Attachment 2003TMI TerreStar-up

This document pretains to SAT-LOI-19970926-00161 for Letter of Intent on a Satellite Space Stations filing.

IBFS_SATLOI1997092600161_819598

SQ\/Q—% \[e/bj nston September 26, 2003 Mr—BDonald=*belson—C International Bureau Federal Communications Commission 445 Twelfth Street, SW Washington, DC 20554 Re: File No : 189—SAT—LOI—97 IBFS Nos. SAT—LOI—19970926—00161 SAT—AMD—20001103—60158 Dear Mr. Abelson: On September 3, 2003, following a meeting with you, Bryan Tramont, Chief of Staff, and John Rogovin, General Counsel, we included as part of our ex parte submission a chart that TMI and TerreStar had used in the meeting the day before. It shows that in every case where a satellite authorization has been cancelled on milestone grounds there was no outstanding non—contingent satellite construction contract that conformed to the authorization and that, in several cases, licenses remained in good standing, even when such a contract did not exist. This submission encloses an updated chart that incorporates the most recent decision on this point. Last week the Commission issued the Conste/lation decision (FCC 03—217), in which it affirmed the Bureau‘s earlier cancellation of Constellation‘s satellite authorization because of its failure to meet milestone requirements. The Commission held this to be the case with respect to the second and subsequent milestone requirements, though it noted, n. 12, that it had not ruled whether even the initial milestone had been met by a non—contingent construction contract. It also held (para. 18) that as to 44 of the 46 satellites in question, Constellation had provided no "evidence that it has entered into a non—contingent contract for . . . construction." This is the critical distinction —— whether there is a non—contingent satellite construction contract that conforms to the authorization. Such a contract existed in our case; it did not exist in the Constellation case. Constellation argued for a waiver because it alleged that economic conditions beyond its control and rapidly changing technology had caused the delay. In our case the issue was not whether excuses for delay were sufficient, because there was no delay in entering the required contract. In the Constellation case (para. 20) the Commission cited the objective of making spectrum "available to parties that appear able and willing to use it to bring service rapidly to the public." TMI/TerreStar met that test as well. Moreover, in the words of last week‘s Constellation decision, TMI and TerreStar were "diligently proceeding with the implementation of its system." The Bureau‘s February 10 Order cited seven milestone cases in connection with the cancellation of the TMI/TerreStar authorization, not all of which are covered by our chart. Accordingly, we thought it would be useful briefly to summarize all of the cited cases, thereby documenting that none of them supports the result which the Bureau reached in the TMI/TerreStar case.

e Columbia: The Bureau‘s Opinion singled out Columbia as being "in many respects, analogous" to the situation in our case. The facts of Columbia are completely different from the facts in our case, however. In Columbia a transfer of the authorization was contemplated by the parties, as was the case here, but unlike here, the parties in Columbia chose to use the pendency of the deal as an excuse not to enter into a conforming, non—contingent construction contract. In contrast, there is no dispute that a conforming, non—contingent construction contract was entered into here. Motorola and Teledesic: In this case, no conforming, non—contingent satellite construction contact had been entered into by the milestone deadline. The parties argued that this was infeasible because an assignment application was pending. The Bureau concluded: "what actually thwarted Motorola from complying with the construction—commencement requirement prior to the milestone deadline was that it could not reach agreement with Teledesic regarding apportionment of cost burdens that would arise under a construction contract executed while the Assignment Application was pending. The Applicants‘ failure to reach agreement with each other concerning reimbursement was not a circumstance beyond their control and cannot be deemed good cause for waiving the milestone rule." In contrast, TMI and TerreStar reached agreement, the basic structure of which had been hammered out in January 2001, and pursuant to that agreement a conforming, non—contingent construction contract had been entered into by the milestone deadline. PanAmSat: This case, decided by the full Commission, also involved a transfer of a satellite authorization via a merger, and the parties tried to use the pendency of the merger and certain modification proposals that flowed from the merger as an excuse for not having entered into a conforming, non—contingent satellite construction contract. Here, of course, TMI and TerreStar not only did not use the pending transfer as an excuse but in fact entered into a construction contract by the milestone deadline. AMSC: This case is particularly relevant because the Commission found that adequate grounds existed to extend AMSC‘s construction completion and satellite launch milestones based on AMSC‘s construction contract with Hughes, a satellite vendor, and TMI, a then unrelated third party, for the joint procurement of AMSC‘s and TMI‘s satellites. Although several parties protested the resulting construction delay, the Commission found that, based upon AMSC‘s ongoing efforts to implement its project (e.g., by seeking to finalize the system‘s technical parameters and complete coordination with Canada), even if the joint procurement was not a cirecumstance beyond AMSC‘s control, a milestone extension was consistent with its anti— warehousing policy and would advance the public interest by allowing new and needed mobile satellite voice services to reach the public. The Commission (para. 13) stated: "Significantly ... in every instance where the Commission has denied an extension request construction of the satellite either had not begun or was not continuing, raising questions regarding the licensee‘s intention to proceed." Far from supporting cancellation of a satellite authorization for failure to execute a conforming, non—contingent construction contract, the AMSC case, therefore, provides a clear

Mele statement of the Commission‘s policy of preserving satellite authorizations (and granting milestone extensions, if warranted) where a valid construction contract exists and the grantee‘s actions show that construction is continuing. Further, in the 4MSC case, the Commission reached that conclusion even though AMSC relied, in part, on a procurement agreement with an unrelated third party. Therefore, the 4MSC case stands for a policy exactly opposite to the Bureau‘s February 10 Order. MCI This 1987 Common Carrier Bureau case was cited solely to evidence the FCC‘s long—standing policy of imposing construction milestones on satellite licensees which TMI and TerreStar fully accept. There, the Bureau decided to extend by 11 months MCI‘s initial construction milestone for one of its satellites even though no manufacturing contract had been executed and no timely extension request had been filed. Here, by contrast, no extension was asked for or needed, because a conforming, non—contingent satellite manufacturing contract was executed. The MCI case thus provides no support whatsoever for license cancellation in these circumstances. Norris: This was a very straightforward case in which the authorization holder failed to make a down payment necessary to qualify its construction contract as non—contingent. Norris did not challenge that finding of fact. Instead, it argued that regulatory delay and uncertainties justified its failure to make the payments necessary to make the contract non— contingent. But the Commission rejected this as a ground for waiver or extension. Payment to Loral under the construction contract was not in arrears here and, therefore, Norris is inapposite. Tempo: This similarly straightforward case also does not support cancellation of TMI‘s authorization. It involved the review of a one—year construction contract milestone for a DBS license. Upon looking at the particulars of the contract, the Commission found that they were specific enough to satisfy the initial milestone and there were no unresolved contingencies. The Commission (para. 11) also noted: "We have acted adversely to applicants that were not prepared to commit themselves to going forward with construction of a DBS system. That is not the case here. Tempo has executed its contract and is willing to proceed." The same is also true in the current case where a conforming, non—contingent construction contract indisputably existed as of the milestone deadline (and continues in existence), and TMI and TerreStar are willing and determined to proceed. We appreciate your careful review of the TMI/TerreStar case and are available as needed to answer any further questions that might arise. Respectfully submitted, Gregofi// C. S’taple /Jonathan D. Blake R. Edward Price / Gerard J. Waldron VINSON & ELKINS L.L.P. COVINGTON & BURLING 1455 Pennsylvania Avenue, N.W. 1201 Pennsylvania Avenue, N.W. Washington, DC 20004 Washington, DC 20004 Telephone: (202) 639—6500 Telephone: (202) 662—6000 Counselfor TMI Counselfor TerreStar

Enclosure CC. Mr. Bryan Tramont Mr. John Rogovin Mr. Roderick Porter Ms. Jacquelynn Ruff Mr. Karl Kensinger Ms. Jennifer Manner Mr. Barry Ohlson Mr. Paul Margie Mr. Sam Feder

Sept. 23, 2003 SATELLITE MILESTONE ORDERS A. Revocation Cases Involving First Milestone First Milestone: Non— Contingent Construction Grantee Contract in Compliance Reasons for Revocation with Authorization TMI TMI, as the authorization holder, "did not (GHz License, Feb. 10, YES enter into a satellite manufacturing 2003) DA 03—385 agreement," though it contracted with TerreStar to do so and it did. In addition, TMI did not "demonstrat[e] an investment and commitment." Commission Decisions|..‘ ... ; | t tt t PanAmSat PanAmSat did not enter into a non— (Ka—band License, June No contingent construction contract and failed 26, 2000) to provide adequate justification for seeking FCC 01—178 to extend its construction commencement milestone. Morning Star Morning Star‘s contract (lacking any Satellite Company No construction or payment schedules) failed to (Ka—band License, meet the Commission‘s minimum June 26, 2000) requirements for a non—contingent contract. FCC 01—179 Norris Satellite Norris failed to make a critical installment Communications No payment to make its contract non— (Ka—band License, contingent. Norris‘s failure to make this March 14, 1996) payment prevented satellite construction FCC 97—377 from commencing by the extended authorization deadline. BureauDecisions|__ ... to Globalstar Globalstar‘s manufacturing contract (2 GHz License, Jan. 30, No provided for construction pursuant to an 2003) implementation schedule at variance with DA 03—328 the milestones in its license grant. Motorola Motorola did not enter into a non—contingent (Ka—band License, No contract and did not commence construction Sept. 4, 2002) of its Ka—band satellite system by the first DA 02—416 milestone deadline. Columbia Despite grant of a seven month extension of Communications No the first milestone, Columbia failed to sign a Corporation (C—band manufacturing contract because of the license, April 5, 2000) pendency of a merger with GE Americom. DA 00—702 DC: 966300—1

Sept. 23, 2003 Constellation The "sharing agreement" that CCHI entered Communications No into with ICO was not a satellite Holdings, Inc. manufacturing contract. It was merely a (2 GHz License, Jan. 30, contract for purchase of capacity if and 2003) when the satellites have been constructed, DA 03—285 launched, and made ready for operation pursuant to a separate contract over which CCHI has no control. Mobile Communications The "sharing agreement" MCHI entered Holdings, Inc. No into with ICO was not a satellite (2 GHz License, Jan. 30, manufacturing contract. It was merely a 2003) contract for purchase of capacity if and DA 03—285 when the satellites have been constructed, launched, and made ready for operation pursuant to a separate contract over which MCHI has no control. B. Reinstatement and Waiver Cases Involving First Milestone (selective) mnavona ty First Milestone: Non— Contingent Construction Grantee . . Reasons For Action Contract in Compliance with Authorization The Boeing Company The Bureau held that, Inter—organizational (2 GHz MSS License, No Work Authorization (IWA) between Boeing June 24, 2003) DA 03— IDS, a division of licensee, and Boeing 2073 Satellite System met the first milestone. Bureau also found there was compliance although the IWA was for a GSO system rather than a NGSO system, as originally authorized. EchoStar Satellite License reinstated, on reconsideration, Corporation (Ka—band No based on additional evidence, as of the license, November 8, milestone date, as to the payload and power 2002) DA 02—3085 budget for the hybrid Ku/C/Ka band satellites. Thus, Bureau finds that construction contract did in fact cover the authorized system. Volunteers In Technical Licensee was permitted to rely upon Assistance ("Little LEO" No construction of a third party‘s satellite to License, March 7, 1997) meet milestone applicable to replacement DA 97—501 satellite. DC: 966300—1

Bureau Orders _ [ : First Milestone: Non— Grantee Contmgen't Constru.ctlon Reasons For Action Contract in Compliance with Authorization NetSat 28 Company LLC Bureau waived construction milestone (Ka—band License, No granted and reinstated license even though May 25, 2001) DA 01— construction contract post—dated milestone 1284 by approximately 18 months because contract provided for timely completion of satellite and launch and licensee had expended over $10 million on system development. United States Satellite Construction contract milestone was held to Broadcasting Company, No be satisfied by licensee‘s having entered Inc. (DBS License, contract to purchase for 5 transponder October 22, 1992) [Mass payload on third party‘s satellite (%.e., Media Bureau] DA 92— without a separate manufacturing contract) 1462 because the licensee had met payment schedule to date under purchase contract. C. Bureau Orders Canceling Licenses after the First Milestone Grantee First Milestone: Non— Reasons for Revocation Contingent Construction Contract in Compliance with Authorization Mobile Communications The Bureau concluded that MCHI failed to Holdings, Inc. (Big LEO Not Applicable contract for all of its May 31, 2001 License, May 31, 2001) authorized satellites by the milestone DA 01—1315 deadline and thus violated its second milestone requirement. Constellation Constellation did not certify completion of Communications Not Applicable its second and third construction milestones. Holdings, Inc. (Big LEO The Bureau found that Constellation did not License, Nov. 8, 2002) provide sufficient grounds to justify an DA 02—3086 extension of those milestone deadlines. *# kok * % * *# oo Affirmed by full Not Applicable, but FCC Full Commission confirmed the Bureau‘s Commission on points out that it had not findings and noted that as to 44 of 46 of Reconsideration concluded that a non— Constellation‘s satellites, there was no (September 17, 2003) contingent construction construction contract. FCC 03—217 contract existed that conformed with Constellation‘s authorization

E—SAT, Inc. The Bureau concluded that E—SAT had not (Little LEO License, Not Applicable demonstrated that it faced unforeseeable April 23, 2003) circumstances beyond its control requiring DA 03—1113 an extension; nor were there unique and overriding public interest concerns. Loral Loral did not complete construction of its (Ka—band License, Not Applicable Orion satellites by the requisite milestone April 1, 2003) and the Bureau found no reason to extend DA 03—1045 Loral‘s milestone schedule. D. Waiver Case after the First Milestone Grantee First Milestone: Non— Reasons for Revocation Contingent Construction Contract in Compliance with Authorization GE American Bureau waived milestones on its own Communications (Ka— Not Applicable motion based on facts showing licensee‘s band License, May 25, "intent to proceed," noting that milestone 2001) DA 01—1286 waivers have been denied and licenses cancelled only "where construction of the satellite either had not begun or was not continuing . .."


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