Attachment 1992Response to oppo

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

IBFS_SATLOA1990051800036_1060537

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 Py ) In re Application of SATELLITE CD RADIO, INC. ) File'NOS: 49/50—DSS—P/LA—90 ) \\| Lo*~58/59—DSS—AMEND—90 For Authority to Construct and y _2 /" 44/ 45—DSS—AMEND—92 Operate a Digital Audio Radio ) Service Satellite System Using ) RECE'VED the 2310 to 2360 MHz Frequency ) Band ~ ; DEC 1 5 1992 To: Chief, Common Carrier Bureau erCr">. FEDERAL COMMUNICATIONSCOMMISSION uy on& OFFICE OFTHE SECRETARY RESPONSE TO OPPOSITION TO PETITION TO DENY Primosphere Limited Partnership ("Primosphere"), by its attorneys, pursuant to the Public Notice, DA 92—1408, Report No. DS—1244, released October 13, 1992, hereby submits its response to the "Opposition to Petitions to Deny and Response to Comments" filed by Satellite CD Radio, Inc. ("SCDR") on December 1, 1992. SsCDR is an applicant for authorization to construct, launch and operate a satellite digital audio radio service ("DARS") systenm. Primosphere, which is filing its own application for authorization to construct, launch and operate a satellite DARS system, filed a Petition to Deny-against SsCDR‘s application on November 13, 1992. In its Petition, Primosphere asserted, inter alia, that SCDR‘s application should be denied because SCDR‘s ownership structure is in violation of Section 310(b) of the Communications Act, as amended. SsCDR‘s Opposition essentially makes three points in response to this aspect of Primosphere‘s Petition. Primosphere herein will address each in turn.

I. SsCDR‘s Ownership Structure, As Amended, Remains in Violation of Section 310(b) of the Communications Act. SsCDR points out that on October 30, 1992, it filed an amendment which reported changes in its level of alien ownership, and that Primosphere‘s Petition was therefore based on outdated information. Although Primosphere based its November 13 Petition on SCDR‘s pre—amendment ownership structure, the ownership structure as reported in SCDR‘s October 30, 1992 amendment continues to violate Section 310(b) of the Act. According to SCDR‘s October 30, 1992 amendment, 26 percent of sCDR‘s common stock is owned by aliens. In addition, one—third of SsCDR‘s board of directors are non—U.S. citizens and the corporation‘s Chief Executive Officer is also a non—U.S. citizen. Since Section 310(b) prohibits non—U.S. citizens from serving as an officer or director of a corporate applicant/ licensee, SCDR‘s application, as amended, violates Section 310(b) based both on the level of equity owned by aliens and on the participation of aliens in positions of significant influence over decisions affecting policy as well as day—to—day management. SCDR continues to ask the Commission to grant one of as few as three or four available authorizations for satellite DARS to a corporation with aliens in positions of ownership leadership and significant influence. Although SCDR‘s October 30, 1992 amendment asserts that the 26 percent equity owned by an alien does not give that individual "control over Satellite CD Radio," the applicable benchmark in Section 310(b) is 20 percent of the corporation‘s equity, not a controlling interest. Clearly, SCDR‘s October 30,

1992 amendment falls far short of resolving the alien ownership concerns raised by Primosphere in its Petition. II. SCDR‘s Opposition Did Not Rebut the Leqal and Policy Reasons Articulated by Primosphere as to Why the Act‘s Alien Ownership Restrictions Should Apply to _SCDR‘s Proposal. In its Petition, Primosphere asserted that there were both policy and precedential reasons to apply Section 310(b) to SCDR‘s proposed subscr&ption-based service. Primosphere pointed out that, regardless of the ultimate classification of SCDR‘s service as broadcast or non—broadcast, satellite DARS was destined to be a pervasive and influential service, and one which will be provided by only a handful of licensees. 1'“’Furthermore, not applying Section 310(b)»to SsCDR‘s service while applying it, for example, to MMDS licensees, who typically have even less control over program content and whose signal reach is only 15 miles, would be a complete anomaly." SCDR responds essentially by focusing again on whether its service should be classified as broadcast or non—broadcast. Opposition at p. 25. This classificatory distinction misses the point. Whether or not SCDR‘s service is classified for requlatory 1 By SCDR‘s own estimates, its service has the potential to reach roughly 14.5 million people by the year 2003. SCDR Application, p. 38. * In its Petition, Primosphere also questioned the logic in requiring, for example, a 250—watt, daytime—only AM broadcast station, perhaps serving only several thousand persons, to comply fully with Section 310(b) while exempting a satellite DARS radio service with the potential of serving in excess of 10 million persons. Many AM and FM stations typically transmit satellite delivered programming for a large portion of their broadcast day, and air very little, if any, locally produced programming, so SCDR‘s proposed subscription—based service is analogous to the way many radio stations currently operate. 3

purposes as a non—broadcast service, precedent supports applying Section 310(b) to the entity which holds the license for the channel by which a service is delivered. Indeed, SCDR quotes language from the Commission‘s rulemaking on whether to classify subscription—based video services as broadcast or non—broadcast. Opposition at p. 25, citing Subscription Video Services, 2 FCC Rced. 1001 (1987), aff‘d sub nom., National Association for Better Broadcasting V.QFCC, 849 F.2d 665 (D.C.Cir. 1988). Even though the Commission classified direct broadcast satellite and other video subscription services as non—broadcast, Section 100.11 of the Commission‘s rules makes Section 310(b) of the Act applicable to the licensees of DBS systenms. See also Subscription Video Services, 4 FCC Red. 4948 (1989) (on reconsideration) (whereas customer—programmers are not subject to alien ownership restrictions, DBS licensees are). The Commission hasthus applied Section310(b)‘tolicenseesin services directly analogous to SCDR‘s proposed figrvicel recognizing that the licensee is the "gatekeeper" to the spectrum, regardless of whether the licensee also controls program content." 3 SCDR also cites Orion Satellite Corporation, 5 FCC Red. 4937 (1990), in support of its ownership structure. Opposition, p. 25, n. 82. However, the two situations are readily distinguishable. In Orion, the Commission was Gdealing with an international satellite service where foreign ownership is the norm, rather than the exception. 5 FCC Rced. at 4940. SCDR‘s proposed service does not have an international component. In addition, the equity owned by foreign investors in Orion was passive, and the Commission demanded, as a condition of grant, that the limited partnership agreement be amended to insulate the passive investors from any material involvement in the day—to—day affairs of the company. Id. The 26 percent of SCDR‘s equity owned by a non—U.S. citizen is voting, not passive stock, and there appear to be no applicable insulation provisions in SCDR‘s organizational documents. Furthermore, unlike in Orion, aliens occupy positions on SCDR‘s (continued...)

III. SCDR‘s Application Should Not Be__Granted Until the Commission Adopts Rules to Govern Alien Ownership of Satellite DARS. SCDR‘s final line of defense is that it can restructure its ownership if and when the Commission concludes a rulemaking proceeding in which the alien ownership issue is resolved. Thus, SCDR urges the Commission not to wait until a rulemaking proceeding is concluded to grant its application, even though its application, in all likeliflbod, wWill be violative of the rules eventually adopted. SCDR‘s request should not be granted for several reasons. Granting SCDR‘s application prior to the conclusion of the rulemaking proceeding will place artificial and unnecessary pressure on the rulemaking process. The mere existence of a license to SCDR could influence the timing and content of the Commission‘s ultimate rules for this new service. Historically, the Communications Act‘s strict prohibition against "premature construction" of radio facilities stems from concerns that once a person constrficts a station there will be undue pressure on the Commission to authorize the already—constructed but unauthorized facilities. The same kind of pressure would occur in the present situation —— once SCDR constructs and launches its satellites, the 3(...continued) board and an alien will serve as the Chief Executive Officer. There is thus a far greater degree of involvement and influence by aliens in SCDR‘s organization than there was in Orion. And, notwithstanding all of the safequards imposed on alien influence in Orion, the Commission expressly retained jurisdiction to review the matter if circumstances changed [id. at 4940], and one Commissioner expressed reservations about the foreign equity ownership in the licensee [see Separate Statement of Commissioner Barrett, 5 FCC Rced. at 4946]. For all of these reasons, Orion does not stand as support for SCDR‘s ownership structure. 5

Commission will be pressured to adopt rules which permit SCDR‘s alien ownership (or to waive immediately whatever rules it adopts). It is simply insufficient and unpersuasive for SCDR to promise to reform its proposal to conform with the eventual rules. The reality is that SCDR will aggressively try to shape the rules to match its plans, and will seek waivers if the rules do not conform to its ownership structure. Indeed, SCDR is expressly anticipating asking for a waiver of the alien ownership rules even before the rules are adopted. A contemplative, orderly process does not envision granting an application and then immediately thereafter addressing waivers of technical and non—technical rules adopted after the system has been constructed and/or been in operation. WHEREFORE, for the reasons contained in Primosphere‘s Petition to Deny, and in this Response, SCDR‘s application should be denied. Respectfully submitted, PRIMOSPHERE LIMITED PARTNERSHIP By: [fenormoe!N. pekm Howard M. Liberman Gerald Stevens—Kittner Arter & Hadden 1801 K Street, N.W. Suite 400 K Washington, D.C. 20006 (202) 775—7100 and resftr A. 7C;(€Fp/ii/C%M4— Leslie A. Tayor Leslie Taylor Associates 6800 Carlynn Court Bethesda, MD 20817 (301) 229—9341 December 15, 1992 Its Attorneys 6

CERTIFICATE OF SERVICE I, Michelle Jarrett, a secretary of the law firm of Arter & Hadden, hereby certify that on this day, December 15, 1992, a copy of the foregoing RESPONSE TO OPPOSITION TO PETITION TO DENY was served by first class U.S. mail, postage prepaid, upon the following persons: Richard E. Wiley Neal T. Kilminster Michael Yourshaw World Systems Division Carl R. Frank Communications Satellite Wiley, Rein & Fielding Corporation 1776 K Street, N.W. 950 L‘Enfant Plaza, S.W. Washington, D.C. 20006 Washington, D.C. 20024 Counsel for Satellite CD Radio, Inc. Len Schuchman Senior Vice President Michael A. Menius Stanford Telecommunications, Director, Government Inc. Relations, 2421 Mission College Boulevard Common Carrier Programns Santa Clara, CA 95054 Motorola Government Relations Office 1350 I Street, N.W., Suite 400 Steven A. Lerman Washington, D.C. 20005 Sally A. Buckman David S. Keir Leventhal, Senter & Lerman John E. Fiorini, IILI 2000 K Street, N.W., Suite 600 Mark Van Bergh Washington, D.C. 20006—1809 Gardner, Carton & Douglas Counsel for Joint Parties 1301 K Street, N.W. Suite 900, East Tower Washington, D.C. 20005 William K. Keane Counsel for Emmis Winston & Strawn Broadcasting Corp. — 1400 L Street, N.W. Washington, D.C. 20005 Counsel for Aerospace & William J. Potts, Jr. Flight Test Radio Haley, Bader & Potts Coordinating Council 2000 M Street, N.W. Washington, D.C. 20036 Counsel for Association Howard F. Jaeckel for Broadcast Engineering John W. Zucker Standaras, Inc. CBS, Inc. 51 West S2nd Street New York, NY 10019

David E. Leibowitz Tim McDermott Jennifer L. Bendall General Manager Recording Industry KSBJ Association of America, Inc. P.0. Box 187 1020 l9th Street, N.W. Humble, TX 77347 Washington, D.C. 20036 Craig C. Todd Bernard Korman Senior Member of the American Society of Technical Staff Composers, Authors, Dolby Laboratories & Publishers 100 Potrero Avenue ASCAP Building — San Francisco, CA 94103 one Lincoln Plaza New York, NY 10023 Bryan Kinm New World Sky Media 553 South Street Janice L. Stott Suite 312 General Manager Glendale, CA 91202 KVST Radio 1212 S. Frazier Conroe, TX 77301 Robert L. Johnstone Director, Strategic Marketing Gary K. Noreen J Boats, Inc. Chairman & CEO 30 Walnut Street Radio Satellite Corporation Newport, RIL 02840 1167 North Holliston Avenue Pasadena, CA 91109 Peter J. Schaffer Vice President Dr. Jack W. Mitchell General Counsel Director, Wisconsin All Pro Sports and Public Radio Entertainment 821 University Avenue 1999 Broadway Madison, WI 53706 . Denver, CO 80202 Douglas A. Heydon Ralph H. McBride President President Arianespace, Inc. Voice Broadcasting, Inc. 700 13th Street, N.W. P.0O. Box 820 . Suite 230 Bridge City, TX 77611 Washington, D.C. 20005

Joseph N. Pelton John M. Seavey Director President University of Colorado at Seavey Engineering Boulder Associates, Inc. Interdisciplinary 135 King Street Telecommunications Program Cohasset, MA 02025 Engineering Center, OT 2—41 Campus Box 530 Boulder, CO 80309—0530 Bruce D. Jacobs Glenn S. Richardads Gregory L. Masters Henry L. Baumann Fisher, Wayland, Cooper & Valerie Schulte Leader National Association of 1255 23rd Street, N.W. Broadcasters Suite 800 1771 N Street, N.W. Washington, D.C. Washington, D.C. 20036 Counsel for AMSC Subsidiary Corporation James B. Bailey Senior Design Engineer Lon C. Levin Techsonic Industries, Inc. AMSC Subsidiary Corporation 1 Hummingbird Lane 1150 Connecticut Ave., N.W. Lake Eufaula, AL 36027 4th Floor Washington, D.C. 20036 Dr. Frank R. Arans Vice President David J. Del Beccaro LNR Communications Digital Cable Radio 180 Marcus Boulevard 2200 Byberry Road Hauppauge, NY 11788 Hatboro PA 19040 Charles Reutter Rolfe Larson ComStream Corporation Director 104 East Bay View Drive Minnesota Public Radio — Annapolis, MD 21403 45 East Seventh Street Saint Paul, MN 55101 Henry C. Rock, II The Right—Roc Group John E. Fiorini, III 331 West 57th Street Gardner, Carton & Douglas New York, NY 10019 1301 K Street, N.W. Suite 900, East Tower Washington, D.C. 20005 Rollins Hudig Hall Counsel for Radio Operators 13873 Park Center Road Caucus Suite 201 Herndon, VA 22071

H.J. Masoni Manager, Advanced Prograns Hughes Aircraft Company Space and Communications P.0. Box 92919 Los Angeles, CA 90009 Michetle Jarret?


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