-----------------------~~~ 11 FCC Red No. 6 Federal Communications Commission Record DA 96-5 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of EchoStar Satellite Corporation File No. 13 l·SAT·EXT-95 Application for Extension o f Time to Construct, Launch, and Operate a Direct Broadcast Satellite System ORDER Adopted: December 21, 1995; Released: J anua ry 11, 1996 By the Chief, International Bureau: INTRODUCTION 1. In this Order , we grant in part the request of EchoStar Satellite Corporation ("EchoStar") for an extension of time to construct, launch, and operate its DBS system. We granted a conditional constr uction per mit to EchoStar in 1989. In 1992, we assigned EchoStar eleven channels at an eastern orbital location, 119° W.L., and conditioned assign­ ment of channels at a western orbital location on EchoStar's demonstration of completio n of satellite con­ struction contracting.' EchoStac seeks a one-year extension of t ime to launch and operate its eastern satellite, and a four-year extension of time to construct, launch. and op- erate its western satellite.2 . 2. The Commission has recently demonstrated its willing­ ness to cancel DBS permits where the permittee has failed to make sufficient use of the DBS resources bestowed upon it.3 It has also shown that it will not penalize permittees whose demonstrated commitment to providing DBS service has been delayed by factors beyond their control.~ EchoStar clearly falls into that latter group. 3. EchoStar is scheduled to launch its first satellite to the 119° location on December 28. 1995. Grant of the re­ quested extension with respect to this eastern location is consistent with our due diligence requirements. fosters the expeditious use of public DBS spectrum resources. and ensures the rapid delivery of DBS service to the public. Due to the government-wide furlough. however. we are not 1 EchoStar Satellite Corp., 7 F.C.C.R. 1765, 1772 ( 11192) rEchoStar"). EchoStar's assignment of channels at 119° W.L. was con­ ditioned upon the outcome of a then-pending petition filed by Dominion Video Satellite. Inc. ("DVS") for reins1atemen1 of i1s channel assignment at 119° W.L. DVS' petition has since been denied, Dominion Video Satellite, Inc., 8 F.C.C.R. bb!!(l ( 1993). affd Dominion Video Satellite, Inc .. FCC 9S-.i21 (released Octo­ ber 5, 1995). 3 Advanced Communications Corp .. FCC 95-.J28 (released Octo­ ber 18, 1995)("ACC Cancellation Order"). 4 See, e.g., Continental Satellite Corp., DA 95-2347 (released 3017 able at this time to rule on EchoStar's due diligence with respect to its western orbital location, and therefore will defer consideration of the second half of its extension request until we are able to make that due diligence deter­ mination. With this extension, EchoStar now has until August 15, 1996 in which to construct, launch, and begin operating its DBS satellite at its eastern orbital location -- a period that should be more than adequate given its planned December 1995 launch date. BACKGROUND 4. On August 15, 1989, the Commission issued a DBS construction permit to EchoStar, conditioned upon EchoStar's compliance with the Commission 's due dili­ gence rules in the DBS service.5 The due diligence require­ ment has two distinct components. First, a DBS permittee must either begin construction or complete contracting for construction of its satellite(s} within one year of the grant of its construction permit. A OBS permittee does not receive assigned channels or orbital locations until it dem­ onstrates compliance with this requirement. 7 Those assign­ ments are made to permittees in the order that successful showings are received. Second, a permittee must place its satellite(s) in operation within six years after receiving the permit, "unless otherwise determinedby the Commission upon proper showing in any particular case."8 5. On March 23, 1990, EchoStar filed a request for orbital/channel assignments, supported by a due diligence showing that included a copy of portions of a satellite construction contract. On March 5, 1992, the Commission found that EchoStar had complied with the first prong of the due diligence requirement for its eastern satellite, and assigned EchoStar eleven DBS channels at the 119° orbital location.9 6. EchoStar states that both construction a nd payment is complete for its eastern satellite. 10 EchoStar states that it has contracted for launch of that satelli te and paid tens of millions of dollars for launch services and insurance.11 EchoStar reports that completion of construction of its eastern satellite was delayed by the satellite contractor, following an in-orbit malfunction of the same model sat­ ellite in late 1994. 12 Moreover, an early 1995 launch failure delayed a ll scheduled launches by China Great Wall In­ dustry Corporation.' 3 Accordingly, the launch date, originally scheduled for August 1. 1995. is currently sched­ uled for December 28, 1995. EchoStar expects to start transmissions to homes in ear ly 1996.14 7. EchoStar asserts that grant of the requested extensions is in public interest. It contends that grant of its requests would promote a diverse, high-quality multichannel dis- November 21. 1995). s Co11tinental Satellite Corp., 4 F.C.C.R. b292. 6300-0 I ( 1989). 6 See 47 C.F.R. § 11Xl.19(b). 7 Processing Procedures Regarding the Direct Broadcast Sa1elli1e Service, 95 F.C.C.2d 250, 253 (1983). 8 47 C.F.R. § I00.19(b). 9 EclioStar, 7 F.C.C.R. at 1772. 10 EchoStar Extension Request at 2. 11 Id. at 2. 12 Id. at 2-4. 13 Id. at 3-4. 14 Id. at 2. ---------------------------- DA 96·5 Federal Communica.tions Commission Record 11 FCC Red No. 6 tribution service, and satisfy the need, recognized by Con­ gress, for competition to cable from unaffiliated distributors in the market for multichannel video program­ ming.15 Further, EchoStar states that its DBS system will: ( l) provide the public with affordable access to entertain­ ment, informational, shopping, and educational services; (2) use state-of-the-art MPEG-2 digital technology for full multimedia compatibility; and (S) include service to rural areas as a core component of its business plan.16 8. Echostar maintains that it has substantially complied with the Commission's due diligence requirements. It as­ serts that it has completed construction of its first satellite only three f ears after receiving eastern orbital/channel as­ signments.1 In this regard, EchoStar points to progress in deploying its system as follows: (1) its eastern satellite is undergoing final testing; (2) its satellite contractor has ob­ tained an export license to permit transfer of the satellite for launch; (3) it has procured launch insurance; (4) it has a contract with AT&T for satellite tracking, telemetry and control {"TT&C") and maintenance services; and (4) it has more than adequate cash on hand to commence operations of its DBS system. 18 9. Tempo Satellite, Inc. ("Tempo") and Advanced Com­ munications Corporation ("ACC") filed comments con­ cerning grant of an extension of time to EchoStar. Tempo argues that EchoStar's request for extension of time must be denied if a similar request filed by ACC is denied, noting that ACC and EchoStar had roughly the same amount of time {after assignment of channels and orbital locations) to construct and launch a DBS system.1q Tempo further argues that denial of ACC's request requires denial of an extension of time for the DBS construction per mit of Directsat Corporation ("Directsat"). Directsat is now con­ trolled by EchoStar 's parent company and is scheduled to operate on a companion basis with EchoStar's DBS system. As a consequence, asserts Tempo, denial of Directsat's ap­ plication will delay competition in DBS for years because EchoStar is dependent upon Directsat's channels for the viability of its system. 20 10. ACC argues that because EchoStar failed to com­ mence operation of its DBS system before expiration of its construction permit on August 15. 1995. its permit is "null and void" under Commission precedent established in the ACC Cancellation Order. ACC points out that EchoStar had four months more than ACC in which to launch its DBS srtem after assignment of channels and orbital loca­ tions.2 ACC maintains that EchoStar's lack of cable affili­ ation is not important given the Commission's finding in Tempo Satellite, Inc., 7 F.C.C.R. 2728 ( 1992). that entry of a cable-affiliated entity into the DBS service would create new competition.22 IS Id. 16 Id. at 8-10. 17 Id. at 3. 18 Id. at 5. EchoStar states that it raised $323.3 million in a June 19<14 debt offering. and raised another Sti3.3 million in a June 1995 equity offering. Id. at 5 n.-l. 19 Tempo Comments at 6-8. ACC's request was. of course. denied. 20 Tempo Comments at 6. Tempo maintains that Echostar will lose one-half of its recent debenture offering if Directsat's au- 3018 11. Echostar argues that its DBS system will promote competition among multichannel video programming dis­ tributors ("MVPDs") because it is independent of any cable interests, and thus extension of its DBS permit is consistent with the Commission's policy of promoting DBS as in­ dependent alternative to cable in MVPD market.23 It notes that Tempo is a wholly-owned subsidiary o f the largest cable operator in the United States.2' DISCUSSION 12. In ruling on requests for extension of time, we have said that the totality of circumstances - those efforts made and those not made, the difficulties encountered and those overcome, the rights of all parties, and the ultimate goal of service to the public - must be considered.25 Prior to the recent round of extension requests, we had granted exten­ s ions o n two occasions since 1991. The record in those cases demonstrated that the permittees had made significant progress toward the realization of a DBS system, including substantial monetary investment, arranging for financing for completion and launch of the system, contracting with suppliers of DBS home receivinf equipment, and contract­ ing for satellite launch services.2 13. EchoStar's actions since the award of its o rbit­ al/channel assignments demonstrate its capability and com­ mitment to provide DBS service to the public as rapidly as possible. It originally planned to launch its first satellite two weeks before the expiration of its construction permit. Only circumstances beyond EchoStar's control -- namely an in-orbit malfunction of a similar satellite and the grounding of the Chinese launch capability - prevented EchoStar from achieving construction, launch, and opera­ tion of its system at the 119° orbital location during the term of its existing construction permit. Nevertheless, EchoStar will begin operations less than six months after the scheduled expiration date, and less than four years after award of its orbital/channel assignments. It has made all pre-launch payments. In addition. it has secured financing, TT&C and programming contracts, and a license for its ground facilities. 14. We reject ACC's and Tempo's contention that EchoStar requests extension under the same circumstances as ACC. and that therefore we must deny its request for extension of time. EchoStar completed almost all construc­ tion of its first satell ite prior to expiration of its permit. Despite delays in satellite construction and launch, EchoStar will begin operations withi n four years o f the award of orbital/channel assignments and within a few months after the scheduled expiration of its permit. ACC never began actual satellite construction despite receiving its orbital/channel assignments with over three years left on its permit, and by the time we ruled on its permit exten- thorization at 119° is cancelled. Id. at ti. n.o. !t ACC Comments at 7-11. 22 Id. at 9. H EchoStar and Directsat Consolidated Reply to Tempo Com­ ments at 11-12. 2~ Id. is United States Satellite Broadcasting Co.,3 F.C.C.R.68511. 6859, ~ 19AA). ·" See Dominion Video Satellite, Inc .• II F.C.C.R. OOM, 1>6811 ( 11/93): United States Satellite Broadcasting Co .. 7 F.C.C.R. 72~7. 7251 (11/92). -----------------------------~~ 11 FCC Red No. 6 Federal Communications Commission Record DA 96-5 sion, it never intended to begin such construction. More­ over, ACC received its original four-year extension based in part on its citation to delays caused by the failures of launch vehicles27 -- a factor that is also present in this case. 15. Tempo's claim that failure to extend Directsat's per­ mit would jeopardize the viability of EchoStar's system is speculative and must be d ismissed. The Commission has consistently held that each request for extension is consid­ ered on its own merits, independently of extension requests of other DBS permittees.28 EchoStar 's due d iligence with respect to its own DBS system warrants grant of its exten­ sion request. Thus, grant of EchoStar's extension request is based on its actions to implement its DBS system rather than on speculative predictions with respect to its ultimate success or failure in the DBS market. In any event, Directsat's request for extension of its construction permit is being granted concurrent with this order. Moreover, in light of our decision that the totality of the circumstances warrants grant of EchoStar 's extension request, we reject ACC's contention that EchoStar's construction permit is null and void with respect to the eastern orbital location. 16. We believe that EchoStar's imminent launch will bring much needed additional rivalry to MVPD market. It will join DIRECTV and USSB in providing nationwide DBS service to American consumers, providing competi­ tion not only within DBS itself, but a lso in the wider MVPD market. This rivalry can be expected to lead to lower prices and enhanced service options from all MVPDs, and thus clearly will serve the public interest. 17. In this order, we have not considered EchoStar's request for an extension with respect to its western orbital location. EchoStar 's request for assignment of western channels is currently pending. and our resolution of that issue may obviate the need for consideration of an exten­ sion. In any event, it will be most efficient to consider the extension request in the context of EchoStar ·s progress toward providing service from a wester n location. Unfortu­ nately. due to the government shutdown, we are unable at this time to complete that due diligence analysis. There­ fore, we will reserve the question for resolution in connec­ tion with our due diligence determination on EchoStar·s request for assignment of channels at a western orbital location. ORDERING CLAUSES 18. Accordingly, IT IS ORDERED that EchoStar Cor­ poration ·s Request for Extension of its DBS construction permit IS GRANTED IN PART such that the permit is extended to August 15. 1996 with respect to EchoStar 's channels at the 119° orbital location only. 19. IT IS FURTHER ORDERED that consideration of EchoStar's Re-quest as it applies to a western orbital loca­ tion. and of the comments filed by Tempo Satellite. Inc. and Advanced Communications. Inc. on that aspect of EchoStar·s request, ARE DEFERRED until such time as the Commission has the opportunity to analyze EchoStar's western due diligence showing. 20. IT IS FU RTHER ORDERED that this Order is effective upon adoption. 27 Advanced Communications Corp .. 6 F.C.C.R. 226Q, 227..i (1991). !s Id. FEDERAL COMMUNICATIONS COMMISSION Scott Blake Harris Chief, International Bureau 3019