WPC% 2BJ Z Courier3|xBoldTimes New Roman@`7X@HP LaserJet 4_230_1HPLAS4.PRS 4x  @\_)^X@26F 23|xCourierCourier Boldiptitional)HPLA4POS.PRSx  @hhhh:hX@CourierTimes RomanTimes Roman BoldCourier Bold2L XKZ:K<?xxx,2x6X@`7X@?xxx,)x `7X)7jC:,Xj\  P6G;XP7nC:,%4Xn4  pG;X[dCYddddd7>d<d<$8YYdCCddooCYȾfinancial commitments would be subject to negotiation of satisfactory agreements; and our  xcustomary internal business approval procedures, including, if applicable, approval by the Board  x=of Directors." With respect to ESystems, Constellation submits a letter from Peter A. Marino,  xESystems' Senior Vice President, indicating that ESystems has reviewed Constellation's  xapplication and business plan for satellite system construction and operation, and intends to "provide the necessary financial support" for that satellite project.  X_-  ? 10.xThe other Big LEO applicants argue that Constellation is not financially qualified. They  x-argue that the "management commitments" on which Constellation relies fail to meet Commission  X1- xstandards, because, among other things, the Bell Atlantic letter appears to be contingent on further  xcorporate review and approval by the Board of Directors. They also argue that, even if E xSystems' commitment is deemed sufficient, its resources are inadequate, by themselves, to meet  X - xprojected costs. H q* Xe -#XP\  P6Q9XP#эSeveral applicants also note that any Bell Atlantic commitment to Constellation  XN-implicates the lineofbusiness restrictions of the Modified Final Judgment ("MFJ"), a consent  X7-decree to which Bell Atlantic is a party. See American Telephone and Telegraph Co., 552 F.  X -Supp. 131, 227 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001  X -(1983). In light of our conclusion that Bell Atlantic's financial commitment does not meet Commission standards on other grounds, we need not address whether the potential need for  X-Bell Atlantic to seek or obtain a waiver of the MFJ represents the type of contingency that renders its commitment insufficient to demonstrate Constellation's financial qualifications. TRW observes that, even if Bell Atlantic and ESystems were to contribute to  xconstruction costs proportionally to their equity shares in Constellation, those contributions would  xleave Constellation with more than a $1 billion shortfall in funds. TRW also observes that no other Constellation shareholders have indicated their commitment to finance the venture.  Xy-   11.xConstellation, in response, argues that the letters it submitted were generally modeled on  x.letters previously found acceptable by the Commission, and specifically on the letter found to  XK- xestablish financial qualifications in National Exchange Satellite, Inc., 3 F.C.C. Rcd. 6992, 6993  X4- xzn.5 (1988). Constellation also points to another case, Contel ASC, 3 F.C.C. Rcd. 6982 (1988),  xin which an applicant was found financially qualified. Constellation argues that the potential need  x\for Bell Atlantic Board of Directors' approval does not vitiate Bell Atlantic's commitment. It  xargues that the Commission has expressly rejected Board of Directors' approval of management  xycommitments as a necessary element of financial showings. It also argues that the reference to  xBoard approval in the Bell Atlantic letter was merely meant to document Bell Atlantic's normal corporate approval process.  X|-   12.xWe agree that National Exchange sheds much light on this case, for a review of the  x<management commitment in that case serves to accentuate the small but significant modifications  XN- xmade by Bell Atlantic here. The letter in National Exchange was from the Vice Chairman of Burlington Northern, Inc., a corporate parent of the applicant, and stated:   XxThe attached financial statements show Burlington Northern, Inc. (BNI) assets of $10.7"  0*(("   billion and stockholders' equity of $3.5 billion. In addition, BNI has credit lines of $1.35   |billion. Annual funds from operations exceeded $1.2 billion for 1986. These available   funds are well in excess of the $563.2 million required over six years for the National Exchange satellite program.(#   XxBNI has reviewed National Exchange's FCC application and its business plans for satellite   system construction and operation. BNI intends to provide the necessary financial support   for that satellite project and other National Exchange projects subject to normal business   reviews of market conditions and each project's progress to assure acceptable levels of risk and return.(#  X -  n 13.xThe Bell Atlantic letter differs from the National Exchange letter in several material  X - xrespects.  q* Xe -#Xj\  P6G;9XP#эThe letter states, in pertinent part, that Bell Atlantic Corporation (BAC): Xxhas completed an initial review of [Constellation's] FCC application and its business plans for satellite system construction and operation. It is BAC's intent to provide financial support for that satellite project subject to normal business reviews of market conditions and the project's progress to assure acceptable levels of risk and return. (# XxActual BAC financial commitments would be subject to negotiation of satisfactory agreements; and our customary internal business approval procedures, including, if applicable, approval by the Board of Directors.(# First, the Bell Atlantic letter indicates that only "an initial review" of Constellation's  xapplication and business plan has been completed. On its face, this indicates that Bell Atlantic's  X - xycommitment is far from "irrevocable" and is more preliminary than in National Exchange, where  xthe corporate parent had completed its review of the application and business plan. Second, Bell  xAtlantic pledges "to provide financial support" in an unspecified amount whereas the parent  Xy- xin National Exchange set forth the anticipated cost of the system and pledged "to provide the  Xb- xnecessary financial support" (emphasis added). Third, Bell Atlantic appends a caveat not included  XK- xin the National Exchange letter: "Actual . . . financial commitments would be subject to  X4- x-negotiation of satisfactory agreements." This language makes sense only if the letter itself is not  xan "[a]ctual financial commitment[]," and it introduces the type of contingency successful  x=completion of further negotiations and the completion of further agreements that evidences  x=a financing commitment in only an early stage of development. Finally, the Bell Atlantic letter  X- xis explicitly conditioned on Board of Directors approval, "if applicable." The National Exchange  x>letter included no similar conditions, and in fact was submitted by the Vice Chairman of the  X-parent's Board of Directors. _ q* X$-#XP\  P6Q9XP#эCompare National Exchange, Inc., 103 F.C.C.2d 836 (1985)(debt and equity financing subject to approval by the investor's Board does not meet Commission requirements). Such approval is analogous to the types of contingencies, such as approval by a bank's lending committee, that we have not accepted from domestic fixedsatellite applicants, who are subject to virtually the same financial standard as Big LEO applicants. Although Constellation"' 0*(('" correctly observes that we have not included Board of Director's approval as a mandatory portion of financial qualifications showings involving parent corporations, we think it reasonable that when management makes such approval an express condition of its company's commitment, that approval becomes a precondition of financing, rendering the commitment insufficient under our rules. Stated more bluntly, we cannot decline to question whether the statements of a corporate officer are adequate to commit the corporation, when those statements themselves raise the question.  " 0*(("Ԍ X-  ԙ 14.xConstellation correctly argues that there is no "magic language" to demonstrate financial  xjqualifications. The problem, however, is not that the Bell Atlantic letter failed to reproduce the  X- xMNational Exchange letter verbatim. The problem is that Bell Atlantic clearly started with the  X- xNational Exchange language but modified it in ways that, without exception, introduce  X- xcontingencies or limitations into language that had contained none. While the Big LEOOrder  x"does not require an unalterable commitment that funds will be expended regardless of market  Xv- x conditions," it does require a commitment "that absent a material change in circumstances,  X_- x[management] is prepared to expend the necessary funds." _q* X-#Xj\  P6G;9XP#эBig LEO Order at  35 (emphasis added). Bell Atlantic's departures from the  XH- xlanguage in the National Exchange letter indicate that Bell Atlantic's corporate approval process  X1- xxhas not proceeded to this point.  Having found it necessary to add words of equivocation, neither Bell Atlantic nor Constellation can reasonably complain if we take them seriously.  X -  15.xThe tentativeness of Bell Atlantic's commitment is particularly significant given Bell  X - xAtlantic's relatively small equity interest in Constellation. The parent corporation in National  X - xExchange owned a majority of stock in the applicant (60%) and could, therefore, be more readily  xexpected to commit funds unconditionally, given its ability to control the subsequent expenditures  x!of those funds by the subsidiary. Bell Atlantic and Constellation do not have the same  Xy-commonality of interest.=  y q* X-#XP\  P6Q9XP#эThe other case relied on by Constellation, Contel ASC, involved a "commitment letter" with respect to a wholly owned subsidiary. The rules applicable in that case did not expressly require the submission of a "commitment letter" for commitments to a wholly owned  X-subsidiary. See Licensing Space Stations in the DomesticFixed Satellite Service, 50 Fed. Reg. 36071 (Sept. 5, 1985). In this case, the Commission specifically required that Big LEO applicants, including wholly owned subsidiaries, submit evidence of a management  X@ -commitment. See 47 C.F.R.  25.143(b)(3). Furthermore, the Commission's ruling in Contel  X)!-ASC does not reference the letter, nor in any way indicate that the commitment letter was a  X"-matter of decisional significance. Therefore, we do not believe the letter submitted in the  X"-Contel ASC case has any precedential value in this case.=   XK-  | 16.xIn light of the fact that we find the Bell Atlantic letter inadequate under the standards  X4- xembodied in our rules and the 1988 National Exchange case, we conclude that, even assuming  xthat ESystems' commitment letter meets Commission standards, its financial resources are by  xthemselves insufficient to meet Constellation's estimated costs. Furthermore, the ESystems" 0*(("  x-letter does not indicate the extent to which ESystems, which does not have a controlling interest  x\in Constellation, is prepared to expend its internal funds or to use its company's assets as a  X- xvehicle for raising financing to support Constellation's system.Fq* XK-#Xj\  P6G;9XP#эUnlike the corporate parent in National Exchange, ESystems apparently does not view the word "necessary" as including the entire system's cost, given the inadequacy of its  X-financial resources to meet those costs. F Accordingly, Constellation has not demonstrated that it is financially qualified at this time.  X-B. Further Processing Status of Constellation's Application  X_-  217.xSeveral of the parties opposing Constellation's application urge us to dismiss the  XH- xapplication if we find Constellation is not financially qualified. We will not do this. In the Big  X1- xLEO Order, we afforded applicants until January 31, 1996, to demonstrate financial qualifications.  xWe cannot find that because Constellation has submitted an inadequate showing at this time, it  X - xshould lose its status in this processing group. Neither the text of the Big LEO Order nor the  xrules adopted in it indicate any such intent, and we would expect the Commission to provide  xexplicit notice of such a policy. Indeed, to hold otherwise would unfairly penalize applicants  xwho, in good faith, file a system application we later find does not conform with our rules.  x[Therefore, consistent with the Commission's stated goal in adopting the deferral mechanism  x[to provide applicants with an opportunity to finalize financial arrangements over the next year we will defer action on Constellation's application.  XK-  18.xOwnership Changes and Waiver of CutOff Rule. In June of 1991, when Constellation  xfiled its original application, it reported that Microsat Launch Systems, Inc. ("Microsat") owned  xA39% of its voting stock, and Defense Systems, Inc. ("DSI") owned 10.1%. Pacific  xCommunication Science, Inc. ("PCSI") owned a voting interest of less than ten percent, and a  xnumber of additional individuals and corporations held Constellation stock. In its November 16,  xK1994 amendment and subsequent pleadings, Constellation reports that a number of changes have  xoccurred in its ownership structure since its application was filed. Constellation specifically notes  xthat CTA, Inc., which was not a party to its original application, acquired DSI in June 1992; that  xCirrus Logic, Inc. acquired PCSI in March 1993; and that CTA purchased Microsat in September  x1993. Constellation also reports that in March 1993 and October 1994, respectively, ESystems,  xInc. and Bell Atlantic acquired new Constellation voting stock representing 31% and 8%, respectively, of Constellation's currently outstanding voting stock.  X -  >19.xThe cumulative result of these transactions is that more than 50% of Constellation's voting  x[stock is now controlled by entities who were not owners of Constellation at the time it filed its  xapplication. However, Constellation argues that because the transactions occurred over a  xsubstantial period of time, and no one transaction represented a transfer of a controlling interest  xin Constellation, the changes do not constitute a transfer of control of the applicant. Constellation  xstates that the CTA acquisitions of DSI and Microsat, and the Cirrus Logic acquisition of PCSI,  x[were not motivated by a desire to obtain an interest in Constellation, but by a desire to acquire""K0*((!"  xother lines of business. It also states that the sales of stock to ESystems and Bell Atlantic were designed to bolster its finances.  X-  20.xThe other Big LEO applicants argue that the changes in Constellation's ownership  xstructure are so substantial as to require treating the application as newly filed and, therefore, no  xlonger eligible for consideration in this processing group. They contend that the changes  xKrepresent a fundamental change in the character of the applicant, a change reflected in both stock  x=ownership and Constellation's Board of Directors. Several applicants argue that Constellation  x{lacked candor or violated Section 1.65 of the Commission's Rules, 47 C.F.R.  1.65 by not earlier reporting the transactions.  X -  21.xWe recognize that some of the changes in Constellation's ownership may be "major  x=amendments" under Section 25.116 of the Commission's Rules, 47 C.F.R.  25.116, jeopardizing  xConstellation's eligibility for consideration in the current processing group. However, our  xoverriding concern in determining whether a "major amendment" to the applicant's ownership  xstructure has occurred is whether the applicant has attempted to profit from the sale of an  X- xzapplication.q* X -#Xj\  P6G;9XP#эIn this regard, the Big LEO service differs from services in which multiple or cross ownership rules may require closer review of ownership changes. Furthermore, the Big LEO applicants have each proposed to operate as private carriers. Thus, concerns about ownership changes that may violate Section 310(b) of the Communications Act are considerably diminished. Unless there is evidence of this, we see no reason to prevent applicants from  xprocuring partners to help finance the enormous cost of these systems. Regardless of whether  x"there has been a transfer of control here, we find no intent to traffick in applications.  x-Consequently, even if a "major" change in Constellation's ownership has occurred, we find these  xownership changes to be in the public interest pursuant to Section 25.116(c)(2), and we will not  X-treat Constellation's application as newly filed.CHq* X-#Xj\  P6G;9XP#эWe note in this regard that the changes in Constellation's ownership structure resulted in large part from the acquisition of its parents, DSI, PCSI, and Microsat. In the past, we have routinely authorized changes in control based on acquisition of a corporate parent with  X-substantial lines of business apart from the applicant's proposed business. STARSYS Global  X-Positioning, Inc., 8 F.C.C. Rcd. 1662 (Comm. Car. Bur. 1993); Airsignal International, Inc., 81 F.C.C.2d 472 (1980). Furthermore, the Bell Atlantic and ESystems stock acquisitions are  Xa -similar to those authorized in Satellite CD Radio, Inc., 9 F.C.C. Rcd. 2569 (Comm. Car. Bur.  XJ!-1994).C  X-  >22.xWe next address the allegations that Constellation should have disclosed these ownership  x{changes earlier, and that its failure to do so evidences a disqualifying lack of candor or a  xjviolation of Section 1.65 of the Commission's rules. Even assuming that Constellation's course  xkof conduct constitutes a technical violation of Section 1.65 of the Rules, its uncontradicted  xstatements indicate that its actions did not result from intent to deceive or mislead the  xCommission. Accordingly, any violations are not disqualifying. We would note, however, that"|-0*(("  xito the extent Constellation or its parents contemplate concluding future transactions which would  xhave the cumulative effect of changing ownership or control of more than 50% of Constellation's  xstock, it is expected to seek a ruling concerning our cutoff rules prior to consummating those  X-transactions.bvq* X4-#Xj\  P6G;9XP#эIt is not our intent, however, to require a prior ruling as a result of the normal churn of  X-stock in publicly traded corporations. See Sewell, "Assignments and Transfers of Control of FCC Authorizations Under Section 310(d) of the Communications Act of 1934," 43 Fed. Comm. L.J. 277, 311312 (1991)(Gradual, longterm changes in ownership of publicly traded  X-corporations, due to multiple small share, i.e., less than 1%, transactions, do not give rise to a transfer of control).b  X-  !23.xFeeder Links. Constellation originally requested feeder links in the 51505216 and 6525 x[6541.5 MHz bands. On November 16, Constellation amended its application, requesting feeder  xylinks at 50505250 MHz (Earthtospace) and 68257025 (spacetoEarth). Motorola argues that  x<Constellation's amended request for feeder link frequencies constitutes a major amendment under  X1- xSection 25.116 of our Rules.e1q* X-#Xj\  P6G;9XP#э47 C.F.R.  25.116.e It claims that the amendment was not necessitated by the new  X - xpolicies and rules established in the Big LEO Order, and that it increases the potential for  xinterference without resolving any frequency conflicts. Motorola also claims the amended request  x>will decrease the likelihood that there will be enough spectrum available for all the qualified  xmapplicants in their desired feeder link bands, and that such requests will further delay  X - x.unconditional licenses to Motorola and other system operators. Constellation replies that the  xfeeder link spectrum amendment is a necessary consequence of the Commission's policies requiring global coverage and spectrum sharing among CDMA systems.  Xb-  24. xIn the Big LEO Order, the Commission afforded applicants the opportunity to amend their  xLapplications to bring them into conformance with newly adopted requirements and policies for  x\satellite systems. It noted, for example, that a change from a geostationary satellite system  xKconfiguration to a LEO configuration to meet our satellite system design requirement, or a change  x\in coverage patterns to conform with our satellite visibility requirements, would not affect a  x<particular application's status in the processing group. It also indicated, however, that "a change  X- xthat is not necessary to bring the application into conformance with our rules and which would  x=increase frequency conflicts,"would render the application newly filed under Section 25.116 of  X- xthe Rules.q* X"-#Xj\  P6G;9XP#эBig LEO Order at  59 (Emphasis added). As an example, it stated that a design change from a CDMA to a TDMA/FDMA  xsystem, which would not facilitate spectrum sharing, would be a major amendment. Such  xapplications would be considered in a future processing group, after those applications deferred for consideration until January 1996.  X7-  25.x Constellation redesigned its system to facilitate the spectrum sharing plan adopted in the  X - xMBig LEO Order by increasing the number of end users that can be served simultaneously. It"  h 0*((z"  xappears that Constellation's feeder link requests were a consequence of this redesign. Therefore,  xZwe do not believe the changes in Constellation's feeder link proposal should be considered major.  xFurthermore, even if the amendment were considered major within the meaning of Section 25.116  xof the Rules, we would waive that rule in this case because (a) the modified system serves the  xZpublic interest by increasing system capacity and spectrumuseefficiency in the service links; (b)  xfeeder link spectrum is for a use ancillary to the use of Big LEO spectrum; (c) the service is at  x]a relatively early stage of development in which its spectrum requirements are still being  xaddressed; and (d) any third parties who might be adversely affected by feeder link allocations  xwill have a full opportunity to address potential interference concerns in other pending  X1- xproceedings1q* X -#Xj\  P6G;9XP#эWe note that the Commission has a number of issues related to the allocations of spectrum for Big LEO feeder links separately before it in several pending proceedings,  X| -including the 28 GHz Proceeding, (Second Notice of Proposed Rule Making in CC Docket  Xe -No. 92297), 9 F.C.C. Rcd. 1394 (1994), and Preparation for the World Radio Conference, (Notice of Inquiry in IC Docket No. 9431), 9 F.C.C. Rcd. 2430 (1994). or, in the event Constellation ultimately establishes its financial qualifications, in  xconnection with any further amendments to or modifications of Constellation's feeder link proposal. Accordingly, we decline to treat Constellation's application as newly filed.  X -  III. Conclusion and Ordering Clause TP  X -  _26.xFor the reasons stated, we cannot find at this time that Constellation is financially  x qualified to construct, launch, and operate the Big LEO system it proposes. In light of this  x\conclusion, we need not address Constellation's technical qualifications and we express no  x<opinion on that issue. We reject, however, the parties' arguments that Constellation has forfeited  xits right to further consideration with the second portion of this processing group. Constellation  xwill therefore have until January 1996 to firm up its financial qualifications, in accordance with  X-the Big LEO Order.uq* X-#Xj\  P6G;9XP#эBig LEO Order at  4041.u  X-  27.xAccordingly, IT IS ORDERED, that application file Nos. 17DSSP91(48); CSS91013;  x9SATLA95; 10SATAMEND95, ARE DEFERRED, subject to Constellation  x.Communications, Inc., submitting a showing demonstrating its financial qualifications no later than January 31, 1996.  x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@Scott Blake Harris x` `  hh@Chief, International Bureau