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FCC Reviews Bond Requirement In Licensing Process

By | May 17, 2004

      By Paul Dykewicz, PBI Media LLC

      Officials with the Federal Communications Commission’s (FCC) International Bureau are declaring their shift to a first-come, first-served licensing policy from the former approach of using sometimes lengthy processing rounds as an unquestioned success. The key reason is that the protracted delays from the past are gone in which the old licensing regime caused systems to be held up from providing commercial service. However, the next issue is how to resolve industry complaints about an accompanying requirement for a performance bond.

      In a speech at The Carmel Group’s recent “Five Burning Questions” conference, FCC International Bureau Chief Don Abelson talked about forging a “partnership” with industry to benefit consumer choice and spectrum efficiency. The centerpiece of that effort is the “reformed” process for the FCC to issue earth- and space-station licenses for most non- satellite TV and non-satellite radio systems, he added. Spectrum for the later two sectors is assigned by auction, so the first-come, first-served approach was not applied in that instance.

      “Under its previous satellite licensing procedure, it could take three years for the FCC to issue a satellite license,” Abelson said. “We expected the new procedures to reduce these times to 180 days for GSO (geostationary) applications and 270 for NGSO (non-geostationary) applications, on average. Our experience has been better than we expected. For the first six months in which the new system has been in place, we have acted on GSO satellite applications in an average of 81 days.”

      However, the International Bureau is reviewing whether any changes should be implemented to modify a bond requirement it imposed on applicants as part of the licensing reform. The FCC is conducting a notice of proposed rulemaking that seeks comment on whether the GSO bond of $5 million and $7.5 million for non-GSO are the correct amounts to help ensure applicants are not warehousing spectrum. At the same time, FCC officials do not want the bonds to be too high, thus preventing legitimate entrepreneurial companies from launching a new service that would be in the public interest, said Rod Porter, deputy chief of the International Bureau. Comments have been received, and they now are under review, he added.

      The FCC is expected to complete a report and order on the bond requirement by early summer.

      SES Americom favors a “business-friendly” bond that would reduce the initial bond amount required for an applicant to seek a license. The current approach is flawed, the carrier says, because it ignores commercial realities that require risk sharing with major customers, and it is the most expensive when a project is most uncertain, according to an April 27 ex parte communication between SES Americom and International Bureau officials.

      SES Americom prefers a $500,000 initial bond, due when construction begins. This approach would more closely track the satellite operator’s risk profile for a new project, and it would be proportional to capital expenditures on a project, SES Americom representatives said.

      Intelsat Ltd., however, prefers the current bond requirement, countering that the $5 billion bond is not “big” when compared to the total cost of building, launching and insuring a satellite. In particular, the cost of the bond is much smaller if a licensee honors its commitment to the FCC to actually use the spectrum rather than to warehouse it, company officials said.

      The Intelsat position is that the former processing rounds did not provide “sufficient transparency, certitude and timeliness” for a company to pursue a new business initiative. It is hard to build and to execute quickly a business plan when one might not know how much spectrum one has for several years, its officials wrote.

      The existence of the performance bond and the “modest costs associated with it” will cause potential license applicants to look harder and earlier at their initiatives before embarking upon a path that will potentially warehouse scarce spectrum to the detriment of other operators and the consuming public, Intelsat officials explained.

      Paul Dykewicz is senior editor and senior analyst of Satellite News. He can be reached at 301/354-1769.

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