Attachment 1997Primosphere repl

This document pretains to SAT-LOA-19900518-00036 for Application to Launch and Operate on a Satellite Space Stations filing.

IBFS_SATLOA1990051800036_1060355

                                                                                COPY
                                                                                                         V/7

                             Before the          RECEIVED
               FEDERAL COMMUNICATIONS COMMISSION
                                Washington, D.C. 20554                               DEC 5 — 1997
                                                                              Federai Co iunications Commission
                                                                                        Ci‘zs of Secratary

In the Matter of                                      )     File Nos. 71—SAT—AMEND—97
                                                      )     49/50—DSS—P/LA—905
SATELLITE CD RADIO, INC.                              )     58/59—DSS—AMEND—90
                                                      )     8/9—DSS—AMEND—92
Application for Authority to Construct,               )     12/13—DDS—AMEND—92
Launch and Operate Two Satellites in the              )     44/55—DDS—AMEND—92
Digital Audio Radio Service                           )     42—SAT—AMEND—95
                                                      )     71—SAT—AMEND—97
To: The Commission



                                                  P       ATION F           VIEW

        Primosphere Limited Partnership ("Primosphere"), by its attorneys, pursuant to Section

 1.115 of the Commission‘s rules, hereby files its Reply to the Opposition to Application for

Review filed on November 25, 1997, by Satellite CD Radio, Inc. ("CD Radio") in the above—

captioned matter.

        Background. On November 10, 1997, Primosphere filed an Application for Review of

the Order and Authorization of the Chief, International Bureau, granting authority to CD Radio

to launch and operate a satellite system in the Satellite Digital Radio Serve ("SDARS") and

denying Primosphere‘s Petition to Deny the application of CD Radio. Primosphere maintained

 that the percentage of foreign equity investment in CD Radio exceeds the statutory benchmark of

 Section 310(b)(4) of the Communications Act by more than six percent and that the Bureau erred

 in determining that because CD Radio proposed neither broadcast nor common carrier service,

 Section 310(b)(4) does not apply. Primosphere argued that the Bureau should not have used the

 decade—old Subscription Video decision to determine that CD Radio would not be a broadcaster,

— and that the Subscription Video decision should be overruled. Primosphere further noted that the


Bureau erred in applying common carrier law in order to determine that the foreign ownership

was in the public interest, even if it considered CD Radio subject to Section 310(b)(4).

Primosphere criticized the Bureau‘s reliance on CD Radio‘s assertion that a future public stock

offering would result in the dilution of foreign ownership. And finally, Primosphere urged the

Commission to investigate the ownership interests of Robert Friedland.

        In its Opposition, CD Radio appears to have lost its patience with Commission processes,

invoking the passage of seven years since it filed its application as at least one reason to

"expeditiously" deny Primosphere‘s Application for Review. The mere passage of time is not a

sufficient reason to ignore the infirmity of the Bureau‘s decision.

        Primosphere i            itled to request that the          Commission review and overturn its

Subscription Video decision. The Bureau relied on the decade—old Subscription Video decision

to determine that CD Radio would not be a broadcaster and therefore that the foreign ownership

restriction of Section 310(b)(4) of the Act does not apply.               Primosphere maintains that this

decision is no longer applicable to today‘s multi—channel environment. CD Radio takes issue

with this argument, arguing that Primosphere should have filed a petition for reconsideration of

the Subscription Video decision or filed a petition for reconsideration of the SDARS Order itself.

The notion that in order to request the Commission to change a policy it might be necessary to

have filed in a ten—year—old proceeding must be dismissed out of hand. No party, including

Primosphere (not even in existence in 1987), can be held to such an absurd standard. Nor should

Primosphere be required to have argued for the revision of the Subscription Video decision in the

SDARS proceeding.‘         Section 115(b)(2)(iii) of the Commission‘s rules specifically permits an


‘ It is well settled that the Commission may adopt or change a policy in an adjudicatory proceeding. See Busse
Broadcasting Corp. v. F.C.C., 87 F.3d 1456, 1465, 3 C.R. 1226 (D. C. Cir. 1996); Columbia Broadcasting Sys., Inc.
 v. F.C.C., 454 F.2d 1018, 1026, 23 RR. 2d 2019 (D.C. Cir. 1971).

                                                  12.


application for review of a Bureau‘s decision where: "The action involves application of a

precedent or policy which should be overturned or revised." This is precisely Primosphere‘s

contention. Whether the Bureau had a right to rely on the Subscription Video decision is not at

issue. Whether the Bureau should have relied on the decision is another matter altogether and

one properly before the Commission for review.

       must
       Foreign ownership reviwed now.                    The Report and Order establishing the

SDARS service permitted licensees the flexibility to choose whether or not to provide

subscription service. It did not discuss the eventuality of a licensee changing from subscription

to non—subscription service, and certainly adopted no administrative mechanism for doing so. In

its Order, the Bureau apparently assumes such a mechanism —— a petition for declaratory ruling.

Of course, the Bureau had no authority to adopt such a policy in the absence of any Commission

statement on the issue and mis—read the Commission‘s intention to give licensees maximum

flexibility to choose their own business plans. In spite of CD Radio‘s assurance in its Opposition

that it will seek Commission approval, should CD Radio abandon subscription service, the fact

remains that, under the rules, it need not do so.     Thus, even under the Subscription Video

definition, CD Radio could become a broadcaster with no opportunity for the Commission to

determine whether its impermissible degree of foreign ownership is in the public interest.

       CD Radio‘s foreign ownership will not decrease, as the Bureau was led to believe.

The Bureau gratefully accepted CD Radio‘s assurance that an imminent public stock offering

would dilute the degree of foreign ownership, thus mooting the issue. We now find that perhaps

the Bureau bought a pig in a poke. In its Opposition, CD Radio explains:


       In just the past few days, as CD Radio‘s financing neared completion, it has
       become clear that these earlier pro forma estimates must be adjusted to account
       for the fact that many of CD Radio‘s preferred shareholders have not yet
       converted their shares to common stock and that the current public offering is not
       as large as had originally been projected.

Indeed. Based on CD Radio‘s own statements, the Commission has now learned that it cannot

and should not rely on future events that may dilute the foreign ownership.       Once again CD

Radio has pled according to the dictates of convenience.

       Why the Friedlands‘ interest in CD Radio must be examined. CD Radio continues to

urge the irrelevance of Primosphere‘s emphasis on the citizenship and legal entanglements of

Robert Friedland and his continuing relationship to CD Radio. The fact is, however, justifiable

suspicions about Robert Friedland ?annot be wished away.          Robert Friedland was reported

initially as owning 19 percent of CD Radio‘s stock as a Canadian citizen. Regardless of CD

Radio‘s protestations, there has never been an affidavit from Mr. Friedland clarifying the

question of his citizenship; only CD Radio‘s assertions that Mr. Friedland holds dual Canadian

and U.S. citizenship. Furthermore, although Robert Friedland transferred his stock to his wife,

Darlene (surely an unnecessary act if he were, indeed, a U.S. citizen), we have never been given

any information about the terms of the transfer except for Darlene‘s statement that Robert has no

legal or beneficial interest in the stock. Now, given that Darlene has transferred her voting rights

in the stock to Mr. Margolese, a Canadian citizen, the circumstances and conditions under which

she acquired her husband‘s stock become more important.             As Primosphere noted in its

Application for Review, the voting trust agreement brings combined total control of CD Radio

by non—U.S. citizens to more than 50 percent. And, as noted above, CD Radio now admits that


the results of its public offering may not have the dramatic effect of diluting the percentage of

foreign ownership so relied upon by the Bureau.

        In its Opposition, CD Radio says nothing about the U.S. government suits against Robert

Friedland, who, at the very least, is a former stockholder and director of CD Radio and whose

continuing relationship with the company is still in doubt. The Bureau‘s reluctance to consider

these suits because they are still pending was in error.                These suits, which have not been

dismissed, are pending because Mr. Friedland has fled the country! The U.S. government seeks

to hold Mr. Friedland personally liable for one of the most significant environmental disasters in

the nation‘s history. If, as Primosphere maintains, the Commission should properly be using the

standards of a broadcast application process to examine the applicant‘s qualifications, then surely

this matter is relevant.*

        Conclusion. CD Radio decries the seven years it has taken the Commission to reach the

point where it will grant licenses to provide a digital audio radio service. Primosphere urges that

after seven years of effort it is now incumbent upon the Commission to make sure that it does the

right thing. The Commission must step back from the heady excitement of the auction process

and take the correct actions now:            Reconsider the Subscription Video decision.             Apply the

Communications Act‘s           foreign ownership restrictions to CD Radio.                      Investigate the

circumstances of Robert Friedland‘s involvement with CD Radio. When the Commission fully




* So too, is the matter of Mr. Friedland‘s criminal conviction in 1971. Even where a minority owner‘s relationship
with an applicant has been terminated, the Commission has held an investigation of character applicable. See TV 9,
Inc. v. F.C.C., 495 F.24 929, 28 R.R. 2d 1115 (D.C. Cir. 1973), cert. denied, 419 U.S. 986 (1974).


                                                   15.


considers these matters the Commission will conclude that it is not in the public interest to grant

a license to CD Radio.

                                             Respectfully submitted,

                                             PRIMOSPHERE LIMITED PARTNERSHIP



                                             o. avoelM. Phesn
                                                     Howard M. Liberman
                                                     Robert J. Ungar
                                                     Elizabeth A. Hammond
                                                     ARTER & HADDEN LLP
                                                     1801 K Street, NW., Suite 400K
                                                     Washington, DC 20006
                                                     (202) 775—7100

                                              Its Attorneys

December 5, 1997




 116253.1D


                               CERTIFICATE


       I, Nellie Martinez—Redicks, a secretary at the law firm of Arter & Hadden LLP, hereby

certify that a true copy of the foregoing Reply to Opposition to Application for Review has been

mailed by First Class United States mail, postage prepaid, this 5th day of December, 1997 to:

                                       Carl R. Frank, Esq.
                                     Wiley Rein & Fielding
                                      1776 K Street, N. W.
                                    Washington, DC 20006




                                            ddrtee Wlaxtonp.bfpcibo)
                                             Nellie Martinez—Redicks C



Document Created: 2014-09-05 14:34:13
Document Modified: 2014-09-05 14:34:13

© 2024 FCC.report
This site is not affiliated with or endorsed by the FCC