Satellite Terminal Licensing: Simplifying a Daunting Task

By | October 1, 2008 | Feature, Telecom

Licensing satellite terminals remains a widely misunderstood topic often surrounded by confusion and myth. But it is not the maze it is made out to be. Since the licensing authority is not the same in all countries, different rules apply; but different rules should not automatically suggest added difficulty securing a license.

Once a license has been granted, do the holders — either a company or carrier — need to do anything else? Is it clear sailing for a company operating a satellite terminal? Or can changes to the satellite network cause the company to fall out of compliance? For public companies scrutinized under Sarbanes-Oxley legislation, should satellite licenses be included in information technology audits? In the aftermath of Enron and WorldCom stock scandals, Congress passed the Sarbanes-Oxley Act in 2002 to minimize the chance of fraudulent bookkeeping, thereby helping safeguard investors. Since information technology departments are closely entwined with accounting departments, IT systems are audited to insure everything is in order. Since satellite licenses fall under the IT department’s domain, a public company operating a satellite network without the proper licenses could have extremely negative consequences.

Types of Licenses

While there is general agreement on the definition of a license, there is not unanimity on the classification of licenses for satellite terminals. Each country has a unique set of classification and naming conventions, making it difficult to discuss all of the options in a concise manner. For the sake of brevity, satellite terminal licenses can be broken down into three broad categories: the operator license, the end-user license and the piggyback license.

In the United States, there are several elements that an operator must provide the U.S. Federal Communications Commission (FCC) when applying for a license, including: a frequency coordination study, a spectral density showing, disclosures regarding foreign ownership of the business and statements regarding U.S. Federal Aviation Administration compliance regarding antenna height. Ku- and C-band licenses are handled differently. For Ku-band networks, an operator requests a license that covers a specific number of terminals, often hundreds or thousands, and the license is good for 15 years. Once the hub is licensed, individual VSAT terminals operate under a blanket license. Due to potential interference with terrestrial microwave networks, C-band licensing is done differently. Instead of a blanket license, individual C-band satellite terminals must be licensed separately and individually frequency coordinated. Special licenses, known as CSAT, are available for networks of C-band terminals.

Outside the United States, the operator is required to own a portion of the telecommunications infrastructure. The licensing authority will only work with an operator that has a local office (e.g. are incorporated locally) and makes a commitment to develop the telecommunications infrastructure in the country. Generally, there are reporting obligations, as well as maintenance or revenue sharing fees required from the operator. Obtaining an operator license can be difficult and time consuming, as well as expensive. For the most part, a country will limit the number of licenses it grants.

"Some countries are completely silent as to how their regulations apply within the [Exclusive Economic Zone]…. Often times it is acceptable to negotiate with the licensing authority when procuring a satellite terminal license for operations in the EEZ."

— Magallanes

An end-user is the final subscriber of telecommunication services, or the final beneficiary that does not resell the service. This type of authorization is usually limited to private, closed or independent networks for the end users own exploit. An end-user license can only be used by a single company. Although limitations will usually come in the form of external factors, such as lack of space segment, for all practical purposes there is no limit to the number of end-user licenses which may be granted by the licensing authority. End-user licenses are easier to obtain and are less costly compared to operator licenses. On the other hand, end-user licenses are usually restricted to the technical parameters of the particular system applied for. Anytime the operating parameters of the system change, such as a change in the satellite or antenna, the end-user license must be modified.

A small number of countries allow an existing company with an operator’s license to provide license coverage to other parties. In this case, the licensed operator acts as the de facto authority for licensing purposes which reduces the burden on the licensing authority. The aspiring end user can then approach the operator for licensing coverage rather than going through the government agency. The operator offering this "piggyback" licensing coverage then reports to the licensing authority — usually on an annual basis — the number of subscribers for the previous period and pays taxes accordingly. The licensed operator also will be allowed to charge a fee for licensing.

Licensing satellite terminals for use on the ocean can add a new layer of complexity to the process. "There is a common misunderstanding that satellite terminals don’t need to be licensed if they are located offshore beyond the 12-nautical-mile limit of a particular country," says Raul Magallanes, who owns a Houston-based law firm focusing on licensing. Magallanes, who spent 10 years as a satellite engineer, helps satellite service providers, carriers and multinational corporations with licensing requirements around the world. "The waters inside the 12-mile boundary are recognized by international law as a country’s national territory and outside that limit are classified as international waters. However, it is important to note that there are international treaties, such as Convention on the Law of the Sea (1994), that state that a country’s jurisdiction extends up to the outer limit of the Exclusive Economic Zone (EEZ)…. Some countries are completely silent as to how their regulations apply within the EEZ. Given the lack of clear guidelines in the EEZ, often times it is acceptable to negotiate with the licensing authority when procuring a satellite terminal license for operations in the EEZ."

License Modifications

Satellite terminal licenses usually are valid for long periods of time — 10, 15 or 20 years or even indefinitely. Once licensed, many end users and service providers assume that no further action is required for the reminder of the license term. However, a license generally is constrained to the engineering design parameters of the original satellite system. This is particularly true for end-user licenses. Therefore, whenever the associated satellite network changes, the license also must be modified. There are three primary situations that may cause a VSAT license to become obsolete: a change in the network, a change in the law and a change in circumstances.

A VSAT license is nothing more than a temporary, revocable authority to transmit energy. As such, licenses come packaged with certain constraints and other conditions that prohibit the user from acting outside the boundaries of the license operating parameters. Network changes such as an increase in transmit power or power density, relocating a VSAT unit, or a change frequencies or target satellite may prompt a license modification.

Sometimes a change in the law may cause a satellite license to become obsolete. Thus, it is always good practice to keep abreast of what is going on in the regulatory world. When the FCC enacted the Earth Station on Vessels (ESV) regulations in 2005, stabilized antennas installed on large marine craft and previously licensed as fixed earth stations were required to become relicensed to comply with the new regulations. Existing stations were not grandfathered, and many operators did not find out about this requirement until after the grace period had passed. There are operators that still do not know of the new rules and are still falsely relying on their original licenses for their ESV operations.

Penalties differ from country to country but can be very stiff for non-compliance or allowing licenses to lapse. Depending on a number of mitigating circumstances, fines in the United States can be as much as $10,000 per day for operating a satellite terminal without a proper FCC license. Companies should be vigilant maintaining their licenses. "A poorly maintained license can depreciate or completely lose its value," says Magallanes. "Companies often discover that their licenses are out of compliance while performing a compulsory license audit. Take for instance a company — the target of a merger or acquisition — that finds out that it has been operating its VSATs in excess of their permitted licensed parameters, or even worse, unlicensed. When this company discovers that it is now potentially subject to regulatory sanctions or fines it will most likely be placed at a negotiating disadvantage."

Being proactive is the best way to minimize a company’s regulatory risk and performing a license audit is the recommended proactive move. A company’s network is in constant flux, and regulations continually change, sometimes without notice. An annual license audit can be the best preventative measure to keep a company’s risk at a safe level.

This audit process requires legal and technical competence in satellite communications. Make sure your counsel and engineers are in sync. Finally, once the existing licenses, existing network, planned growth and existing and upcoming regulations are examined in their totality, a plan of action should be drafted. This should include: obtaining new licenses where VSATs are operating unlicensed or where planned growth calls for new VSATs; modifying existing licenses where existing license parameters have been exceeded or will be exceeded due to planned network growth or upcoming regulations; and cancelling unused licenses where VSATs have been decommissioned.

Conclusion

While certain countries are more challenging than others to secure licenses from, the vast majority of countries are very straightforward to deal with. Although satellite technology is the superior choice for many applications in remote areas of the world, undue trepidation about the amount of time and expense to secure a license often sends network architects in search of other solutions. With a little knowledge, those fears can be laid to rest.

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