Regulatory Review: ITU Satellite Filing Fees–The Bill Is In The Mail

by Gerry Oberst

At the recent gathering in Rio de Janeiro, Brazil, an International Telecommunication Union (ITU) "Internet Strategy and Policy Advisor" described how the ITU works. Speaking before the Government Advisory Committee of the Internet Corporation for Assigned Names and Numbers (ICAAN), this advisor positioned the ITU for greater involvement in Internet governance. Toward that end, he sought to explode the myth of ITU fees, arguing the ITU only collects membership fees "with the exception of minor cost-recovery activities."

Tell that story to the satellite sector. The bills are coming due for cost-recovery for ITU management of satellite orbital positions and radio frequencies, and some satellite operators are fuming.

The ITU staff issued the vast bulk of bills starting in the last quarter of 2002. During a period of a little more than six months from September 2002 to March 2003, the bills under various categories of satellite filings amounted to about eight million Swiss francs (approximately U.S.$5.8 million).

This eight million figure may be a drop in the bucket. Some ITU papers refer to recovery of as much as 31.5 million Swiss francs (U.S.$23 million) for the ITU 2004/2005 accounting years.

The gross figures hide some striking differences in charges. Thus, one fee was issued for as little as 330 Swiss francs (U.S.$239), while many other fees were for tens or hundreds of thousands. One U.S. filing in the Ku-band was charged 7,100 Swiss francs (U.S.$5,141), while another U.S. satellite in the same Ku-band series racked up a fee of 280,024 Swiss francs (U.S.$202,769). Belgium filed for eight satellites in 2002, most of which cost a few thousand francs. Two of the eight, somehow, cost 226,344 Swiss francs (U.S.$163,898) each. France ran up charges in the six month period of almost two million Swiss francs, with fees as little as 588 francs (U.S.$426) and as much as 167,176 francs (U.S.$121,054).

These fees are calculated based on the complexity of the filing, which is measured by the amount of processing units the application will require. The rules set up a schedule of processing charges with nine categories. Each filing within a category has a flat fee that covers a certain number of units, but if the filing has additional complexities, an algorithm is used to define the number of excessive units, which are charged extra. Operators have complained, however, that this algorithm was only adopted in 2002 but applied retrospectively, with results that differed drastically from what they had expected.

Under the rules, each country can nominate one satellite each year for a free filing. Some 57 filings are currently free under this approach. That presumably means that a country has an incentive to load its first free satellite filing with a big combination of frequencies and emission designators, because the unit charges take this into account, making a more complicated satellite more expensive.

The ITU maintains its Web site on satellite cost recovery at http://www.itu.int/ITU-R/space/costrec/index.html that sets forth the amounts being charged. The ITU also has prepared software that allows an administration to calculate the number of units for a particular filing, in order to estimate the cost recovery fee.

How did we get to these "minor cost-recovery" fees? It officially started with resolutions from the ITU Plenipotentiary Conference in 1998, adopting the principle of cost recovery for satellite network filings. The ITU Council (i.e., the member countries) fiddled with this in 1999, and again in 2001, to establish details on how fees are charged and to whom.

The primary purpose of the cost recovery fee has been to instill discipline in the filing process and deter applications for satellites that never will be built. Ironically, one effect of the new fees probably was to boost the number of filings, and thus the processing delays, as some administrations filed many applications before the fees became effective.

Nevertheless, the ITU noted a "marked reduction" in requests for satellite coordination during 2002 that coincided with the application of cost recovery fees. The claim is that this reduction, combined with greater internal efficiencies, may shrink the backlog in processing filings. Already the ITU backlog in treating coordination requests dropped in 2002 from 154 weeks to 129 weeks.

Another impact is that some fees are not paid–as of March 2003, 28 payments amounting to 273,064 Swiss francs (U.S.$197,729) were late, and the ITU records show that alot of other satellite filings have been withdrawn, some presumably due to the new charges. The ITU said in one paper that by March 2003, countries had withdrawn 98 satellite coordination requests, more than three times the number of withdrawals received in the whole of 2002.

There may be some myths about the ITU, but its new filing fee system is not one. The bills are coming due for satellite filings and operators must include this cost element in their planning. What the Internet crowd might think about these "minor fees," paid for the privilege of processing backlogs of two to three years, is for them to decide.

Gerry Oberst is a partner in the Brussels office of the Hogan & Hartson law firm. His email address is [email protected].