        Pursuant to Section 1.16 of the Commission’s Rules, 47 C.F.R. 9 1.16, I, Nader Modanlo,
Chairman and President of Final Analysis Communication Services, Inc., hereby submit this
declaration in support of the foregoing Application for Review (“Application”) dated April 16,
2004. I have read the Application and declare that the statements contained therein are true of
my own knowledge, except as to matters which are therein stated on information and belief, and
as to those matters, I believe them to be true. I declare under penalty of perjury that the
foregoing is true and correct.




                                               Nader Modanlo
                                               Chairman and President
                                               Final Analysis Communication Services, Inc.


       R A P FA         Mr.JanFriis
                        Final Analysis Communication Services, Inc.
                        970 1-E Philadelphia Court
                        Lanham,MD 20706
      ACCOUNTING
      TECHNOLOGY


      Dear Mr. Friis:

      At your request, the enclosed information is meant to give you a summary of our understanding of total
      costs incurred by Final Analysis Communication Services, Inc. (FACS) from 1998-2001 related to the
      design, development, construction and launch of the FACS System, a global constellation of non-voice,
      non-geostationary low earth orbit satellites. The enclosed results are a byproduct of our prior work
      relative to services performed under previous engagements.

      General Involvement with FACS
      My firm and I were employed by the law firm of Stein, Sperling, Bennett and DeJong to provide
      certain specific forensic auditing services. The basic scope of our assignment was initially to review
      and analyze the transactions of FACS for 2001 and 2002 to assess the general condition of the records
      of the company and of the company, itself. If any exceptions were noted or any fraud was uncovered
      during this process, we were to report it.

      More recently, we were asked to expand our testing to include January 1, 1995 through 2001. In so
      doing, we recognized that much of the details of transactions would be supported from charges from
      the parent company of FACS, Final Analysis, Inc. (FAI). As such, we performed a review of the cash
      receipts and disbursements from 1995 through December of 200 1, (although very few transactions
      occur in FA1 after September of 2001 as it became subject of an involuntary bankruptcy proceeding).

      In general, our work encompassed what is known as a proof of cash for this period. These are
      procedures in which the deposits and disbursements from the bank statements for a certain period of
      time are agreed to the books of record of a business to ensure that everything that flowed through the
      bank has been included in the books of record and everything in the books of record have been
      recorded by the bank.

      Some Definitions
      However, as forensic or fraud auditing is typically much more detailed than standard audit procedures,
      our review of the documentation supporting such transactions extended to a much greater number of
      transactions.



Embracing
_______      Ymr Vkion
                  _ _          _ _ ~                                                            .__.-   -__
1899 L STREET, NW I SUITE      600 I WASHINGTON,     DC   20036 1202-822-5000   I F:   202-822-0669 I www,raffa.com


$
    Mr. Jan Friis.                                 April 15, 2004                                      Page 2


    To be clear, auditing is a systematic process of objectively obtaining and evaluating evidence
    regarding assertions about economic actions and events to ascertain the degree of correspondence
    between those assertions and established criteria and communicating the results to interested users.
    This is typically done through financial statements.

    In afinanciaf audit, the assertions about which the auditor seeks objective evidence relate to the
    reliability and integrity of financial and, occasionally, operating information. The examination of the
    objective evidence underlying the financial data as reported is called an audit.

    Analytics, inquiries of management and the verification of information through evidential matter
    (support) external to the company (i.e., “other audit procedures”) are required.

    A forensic audit or fraud investigation is a process in which specific and detailed audit procedures are
    performed with the intent of determining if a fraud has been committed. Fraud encompasses an array
    of irregularities and illegal acts characterized by intentional deception and can be perpetrated for the
    benefit or detriment of an organization.

    As fraud by its nature involves falsehood and deception, those who commit fraud attempt to conceal
    their acts so as to escape detection and its consequences. As such, even those who specialize in fraud
    detection and investigation cannot guarantee that fraud will be detected as a result of a forensic audit.
    From our testing, we did not note any direct evidence of fraud.

    Disbursements and Stock Transfer
    From our work we were able to determine that between January 1, 1998 through May 3 1, 200 1 , FACS
    made payments of approximately $21 million in cash and $56 million in stock transfers (for a total of
    about $77 million) related to the design, development, construction and launch of the FACS System.
    This includes all funds disbursed inclusive of payroll, vendor charges, loan repayments, transfers to
    others, etc. The $21 million amount did not appear to include any cost associated any R&D programs
    nor does it include any cost associated with Company’s domestic and international regulatory efforts or
    other legal costs. However, this amount did include approximately $2.2 million of payroll costs related
    to the design and development of the FACS System.

    In order to arrive at the total population of cash disbursements, we downloaded a schedule of cash
    disbursements for each year from the accounting system(s) of FACS. The schedule generally included
    check number with date, vendor and amount listing a brief description of the invoice. We sorted the
    amounts into one of 8 categories of disbursement including payroll and related benefits, overhead,
    satellite costs, business development, regulatory costs, loan repayments, transfers to FACS and transfer
    to others.

    We selected from this population any vendodpayee that was paid in excess of $10,000 for the period
    from January 1, 1995 through September 200 1.


Mr. Jan Friis.                                April 15,2004                                      Page 3


For each of these disbursements:
    J We reviewed the original invoices or other supporting documents received from the
       vendodpayee.
   J We reviewed the cancelled checks noting authorized signatories and reasonable
       endorsemenddeposit information on the back of the check.
   J We noted that the disbursement agreed to the bank statement.
   J We noted that the vendor was a part of FA1 and FACS master vendor’s list.
   J If it was a wire transfer or a cash withdrawal, we noted that it cleared the bank statement and
       (in most cases) who initiated the transfedwithdrawal. For bank transfers, we were able to
       determine the destination bank.

For the stock transfers:
    J We reviewed several constructions and launch contracts between and among FACS former
       parent company and prime contractor and other third parties.

As for payroll disbursements, those were confirmed by taking the payroll for each of the calendar years
and agreeing it to the amounts reported on the Federal payroll forms including the Forms w-2/w-3 and
Forms 1099/1096 annual filing/reconciliation and Federal Forms 941 and 940; thus covering 100% of
the disbursements made for payroll.

Restrictions
This report is intended solely for use of the management of FACS and the law firm of Kelley Drye and
Warren, LLP and should not be used for any other purpose.

Sincerely,




Thomas J. Raffa


.
    Final AnaJvsis Inc.
                                                   FMSAT
                                      Global Telecommunications System

                             Acceptance of Requirements for Milestone CDR
                                                For the
                                   Earth Horizon Sensor Subsystem
                                             BY
                                SERVO CORPORATION OF AMERICA
                                          Date: September 16,2000

    On September 16, ZOO0 I reviewed CDR documentation submitted by SERVO CORPORATION
                    .
    OF AMERICA The documentation received is very extensive and complete. The documentation
    satisfies the requirements of the CDR milestone, and is accepted by FAI.

    The docmentation contains 36 B-sizedrawings and 143 A-size drawings, descriptions, analyses,
    specifications and procedures. From this documentation it is apparent that the design is complete
    and ready for manufacture.

    The documentation contains:

    a.    Unit performance specifications
    b.    Descriptions of the Item Design
    C.    Functional Block Diagrams (and 38 pages of math models)
    d.    Design analyses (IR performance)
    e.    Performance characteristics and other documentation
    f.    Requirements compliance
          Mechanical and Electrical ICD
    h.    Full set of engineering drawings

    While the above satisfies the requirements of a CDR, when available, FAI would like to review the
    parts derating analyses, the test results obtained to date and the test plans.

    The CDR Milestone is successfully satisfied,




    -
    Dr. George Sebestyen
    Chief technical Offcer (Acting)




                                           Final Analysis Proprietary


.

                                    CERTIFICATE OF SERVICE


            I, Beatnz Viera-Zaloom, hereby certify that a true and correct copy of the foregoing
    Application for Review, on behalf of Final Analysis Communication Services, Inc., was
    delivered via hand delivery or via e-mail, this 16th day of April, to the individuals below.



    The Honorable Michael K. Powell *                The Honorable Kathleen Q. Abernathy *
    Chairman                                         Commissioner
    Federal Communications Commission                Federal Communications Commission
    445 12th Street, S.W.                            445 12th Street, S.W.
    Washington, D.C. 20554                           Washington, D.C. 20554

    The Honorable Michael Copps *                    The Honorable Kevin Martin *
    Commissioner                                     Commissioner
    Federal Communications Commission                Federal Communications Commission
    445 12th Street, S.W.                            445 12th Street, S.W.
    Washington, D.C. 20554                           Washington, D.C. 20554

    The Honorable Jonathan S. Adelstein *            Donald Abelson
    Commissioner                                     Bureau Chief, International Bureau
    Federal Communications Commission                Federal Communications Commission
    445 12th Street, S.W.                            445 12th Street, S.W.
    Washington, D.C. 20554                           Washington, D.C. 20554
                                                     Donald.Abelson@fcc.gov

    Roderick Porter                                  Steven Spaeth
    Deputy Bureau Chief, International Bureau        Legal Advisor
    Federal Communications Commission                Office of the Bureau Chief
    445 12th Street, S.W.                            International Bureau
    Washington, D.C. 20554                           Federal Communications Commission
    Roderick.Porter@fcc.gov                          445 12th Street, S.W.
                                                     Washington, D.C. 20554
                                                     Steven.Spaeth@,fcc.gov

    Thomas S. Tycz                                   Cassandra Thomas
    Chief, Satellite Division                        Deputy Chief, Satellite Division
    International Bureau                             International Bureau
    Federal Communications Commission                Federal Communications Commission
    445 12th Street, S.W.                            445 12th Street, S.W.
    Washington, D.C. 20554                           Washington, D.C. 20554
    Thomas.Tvcz@,fcc.~iov                            Cassandra.Thomas@,fcc.pov


Mark Young                                      Bryan Tramont *
Satellite Division                              Chief of Staff
Federal Communications Commission               Office of Chairman Michael Powell
445 12th Street, S.W.                           Federal Communications Commission
Washington, D.C. 20554                          445 12th Street, S.W.
Mark.Young@,fcc.gov                             Washington, D.C. 20554

Sheryl Wilkerson *                              Jennifer Manner *
Office of Chairman Michael Powell               Office of Commissioner Kathleen Abernathy
Federal Communications Commission               Federal Communications Commission
445 12th Street, S.W.                           445 12th Street, S.W.
Washington, D.C. 20554                          Washington, D.C. 20554

Paul Margie *                                   Sam Feder *
Office of Commissioner Michael Copps            Office of Commissioner Kevin Martin
Federal Communications Commission               Federal Communications Commission
445 12th Street, S.W.                           445 12th Street, S.W.
Washington, D.C. 20554                          Washington, D.C. 20554

Barry Ohlson *
Office of Commissioner Jonathan Adelstein
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554




* Via hand delivery

                                            2



Document Created: 2004-04-20 15:37:16
Document Modified: 2004-04-20 15:37:16

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