Motion and Exhibits.

MOTION submitted by Spectrum Five LLC

SpectrumFive Motion for Extension

2016-11-01

This document pretains to SAT-LOI-20160308-00025 for Letter of Intent on a Satellite Space Stations filing.

IBFS_SATLOI2016030800025_1157518

                                    Before the
                      FEDERAL COMMUNICATIONS COMMISSION
                               Washington, D.C. 20554



In the Matter of

Spectrum Five LLC Petition for Declaratory               SAT-LOI-20160308-00025
Ruling To Provide Service from 110.9

Spectrum Five LLC Petition for Declaratory               SAT-LOI-20160308-00026
Ruling To Provide Service from 115



 MOTION FOR EXTENSION OF TIME OR, IN THE ALTERNATIVE, FOR WAIVER

         In December 2015, the Commission comprehensively revised its milestone and bond

rules.1 Those rules took effect on September 19, 2016.2 On October 5, 2016, the Commission

granted Spectrum Five’s applications for satellite space station authorizations, seeking to provide

service from 110.9˚ W.L. and 115˚ W.L.3 To Spectrum Five’s knowledge, these are the first

approved applications for geostationary satellites under the newly effective milestone and bond

rules.

         Under those rules, and the conditions on the license, Spectrum Five must post a surety

bond that complies with newly adopted 47 C.F.R. § 25.165(a)(2) & (b) by November 4, 2016.

Spectrum Five has worked diligently — both before and after the Commission granted its


         1
         See Second Report and Order, Comprehensive Review of Licensing and Operating
Rules for Satellite Services, 30 FCC Rcd 14713, ¶¶ 49-85 (2015) (“Satellite Rules Order”).
         2
         See Public Notice, International Bureau Announces Effective Date of Rules Adopted in
the Part 25 Second Report and Order, 31 FCC Rcd 9807 (2016).
         3
          See Stamp Grant, Spectrum Five LLC Petition for Declaratory Ruling to Provide
Service from 110.9, SAT-LOI-20160308-00025 (Oct. 5, 2016); Stamp Grant, Spectrum Five LLC
Petition for Declaratory Ruling to Provide Service from 115, SAT-LOI-20160308-00026 (Oct. 5,
2016).


application — with Marsh & McLennan Companies and Chubb Limited to develop a form of

bond that complies with the new requirement for a surety bond, the value of which escalates on a

daily basis from $1 million to $3 million over a five-year period.4 Although Spectrum Five has

worked with Marsh and Chubb, or their predecessors, to obtain surety bonds for Spectrum Five’s

prior satellite licenses under the prior milestone and bond regime, the new milestone and bond

regime raises novel questions about the structure of a compliant surety bond.5 Although the

guidance the International Bureau provided on October 7, 2016 — two days after the award of

the licenses at issue here — clarified a number of aspects of the new regime,6 questions still

remain.7 For example, although the guidance clarifies that a periodically increasing bond (e.g.,

yearly) rather than a daily escalating bond is acceptable, the guidance is less clear about how

increases in the bond amount are to occur.8 The guidance also does not address the return or

release of fixed value bonds that are replaced by subsequent, fixed value bonds at a higher

amount. Without a return or release, the successive bonds could become cumulative; at the same

time, a provision limiting the period during which a bond is in effect could be viewed by the

Commission as an unacceptable contingency.




       4
        See Declaration of Francis Curran (“Curran Decl.”) ¶ 6, attached; Declaration of David
Wilson (“Wilson Decl.”) ¶¶ 4-5, attached.
       5
           See Curran Decl. ¶¶ 5, 7; Wilson Decl. ¶¶ 5-6.
       6
        See Public Notice, International Bureau Updates Procedures for Filing and
Maintaining Surety Bonds Pursuant to Revised Milestone and Escalating Bond Requirements,
DA 16-1157 (Int’l Bur. Oct. 7, 2016).
       7
           See Curran Decl. ¶ 7; Wilson Decl. ¶ 6.
       8
          Compare id. at 2 (referring to the “submi[ssion] of a new bond” at the end of the period
covered by the fixed value bond) with id. at 2 n.9 (referring to submitting “annual increases” of
the initial bond via amendment). The clarification that a fixed bond is permissible answered one
of the most difficult questions, as the mechanics of providing security for a bond that increases in
value daily posed insurmountable difficulties in implementation.


                                                 2


       Although Spectrum Five has been working diligently with Marsh and Chubb through

these and other issued raised by the Commission’s novel regime, an additional two weeks is

required to complete those efforts.9 Spectrum Five, therefore, requests a two-week extension, to

November 18, 2016, of the 30-day deadline in 47 C.F.R. § 25.165(a) and in Condition 4.a of

each license grant for posting of a conforming surety bond. In the alternative, Spectrum Five

requests that the Commission waive the 30-day deadline in 47 C.F.R. § 25.165(a) and in

Condition 4.a of each license grant, allowing the posting of a conforming surety bond on or

before November 18, 2016.

       The Commission has authority to grant extensions of deadlines, or to waive its rules, on a

showing of good cause.10 Spectrum Five has met that standard here. Spectrum Five, along with

its sureties, has worked diligently to comply with the novel milestone and bond regime the

Commission adopted in the Satellite Rules Order in December 2015, beginning its efforts before

the Commission granted the license applications at issue. Although those efforts were assisted

by the Bureau’s guidance issued after those rules took effect, that guidance was issued during the

30-day period for Spectrum Five to post its surety bonds and did not resolve all issues that

Spectrum Five and its sureties had been discussing.11 Given the novelty of the new regime, the

fact that Spectrum Five’s licenses appear to be the first to require surety bonds under the new




       9
           See Wilson Decl. ¶ 8.
       10
         See, e.g., Order, Request for Initiation of Proceeding, 17 FCC Rcd 25331, ¶ 4
(Wireline Comp. Bur. 2003) (finding “good cause for an extension of the deadline”); Satellite
Rules Order ¶ 88 (“The Commission may waive any rule for good cause.”).
       11
            See Curran Decl. ¶ 7; Wilson Decl. ¶ 6.


                                                 3


regime,12 and Spectrum Five and its sureties diligent efforts to comply with the new regime,

Spectrum Five has shown good cause for the brief extension or waiver it seeks here.

       The extension and waiver Spectrum Five seeks will not alter either its surety bond

obligations under § 25.165(a)(2) or its launch milestone date under § 24.164(a). That is, both the

minimum value of the bond required under § 25.165(a)(2) and the launch milestone date under

§ 25.164(a) will continue to be calculated from the date of the license grants (October 5, 2016).

       For the foregoing reasons, the Commission should either extend the deadline for posting

of the surety bonds for these two licenses to November 18, 2016, or should waive § 25.165(a)

and Condition 4.a of the licenses to permit posting of those surety bonds on or before that date.

                                             Respectfully submitted,

                                                /s/ Scott H. Angstreich
                                             Scott H. Angstreich
                                             Daniel V. Dorris
                                             Kellogg, Huber, Hansen, Todd,
                                               Evans & Figel, P.L.L.C.
                                             1615 M Street, N.W., Suite 400
                                             Washington, D.C. 20036
                                             (202) 326-7900
                                             sangstreich@khhte.com
                                             ddorris@khhte.com

                                             Counsel for Spectrum Five LLC

November 1, 2016




       12
         At a minimum, these are the first surety bonds Marsh and Chubb have written under
the new regime. See Curran Decl. ¶ 5; Wilson Decl. ¶ 3.


                                                 4


                                     Before the
                      FEDERAL COMMUNICATIONS COMMISSION
                               Washington, D.C. 20554



In the Matter of

Spectrum five LLC Petition for Declaratory               SAT-LOI-20160308-00025
Ruling To Provide Service from 110.9

Spectrum five LLC Petition for Declaratory               SAT-LOI-2016030$-00026
Ruling To Provide Service from 115



                         DECLARATION OF FRANCIS J. CURRAN

        1.     I, Francis J. Curran, am the Mid-Atlantic Surety Practice Leader at Marsh &

McLennan Companies. I have worked at Marsh for 15 years, where I provide brokerage services

for the surety bond industry.

       2.      I have previously arranged for several surety bonds for companies developing

satellites pursuant to the federal Communication Commission’s rules. Several of those surety

bonds were placed with Chubb Limited, a large insurer, or its predecessors.

       3.      Each of the prior satellite performance bonds that I placed were issued under the

Commission’s prior rules requiring a fixed surety bond that could be reduced upon meeting

several milestones.

       4.      I understand that, on September 19, 2016, the Commission amended its rules to

require an escalating surety bond for companies developing satellites. I understand further that,

on October 5, 2016, the Commission approved Spectrum five’s applications for the two licenses

referenced in this document, with the requirement that Spectrum Five post surety bonds that

comply with the new rules by November 4, 2016.


        5.      To the best of my knowledge, neither Marsh nor Chubb has placed a bond
                                                                                       under
these new rules.

        6.      Since before the October 5, 2016 license grants, I have been working diligen
                                                                                             tly
with David Wilson of Spectrum Five to place such a surety bond with
                                                                    Chubb. However, the
process to secure the bonds has taken longer than usual due to the change
                                                                          s to the bonding
requirement.

       7.      I have reviewed the Commission’s guidance dated October 7, 2016, regard
                                                                                       ing
how to comply with the revised bond rules. While that guidance was helpfu
                                                                          l, it did not resolve
all of the issues we have had to resolve.

       8.      I attest that the foregoing statements are true and accurate to the best of
                                                                                           my
knowledge.

       I declare under penalty of perjury that the foregoing is true and correct to
                                                                                    the best of my
knowledge.

       Executed in Philadelphia, Pennsylvania, this 1st day of November, 2016




                                                             Francis1j/Curran


                                    Before the
                      FEDERAL COMMUNICATIONS COMMISSION
                               Washington, D.C. 20554



In the Matter of

Spectrum Five LLC Petition for Declaratory                SAT-LOI-20160308-00025
Ruling To Provide Service from 110.9

Spectrum Five LLC Petition for Declaratory                SAT-LOI-20160308-00026
Ruling To Provide Service from 115



                            DECLARATION OF DAVID WILSON

       1.      I, David Wilson, am the President and CEO of Spectrum Five LLC.

       2.      The Federal Communications Commission has previously granted Spectrum Five

license to operate geostationary satellites. For those prior license grants, I have been involved in

procuring the surety bond required by the Commission’s rules. In each of these prior instances,

the surety bond was provided under the Commission’s prior rules requiring a fixed surety bond

that could be reduced upon meeting certain milestones.

       3.      I understand that, on September 19, 2016, the Commission revised its bond rules

to require that recipients of satellite licenses submit escalating surety bonds. Spectrum Five has

never had to obtain a surety bond under these new rules, nor has Spectrum Five obtained a

similar escalating surety bond. I am not aware of any other satellite company having obtained a

surety bond under the new rules.

       4.      On October 5, 2016, Spectrum Five was granted two licenses to provide service

from 110.9 W.L. and 115 W.L. After applying for those licenses, and before the Commission

granted them, I contacted Fran Curran, a broker for surety bonds at Marsh & McLennan


Companies from whom Spectrum Five had previously obtained satellite surety bonds, and began

discussions about securing surety bonds under the new rules in the event the Commission

granted the license applications.

       5.      I have been working diligently with Mr. Curran and with Chubb Limited to obtain

a surety bond that complies with the Commission’s new rules through Mr. Curran. I understand

that neither Marsh nor Chubb have issued surety bonds pursuant to the Commission’s new rules.

       6.      I have reviewed the Commission’s guidance dated October 7, 2016, regarding

how to comply with the revised bond rules. While that guidance was helpful, it did not resolve

all of the issues we have had to resolve.

       7.      Spectrum Five remains willing and able to post the required surety and to move

forward with development of satellites for the 110.9 W.L. and 115 W.L. orbital locations.

       8.      I anticipate that we will be able to resolve all remaining issues by November 18,

2016, by which time I anticipate that Spectrum Five will be able to submit the surety bond.

       Under penalty of perjury, I attest that the foregoing statements are true and accurate to the

best of my knowledge.

       Executed in Washington, D.C. this 1st day of November, 2016



                                                             _________________
                                                             David Wilson



Document Created: 2016-11-01 16:09:03
Document Modified: 2016-11-01 16:09:03

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