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Competition Issues in the Satellite Space Segment

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Released: April 15, 2014

Federal Communications Commission

FCC 14-38

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Issues Related to Allegations of Warehousing
)
IB Docket 13-147
and Vertical Foreclosure in the Satellite Space
)
Segment
)

ORDER

Adopted:

April 14, 2014

Released:

April 15, 2014
By the Commission:

I.

INTRODUCTION

1.
In June 2013, the Commission issued a Notice of Inquiry exploring allegations that
certain fixed-satellite service (FSS) operators are: (1) “warehousing” satellite orbital locations and
frequency assignments; and (2) foreclosing competitors from purchasing capacity on their satellites
(vertical foreclosure).1 Based on the record, we close this inquiry.

II.

BACKGROUND

2.
The Commission opened this docket as a vehicle for building a record that would enable
us to evaluate claims of anticompetitive behavior raised in other Commission proceedings.2 These claims
were initially raised in the context of the Eleventh Orbit Act Report, which is the Commission’s annual
report to Congress on the privatization of INTELSAT and Inmarsat, and the impact privatization has had
on the domestic and global satellite markets. In response to the public notice issued in preparation for the
Eleventh Orbit Act Report, several firms known as “integrators”3 alleged that, following recent
consolidation and vertical integration by FSS providers, they were being foreclosed from securing
satellite bandwidth capacity. The integrators alleged that without sufficient bandwidth capacity they were
less able to compete against FSS providers, resulting in harm to government and corporate customers.4

1 Allegations of Warehousing and Vertical Foreclosure in the Satellite Space Segment, Notice of Inquiry, IB Docket
No. 13-147, 28 FCC Rcd 8571 (2013) (Notice of Inquiry).
2 FCC Report to Congress as Required by the ORBIT Act: Eleventh Report, 25 FCC Rcd 7834 (2010) (Eleventh
Orbit Act Report
); Third Report and Analysis of Competitive Market Conditions with Respect to Domestic and
International Satellite Communications Services, Report and Analysis of Competitive Market Conditions with
Respect to Domestic and International Satellite Communications Services
, Third Report, IB Docket Nos. 09-16 and
10-99, 26 FCC Rcd 17284 (2011) (Third Competition Report).
3 The integrators are satellite service providers who (1) purchase satellite capacity from satellite operators; (2)
enhance the use of such capacity for particular purposes; and (3) resell the enhanced product to corporate or
government customers. Integrators often compete with their own satellite operator to sell to the same customer; in
this sense, integrators are analogous to resellers of terrestrial telecommunications services.
4 See, e.g., Comments of ARTEL, Inc., in Eleventh Orbit Act Report (filed Apr. 7, 2010) at 5; and Comments of
CapRock Communications, Inc., in Eleventh Orbit Act Report (filed Apr. 7, 2010) at 10. In the NOI at fn. 8,
subsequent to raising these allegations, both companies have undergone changes in ownership. CapRock was
acquired by Harris, http://www.sec.gov/Archives/edgar/data/202058/000095012310073462/g24273e8vk.htm, and
(continued….)

Federal Communications Commission

FCC 14-38

Integrators also alleged that FSS providers were warehousing satellite orbital locations, to the detriment
of customers.5
3.
As noted in the Notice of Inquiry, the Eleventh Orbit Act Report was not the appropriate
forum in which to address these allegations. Instead, the Commission’s annual report to Congress on
satellite competition provided a natural vehicle for gathering information that could bear on such
allegations. In this regard, the International Bureau, in preparation for the Third Competition Report,
issued a public notice soliciting comment on a variety of issues, including the claims related to vertical
foreclosure and warehousing.6 In response to the public notice, one of the integrators, CapRock, repeated
and expanded upon the comments it made in the context of the Eleventh Orbit Act Report.7
4.
In the Third Competition Report, the Commission concluded that there was not enough
information in the record to evaluate allegations of vertical foreclosure and warehousing.8 Consequently,
the Commission stated that it would open a separate proceeding to generate a more detailed record. The
separate proceeding was the Notice of Inquiry in which we asked targeted questions designed to elicit
such a record on key issues related to vertical foreclosure and warehousing.9

III.

DISCUSSION

5.
Four comments were filed in response to the Notice of Inquiry.10 Two FSS satellite
operators, Intelsat License LLC (Intelsat) and SES S.A. (SES), responded to the questions related to
vertical foreclosure and warehousing.11 Two other operators, EchoStar Satellite Operating Corporation
and its wholly-owned subsidiary Hughes Network Services, LLC (EchoStar), filed joint comments
responding to the questions related to warehousing.12 The Satellite Industry Association (SIA) also filed
comments addressing the warehousing questions.13 The record we received in response to the questions
raised in the Notice of Inquiry about vertical foreclosure was sparse and came only from two commonly
situated stakeholders, satellite operators Intelsat and SES. Intelsat and SES state that further action by the
(Continued from previous page)
ARTEL received a major investment from TP Growth, http://www.reuters.com/article/2011/06/02/idUS111266+02-
Jun-2011+BW20110602.
5 Comments of CapRock Communications, Inc., in Eleventh Orbit Act Report at 12-15.
6 International Bureau Invites Comment for Fourth Annual Report to Congress on Status of Competition in the
Satellite Services Industry,
Public Notice, 25 FCC Rcd 10049 (Int’l. Bur. 2010).
7 See Comments of CapRock Communications, Inc., in Third Competition Report (filed July 22, 2010).
8 Third Competition Report, 26 FCC Rcd at 17350,17354, ¶¶169, 183. See also Notice of Inquiry, 28 FCC Rcd at
8752, ¶1.
9 See Notice of Inquiry, 28 FCC Rcd at 8582-84, ¶¶ 29-36.
10 DIRECTV, LLC, did not file comments in response to the Notice of Inquiry. Several months after the comment
period closed, however, DIRECTV submitted a copy of a petition it filed in an adjudicatory proceeding involving
SES Americom, Inc., into the record in this proceeding. DIRECTV’s petition requests that the Commission deny an
application related to the SES-3 satellite because DIRECTV believes the application is an attempt by SES
Americom to warehouse spectrum. See IBFS File Nos. SAT-RPL-20121228-00227 and SAT-AMD-2013113-
00132. DIRECTV’s petition did not address the questions raised in the Notice of Inquiry, that is, whether the
Commission should adopt new rules to address warehousing and, if so, what those rules should be. Consequently,
the Notice of Inquiry is not the appropriate forum in which to address DIRECTV’s petition. Rather, it is
appropriately addressed in the application proceeding.
11 Comments of Intelsat License LLC (Comments of Intelsat) (filed Aug. 19, 2013), at 6-18, 21-26; Comments of
SES S.A. (Comments of SES) (filed Aug. 19, 2013), at 13-22, 24-26.
12 Comments of EchoStar Satellite Operating Corporation and Hughes Network Services, LLC (Comments of
EchoStar) (filed Aug. 19, 2013), at 7-17.
13 Comments of Satellite Industry Association (Comments of SIA) (filed Aug. 19, 2013), at 1-7.
2

Federal Communications Commission

FCC 14-38

Commission regarding vertical foreclosure is unwarranted. Notably, no integrator or other potentially
affected party filed comments on this issue.
6.
Regarding the questions in the Notice of Inquiry related to warehousing, Intelsat, SES,
EchoStar, and SIA generally agree that the warehousing questions assume a non-competitive industry and
that codifying rules in this area would greatly restrict operator flexibility.14 All four commenters
recommend that the Commission terminate the warehousing portion of this proceeding.15
7.
For the following reasons we terminate this proceeding. With respect to vertical
foreclosure, we close the proceeding given the limits of the record and information on this issue. With
respect to the warehousing issues, we conclude that the record does not provide a basis for taking further
action at this time.

IV.

ORDERING CLAUSES

8.
Accordingly, IT IS ORDERED that this Notice of Inquiry is terminated.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary

14 See Comments of Intelsat 6-21; Comments of SES 6-23; Comments of EchoStar at 7; and Comments of SIA at 1-
3.
15 See Comments of Intelsat at 30; Comments of SES at 27; Comments of EchoStar at 16-17; and Comments of SIA
at 7.
3

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