Attachment SkyTerra Opposition

SkyTerra Opposition

OPPOSITION TO PETITION TO DENY submitted by SkyTerra Communications, Inc.

Opposition to Petition to Deny filed by SkyTerra Communications, Inc. to the Petition to Deny filed by Intelsat Global Sales Marketing, Ltd. on October 31, 2003.

2003-11-14

This document pretains to SES-T/C-20030918-01300 for Transfer of Control on a Satellite Earth Station filing.

IBFS_SESTC2003091801300_346179

RECEIVED Before the FEDERAL COMMUNICATIONS COIMMISSION Washington, D.C. 20554 - ~uwacAno~ -OPTHE- ~ I In the matter of Verestar, Inc. American Tower Corporation SkyTerra Communications,hc. To.: Chief, International Bureau OPPOSITlON TO PETITION TO DENY SkyTerra Communications, hc,("SkyTma"), by undersigned counseI, hereby submits this Opposition to the Petition to Deny ("Pctilion")filed by Inlelsat Global Sales and Markcting, Lid. ("lntelsat")on Octobm 31,2003 against the above-referenced application ("TransferApplication")to transfa control of Verestar, hc.("Verestar") fiom American Tower Corporation ("American Tower") to SkyTerra.' The Pelition asks the Commission cither to deny the Transfer Application or, at a minimUm, to "de€er action on the application until such time as Verestar reaches agreements with its suppliers"2,including Intelsat. htelsat lacks standing to object to the Transfer Application because the soh ground for filing the Petition was to gain leverage in a plivatc contractual dispute with Verestar. In accordance with the Commission's longsianding policy o f refusing to ' B y lcttcr to the Commission, dated October 23,2003, Rare Medium Group, hc. (the name of the transferee on thc Transfer Application when filed) changed its name to SkyTerra. petition at pp. 1-2.

adjudicate private conwdctual dispules, the Petition should be 8 u m m ~ l dismissed y for this reason alone. Intelsat's attempts, moreover, to concoct public interest issues arising from the transaction wholly fail because virtually all of the issues it raises are baed on unsupported allegations or factual inaccuracies. In this regard, Intblsat's Pctition represents the very cssence of a "frivolous pleading"because it was filed with little or no effort to ascertain the underlying facts and expressly requests delay for the sole purpose of giving Intelsat time to work out its differences with Verestar in a private contractual dispute3 In order to deter other parties from filing similarly frivolous pleadings in the future, the Commission should invoke its power to strike the Pctition as a "shm" as expeditiously as possible 50 that SkyTerra can begin thc process of building Veresl;ar's business for the bcnefit of its customers. I. lNI'EL$AT LACKS STANDING TO OBJECT TO THE: TRANSFER APPLlCATlON €!ECAUSE THE SOLE REASON IT FILED THE PETITION TO DENY WAS TO GAIN LEVERAGE IN A PRIVATE CONTRACTUAL DISPUTE WITH VEKESTAR The Commission'srules require a petition to deny to contain speciiic allegations of fact, supported by affidavit, sufficientto demonstrate that the filer is a "party in interest"to the proc~cding.~ In short, a petition to dcny must dmonstrate that the entity filing thc pleading has standing. Not ody did Intelsat fail to file an f i d a v i t io support of its Petition, it fail& even lo allege in the Petition that it has slanding to object to the See Commission Taking Tough Measures Against Frivolbus Pleadings, Public Notice, 11 FCC Rcd 3030 (1996). See 47 C.F.R. 6 1.,52. ' See 47 C.E.R, 6 25.154. See also Scction 303(d)( 1) of the Communications Act of 1934, as mended. 2

proposed transfer, Given that Intelsnt has not satisfied even the most basic requirements for a properly filed pleading, the Commission should sumarify dismiss the Petition. lntclsat's failurc to allege that it tias standing is not surprising,howevm, given that it would not be able to mcet even a single elemcnt of the Commission's three-part test for demonstrating standing: "(1) personal injury, (2) that is 'fairly traceable' to the challenged action, and (3) a substantial likelihood that the relief rquested will redress the The only arguable "personal injury'' Jntelsat refers to in Ihe Petition injury ~lairned."~ relates to mounts htclsal claims it is owed by Verestar in an ongoing contractual dispute.' As described by Intelsat in the Petition, Veresttar, SkyTerra and Tntelsat have becn negotiating over this contractual dispute for some time now and have f'ailed to reach an agreementa8The parties haw negotiated many (though not all) of the terns for a settlbment of their private contractual dispute but have failed to cxchange signature pages on their letter agreemcnt. As the attached email from a senior executive of lntelsat to Keith Kanuncr of SkyTerra and Ray O'Brien of Verestar demonstrates, it is preciseIy the fact that Verestar and SkyTerra had not acquiesced to Intelsat's demmds for a signed agreement by October 3 1,2003- the last date for filing pctitions to dcny the Transfer Application -that formed the basis for Intelsat's Petition: In re Applicnlian of MCI Communicutions Cop,Transferor, nnd Southern Puc$c Telecommunications Company,Trmsfwee,for Consent to Transfa Confro1of Qwesl Communicutions. Jnc., Memorandum Opinion and Order, 12 FCC Rcd 7790, 7794 (1397) (citation omitted). ' Petlition at pp. 1,4. 8 3d. 3

Dear Keith and Ray As you know, Intelsat filed a pleading before the FCC at 6 pm on Friday 3 1 October, after we had been unable to get signatures from either SkyTerra or Verestar on the I.etterof agreement which had been agrced between Kdth and I on Thursday 23 Octobcr and sent to S k f h r a on 24 October, It wasn't the path we preferred to go down - and one 1, and others at Intelsat, had worked to try to avoid9 And lest thcre be any doubt that the Petition was filed solely as a weapon to prasure Verestar and SkyTerra into agreeing to Intelsat's commercial demands, the emad continues: We sti IJ have an opportunity to collectively change the situation. Intelsat is willing to withdraw its pleading as soon as wc can get thc letter o f agreemcnt signed AND get the requisite signatures on the legallybinding executjon documents that will finalize the agreement betwe.cn the three pades concaning the arrears owed to Tntelsat. I belicve we would need to complete this work by next Wednesday, 12 November, which 1 understand is just in advance of the deadline for SkyTerra to file a counter- plcading with the FCC, should it decide to do s ~ . ' ~ Intelsat's displeasure over its iuability to resolve a private contractual dispute hardly constitutes "personalinjury" that i s "fairlytraceable"to the challenged action here, nmely, Commission grant ofthe Trm€er AppJication. On the contrary, Intelsat's Petition is nothing morc than an attempt to involve the Commission in a private contractual dispute, which the Comnlission has a longstanding policy of refusing to 9 Emdl,dit4 Novmber 5,2003,attached hereto as Exhibit 4. 4

adjudicate." In order to prcvcnt a ftivolous pleading !?.omresulting in a canmercial advantage to Jntelsat,SkyTerra rcspcctfdly requests that the Conmission promptly dismiss the Petition and, equally important, that i t evaluate any public interest concerns raised by hitelsat's aegotiation tactics only as a separate matter. As fir tbe third element of the test for sttinding- redressability - htelsat has not even alleged that its requested relief would redress its alleged injury resulting fiom the. unrelated contractual disputc with Vetestar. In fact, even if its privatc contractual dispute with Verestar wcrc a valid reason for the Commission to deny or delay the grant ofthe Transfer Application - which it is not - the relief requested is far more likely to harm than to hclp Intelat. Verestar's financial troubles are a matter of public record, including in this very proceeding.'' Denial - or even dclay - in panting the Transfer Application likely will exacerbate those fmaicial troubles, thus making it more difficult for Intal~at and Verestar to rcach a commercial accord. 111 sum, the Commission should recognizc Intelsat's Petition for what it is: an attcmpt to obtain relief from the CommisSion in connection with Intelsat's private conX1.actualdispute with Vereslai, As such, the Petition shauld be summdly dismisscd. I' In re AppkaLion of MCI TelecommunictrtionsCorporation,Assignor and EchoStar 110 Corporation. Assignee, Order and Authorization, 16 FCC Rcd 21608,T 29 (1999) (citing Listeners' Guild, Inc, u. FCC,813 F.2d 465,469 @.C. Cit. 1987); StocWtolders of Renaissance Communications Corp., 12 FCC Rcd 11866,11863 (1997); Northwest Broadcasting, Inc,, 12 FCC Rcd 3289,3293 (1997); WHOA-W, h c . , 11 FCC Rcd 20041,20043 (1996)). l2 As described in thc public interest statement in the Transfer Application, "[wlithout the many benefits that will flow from this transaction, Verestar may not be able to continue as a going concern." Transfer Application, Response to Ttems 43 and A21, p. 2. 5

I I . II. INTEJSAT'S ATTEMPTS TO FABRICATE LEGITIMATE PUBLIC INTEREST ISSUES IN THE TRANSFBR APPLICATION WHOLLY PAIL BECAUSE THEY ARE GROUNDED ON UNSUPPORTED ALLEGATIONS AND FACTUAL INACCURACIES Even if lntclsat had standing to object to the Transfer Application -which it neither has nor alleges it has - Iritelsat has failed to raise a singlc lcgi timate public interest issue with rcspect lo the Transfer Application. Instead, Intelsat's Petition is a long parade o f unsupported allegations and factual inaccuracies, For example, hitelsat erroneously describes SkyTerra as "a highly leveraged, finmciat1y stressed vcnture capital conipany.'''3 Tntelsat provides no supp~rtwhatsoever for this assertion. Given that SlcyTcrra has no debt, it is patently falsc to describe the company as highly leveragcd.14 And while Intalsat notes that SkyTerra has faccd financial challcnges in recent ycars, Ifitelsat fails to mention that SlcfI'erra was heavily involved in Internet-related busincsses in the late 1990s, a market segment that suffercd one of the most notorious meltdowns in thc history of Wall Street.'' When the dot-corn - boom went bust in 2000, SkyTem like virtually cvery other company participating in the Internet space - faccd a number of difficult business choices.I6 So the fact that SkyTtrra pullcd out of a numbcr ofhtemet ventures in 2001 hardly makes it unique and certainly does not justify Intelsat's claim that SkyTerra "isa venture capital company whose business is to t&c positions in independently managed companies, and to sell l3 Peiilion at p. 1, 14 Rare Medium Group, hc.,U S Securities and Exchange Cam.missio,n,Farm lO-K, fild March 5,2003(''SkyTewa 10-A?). Is I . . at 3-17. l6 Id. 6

- There is simply no them or to discontinue their operations, as quickly as po~sible."'~ basis for such an assertion and Intelsat's attempts to mischaracterizethe facts set forth in SkyTcrra's 10-Kare disingenuous at best. Intclsat also claims that SkyTerra has "neither the financial ability nor the teclmical expertise necessary to continue to provide service to Vercstar's With respect to SkyTerra'stechnical expertise, SkyTerra first notes that it is mcrely acquiring control of Verestar and that Vcrcsta's seasoned m,magcment:will continue to operate the company. SkyTerra itself, moreover, has impressive credentials in satcllite communications. J c f h y Leddy,President of SkyTerra, has morc than 25 years of experience in satellite communications, l9 In addition, SkyTerra Vice Presidcnt Eric Goldman has substantial expenencc working En the slrtellitc industry, including six yms with a Little LEO company. SkyTerra also controls MSV Investors, LLC, which is an active participant in the Mobile Satcllite Ventures, L.P. ("MSV")joint venture involving Motient, TMI Communications, Inc. and othcrs. MSV provides mobile dighat voice and data communications services via satellite in North In short, Intclsat's claim that SkyTena lacks the requisite technical expertise to build Verestar's business is not only irrelevant to the merits of the Transfer Application, it is also false. l7 Pelition at p. 2 Id. atp. 1. l9 From 1980 to 2001, Mr. Leddy servcd in key executive and operating leadership roles with EMS Technologies, a leading provider of wireless, satcllite and broadband communications products and solutions. He was electd to the U.S. Space Foundation's Hall of Fame in 1997 for his role in the development of NASA's Ka-band Advanccd Communications Technology Satellite. See SkyTma IO-K at pp. 32-33,40. 2o M ,atp. 3. 7

As for SkyTerra's financial ability to consummate the transaction and build Vertstar's business, htelsat oncc again O f f e n only unsupported allegations in its Petition. hitelsat notcs, for example, that SkyTcrra suffered a net loss of $4.0 miMion for the year ending December 31,2002. In light of its strong cash posjtion, SkyTma's net loss last ycar is wholly irrelevant to its ability to consummate the transaction with Verestar and build the Vcrcstar business. And Jntelsatconcludes its improper effort to cxercise commercial leverage by stating: SkyTerra has neither the ability nor the desire to fund Verestar for the long-haul nor does it care about scrvice to Vercstar'scurrent or hture customcr base. SkyTerra's only interest in Vcrestar is the speed at which it can flip the company.21 lntclsat has no knowledge, persotial or otherwise, that could possibly substantiate these assertions about SkyTcrra's motives, Indeed, SkyTerra and American Tower have committed to extend significant fin,mcing to Verestar upon closing. Moreover, Intelsat fails to explain how S k y T m - or any other entity for that matter - could make money by "flipping"compzlnies that are financially troubled like Vercstar. The position simply defies logic. Suffice it to say that SkyTerra's motives for acquiring Verestar and providing new financing to the enterprise are elltirely consistent with the public interest (namely, to return the company to profitability for the bencfit dits existing aid future customers), md Intelsat has supplied not onc iota of evidence to suggest olhedse. 21 Fetitim at p. 4. 8

Intclsat also maintains that the Commission should defer action on the Transfer Application because - in Lntclsat's view - the transaction "cannot close until such time as Vwestar reaches accords with its vcndors, includjng lntelsat . . .zI'. The issue of whcther Verestar can rcach conirnacial agreements with its vendors is wholly unrelated to the Communications Act, Commission rules, and the public interest. Even if the issue w m a relevant coiicern for the Commission, moreover, lntelsat is wrong as a factual inattcr because SkyTma cun waive the condition.23 Til the final analysis, Intelsat's repeated requests for dclay of Commission action on the Transfer application belie its true motives: 10 pressure Verestar into capitulating to htelsat's commercial demands.24 Indeed, a party raising lcgitimate public interest issues concming a proposed transfer application should be seekingprompf Commission action, not delay. Intelsat's Petition - with its baseless assertions about SkyTerra's financcs and modves, its misreading of straightforward provisions of the SPA, and its express request - for delay only so long as Tntelsat's dispute with Vcreatar remains outstanding all point to the sanie conclusion: lntelsat is not seeking resolution of any public interest issues whatsoever. 22 Id. at p. 1. 23 $ea $lock Purchase Agreement ("SPA") at Scction 6, p. 28, first sentencc ("[SkyTerral's obligation 10 purchase the Purchased Units from [American Tower] at the Closing is subject to the satisfaction on or prior to the Closing Date of each of the following conditions unlms waived by [SkyTm]:" (emphasis added). The SPA is an exhibit to the Transfer Application. 24 Thc SPA also contains a "drop-dead date" of December 3 1,2003. See SPA at Section 11.l(b). The existence of this "drop-dead date" - which lntelsat knows about given that it rcad the SPA when preparing its Petition - increases Lntclsat's ability to exert prcssurc on Vefestar to cave to htelsat's commercia1 demands. 9

htelsat also raiscs licensing issues at Vereslar that it claims indicate that Vcrestar lacks "the requisite expertise or technical qualifications to be a Commission li~ensee."~~ SkyT.erta refers the Commission to the Joint Opposition to Petition to Deny filed today by Vcrcstar and American Tower, which responds to each o€Intelsat's claims concerning these licensing mattcrs. XI$. CONCLUSION For the foregoing reasons, the Comnlission should summarily dismiss Jntelsat's Petition so that SlcyTma nay acquire control of Verestar and cxpand its business for tZle benefit of Verestar's prcsent and future customers. Respectfully submitted, SKYTERRA CO-CArnONS, INC. By: Btian D.Weimer Skadden, A r p s , Slate, Meagber & Flom LLP 1440 New York Avenue, N.W. WtdhgtOn, DC 20005-2111 Dated: November 14,2003 25 Petition at p. 7. 10

EXHIBlT-A - 02 From: 'RWk@&E!ll Sent: Wednesday, November 05,2003 4:04 AM Dear Keith and Ray As you know, lntelsat fited e pleading before the FCC 81 6pm on Frlday 31 October, after we had been unable to get signatures from either Skyterra or Verestar on the letter ofagreemen1which had been agreed between Kefth and I on Thursday 23 Oct-r and sent to Skytern an 24 October. It wasn't lha path we preferred I O g~ down - and one I, and others at InteleaI, had worked to try lo avokl. We still have an opportunity lo cdloctively change the slhratian. Intetsat is willing to withdraw its pleading as soon as we can get the letter of agreement signed AND get the requisite signatures on the Malty-binding execution documents that will finalise the agreement between the three parties concerning the arrears ow& to Intelsat. I believe W B would need to COmplele lhis work by next Wednesday. 12 November, which I understand ki just in advance of the deadltne far Skyterra to file a counter-pleading wlth the FCC, should it decide to do so- l Can I have an indication please Chat you are bath sUll ready lo formalbe our agreement. If$0,could w get the ball rolling by having troth Vewttar end Skyterra senU me by fax today a signed mpy of the agreement letter. My fax number is +I4 208 899 6 1 M We will get working irnmedlateiy on the executlon documents. Looking forward to getting back to where WB want to be,and continuing to grow our buslness together best regards John

1, Robert C. Lcwis, Senior V i a Prcsjdent and General Counsel of SkyTerra Communicsths, hc.,hereby certify under pensJty of perjury that the information in Khh Opposition to Petition to Dmy i s tme andemccuratc to the be* of my knowlcdga, Executedon: November 14,2003

CERTIFICATE OF SERVICE I, Malcolm J. Tucslcy, hereby certify that on November 14,2003, I caused a copy of thc foregoing Oppositiou to Petition io Deny to be sewed via first class mail, postage prcpaid, or by hand delivery" upon the following: Marlene H. Dortch* Donald Abelson" Secretary Chief Federal Communications Commission Tnntemational Burcnu 445 12th Street, S.W. Federal Communications Commission Washhgton, D.C. 20554 445 12th Street, S.W. Washington, D.C. 20554 John Muleta* Chief James L. Ball* Wireless TelecommunicationsBureau Chief, Policy Division Fcderd Communications Commission Intcmational Bureau 445 12th Skeet, S.W. Federal CommunicationsCommission Washington, D.C. 20554 445 12th Street, S.W. Washington, D.C. 20554 Tom Tycz* Chief, Salellitc Division Fern 3 annulnek* international Bureau Deputy Chief, Satellite Division Federal Communications Commission International Bmau 445 1 2th Strcet, S.W, Federal Communications Comiission Washington, D.C.20554 445 12th Strcct, S.W. Washington, D.C. 20554 Karl Kensinger" Associate Chicf, Satellite Divkion Qualex Tntmatitional, Portals fl* International Bureau 445 '12th Street, S.W. Federal Comnunications Commission Washington, D.C. 20554 445 12th Street, S,W. Washington,D.C.20554 Robert A. Mansbach htelsat Global Sales and Marketing, Ltd. David Meltzer 3400 International Drive, N.W. Intelsat Global Service Corporation Washington, D.C. 20008 3400 International Drive, N.W. Washington, D.C. 20008 Eliot Greenwald Swidler, Bcrlin, Shcreff, Preidmm, LLP Scott H. Lyon 300 K Strect, N.W. Vercstar, LLC Washington, D.C. 20007 3040 Williqns Drive, Suite 600 Fairfax, VA 2203 1 Chicf Compliance 0fficer American Tower Corporation 1 16 Huntington Avenue, 1 1th Floor Boston, MA 021 16 - Server 2A MSW 463207.01-D.C.


Document Created: 2003-11-21 10:42:50
Document Modified: 2003-11-21 10:42:50
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