Attachment 2003TMI TerreStar-re

2003TMI TerreStar-re

LETTER submitted by TMI;TerreStar;MSV

ltr

2003-12-31

This document pretains to SAT-MOD-20021114-00237 for Modification on a Satellite Space Stations filing.

IBFS_SATMOD2002111400237_842896

ORIGINAL _?.dwx RECEVED 8+ ranre= o,,OR ,LaTg syp ; DEC 3 1 2003 FilLEr EDeRaL Ns commission ® o&?&%@&fim&mfiv December 31, 2003 Sheryl Wilkerson, Legal Advisor to Chairman Michael K. Powell Jennifer Manner, Legal Advisor to Commissioner Kathleen Q. Abernathy Paul Margie, Legal Advisor to Commissioner Michael J. Copps JAN 1 $ 2004 Sam Feder, Legal Advisor to Commissioner Kevin J. Martin . Barry Ohlson, Legal Advisor to Commissioner Jonathan S. Adelstein mt@mm Srangy 5: Federal Communications Commission Bureg(s= 445 Twelfth Street, S.W. tz Washington, D.C. 20554 == c Re: File No. 189—SAT—LOI—97 m IBFS Nos. SAT—LOI—19970926—00161 ~/ SAT—AMD—20001103—00158, 2 SAT—MOD—20021114—00237 f}_’ SAT—ASG—20021211—00238 Dear Legal Advisors: The Wireless Carriers‘ December 22, 2003, ex parte submission cites various cases for language they contain that is at most dicta but whose holdings do not support and often undercut the positions they advocate. Fortunately, the Commission has the opportunity on review to redress the injustice that resulted from the reliance the International Bureau placed on many of these cases when it canceled the TMI/TerreStar 2 GHz satellite authorization on February 10, 2003. First, the threshold question is what standard of notice had to be met before the Bureau could impose the death penalty on TM/TerreStar. TMI/TerreStar cited five appellate cases that held that the agency‘s notice (usually the FCC‘s) was inadequate. Letter to Mr. Paul Margie (Dec. 18, 2003). These cases explained that in these circumstances the Commission must provide "full and explicit notice of all prerequisites," Salzer v. FCC, 778 F.2d 869, 871—72 (D.C. Cir. 1985), and must do so to an "ascertainable certainty," Trinity Broad. ofFla., Inc., v. FCC, 211 F.3d 618, 628 (D.C. Cir. 2000). The Wireless Carriers‘ December 22, 2003, letter cited two cases in response: Lakeshore Broad., Inc., v. FCC, 199 F.3d 468 (D.C. Cir. 1999); McElroy Elecs. Corp. v. FCC, 990 F.2d 1351 (D.C. Cir. 1993). The holding in Lakeshore was on a different issue: whether the applicant was entitled to personal notice of a required fee payment; the court found that public notice sufficed. The holding in McElroy was that the Commussion had not provided sufficient notice. Moreover, McElroy exactly tracked the distinction TMI and TerreStar have drawn between whether the Bureau‘s reading of the first No. of Copies rec’défi, List ABCDE DC: 1157938—1

Wilkerson; Manner; Margie; Feder; Ohlson December 31, 2003 Page 2 milestone requirement was reasonable‘ and whether the Commission had given sufficiently clear notice of the Bureau‘s interpretation so as to support the death penalty. Second, the next question is what notice was, in fact, provided. The statute and the FCC regulations provide no indication that TMI itself had to enter directly into the construction contract with Loral. The 2 GHz MSS Order, which is the most authoritative statement of the milestone requirements absent notice in the Act or the FCC‘s rules, twice refers to the obligations of "prospective operators," (not to the licensee‘s obligations), which TerreStar clearly is. 2 GHz MSS Order, 15 FCC Red. 16,127, 16,179 (2000). Moreover, it articulatesthe requirement as "the satellite system must enter into a construction contract," which clearly occurred here. Id. at 16,177 (emphasis added). TMI‘s authorization, in turn, specifically referenced the 2 GHz MSS Order. 16 FCC Red. 13,808 (2001). Third, a further place to look for guidance is the case law, although the language of the 2 GHz MSS Order could well be regarded as determinative. TMI/TerreStar‘s September 26, 2003, letter documented that the critical issue in the case law, on which each holding turns, is whether a non—contingent construction contract, conforming to the license, existed. Letter to Mr. Don Abelson (Sept. 26, 2003). In each of the eight cases where satellite licenses have been canceled, the opinion makes clear that the absence of a contract was the > pivotal fact. In five cases, milestones were extended or licenses maintained because the Commussion held that other circumstances excused or counterbalanced the absence of a contract. Since TMI had arranged for such a contract to be entered into through its agreement with TerreStar, which the Wireless Carriers concede was binding, it had every reason to believe it had complied with the milestone requirement. The letter to Mr. Abelson also demonstrated that none of the cases cited by the Bureau Aheld that a satellite authorization would be canceled where a conforming, non—contingent construction contract was in existence by the milestone deadline. In contrast, the Wireless Carriers‘ December 22 letter cites six cases, not because of their holdings, none of which supports the Wireless Carriers‘ position, but because they contain language that refers to licensees‘ obligations. Attachment A shows that this language is not integral to the holdings of any of those cases. In fact, the holdings of those cases often rebut the inferences the Wireless Carriers seek to draw from them. Also, the language relied upon by the Wireless Carriers does not address whether the licensee can meet the requirements by obligating the prospective operator to take those steps, as is shown to be permissible by the 2 GHz MSS Order, a careful reading of the language of the TMI authorization, and the Commission‘s acceptance of third—party arrangements in other cases. In fact, the cases cited by the Wireless Carriers use the term "licensee" to reference actions the Commission knows that ‘ We continue to believe that the Bureau‘s interpretation was unreasonable because it was inconsistent with the August 25, 2000, 2 GHz MSS Order, prior satellite cases, practice in other services regulated by the FCC, and sound policy whose objective is to expedite service implementation and prevent spectrum warehousing.

Wilkerson; Manner; Margie; Feder; Ohlson December 31, 2003 Page 3 some other entity will have to undertake." Instead, these and other cases emphasize that the critical fact is whether the construction contract arrangements prevent warehousing, avoid delay, and assure that progress is being made toward system implementation® —— all of which objectives were satisfied in this instance. ‘ Fourth, the Wireless Carriers‘ December 22, 2003, letter refers to differences between the third—party relationships at issue in USSB, A4MSC, and VZT4 and the TMI/TerreStar relationship here (they ignore KaStarCom, which in all significant respects is similar to TMUTerreStar). Yet those cases are completely silent, and give no guidance, as to why those third—party relationships were deemed sufficient to achieve milestone compliance. Indeed, none of those three cases even addressed the third—party nature of the relationships. The holdings of those cases were on entirely different issues. USSB and 4MSC were extension—of—milestone cases (no extension was sought or needed here). And VZT4 was a defacto control case (TMI retained control here). The reason those cases are significant —— and the reason that the decisive paragraph 10 of the Bureau‘s February 10, 2003, Order is not supported by any citations —— is that the Commission has not treated third—party contract cases differently. In all cases —— first— party or third—party contracts —— the critical question has been whether there was a construction contract, whether it was non-contingent,4 and whether it conformed to the authorization —— all conditions that were met here. Fifth, the Wireless Carriers‘ December 11, 2003, submission (at n.20) and their presentation at the "moot court" on December 17 dwelled pejoratively on the amount of money that has been expended under the Loral contract. But the $850,000 paid to Loral was what Loral contracted for in arms‘ length negotiations, and TMI and TerreStar have expended seven times that much on the 2 GHz project to date. In any event, the holdings of the two cases cited by the Wireless Carriers are completely beside the point at issue here. Advanced Communications Corp., 10 FCC Red. 13,337 (1995), was an extension—of—deadline case, and Mobile Communications Holdings, Inc., 18 FCC Red. 1094 (2003), was a non—conforming contract case. Additionally, in the first case the 1% payment made by the licensee was on a nine—year—old contract, and in the second case the 0.5% payment was combined with a provision for no future 2 E.g., Morning Star Satellite Co., 16 FCC Red. 11,550, 11,553 (2001) ("licensees are building their systems"); Columbia Communications Corp., 16 FCC Red. 10,867, 10,872 (2001) ("licensees have built and launched"). * E.g., Morning Star Satellite Co., 15 FCC Red. 11,350, 11,352 (2000) ("Requiring licensees to adhere strictly to a milestone schedule prevents orbital locations from being ‘warehoused‘ by licensees to the exclusion of qualified entities that are prepared to implement systems immediately."); accord PanAmSat Licensee Corp., 16 FCC Red. 11,534, 11,538 (2001); Columbia Communications Corp., 15 FCC Red. 16,496, 16,497 (2000). * "[N]either significant delays . . . nor conditions precedent to construction." Pand4mSat Licensee Corp., 16 FCC Red. 11,534, 11,539 (2001); accord Mobile Communications Holdings, Inc., 18 FCC Red. 1094, 1099 (2003).

Wilkerson; Manner; Margie; Feder; Ohlson December 31, 2003 Page 4 payments until 30 days after the satellite was to be launched and capacity made available. Here, TMI/TerreStar had paid $850,000 within six months after the Loral contract was entered into, and they are obligated to pay a total of $380 million in installments by the time of the satellite launch. Here too, reading the holdings of the cases leads to the opposite result from the one urged by the Wireless Carriers. Sixth, at the December 17 "moot court," the Wireless Carriers dismissed as irrelevant the Commission‘s routine practice in other services of allowing third—party contracts for required construction of licensed facilities. (Yet, the 2 GHz MSS Order expressly stated that the Commission would administer its satellite milestone requirements "{[cJonsistent with our practice in other services." 2 GHz MSS Order, 15 FCC Red. at 16,178.) The Wireless Carriers did so on two grounds. (1) They said that these other services were different because the authorizations were obtained in auctions while satellite authorizations are obtained for free. But TerreStar and TMI cited seven services —— ITFS, MMDS, MDS, SMRS, cellular, PCS, and broadcast —— the majority of which did not use auctions toselect licensees, and in all of which third—party construction contracts are routine. (2) The Wireless Carriers also said that the Commission‘s practice in these other services did not provide guidance because the cases concerned questions of defacto control —— clearly not an issue in our case because of the explicit protections in the TerreStar/TMI contract. But that is exactly the point. For the Commission to even consider whether a third—party contract delegated too much control away from the licensee, it must be true that third—party contracts are acceptable if the licensee retains sufficient control. In none of the other licensed services has the Commission challenged or even raised an issue with the third—party nature of the construction contracts. * *# * We are grateful for the attention that you and the Commissioners have given to this matter. The licensing authority here, Industry Canada, had approved the satellite design, it had held that the relevant milestone requirement had been met, design and construction were moving forward in a timely manner and consistent with the specifications of the authorization, the strong joint venture entity in which TMI has a substantial continuing interest was conscientiously prosecuting the construction contract, and needed new competitive satellite services were to be provided. The Wireless Carriers successfully obscured these facts below.

Wilkerson; Manner; Margie; Feder; Ohlson December 31, 2003 Page 5 But these are the facts that should control and call for the Commission, on review, promptly to reinstate the authorization. Respectfully submitted, Pu F1hay Loh doul. Gregory C.Staple gfathan D. Blake R. Edward Price rian D. Smith VINSON & ELKINS, L.L.P. _ CoOVINGTON & BURLING 1445 Pennsylvania Avenue, N.W. 1201 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Washington, D.C. 20004 Telephone: (202) 639—6500 Telephone: (202) 662—6000 Counselfor TMI Counselfor TerreStar iiges mt BROWNSTEIN HYATT & FARBER, P.C. 1615 L Street, NW. Washington, D.C. 20036 Telephone: (202) 296—7353 Counselfor Mobile Satellite Ventures Attachment ce: File No. 189—SAT—LOI—97 IBFS Nos. SAT—LOI—19970926—00161, SAT—AMD—20001103—00158, SAT—MOD—20021114—00237, SAT—ASG—20021211—00238 Chairman Michael K. Powell Commissioner Kathleen Q. Abernathy Commissioner Michael J. Copps Commissioner Kevin J. Martin Commissioner Jonathan S. Adelstein Bryan Tramont, Esq. John Rogovin, Esq. Neil Dellar, Esq. David Horowitz, Esq. Kathryn A. Zachem, L. Andrew Tollin, Craig E. Gilmore, Wilkinson Barker Knauer, LLP Douglas I. Brandon, AT&T Wireless Services, Inc. John T. Scott, III, Charla M. Rath, Cellco Partnership (d/b/a Verizon Wireless) J.R. Carbonell, Carol L. Tacker, David G. Richards, Cingular Wireless LLC

ATTACHMENT A CASES CITED IN WIRELESS CARRIERS‘ Drc. 22, 2003, EX PARTE SUBMISSION Was there a Conforming Was the Non—Contingent Case Name Holding of Case Authorization Construction Upheld Contract PanAmSat Licensee Pendency of merger held not to No No Corp., 16 FCC Red. excuse failure to enter into a 11534 (2001) construction contract. Columbia Pendency of transfer held not to No No Communications excuse failure to enter into a Corp., 15 FCC Red. construction contract. 16496 (IB 2000) Tempo Satellite Inc., 7 Construction contract held to be Yes Yes FCC Red. 6597 (1992) sufficiently specific to conform to authorization. Columbia Construction contract held to be Yes Yes Communications sufficiently specific to conform to Corp., 16 FCC Red. authorization. 10867 (IB 2001) Morning Star Satellite Construction contract held to be No No Company, L.L.C., 16 insufficiently specific to meet FCC Red. 11550 requirements of non—contingent (2001) contract. DirectSat Corporation, Licensee held to be able to sell its Yes Yes 10 FCC Red. 88 satellite authorization for a profit (1995) during the course of construction because construction is proceeding in timely fashion.


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Document Modified: 2019-04-21 09:53:25
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