By Fred Donovan

In a curious decision, the Federal Communications Commission’s International Bureau granted a license to Digital Broadband Applications Corp. (DBAC) to use Canadian satellites to offer digital broadcast services (DBS) and Internet services in the United States. In its order, the bureau displayed a sleight of hand that David Copperfield would envy.

The bureau first determined that DBAC’s license application should be subject to the ECO-Sat test (effective competitive opportunities for satellites) under the agency’s DISCO II framework. That test requires a U.S. applicant seeking authority to operate with a foreign-licensed satellite to demonstrate “that U.S.-licensed satellite systems have effective competitive opportunities to provide analogous service in the country in which the non-U.S.-licensed space station is licensed.”

After concluding that in fact the Canadian market was closed to U.S.-licensed satellite systems, the bureau then said that those barriers don’t matter because granting the application is “in the public interest” – a standard wide enough to drive any application through. In effect, the bureau gutted the ECO-Sat test and destroyed any leverage the U.S. government might have in securing greater access for U.S.-licensed satellite operators to the Canadian market.

One issue considered by the bureau revolved around the World Trade Organization and what services are covered by that market-opening agreement. In its DISCO II order, the FCC said that there would be a presumption in favor of granting U.S. market access to satellites licensed in countries that had signed the WTO telecom services agreement, which includes Canada. However, the U.S. secured an exemption in the WTO accord for one-way DBS services.

In its application, DBAC argued that since it plans to offer two-way video and Internet services, its application should qualify for the presumption. The bureau begged to differ and found that part of DBAC’s proposed service would be one-way DBS service, so it had to undergo the more strenuous ECO-Sat test.

The bureau then reviewed the barriers to entry in Canada for U.S. satellite systems. Its conclusion was clear: “Thus, a de jure barrier exists in Canada for any U.S. satellite seeking to offer a DBAC-analogous service.” Okay, then the DBAC application fails the ECO-Sat test, right.

Not on your life. “Despite the existence of this barrier, we do not believe that the Nimiq satellite should be denied access to the U.S. market for DBAC’s proposed video service offering.” And why? Because the ECO-Sat test can be thrown out the window if there’s a “compelling public interest reason” to do so. And the compelling public reason? Competition in the U.S. market. Wait a minute. The bureau just said it was all about barriers to entry in the Canadian market. It had us looking at its right hand, while all the while the trick was being done by the left. Impressive. It’s time to clap.

DBAC’s new service may very well provide a vibrant competitor in the U.S. DBS and Internet marketplace. But it can do so only because of the bureau’s slight of regulatory hand.

Even the “safeguards” that International Bureau Chief Don Abelson bragged about in a media briefing earlier this month (SN, May 12, p. 2) have only to do with competition in the U.S. marketplace, not with U.S. access to the Canadian market. Looks like the bureau did a nice two-step around DISCO II.

Fred Donovan is managing editor of SATELLITE NEWS. The views expressed here are those of the author and do not necessarily reflect the opinions of the PBI Media, its owners or affiliates. You can contact him at 310/354-1803 or email [email protected].