Attachment redacted

redacted

OTHER submitted by Hughes

redacted

2006-04-19

This document pretains to SAT-MOD-20050523-00106 for Modification on a Satellite Space Stations filing.

IBFS_SATMOD2005052300106_497944

ORIGINAL BEFORE THE Federal Communications Commission WASHINGTON, D.C. 20584 In the Matter of Hughes Communications, Inc. File Nos. SAT—LOA—20050214—00038 SAT—MOD—20050523—00106 Authorization To Launch and Operate a SAT—AMD—20060306—00025 Geostationary Orbit Space Station in the Call Sign: $2663 Fixed—Satellite Service Using Ka—Band at the leceli C 95° W.L. Orbital Location Received RECEIVED — FCC APR 2 0 2 To: Chief,Intemational Bureau 9 APR 1 9 2006 Polioy Bran pEMONSTRATION or ComprraNcRaving feornzerncmnee SATELLITE IMPLEMENTATION MILESTONES Hughes Communications, Inc. (‘Hughes"),by counsel and pursuant to Section 25.164 of the Commission‘s Rules, hereby demonstrates to the Commission that it has met the frst three milestones set forth in the authorization issued on April 19, 2005 granting authority to launch and operate a Ka—band geostationary Fixed—Satellte Service ("FSS") payload at the 95° West Longitude orbital location. See SkyTerra Communications, Inc., SAT—LOA—20050214—00038, Grant Stamp, April 19, 2005 (‘95W License Grant")." In particular, Hughes demonstrates herein that:() it is party to a binding and non—contingent contract (a copy of which is Attachment 1 hereto) for the timely construction ofthe FSS satellte authorized in the 95W License Grant; (i) it has completed Critical Design Review for the spacecraft; and (ii) it has commenced. physical construction of the authorized facility. As a result othese showings, Hughes respectfully requests that the Intemational Bureau determine that Hughes has satisied the first * Seealso Public Notee, DA 05—1130 (rel. April 2, 2005). Parsuant to an August 2005 applcationforproorma assignment of cemse, the lcense of SkyTera Communications, Inc. wasassigned t SkyTera HoldingsInc. See Pile No. SAT—ASG—20050826—00168. In December 2005, SkyTema Holdings,Inc. informed the Commission that is name had changed to Hughes CommunicationsInc. See Letr dated December 20,2005, rom counselfor Hughes and ShyTeto thSecretry ofthe Commision. ile No. SAT—ASG—20050826—00168, In this submission, references t"Haghes" shll nclude Huhes Communications Ic.and.a appicabl, ts predecessors in interest witrespect o the 95W License Gran, SkyTerra Communications, Inc.and SkyTerra Holdings, Inc

three milestone requirements set forth in the 9SW License Grant. The determination that Hughes has satisfied the first three of the four satellite implementation milestones will allow Hughes to reduce to $750,000 the $3 million bond that it posted on May 23, 2005 pursuant to the 95W License Grant.® 1. ExecutiveSummary The Commission granted Hughes® application for a Ka—band FSS space station license at the 95° W.L. orbital location on April 19, 2005. ‘The 95W License Grant requires Hughes to meet four satellite implementation milestones, as follows: Execute a Binding Contract for Construction by April 19, 2006 Complete the Critical Design Review by April 19, 2007 Commence Physical Construction by April 19, 2008 Launch and Begin Operations by April 19, 2010 See 95W License Grant at 42. Hughes was also required to post a $3 million bond with the Commission within thirty days of the effective date of the grant pursuant to procedures established by the Commission. 1d. Hughes fled the required bond with the Commission on May 23, 2005. See Letter from Robert A. Mazer, Counsel to SkyTerra Communications, Inc., to Marlene H. Dortch, Secretary, FCC, dated May 23, 2005 (transmitting performance bond). Hughes is the 100% owner and parent of Hughes Network Systems, LLC (‘HNS®)" * Mughes ifling his equest withtheatachments omited from the copy intended for pblic disclosire (ncluding its constrictioncontract and other confidental and propricry infrmation). This request, wthallatachments, is being filed contemporaneously undera requestfor confidenta treatment * On Aprl22, 2005, DIRECTV (through is wholly—ouned subsidiay, Hughes Network Systems,Inc,transfered 10 SkyTerra Communications, Inc. an inita 50% of the memmbership interestsof HNS. See Aughes Nemork Syitems, Linited and Hughes Networks Systens, Inc. Assignors, and HNS License Sub, Linited and HINS License Sub, LC AssigneesApplicationsor ConsentforAssinnnent ofrth Station License and Associated Specal Tenporary Authorizations, Order and Autborization, 20 FCC Red 8080 (2005),and Order, 20 FCC Red 9106 (2005). I Seprember 2005, kyTera Communications,Inc. ransfered ts 50% of HNS to SkyTerra Holdings,Inc. a wholl—owned subsdhry of kyTerra Communications,Inc. On Janary 1,2006, DIRECTY (through is subsidiy DTV Network Systems,Inc. (formerly known as Hughes Network Systems, Inc.) sold it remaining 50% of HNS to Hughes Communicationsn (formerly known asSkyTera Holdings,In.,resutingin Hughes Communications, In. owning 100% ofHNS. See Letr o Ms. MarleneH. Dorich, Secreuiry, Fedeal Communications Commission,from Mr.Tom W. Davidson, EsIBFS NosSES—TIC:—20050829—01 180 and sE—TIC20050829—01181 (ln.19, 2006)

Under the Commission‘s Rules, a geostationary satellilicensee may reduce the amount ofits bond by $750,000, twenty—five percent of the total amount, upon successfully meeting each ofthe milestones set forth in its authorization. See 47 C.F.R. § 25.165(d). ‘The Commission‘s procedures provide that licensees will be permitted to file a new bond at a lower amount only after the Intemational Bureau announces that the licensee has met the milestone(s). See FCC Public Notice, Report No. SPB—187, DA 03—2602, 18 FCC Red 16283 (2003). On December 17, 1999, Hughes Network Systems,Inc.(a predecessor—in—interest to Hughes® wholly—owned subsidiary HNS) and Hughes Space and Communications, Interational, Inc. (‘Bocing")" entered into the Agreement for Delivery of Space Segment and System Engineering Services for the Spaceway North America System (*Spaceway Contract‘). The Spaceway Contract provided for Boeing to construct the first two SPACEWAY satelites and to procure the long lead parts for SPACEWAY 3. ‘The Spaceway Contract also contained an option to complete the construction of SPACEWAY 3. Boeing was directed in a November 29, 2004 amendment (Amendment No. 11) to the Spaceway Contract to complete and deliver SPACEWAY 3 per a defined schedule. On April 21, 2005, The DIRECTV Group, Inc. ("DIRECTV") assigned to its wholly—owned subsidiary, HNS, the rights to the satellte work in progress and the obligations for all future payments for the SPACEWAY 3 satellite. See Artachment 2,Bill of Sale and Assignment and Assumption Agreement between DIRECTV and HNS, dated April 21, 2005. On March 6, 2006, Hughes applied for authority to conform the technical parameters of the spacecraft specified in the 95W License Grant (as then proposed to be modified by Hughes in °* Atthe timethatthe contact wasexecuted,boh paries were subsidiris of Hushes Elecronics Corpoation ("HEC). Subsequenty, Hughes Space and Communications Itermational, Inc. vas sld t The Bocing Corportion and was renamed Bocing Sitelite Systems International, nc. Thereafe,in December 2003 a contoling inerest in HEC was sold to The News Corportion.and in March 2004 HEC was renamed The DIRECTV Group,Inc

a stl—pending May 2005 modification of license application) with the specifications of the SPACEWAY 3 work—in—progress that it had determined to associate with itslicense for the 95° W.Lorbitallocation. Progress toward completing this satellte is aready well advanced." In fact, as of the date of this fling, Hughes has already reached three ofthe four milestones contained in the 5W License Grant, and is on target to reach the fourth milestone within approximately 12 months from now. As shown in Table 1, below, each of these milestones was met by Hughes in all respects on April 22, 2005, the date on which the ownership of the SPACEWAY 3 work—in—progress became attributable to Hughes through itsintial acquisiion of a 50% interest in HNS.° * See Hughes March 2006 Amendment, File No. SAT—AMD—20060306—00025, at Extibit C (Notlication of Commencement of Space Sution Constuction) * Alhough the milestonesestablshe in the 95W Licnse Grant were satfid in April2005, coincidentallyjust diays aferth icense applictionwas granted, it wa nountl atethat Hughes decided to associtethe SPACEWAY 3 work—impropress with ts lcensefor 95° WL. See Hughes March 2006 Amendment, File No SAT— AMD—20060306—00025, t Exhibit C (NotIietion ofCommencement of Space Station Constuction).

Table 1: Milestone Date on Which the PCC Rute Mitestone RE8MWWEPE ppuestone was Evidence of Completion" PSW ECS sutistied byNt Grant Licen 28164000 Envy imo a April 19,2006 Aprit22, 2008 Spacevay Contact signed on December 17, RBnding. Non— . 1999 (bnding contact o procure longlead Contigent ToWConmeN®tt pars forSpACEWAY3) Contaet S e extcuted); November29, Spacevay Contract, Amendment 11 @ § 1 2004 (completion of (option under Deceimber 1999 Spacouay SPACEWAY 3 diected)] Contrct exercied; completion and delivery of SPACEWAY 3 direcid) 25.164(0) Criiel Design April 19, 2007 Aprit22, 2008" BocingLener at$ 2 (Atachment 3 ereto; Review (Key Dates: March9, Hughes Declaration at 8 (Atactment4 2001 (actl completion herec) orcbr o SPACEwAY 31 25.1640)0) Commencement Apri192008 Aprit22,2008" Bocing Lener at3; ofCms:“mm Pysical (Key Dates: December Hughes Declantion at 19 17, 1999 (contact Spaceway Contact signed on December 17, executed; ordering of lng 1999 (bndingcontract to procurelong lead lead pats fr pats forSPACEWAY 3) seaceway 3: November 29,2004 Spacevay Contact Amendment 11 @ § 1 (completion o (option under Dec. 1999 Spacevay Contact SPACEWAY 3 directed] exercised; completion and deivery of SPACEWAY 3 direcid) Each element summarized above is discussed below in detail, and each document referenced is fullyidentified. Accordingly, Hughes is filing this notification pursuantto Sections 25.164(c), (d) and (e) of the Commission‘s Rules to reportits completion of these three milestone requirements. In addition, because satisfaction of these requirements permis it to reduce the amount ofthe bond posted with the Commission,® it is requesting that the Commission review this submission and * Asdiscussd above, the SPACEWAY 3 wor progress wasassined to Hughes on Aprl 21, 2005, vidence of which iprovided in Atiachment 2. "The transfe of the ntal 50% inerest in NS to Hughes‘ predecessonin— inerestonApri22, 2005 i a matrorecordbefore the Commission * Seed1 CER§28.1680.

issue a Public Notice affirming that Hughes has met is first three implementation milestones, thercby allowing Hughes to reduce the amount of its performance bond to $750,000, commensurate with the progress made to date in bringing the 95° W.L. facility into service. Appropriate showings regarding each ofthe three milestones are provided below. 1t Milestone Compliance Mitestone 1 ~ Entry into a Binding Non—Contingent Construction Contract The inital contracting milestone requires thatthe licensee enter into a binding, non— contingent contract for construction of the authorized facilty. See Amendment ofthe Commission‘s Space Station Licensing Rules and Policies, 18 FCC Red 10760, 10831 (1 184) (2003) ("SSLR Order"). Hughes Network Systems, Inc., entered into the Spaceway Contract for construction ofthe SPACEWAY 3 space station on December 17, 1999. At that time, the parties to the Spaceway Contract agreed tothe procurement of long—lead items for SPACEWAY 3. contemporaneously and in conjunction with the construction of the SPACEWAY 1 and 2 spacecraft that are now in orbit and are operated by DIRECTV. The binding, non—contingent contractual amendment to complete the construction and to deliver the SPACEWAY 3 spacecraft was signed on November 29,2004. A copy of the Spaceway Contractis attached hereto as Attachment 1," as required by Section 25.164(c) of the Commission‘s Rules, 47 C.F.R. § 25.164(c). As described above, the rights to the "work in progress" for SPACEWAY 3 under the Spaceway Contract were assigned to HNS on April 21, 205. A copy ofthe April 21, 2005 Assignment is attached hereto as Attachment 2. Both are submitted under request for confidential treatment in a concurrently filed submission. Finally, as detailed above, on April 22, 2005, DIRECTV (through its wholly— * The Spaceway Contrct l remains in effct withrespect to other Spacenay satlitesthat willb implemented by DIRECTV. Amendment No. 12 o the Spacesay Contact perains only t these othersitelies,and therefore is not provided here.

owned subsidiary, Hughes Network Systems, Inc.), transferred to Hughes® predecessor—in— interest 50% of the ownership interests of HNS, bringing the work—in—progress under the control of the holder ofthe 95W License Grant, Hughes (at that time, SkyTerra Communications, Inc.). The Spaceway Contract, as amended, satisies the Commission‘s contract milestone obligation. ‘The agreement is binding and non—contingent as between the parties; it identifies the specific satellite and design characteristics; t specifies the dates for the start and completion of construction‘"; and it includes payment terms (spread throughout the construction phase of the contract with significant initil payments and the majority of payments before the end of construction) that unequivocally demonstrate Hughes® investment and commitment to completion of the system."" These are the elements that the Commission looks to when assessing compliance with the first milestone."" Milestone 2 Completion of Critieal Design Review The Commission has not prescribed a particular method or standard for determining satisfaction of the second implementation milestone, the completion of Critical Design Review ("CDR"). It has, however, identified this stage as the point in "the spacecraft implementation process at which the design and development phase ends and the manufacturing stage start." See SSLR Order, 18 FCC Red at 10833 (4 191). The Commission has suggested that evidence of compliance with this milestone may include: (i)proof ofa large payment of money, often ® See generall Spacenay Contract, Atachment A Statement of Work at § 3.1, Atachment B, Space Segment Requirements Specification. and Amendment 1 1, dated November 29,2004 " See, «2. Spoceway Contact, Atachment A.Satementof Work,at 3.1.12 (uthorzing immediate rocurement o long lead pars)and Amendment 1 at 2dated November 292004(specifyinga chedulefor Consent o Shipto oecur no lter thana dteuin " see Spaceway Contract, Atachment D, Amendment 11 at 4 dted Novermber29, 200%; Amendment 13, dated October26, 2005 and Bocing Leter at§4,dated Apri 10, 2006. ® See, e Mobile Communications Holdings,In., 18 FCC Red 11650, 1684 (2003), uoting Tempo Sarelite, Ine., 7 FCC Red 6307, 6600 @ 13) (1902)

coincident with the completion of CDR;(i) affidavits from independent manufacturers; and (ii) evidence that the long lead items needed to begin physical construction of spacecraft have been ordered. 1d. As confirmed by Bocing, Hughes® contractor, the CDR for the 95° W.L. stellite was successfully completed on March 9, 2001. See Letter from Louis F. Benfant, Manager, Contracts, Bocing SatelliInternational, Inc., to Craig Plastrik, Legal Counsel, HNS (*Bocing Letter®). The Bocing Letteris included as Attachment 3 to this Demonstration of Compliance with Satellite Implementation Milestones. The fact that the Ka—band FSS satellite liensed to Hughes is now in the late stages of construction (see discussion of Milestone 3, immediately below), and that it is scheduled to be shipped from Bocing‘s manufacturing facility in the fourth quarter of 2006, under the rationale ofthe SSLR Order, demonstrates unegquivocally that Hughes has satisied the CDR milestone. Mitestone 3 — Commencement of Physical Construction As with the CDR milestone, the Commission has established no specific guidelines for determining satisfaction of the third implementation milestone, commencement of physical construction. Instead, it has stated that lcensees are required "to provide sufficient information to demonstrate to a reasonable person that they have commenced physical construction of their Hicensed spacecraft" SSLR Order, 18 FCC Red at 10834 (1 193). As stated above, actual construction of the SPACEWAY 3 satellite, now designated for the 95° W.L.orbital location and authorized to Hughes, began in December 1999, with the procurement of long—lead items for SPACEWAY 3 under the Spaceway Contract. See also Bocing Letter at 1; Hughes Declaration (Attachment 4 hereto) at §.9.. In November 2004, Bocing was directed to complete construction of the SPACEWAY 3 satellte and to deliver it per a set schedule.

Pursuant to the terms ofthe Spaceway Contract, Hughes (or its predecessors in interest) has made payments totaling 86% ofthe total amount due for SPACEWAY 3 under the Spaceway Contract. See Bocing Letter at 34. 11. Request for Determination of Milestone Compliance Hughes has submitted the foregoing information in complisnce with Sections 25.164(c) (d)& (c) ofthe Commission‘s Rules govering milestone compliance. This information demonstrates that three ofthe fourimplementation milestones set forth in the 95W License Grant have already been met. Hughes emphasizes that under Commission precedent,the fact that the milestone showing relates to a satelite with technical parameters that are proposed in the pending modification oflicense application, s amended, rather than to the technical parameters of the spacecraftidentified in its authorization is immaterial for purposes of determining Hughes‘ satisfaction of the implementation milestones. ‘The Commission has determined that so long as the contract the licensee submits to show milestone compliance is binding, non—contingent, and demonstrative ofthe licensee‘s intent to use the spectrum authorized in a manner consistent with the stated policy objectives of the milestone requirement(Le., to employ the resourcein a timely manner and to ensure that spectrum is not held by licensees unable or unvwilling to proceed with their plans), the milestone will be satisfied even though a modification of license application is pending."* A contract that requires the selected manufacturer to build a system that the Commission has not yet authorized is no impediment, and certainly does not renderthe license null and void. In addressing such a matter,the Commission indicated that such a contrary interpretation would: overlook{} the fact that the Commission often receives requestsfrom licensees to modify the technical design of their satelites while they are being constructed. In recognition of the several years required to construct a !* See Teledesic LLC, 17 FCC Red 11263, 1265 (ln l Bu. 2000)

satellite,... the rapidly changing technology, and our goal of encouraging more efficient use ofthe radio spectrum, the Commission generally allows Hicensees to modify their satellte systems provided the modifications are consistent with Commission policies and do not present any particular interference problems. [Each] modification application will be decided on its own merit and does not factor into our determination as to whether (the Hicensee} has met its inital construction milestone."" Under these circumstances, tfact that Hughes has a modification oflcense application pending, and has a binding, non—contingent contract to construct a satellite that reflects the technical parameters proposed in the modification application, in no way undereuts its satisfaction of thfirst (and the two subsequent) milestones. The Commission expectslicensces to act exactly as Hughes has acted here."" The 95W License Grant required Hughes to post a $3 million performance bond thity days following grant. See ISW License Grant at $ 2. Pursuant to the Commission‘s rules, geostationary satellite licensees "will be permitted to reduce the amount of the bond by $750,000 uon successfully meeting" each milestone deadline. 47 C.FR. § 25.165(d). Inasmuch as Hughes has demonstrated herein thatit has completed the firsthree of the four implementation milestones to which it is subject, it respectfully requests that the Commission affirm this fact by issuing a Public Notice, thereby allowing Hughes to reduce the amount ofits bond to $750,000, the amount that its lcense and the Commission‘s rules permit a geostationary satellite icensee to post following completion of is first three implementation milestones. kok 0k k0% 5n ©* Hughes beleves that the determination in the Teledesi proceedingi corect and remains vital Commision policy,even afterthe adopton ofthe implementation bond requiement in 2003. Should this not be th case, and should the Commissin beinclined to dtermine thata binding., non—contingent contracttoimplementa proposed. but not yetauthorized satellte i nsuffiient o satisthe contact milestoe, Hughesrespectfuly and contingenty requestthe Commission o stath aperation oftheforfitreprocess untl actionon Hughes® May 2008 modificationof icense applcation, asamended in March 2006, is completed. Such reatment would avoid an arbitrayand unnecessaly puntive resul, and would notundermine the polcyobjectives othe milestone requrement. Hughesapplictionhas beenaccepted for Alng, drew no opposingcomments opettion t deny, and is ie for imminentgrant. Inasmuch as thsatelite willb completly consructd in essthan six months,the requested stay would not viggeany outyearchain reacton 10

Should there be any questions regarding the foregoing information, please contact the undersigned counsel. Respectfully submitted, HUGHES COMMUNICATIONS, INC. By: ul R. Rodriguer Stephen D. Baruch David S. Keir Leventhal Senter & Lerman PLLC 2000 K Street, N.W., Suite 600 Washington, D.C. 20006 (202) 420—3070 Its Attomeys Joslyn Read Assistant Vice President Regulatory & Intemational Affairs Hughes Network Systems, LLC 11717 Exploration Lane Germantown, MD 20876 April 19, 2006 11

SUBMITTED SEPARATELY PURSUANT TO REQUEST FOR CONFIDENTIAL TREATMENT

ATTACHMENT 2 SUBMITTED SEPARATELY PURSUANT TO REQUEST FOR CONFIDENTIALTREATMENT

SUBMITTED SEPARATELY PURSUANT TO REQUEST FOR CONFIDENTIAL TREATMENT

ATTACHMENT 4 SUBMITTED SEPARATELY PURSUANT TO REQUEST FOR CONFIDENTIAL TREATMENT


Document Created: 2006-04-28 13:39:57
Document Modified: 2006-04-28 13:39:57
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