DA 95-31 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re Participation by COMSAT Corporation in a New Inmarsat Satellite System Designed to Provide Service to Handheld Communications Devices File No. ISP-95-003 ORDER Adopted: January 6, 1995 Released: January 10, 1995 By the Chief, International Bureau: 1. On December 1, 1994, TRW, Inc. filed an "Emergency Motion for Temporary Relief." It asks the Commission to issue certain orders to COMSAT Corporation regarding its proposed investment in the Inmarsat-P mobile satellite service. Acknowledging that in its Inmarsat-P Declaratory Ruling, the Commission refused to declare that COMSAT could not "participate" in Inmarsat-P, TRW asks us to revisit the legality of such "participation" on the basis of information not previously on the public record. In the alternative, TRW asks the Commission to preserve the status quo by prohibiting any COMSAT investment in Inmarsat-P until the Commission decides that the Affiliate is structured consistently with the Inmarsat-P Declaratory Ruling. COMSAT opposes TRW's motion. Motorola Satellite Communications, Inc. filed comments in support of TRW's motion. 2. The Bureau denies TRW's motion. The "new information" submitted by TRW sheds little additional light on the nature of the Affiliate, largely because the Affiliate has not yet been created and therefore has no structure. As for the alternative temporary relief sought by TRW, we find that such relief is not necessary to prevent irreparable injury to TRW; that it would cause irreparable injury to COMSAT and perhaps other Inmarsat Signatories; and that it would not be in the public interest. BACKGROUND 3. The International Maritime Satellite Organization (Inmarsat) has for several years contemplated a global, handheld, satellite telephone service to be known as Inmarsat-P. Inmarsat-P would provide voice, facsimile, and data service not only to maritime users, but to international business travelers, small aircraft, and "quasi-fixed" commercial, industrial, and governmental users in remote areas. 4. Inmarsat-P service will be offered not by Inmarsat itself, but by a private corporation that has come to be known as the "Affiliate." Inmarsat itself is expected to own fifteen percent of the Affiliate, and individual Inmarsat Signatories such as COMSAT may elect to make further investments on their own. Initially, Inmarsat and the Affiliate are expected to enter into contracts for Inmarsat to provide technical support, management, and other services. Inmarsat itself will be the exclusive wholesaler of certain maritime and aeronautical services provided through the Affiliate. The Affiliate is expected commence Inmarsat-P service in 1999 or 2000. 5. In the Inmarsat-P Declaratory Ruling, the Commission acted on Motorola's petition for a declaration that COMSAT's provision of Inmarsat-P service would be inconsistent with the International Maritime Satellite Telecommunications Act. After agreeing with Motorola that COMSAT could not provide Inmarsat-P service through Inmarsat itself, the Commission held that it was possible for COMSAT to provide Inmarsat-P service through the Affiliate -- if it were structured properly. Specifically, the Commission stated that if COMSAT's participation in Inmarsat-P takes a form that extends COMSAT's exclusive status within Inmarsat, then it is inconsistent with the Maritime Satellite Act . . . . If, however, COMSAT's participation in Inmarsat-P takes a form which does not extend COMSAT's exclusive status, then such participation would be legally permissible . . . . We cannot determine whether Inmarsat-P will extend COMSAT's exclusive status until COMSAT files a formal application with us. 6. The Inmarsat-P Declaratory Ruling also contained some "observations" about how the Commission will determine whether any particular structural arrangement "extends COMSAT's exclusive status within Inmarsat." First, the Commission said that its test was directed toward "real-world, competitive consequences," not mere matters of form. Second, the Commission said it would "examine not only who participates, but who is not permitted to do so." In this regard, the Commission noted that substantial investment by Inmarsat Signatories would not necessarily flunk the test as long as investment in the Affiliate were "open to the participation of a suitable cross-section of non-Signatory telecommunications entities and other investors. . . . By contrast (to take an extreme case), if participation in the new venture were restricted to Inmarsat and its Signatories, it would be impossible for us to conclude that COMSAT were participating in a non-Inmarsat venture." Third, the Commission stressed that the "competitive focus" of its test required an examination of the Affiliate's "operational principles as well as its finances, to see whether any special privilege is directly or indirectly attached to Signatory status per se." 7. The Inmarsat Council is scheduled to meet in an extraordinary session beginning January 10, 1995, at which time the Council will give final consideration to issues relating to the Affiliate. A first meeting of those who have pledged to invest in the Affiliate will begin on January 17, and a first meeting of the Affiliate's shareholders will take place January 24. The first meeting of the Affiliate's Board of Directors is expected to take place shortly thereafter. SUMMARY OF THE PLEADINGS 8. In its motion, TRW asks for "temporary emergency relief in the form of an order enjoining any action or failure to act by [COMSAT] that would in any way permit or support, directly or indirectly, any investment by Comsat in the proposed Inmarsat-P affiliate." TRW presents this request as a means of preserving the status quo until such time as the Commission has determined whether COMSAT may lawfully invest in the proposed Affiliate. However, TRW contends that this latter determination should be made now, on the basis of information that was not on the public record when the Commission issued its Inmarsat-P Declaratory Ruling. TRW then contends in the alternative that if the Commission cannot yet determine whether COMSAT has complied with the Inmarsat-P Declaratory Ruling, the Commission should preserve the status quo by granting the requested relief. TRW argues that this relief is justified under the four-part Virginia Petroleum Jobbers test because: (a) TRW is likely to prevail in demonstrating that the Affiliate's structure is not consistent with the Commission's Inmarsat-P Declaratory Ruling; (b) TRW will be irreparably harmed if COMSAT invests in Inmarsat-P before a Commission decision on the structure of the Affiliate; (c) COMSAT will not be harmed by the requested relief; and (d) the requested relief is in the public interest. 9. In alleging that Commission action is necessary to prevent irreparable injury, TRW places great emphasis on the upcoming Council meeting at which Inmarsat is expected to invest in the Affiliate. TRW states that once Inmarsat decides to invest in the Affiliate, all Inmarsat Signatories, including COMSAT, will be required to commit funds to Inmarsat. Based on Inmarsat's expected investment of US$150 million, TRW calculates that COMSAT's share of this Inmarsat investment -- which we shall refer to as COMSAT's "indirect investment" -- will be "a minimum of $33,000,000." TRW argues that this "indirect investment" will be so large that the Commission would be unable to ignore [it] when Comsat finally files an application either to invest in the Affiliate or to provide Inmarsat-P service within the United States. Indeed, Comsat can be expected to argue -- as it has on many prior occasions -- that the Commission has no choice but to approve its participation in the Affiliate once it has made such a financial commitment. Thus TRW cautions that unless the Commission acts now to prohibit COMSAT from supporting any investment in the Affiliate, COMSAT may become obligated to make an "indirect investment" of such magnitude that the Commission will be presented with a "fait accompli" when it is called upon to approve or disapprove the structure of the Affiliate. 10. COMSAT's opposition to the TRW motion states that the "new information" supplied by TRW is insufficient to permit a Commission decision on the structure of the Affiliate at this time -- even if the information were accurate and relevant, which COMSAT denies. In addition, COMSAT argues that, under Virginia Petroleum Jobbers, TRW is not entitled to the "temporary emergency relief" it requests because: (a) TRW is not likely to demonstrate that the Affiliate's structure is inconsistent with the Inmarsat-P Declaratory Ruling; (b) TRW has not demonstrated that it will be irreparably harmed if COMSAT is permitted to support Inmarsat-P pending a Commission ruling on the Affiliate's structure; (c) COMSAT, Inmarsat, and the Affiliate's other potential investors would be irreparably harmed if TRW's motion were granted; and (d) the requested relief is not in the public interest. 11. Motorola filed comments in support of the TRW motion, expanding upon the legal basis for the relief requested by TRW. Citing satellite procurement cases, Motorola states that the Commission has always required COMSAT to apply to the Commission before investing in Inmarsat or Intelsat programs. From this premise, Motorola argues that COMSAT must file an application for authority to invest in the Affiliate before it commits any funds to Inmarsat. Motorola also observes that the Commission has statutory authority under the Maritime Satellite Act to "institute such proceedings as may be necessary to carry out" the Act's designation of COMSAT as the sole U.S. Signatory to Inmarsat, with all of the duties implied by that designation. Motorola seconds TRW in urging the Commission to exercise this authority, and to preserve the status quo pending a Commission determination that the Affiliate is structured in accordance with the Inmarsat-P Declaratory Ruling. Like TRW, Motorola states that: it will be irreparably harmed if COMSAT invests in the Affiliate; there is "a substantial prospect" that the Affiliate will not be structured in compliance with the Inmarsat-P Declaratory Ruling; any harm to COMSAT will be COMSAT's own fault for not placing more information on the public record before the Inmarsat-P Declaratory Ruling; and the public interest would be served by a Commission determination of the legality of COMSAT's investment before that investment occurs. 12. In reply to Motorola, COMSAT denies that it is required by existing law to apply for Commission authorization before supporting or investing in the Affiliate. It states that neither a direct nor an indirect investment in the Affiliate would be a satellite procurement, so the cases cited by Motorola are inapplicable. COMSAT states further that although the Commission does indeed have broad authority to carry out its statutory responsibilities, neither TRW nor Motorola has satisfied the four-part Virginia Petroleum Jobbers test for temporary relief. DISCUSSION A. The Request for an Immediate Ruling on the Affiliate's Structure 13. We have reviewed the "additional information" submitted by TRW and find it insufficient to warrant a Commission ruling on the structure of the Affiliate at this time. We will not address each of TRW's thirteen allegations individually, but note that many were already on the public record at the time the Inmarsat-P Declaratory Ruling was issued. Furthermore, TRW does not tie its factual allegations to any analysis of the extent to which the Affiliate attaches special privileges to Signatory status, circumscribes non-Signatory investment, or otherwise extends COMSAT's exclusive status within Inmarsat. Many of the allegations lack any apparent connection to the "real-world, competitive consequences" on which application of the test set forth in the Inmarsat-P Declaratory Ruling depends. Nowhere does TRW explain how the Commission could conceivably rule on the structure of the Affiliate without seeing, at a minimum, the organic documents that create and govern that structure. TRW's request for an immediate ruling on the structure of the Affiliate must therefore be denied. B. The Request for Temporary Relief 14. In the absence of a ruling on the structure of the Affiliate, TRW seeks an order maintaining the status quo until such time as the Commission rules on whether the Affiliate's structure comports with the Inmarsat-P Declaratory Ruling. TRW submits that it is entitled to such relief if it can demonstrate (a) that TRW has a substantial likelihood of demonstrating that the Affiliate's structure does not comport with the Inmarsat-P Declaratory Ruling; (b) that the relief is necessary to prevent irreparable harm to TRW; (c) that the temporary relief will not substantially harm other interested parties; and (d) that the temporary relief will be in the public interest. TRW takes these four conditions from the Virginia Petroleum Jobbers test, which the Commission applies when it consider petitions for stays of its own orders. 15. The relief sought by TRW is not in the nature of a stay, as it does not prevent any part of the Commission's Inmarsat-P Declaratory Ruling from taking effect. It is, however, a request that the Commission maintain the status quo temporarily, and we assume for the sake of discussion that Virginia Petroleum Jobbers sets forth the correct standard. Under that standard, we find that TRW has failed to satisfy at least three of the four prongs: the relief is not necessary to prevent irreparable injury to TRW; the relief would substantially harm COMSAT and perhaps other interested parties; and the requested relief is not in the public interest. 1. Irreparable Injury to TRW 16. TRW argues that it will be irreparably injured if COMSAT is permitted to invest in the Inmarsat Affiliate, directly or indirectly, because the Commission would be unwilling to act if it later found that the Affiliate were structured in a way that extended COMSAT's Signatory status. This suggestion is contrary to the Commission's case law and places too little faith in the integrity of the Commission's processes. In the Inmarsat-P Declaratory Ruling, the Commission announced the test it would apply to determine whether the Affiliate could be considered a "non-Inmarsat venture." We refuse to assume that the Commission will be unwilling to apply that test fairly and scrupulously when it is presented with a service application from COMSAT. No interested party should make that assumption either. 17. In addition, TRW's argument assumes that if the Commission were to rule on the structure of the Affiliate in advance of any COMSAT investment, it would (or at least might) forbid the investment. This premise is also contradicted by the Commission's cases. The Commission has, as Motorola points out, historically required COMSAT to apply for authority to "participate in" Intelsat and Inmarsat satellite procurements. But not once has the Commission ruled that such an investment cannot take place. Indeed, the Commission normally rules on such requests after COMSAT has already contributed funds toward the satellite procurement under review, and it is well settled that the actual contribution of funds without prior Commission approval is permissible. These cases demonstrate that even where satellite procurement is at issue -- as Motorola contends it is here -- the result of an unfavorable ruling on COMSAT's application is exclusion of the expenditure from COMSAT's rate base. The remedy requested by TRW is simply not available in these situations. 18. In addition, we note that the order sought by TRW here would actually go further than a ban on contributing funds. It would prohibit COMSAT from "voting, or otherwise directly or indirectly acting or failing to act, in a manner that would support any Inmarsat or Comsat investment or commitment to invest in the Affiliate." Such an order would appear to require that COMSAT oppose Inmarsat investment in the Affiliate, which is inconsistent with the United States government's conditional support for the Affiliate concept at the recent Inmarsat Assembly of Parties. 19. TRW and Motorola both attempt to distinguish procurement cases in which the rate-base remedy has been applied. TRW argues that the issue here is not harm to ratepayers but "an ultra vires act by Comsat and a violation of the Maritime Satellite Act as interpreted by the Commission in the [Inmarsat-P Declaratory Ruling]." Motorola similarly states that the rate-base remedy would be "worthless to Motorola" because "[t]he competitive harms to Motorola and TRW that would flow from a U.S. investment and sponsorship of Inmarsat-P within an international governmental organization could not be reversed by different accounting treatment." But these arguments are also based on an incorrect premise: that the Maritime Satellite Act forbids investment by COMSAT to the same extent that it forbids provision of service by COMSAT. This position is impossible to reconcile with the Commission's Inmarsat 3 Procurement decision. There, the Commission approved COMSAT's contribution of funds toward Inmarsat's procurement of satellites for aeronautical services without deciding whether COMSAT could actually use those same satellites to provide those same services. As the Commission stated with admirable concision, "[P]rocurement authorization is not the same as service authorization." 20. In summary, TRW has not demonstrated that the relief it requests is necessary to prevent irreparable injury because COMSAT's investment in the Affiliate, either directly or indirectly, in no way diminishes any remedy that would be available to TRW today. TRW's arguments to the contrary are based on misunderstandings about the nature of the remedies that would be available today. 2. Substantial Harm to Other Parties 21. TRW also fails to demonstrate that the relief it requests would not cause substantial harm to COMSAT or other interested parties. TRW argues that COMSAT needs Commission approval before it may invest anyhow, so no harm can come from being required to seek that approval now rather than later. We agree with COMSAT that the relief requested by TRW would effectively prevent COMSAT from participating in the upcoming meetings, and would certainly prevent COMSAT from investing in the Affiliate. It is far easier for the Commission to retroactively exclude an expenditure from the rate base, should that be appropriate, than it would be for the Commission to retroactively give COMSAT another opportunity to participate in the formation of the Affiliate. In addition, we are mindful of the harm that might well be suffered by other Inmarsat Signatories if the United States -- having expressed its conditional support for the Affiliate -- reversed course at the eleventh hour. 3. The Public Interest 22. Finally, TRW and Motorola argue that the requested relief will serve the public interest by securing an early determination of whether the Affiliate's structure complies with the Inmarsat-P Declaratory Ruling. We reject this argument, which seems to assume (contrary to the Inmarsat-P Declaratory Ruling) that the Commission already has all the information it needs to rule on the Affiliate's structure. As we have stated above, we do not believe the standards in the Inmarsat-P Declaratory Ruling can be applied to the structure of an Affiliate that does not yet exist. Thus, the likely result of granting TRW's motion would not be to expedite resolution of an outstanding legal controversy. It would be to delay and almost certainly disrupt Inmarsat deliberations by reneging on U.S. expressions of support. That would not be in the public interest. Nor would it be in the public interest for us to silence COMSAT in the upcoming meeting of the Inmarsat Council, thereby depriving the United States of any pro-competitive influence at precisely the time when many important questions about the structure of the Affiliate will be decided. C. The Need for COMSAT to File an Application 23. In ruling on this motion, we have not found it necessary to reach any conclusion about whether a COMSAT investment in the Affiliate is tantamount to an Inmarsat facilities procurement, which would oblige COMSAT to file an application for Commission authorization. We have decided, rather, that even if such an application was required in this case, the possible outcomes of that proceeding would not include the relief requested by TRW. 24. Nonetheless, questions remain about when and perhaps whether COMSAT should file an application for Commission authorization to invest in the Affiliate or "participate in" its facilities procurements. Motorola believes the Commission's Inmarsat and Intelsat procurement cases are about the flow of money from COMSAT to Inmarsat or Intelsat, and that a COMSAT application should therefore be required before any COMSAT funds become committed. The implication of this interpretation would be that COMSAT should already have filed an application and, having failed to do so, should file one now. COMSAT, on the other hand, says the Inmarsat and Intelsat procurement cases are about the facilities of the international satellite organizations. Because a COMSAT investment in the Affiliate does not, by itself, have any effect on facilities, COMSAT believes no application is required at this stage. This view might imply that COMSAT should file an application shortly before the Affiliate actually procures its satellite facilities, but not when COMSAT is merely investing in the Affiliate. 25. We believe these rival interpretations of the Commission's procurement cases beg the larger question of whether the Commission's duty to oversee COMSAT participation in the Affiliate is coextensive with its duty to oversee COMSAT participation in Inmarsat. On the one hand, Inmarsat's investment in the Affiliate, and the contractual relationship between them for the provision of certain services, may be thought to affect Inmarsat facilities just as surely as a new generation of Inmarsat satellites would. On the other hand, it might be argued that the Affiliate's facilities procurements should not be subject to Commission review unless the Affiliate is functionally indistinguishable from Inmarsat. It is not clear to us that the Commission's future oversight of the Affiliate is entirely determined by whether the Affiliate's structure complies with the Inmarsat-P Declaratory Ruling, though these two issues are almost certainly related. 26. The instant motion, decided upon a shortened pleadings cycle with a limited number of participants, is not the proper forum for determining when or whether COMSAT must seek Commission authorization for its investments in the facilities of the Affiliate. However, we believe the question should be answered relatively quickly, for the sake of COMSAT's ratepayers. Accordingly, as an interim matter, we will require COMSAT to apply for Commission authorization prior to any decision by the Affiliate to procure facilities that will be used to provide Inmarsat services. We will require such applications from COMSAT until such time as the Commission can determine the extent to which we shall regulate COMSAT's investment in the Affiliate. We stress that this is an interim solution, which the Commission may abandon once these issues have been given fuller consideration. 27. Thus, to the extent that COMSAT acquires any indirect interest in the Affiliate by reason of Inmarsat's investment in the Affiliate, we are ordering COMSAT to apply to the Commission for authority to participate in any procurement by the Affiliate of facilities that will be used to provide Inmarsat services. The Application shall be filed at least sixty days before the Affiliate's Board of Directors makes any final decision to procure the facilities in question, and in any event not later than May 1, 1995. In addition to the information normally included in COMSAT's procurement applications, COMSAT shall include the organic documents of the Affiliate, an analysis of the extent to which the Affiliate's facilities decisions affect Inmarsat ratepayers, a demonstration of the Affiliate's structural compliance with the Inmarsat-P Declaratory Ruling, and an outline of the extent to which the Affiliate is or should be subject to Commission oversight beyond that for which the Communications Act provides. CONCLUSION 28. Accordingly, IT IS ORDERED that TRW's Emergency Motion for Temporary Relief is hereby DENIED. 29. IT IS FURTHER ORDERED that, to the extent that COMSAT acquires any indirect interest in the Affiliate by reason of Inmarsat's investment in the Affiliate, COMSAT must apply to the Commission for authority to participate in any procurement by the Affiliate of facilities that will be used to provide Inmarsat services. The Application, prepared in accordance with paragraph 27 of this Order, shall be filed at least sixty days before the Affiliate's Board of Directors makes any final decision to procure the facilities in question, and in any event not later than May 1. 30. IT IS FURTHER ORDERED that this Order be effective upon its adoption on January 6, 1995. FEDERAL COMMUNICATIONS COMMISSION Scott Blake Harris Bureau Chief