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ROBERT M. FRANKLIN, TRANSFEROR, INMARSAT, PLC, TRANSFEREE, CONSOLIDATED APPLICATION FOR CONSENT TO TRANSFER OF CONTROL OF STRATOS GLOBAL CORPORATION AND ITS SUBSIDIARIES FROM AN IRREVOCABLE TRUST TO INMARSAT, PLC

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Released: December 31, 1969

Federal Communications Commission

DA 09-117

Before the

Federal Communications Commission

WASHINGTON, D.C. 20554

In the Matter of
)
)

Robert M. Franklin, Transferor
)
IB Docket No. 08-143
)
Inmarsat, plc, Transferee
)
FCC File Nos.:
)
ITC-T/C-20080618-00276
Consolidated Application for Consent to Transfer
)
ITC-T/C-20080618-00275
of Control of Stratos Global Corporation and Its
)
SES-T/C-20080618-00818
Subsidiaries from an Irrevocable Trust to Inmarsat,
)
SES-T/C-20080618-00819
plc
)
SES-T/C-20080618-00820
)
SES-T/C-20080618-00821
)
0003453455 and
)
ISP-PDR-20080618-00013

MEMORANDUM OPINION AND ORDER

AND DECLARATORY RULING

Adopted: January 16, 2009

Released: January 16, 2009

By the Chief, International Bureau:

TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 2
A. The Applicants ................................................................................................................................. 3
B. The Transaction.............................................................................................................................. 10
C. Comments on the Transfer of Control Application........................................................................ 11

III. PUBLIC INTEREST ANALYSIS ....................................................................................................... 15
A. Framework of Analysis.................................................................................................................. 15
B. Timing of Application.................................................................................................................... 20
C. Qualifications of the Applicants..................................................................................................... 23
D. Effect on Competition.................................................................................................................... 25
E. Potential Public Interest Benefits................................................................................................... 52
F. Section 310 Foreign Ownership Review........................................................................................ 55
G. International Dominant Carrier Regulation ................................................................................... 72
H. Pending and Future Applications of Stratos Global....................................................................... 76
I.
Transfer of Accounting Authority Certification ............................................................................ 77
J. National Security, Law Enforcement and Public Safety Concerns................................................ 79
K. Deadline for Closing the Transaction ............................................................................................ 81
IV. CONCLUSION .................................................................................................................................... 82
V. ORDERING CLAUSES....................................................................................................................... 83
APPENDIX A: Authorizations and Licenses Included in the Transfer of Control Application
APPENDIX B: Copy of Executive Branch Agreement

Federal Communications Commission

DA 09-117

I.

INTRODUCTION

1. In this Memorandum Opinion and Order and Declaratory Ruling, the International Bureau, on
delegated authority, considers a series of applications (collectively, "Application")1 filed by Robert M.
Franklin, Trustee (Trustee), and Inmarsat plc (Inmarsat) for authority to transfer control of Stratos Global
Corporation (Stratos Global) and the domestic and international section 214 authorizations,2 Title III
licenses,3 and other Commission authorizations held by three of its subsidiaries (Stratos Holdings, Inc.,
Stratos Offshore Services Company, and Stratos Communications Inc.) (collectively, "Stratos
Licensees"),4 from a trust of which Mr. Franklin is the Trustee to Inmarsat. Applicants have also filed a
petition for declaratory ruling, pursuant to section 310(b)(4) of the Communications Act, as amended,5 to
allow up to 100 percent indirect foreign ownership of Stratos Offshore Services Company (Stratos
Offshore) and Stratos Communications Inc. (Stratos Communications), which hold Title III common
carrier licenses. Finally, Applicants seek Commission consent to new indirect ownership of Stratos
Mobile Networks, Inc. (Stratos Mobile), which is certified as an Accounting Authority under the
Commission's rules. Based on the record established in this proceeding, we find that the grant of the
Application and the petition for declaratory ruling will serve the public interest, convenience and
necessity, subject to the conditions specified below. We also grant the Petition to Adopt Conditions to
Authorizations and Licenses filed by the United States Department of Justice, the Federal Bureau of
Investigation and the United States Department of Homeland Security. We also deny the petition filed by
VIZADA Services LLC (Vizada) in response to this transfer of control application.


1 The instant Application consists of 10 individual applications as follows: two FCC International Section 214
applications seeking consent to the transfer of Stratos Global's international section 214 authorizations, ITC-T/C-
20080618-00276 (authorizations held by Stratos Holdings, Inc.) and ITC-T/C-20080618-00275 (authorizations held
by Stratos Offshore Services Company); two FCC Domestic Section 214 applications seeking consent to the transfer
of Stratos Global's domestic section 214 authorizations (for Stratos Communications Inc. and Stratos Offshore
Services Company); four FCC Form 312's seeking consent to the transfer of Stratos Global's satellite earth-station,
VSAT, and space-station authorizations, SES-T/C-20080618-00819, SES-T/C-20080618-00820,and SES-T/C-
20080618-00821 (authorizations held by Stratos Offshore Services Company), and SES-T/C-20080218-00818
(authorizations held by Stratos Communications Inc.); one FCC Form 603 seeking consent to the transfer of Stratos
Global's terrestrial radio licenses, File No. 0003453455 (authorizations held by Stratos Offshore Services
Company); and one FCC Form 44 seeking consent to the new indirect ownership of Stratos Mobile Networks, Inc.,
as an Accounting Authority (collectively referred to as "Application"). The Application was accompanied by a
narrative description of the parties and the transaction (Narrative). Appendix D of the Narrative is a petition for
declaratory ruling, ISP-PDR-20080618-00013 (Petition for Declaratory Ruling). Appendix A to this Memorandum
Opinion and Order and Declaratory Ruling lists the transfer of control applications, and associated authorizations
and licenses, filed in this proceeding.
2 Section 214 of the Communications Act of 1934, as amended, 47 U.S.C. 214 (hereafter cited as the "Act").
3 Section 309 of the Act, 47 U.S.C. 309.
4 Applicants state that, pursuant to section 63.21(h) of the Commission's rules, 47 CFR 63.21(h) (2008), Stratos
Communications Inc. and two additional Stratos Global subsidiaries, Stratos Mobile Networks, Inc. (Stratos
Mobile), and Stratos Government Services, Inc. (Stratos Government), provide service pursuant to the international
section 214 authorizations held by Stratos Holdings, Inc. (Stratos Holdings). Narrative, Appendix D at 1. See also
ITC-T/C-20080618-00276 and ITC-T/C-20080618-00275, Attachment 1 at 3, n.1. Unless otherwise indicated,
when we refer to "Stratos Licensees" in this Order, the term includes Stratos Mobile and Stratos Government.
5 47 USC 310(b)(4).
2

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DA 09-117

II.

BACKGROUND

2. This Application represents the second step of a two-step process by which Inmarsat proposes
to acquire Stratos Global. In the first step, the Commission approved an application by Stratos Global, a
Canadian corporation, to transfer its stock to a Canadian trust (Trust).6 CIP UK Holdings Limited (CIP
UK), a subsidiary of Communications Investment Partners Limited (CIP), entered into a "Facilities
Agreement" (Loan Facility) with Inmarsat Finance III Limited (Inmarsat Finance), a special-purpose
subsidiary of Inmarsat. Under the Loan Facility, CIP UK borrowed sufficient funds from Inmarsat
Finance for its subsidiary, CIP Canada Investments, Inc. (CIP Canada), to purchase the stock of Stratos
Global. CIP Canada then transferred the stock to the Trust, which held the stock for the benefit of CIP
Canada. CIP UK also granted Inmarsat Finance a "Call Option" (Option), which gave Inmarsat the right
to acquire the Stratos Global stock on or after April 14, 2009.7 It is Inmarsat Finance's decision to
exercise that Option that has given rise to the transaction now before us.

A.

The Applicants

1.

The Transferor (The Trustee)

3. The Trustee of the Trust that now holds the shares of Stratos Global is Robert M. Franklin, a
Canadian citizen and businessman. The Trustee has held the shares for the benefit of CIP Canada and has
controlled Stratos Global during the pendency of the Trust through exercise of the voting rights associated
with the stock.8
2.

Stratos Global and Related Parties

4. Stratos Global, a Canadian corporation, through its subsidiaries the Stratos Licensees, is a
retail distributor of satellite services for a variety of international satellite systems and provides mobile
satellite services (MSS), fixed satellite service (FSS) and terrestrial communications through satellite
services it buys from various satellite operators.9 In providing MSS, Stratos Global resells the services of
Globalstar, Inmarsat, Iridium and Mobile Satellite Ventures (SkyTerra).10 Stratos Global holds licenses
from the Commission for Inmarsat mobile earth terminals, but does not own or operate any MSS gateway
earth stations in the United States. Stratos Global provides FSS service by means of very small aperture
terminals (VSATs) and VSAT hubs that it owns in the United States and satellite service it resells from a
number of satellite operators, including Intelsat and SES.11 Stratos Global is one of the largest
distributors of Inmarsat satellite services.12


6 Stratos Global Corporation, Transferor; Robert M. Franklin, Transferee; Consolidated Application for Consent to
Transfer of Control,
Memorandum Opinion and Order and Declaratory Ruling, WT Docket No. 07-73, FCC 07-213,
22 FCC Rcd 21338, 21374, 113 (2007) (2007 Stratos Order).
7 Id. at 21333-4, 16.
8 Narrative at 4.
9 Stratos Offshore, Stratos Communications, Stratos Mobile, and Stratos Government are wholly-owned direct
subsidiaries of Stratos Holdings, a Delaware corporation that is wholly owned by Stratos Wireless, Inc. (Stratos
Wireless), a Canadian corporation. Stratos Wireless is, in turn, wholly owned by Stratos Global. Narrative at 2-3.
10 On December 8, 2008, Mobile Satellite Ventures announced that it had changed its name to SkyTerra. Available
at
http://www.skyterra.com/media/press-releases-view.cfm?id=196&yr=2008.
11 2007 Stratos Order, 22 FCC Rcd at 22330, 2.
12 Vizada Services LLC, Petition to Deny of Vizada Services LLC, filed Aug. 13, 2008 (Vizada Petition) at 2.
3

Federal Communications Commission

DA 09-117

5. Additionally, Stratos Global operates a terrestrial microwave network in the U.S. Gulf of
Mexico, through which it offers competitive local exchange, competitive access, and interexchange
telecommunications services in Louisiana and Texas, primarily to the oil and gas industry.13 Finally,
Stratos Global's subsidiary, Stratos Mobile, is certified under Title III as an Accounting Authority in the
maritime mobile telecommunications service.14
3.

CIP

6. CIP is a limited partnership organized under the laws of the British Virgin Islands as an
investment company with a focus on satellite service providers.15 CIP consists of five partners, each of
whom holds 20 percent of the equity in CIP.16 CIP created two wholly-owned subsidiaries to carry out
the transaction: CIP UK, a private limited company that was chartered under the laws of England and
Wales, and CIP Canada, a corporation chartered under the laws of Canada.17 CIP Canada is wholly
owned by CIP UK, which is, in turn, wholly owned by CIP.18
4.

The Transferee (Inmarsat)

7. Inmarsat is a provider of mobile satellite services through a commercial mobile
communications satellite system that it built and operates.19 Inmarsat was created in 1979 by the
INMARSAT Convention as an intergovernmental organization (IGO), called the International Maritime
Satellite Organization (INMARSAT), to develop a global maritime satellite system to meet commercial
maritime and safety communications needs of the United States and other countries.20 The INMARSAT
IGO was owned by national representatives, usually providers of telecommunications services, of the
Member countries who had signed the INMARSAT Convention ("Signatories"). Historically,
INMARSAT's role was limited to that of a wholesaler, providing MSS space segment to those
Signatories, who operated land earth stations (LESs) and distributed INMARSAT satellite services to end
users.
8. The INMARSAT IGO privatized in 1999, becoming a U.K. private company (Inmarsat),
headquartered in London, with its former owners, the Signatories, as shareholders.21 In 2005, Inmarsat
became a public company, listed on the London Stock Exchange.22 Applicants state that Inmarsat's
shares are widely held and that all entities that own or control 10 percent or more of the equity or voting
interest in the company have their place of formation and principal place of business in the United States,


13 Narrative at 2.
14 Id.
15 2007 Stratos Order, 22 FCC Rcd at 21330, 4.
16 Id.
17 Id. at 5.
18 Id.
19 Narrative at 3-4.
20 See Comsat Corporation d/b/a Comsat Mobile Communications, Memorandum Opinion, Order and
Authorization, FCC 01-272, 16 FCC Rcd 21661, 21669, 3 (2001).
21 Inmarsat plc, Opposition of Inmarsat plc, filed Aug. 25, 2008 (Inmarsat Opposition) at 4-5.
22 2007 Stratos Order, 22 FCC Rcd at 21331, 8.
4

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DA 09-117

the Cayman Islands, Ireland or the United Kingdom.23 Applicants further state that approximately 89
percent of Inmarsat shares are beneficially owned, and approximately 88 percent of the voting power in
Inmarsat is controlled, by U.S. entities or companies formed under the laws of countries that are Members
of the World Trade Organization (WTO).24 Inmarsat is currently a significant provider of MSS space
segment, although other major satellite operators have entered the industry to provide competition to
Inmarsat.25
9. As part of the Inmarsat privatization, Inmarsat Global LTD (Inmarsat Global), the Inmarsat
subsidiary that provides MSS services, is contractually barred from owning or controlling a distributor of
Inmarsat services until April 14, 2009.26 Applicants state that these restrictions, which are contained in
Inmarsat Global's current distribution contracts, expire on that date.27

B.

The Transaction

10. By the Application now before us, Inmarsat seeks to exercise its right under the Option to
acquire the shares of CIP UK, and intends to consummate the transaction on, or shortly after, April 15,
2009.28 At that time, the Trust will terminate, and the Trustee will transfer the Stratos Global shares (and
associated voting power) to CIP Canada. Through CIP UK, Inmarsat will then indirectly own and control
CIP Canada and, thus, Stratos Global.29

C.

Comments on the Transfer of Control Application

11. The Commission placed the Application on Public Notice on July 14, 2008.30 On August 11,
2008, the United States Department of Justice (DOJ), on behalf of the Federal Bureau of Investigation
(FBI), and with the concurrence of the U.S. Department of Homeland Security (DHS), requested the
Commission to defer action on the Application until such time as the DOJ, FBI and DHS have completed
their review of any national security, law enforcement or public safety implications of that Application.31


23 Narrative at 6. See also Letter from Diane Cornell, Vice President, Government Affairs, Inmarsat Inc., to Marlene
H. Dortch, Secretary, FCC, dated Nov. 7, 2008.
24 Narrative at 10.
25 According to one industry source, Inmarsat's revenues account for about 56 percent of the total revenue of the
major MSS satellite operators. Vizada Inc. and Vizada Services LLC, Reply of Vizada Inc. and Vizada Services
LLC to Oppositions of Inmarsat plc and Stratos Global Corporation, filed Sept. 10, 2008 (Vizada Reply),
Attachment A (Tim Farrar, The Mobile Satellite Services Business: Competitive Structure, Size, Segments, and the
Unique Role of Inmarsat in Certain Segments
) (Farrar Study) at 16.
26 Id. at 6. See also 2007 Stratos Order, 22 FCC Rcd at 21331, 8 n.9.
27 Inmarsat Opposition at 5.
28 Narrative at 4-5.
29 Id. at 5.
30 See Robert M. Franklin, Trustee, and Inmarsat plc Seek FCC Consent to the Transfer of Control of Stratos
Global Corporation and its Subsidiaries from an Irrevocable Trust to Inmarsat plc,
Public Notice, IB Docket No.
08-143, 22 FCC Rcd 10005 (2008). On July 17, 2008, the Commission issued an Erratum adding one Section 214
authorization that had been omitted from the Public Notice. Robert M. Franklin, Trustee, and Inmarsat plc Seek
FCC Consent to the Transfer of Control of Stratos Global Corporation and its Subsidiaries from an Irrevocable
Trust to Inmarsat plc,
Erratum, IB Docket No. 08-143, 2008 WL 2783591 (F.C.C.) (rel. July 17, 2008).
31 Letter from Joanne P. Ongman, Attorney, National Security Division, U.S. Department of Justice, to Marlene H.
Dortch, Secretary, Federal Communications Commission, dated Aug. 11, 2008 (DOJ Petition to Adopt Conditions).
5

Federal Communications Commission

DA 09-117

On August 13, 2008, Vizada filed a petition seeking denial of the Application or attachment of conditions
to prevent Inmarsat from using the acquisition of Stratos to engage in alleged anticompetitive conduct.32
12. On August 25, 2008, Inmarsat and Stratos Global filed oppositions to the Vizada petition to
deny.33 On September 10, 2008, Vizada replied to the Oppositions.34 On October 9, 2008, the
Applicants filed a joint ex parte letter responding to material in Vizada's Reply.35 On October 28, 2008,
Applicants met ex parte with Commission staff to discuss arguments in their October 8 Ex Parte letter.36
On December 3, 2008, Inmarsat met ex parte to discuss possible changes to the corporate structure related
to the licenses. On December 8, 2008, Vizada filed an ex parte letter responding to Applicants' October 9
ex parte letter and ex parte presentation to Commission staff on October 28.37 On December 9, 2008,
counsel for Vizada met ex parte with members of Commission staff.38 On December 19, 2008, Inmarsat
and Stratos Global filed an ex parte letter replying to the Vizada December 8 ex parte letter.39 On
January 9, 2009, DOJ (including the FBI) and DHS (collectively, the "Agencies") filed a joint Petition to
Adopt Conditions on Transfer of Control.40
13. Vizada, in its Petition to Deny, Reply and ex parte letter, raises three challenges to the
Application. First, Vizada argues that the Commission should either dismiss the Application as
premature, since Inmarsat cannot consummate the transaction until April 2009, or postpone consideration


32 Vizada Petition.
33 Inmarsat Opposition; Stratos Global Corporation, et al., Opposition to Petition to Deny, filed Aug. 25, 2008
(Stratos Global Opposition).
34 Vizada Inc. and Vizada Services LLC, Reply of Vizada Inc. and Vizada Services LLC to Oppositions of Inmarsat
plc and Stratos Global Corporation, filed Sept. 10, 2008 (Vizada Reply). On August 25, 2008, Vizada filed a
Motion for Extension of Time to Reply to the Inmarsat and Stratos Global Oppositions, citing unavailability of key
personnel as the reason for the request. On August 27, 2008, Inmarsat and Stratos Global filed a Joint Opposition to
Motion for Extension of Time. Also on August 27, 2008, Vizada filed a Reply to Opposition to Motion for
Extension of Time of Vizada, Inc., and Vizada Services LLC. On August 28, 2008, the International Bureau issued
and Order granting in part Vizada's Motion. Robert M. Franklin, Trustee, and Inmarsat plc Seek FCC Consent to
the Transfer of Control of Stratos Global Corporation and its Subsidiaries from an Irrevocable Trust to Inmarsat
plc,
Order, IB Docket No. 08-143, 23 FCC Rcd 13010 (2008).
35 Joint Letter from John P. Janka, Latham & Watkins LLP (Latham & Watkins), Counsel for Inmarsat, and Alfred
M. Mamlet, Steptoe & Johnson LLP (Steptoe & Johnson), Counsel for Stratos Global, to Marlene H. Dortch,
Secretary, Federal Communications Commission, dated Oct. 9, 2008 (Inmarsat/Stratos Global October 9 Ex Parte
Letter).
36 See Joint Letter from John P. Janka, Latham & Watkins, and Alfred M. Mamlet, Steptoe and Johnson, Counsel for
Inmarsat, and Alfred M. Mamlet, Steptoe & Johnson, Counsel for Stratos Global, to Marlene H. Dortch, Secretary,
FCC, dated Oct. 29, 2008.
37 Letter from Peter A. Rohrbach, David J. Saylor, and Kimberly S. Reindl, Hogan & Hartson , Counsel for Vizada,
to Marlene H. Dortch, Secretary, FCC, dated Dec. 8, 2008 (Vizada December 8 Ex Parte Letter).
38 See Letter from Peter A Rohrbach, Hogan & Hartson, Counsel for Vizada, to Marlene H. Dortch, Secretary, FCC,
dated Dec. 10, 2008.
39 Joint Letter from John P. Janka , Latham & Watkins, Counsel for Inmarsat, and Alfred M. Mamlet, Steptoe &
Johnson, counsel for Stratos Global, to Marlene H. Dortch, Secretary, FCC, dated Dec. 17, 2008 (Inmarsat/Stratos
Global December 17 Ex Parte Letter).
40 U.S. Department of Justice, Federal Bureau of Investigation, and Department of Homeland Security, Petition to
Adopt Conditions on Transfer of Control, filed Jan. 09, 2009.
6

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DA 09-117

of the Application until Inmarsat has negotiated new distribution contracts.41 Second, Vizada argues that
the Commission should deny the Application because the vertical integration of Inmarsat and Stratos
Global will impair competition in the distribution of Inmarsat satellite services.42 Finally, Vizada argues
that the Commission, should it decide to grant the Application, should attach auditable and enforceable
conditions on such approval, such as arm's length structural separation, non-discrimination guarantees
and confidentiality requirements, because of the risk of anticompetitive conduct.43
14. Inmarsat and Stratos Global reject all three of Vizada's arguments. Inmarsat and Stratos
Global argue that the Application is ripe for Commission action, despite the April 2009 consummation
date and the ongoing contract negotiations,44 and should be granted without conditions.45 Inmarsat and
Stratos Global also deny that Inmarsat has market power and that the proposed merger would harm
competition in the distribution of Inmarsat satellite services.46

III.

PUBLIC INTEREST ANALYSIS

A.

Framework of Analysis

15. Pursuant to sections 214(a) and 310(d) of the Act,47 the Commission must determine whether
the proposed transfer of control to Inmarsat of the Stratos Global licenses and authorizations will serve
the public interest, convenience and necessity.48 In making this determination, we first assess whether the


41 Vizada Petition at 7-12; Vizada Reply at 18-21.
42 Vizada Petition at 15-41; Vizada Reply at 26-51.
43 Vizada Petition at 41-44.
44 Inmarsat Opposition at 30, Stratos Global Opposition at 5-6. See also Inmarsat/Stratos Global October 9 Ex Parte
Letter at 3-10.
45 Inmarsat Opposition at 27- 29; Stratos Global Opposition at 12-15.
46 Inmarsat Opposition at 12-17; Stratos Global Opposition at 8-12; Inmarsat/Stratos Global October 9 Ex Parte
Letter at 3-10.
47 47 U.S.C. 214(a), 310(d).
48 Section 310(d), 47 U.S.C. 310(d), requires that the Commission consider the applications as if the proposed
transferee were applying for the licenses directly under section 308 of the Act, 47 U.S.C. 308. See, e.g.,
Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantis Holdings LLC For Consent to Transfer
Control of Licenses, Authorizations, and Spectrum Manager and De Facto Transfer Leasing Arrangements and
Petition for Declaratory Ruling that the Transaction is Consistent with Section 310(b)(4) of the Communications
Act
, WT Docket No. 08-95, Memorandum Opinion and Order and Declaratory Ruling, FCC 08-258 at 26 (rel.
Nov. 10, 2008) (Verizon Wireless-Atlantis Order); Applications for Consent to the Transfer of Control of Licenses
XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee
, MB Docket No. 07-57,
Memorandum Opinion and Order and Report and Order, FCC 08-178, 23 FCC Rcd 12348, 12363-64, 30 (2008)
(XM-Sirius Order); Applications of Cellco Partnership d/b/a Verizon Wireless and Rural Cellular Corporation For
Consent to Transfer Control of Licenses, Authorizations, and Spectrum Manager Leases
, WT Docket No. 07-208,
Memorandum Opinion and Order and Declaratory Ruling, FCC 08-181, 23 FCC Rcd 12463, 12476-77, 26 (2008)
(Verizon Wireless-RCC Order); Applications of AT&T Inc. and Dobson Communications Corporation For Consent
to Transfer Control of Licenses and Authorizations
, WT Docket No. 07-153, Memorandum Opinion and Order,
FCC 07-196, 22 FCC Rcd 20295, 20301, 10 (2007) (AT&T-Dobson Order); AT&T Inc. and BellSouth
Corporation Application for Transfer of Control
, WC Docket No. 06-74, Memorandum Opinion and Order, FCC
06-189, 22 FCC Rcd 5662, 5672, 17 (2007) (AT&T-BellSouth Order); Applications of Midwest Wireless Holdings,
L.L.C. and ALLTEL Communications, Inc
., WT Docket No. 05-339, Memorandum Opinion and Order, FCC 06-146,
21 FCC Rcd 11526, 11535, 16 (2006) (ALLTEL-Midwest Wireless Order); Applications of Nextel
Communications, Inc. and Sprint Corporation
, WT Docket No. 05-63, Memorandum Opinion and Order, FCC 05-
(continued....)
7

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DA 09-117

proposed transaction complies with the specific provisions of the Act, other applicable statutes, and the
Commission's rules.49 If the proposed transaction would not violate a statute or rule, the Commission
considers whether it could result in public-interest harms by substantially frustrating or impairing the
objective or implementation of the Act or related statutes.50
16. In analyzing a proposed transfer of control, the Commission generally employs a balancing
test, weighing any potential public interest harms against the potential public interest benefits.51 Indeed,
that is the standard the Commission applied in the 2007 Stratos Order, in approving the transfer of Stratos
Global to the Trust.52 Under the traditional balancing test, the applicants bear the burden to prove by a
preponderance of the evidence that the proposed transaction, on balance, serves the public interest. 53 If
we are unable to find that the proposed transaction serves the public interest for any reason, or if the
record presents a substantial and material question of fact, we designate the Transfer of Control
Application for hearing under section 309(e) of the Act.54
(Continued from previous page)


148, 20 FCC Rcd 13967, 13976, 20 (2005) (Sprint-Nextel Order); Applications of Western Wireless Corporation
and ALLTEL Corporation
, WT Docket No. 05-50, Memorandum Opinion and Order, FCC 05-138, 20 FCC Rcd
13053, 13062, 17 (2005) (ALLTEL-Western Wireless Order); Applications of AT&T Wireless Services, Inc. and
Cingular Wireless Corporation
, WT Docket No. 04-70, Memorandum Opinion and Order, FCC 04-255, 19 FCC
Rcd 21522, 21542, 40 (2004) (Cingular-AT&T Wireless Order).
49 See, e.g., Verizon Wireless-Atlantis Order at 26; XM-Sirius Order 23 FCC Rcd at 12363-64, 30; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12476-77, 26; AT&T-Dobson Order, 22 FCC Rcd at 20301, 10; ALLTEL-
Atlantis Order
, 22 FCC Rcd at 19519-20, 7; AT&T-BellSouth Order, 22 FCC Rcd at 5672, 19; ALLTEL-Midwest
Wireless Order
, 21 FCC Rcd at 11535, 16; Sprint-Nextel Order, 20 FCC Rcd at 13976, 20; ALLTEL-Western
Wireless Order
, 20 FCC Rcd at 13062, 17; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21542-43, 40.
49 See, e.g., Verizon Wireless-Atlantis Order at 26; XM-Sirius Order, 23 FCC Rcd at 12363-64, 30; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12476-77, 26; AT&T-Dobson Order, 22 FCC Rcd at 20301, 10; AT&T-
BellSouth Order
, 22 FCC Rcd at 5672, 19; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11535, 16; Sprint-
Nextel Order
, 20 FCC Rcd at 13976, 20.
50 See, e.g., Verizon Wireless-Atlantis Order at 26; XM-Sirius Order, 23 FCC Rcd at 12363-64, 30; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12476-77, 26; AT&T-Dobson Order, 22 FCC Rcd at 20301, 10; AT&T-
BellSouth Order
, 22 FCC Rcd at 5672, 19; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11535, 16; Sprint-
Nextel Order
, 20 FCC Rcd at 13976, 20.
51 See, e.g., Verizon Wireless-Atlantis Order at 26; XM-Sirius Order, 23 FCC Rcd at 12363-64, 30; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12476-77, 26; AT&T-Dobson Order, 22 FCC Rcd at 20302, 10; AT&T-
BellSouth Order
, 22 FCC Rcd at 5672, 19; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11535, 16; Sprint-
Nextel Order
, 20 FCC Rcd at 13976, 20; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13062-63, 17;
Cingular-AT&T Wireless Order, 19 FCC Rcd at 21543, 40.
52 2007 Stratos Order, 22 FCC Rcd at 21338-9, 27.
53 See, e.g., Verizon Wireless-Atlantis Order at 26; XM-Sirius Order, 23 FCC Rcd at 12363-64, 30; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12476-77, 26; AT&T-Dobson Order, 22 FCC Rcd at 20302, 10; AT&T-
BellSouth Order
, 22 FCC Rcd at 5672, 19; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11535, 16; Sprint-
Nextel Order
, 20 FCC Rcd at 13976-77, 20; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13063, 17;
Cingular-AT&T Wireless Order, 19 FCC Rcd at 21543, 40.
54 47 U.S.C. 309(e). Verizon Wireless-Atlantis Order at 26; See XM-Sirius Order, 23 FCC Rcd at 12363-64,
30; Verizon Wireless-RCC Order, 23 FCC Rcd at 12476-77, 26; AT&T-Dobson Order, 22 FCC Rcd at 20302,
10; AT&T-BellSouth Order, 22 FCC Rcd at 5672-73, 19; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11535,
16; Sprint-Nextel Order, 20 FCC Rcd at 13977, 20; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13063,
17; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21543-44 40; see also Application of EchoStar
Communications Corporation (A Nevada Corporation), General Motors Corporation, and Hughes Electronics
(continued....)
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17. The Commission's public interest evaluation necessarily encompasses the "broad aims of the
Communications Act," which include, among other things, a deeply rooted preference for preserving and
enhancing competition in relevant markets, accelerating private-sector deployment of advanced services,
ensuring a diversity of license holdings, and generally managing the spectrum in the public interest.55
The Commission's public interest analysis may also entail assessing whether the proposed transaction
will affect the quality of communications services or will result in the provision of new or additional
services to consumers.56 In conducting this analysis, the Commission may consider technological and
market changes, and the nature, complexity, and speed of change of, as well as trends within, the
communications industry.57
18. Our analysis starts with an examination of whether the Applicants are qualified to hold and
transfer licenses pursuant to sections 214(a) and 310(d) of the Act.58 Next, we consider the arguments
raised by commenters regarding the potential harms and benefits of the proposed transaction, as well as
its effects on competition. Next, we consider whether this transaction implicates the Commission's
international dominant carrier regulation. Then we consider foreign-ownership issues. Finally, we
consider issues related to national security, law enforcement, foreign policy, and trade policy.
19. Vizada challenges the Commission's balancing test standard, arguing that the appropriate
standard is "whether the [proposed] merger will accelerate the decline of market power by dominant firms
in the relevant communications markets."59 Vizada's argument is predicated upon its assertion that
Inmarsat is dominant in some mobile satellite services markets. Although the Commission has applied
the standard it proposes in mergers involving dominant entities, that is not the situation in this proceeding,
because, as we indicate in our analysis of the competitive effects of this proposed transaction, we find that
Vizada has not shown that Inmarsat is a monopolist or that it has significant market power in the
(Continued from previous page)


Corporation (Transferors) and EchoStar Communications Corporation (A Delaware Corporation) (Transferee), CS
Docket No. 01-348, Hearing Designation Order, 17 FCC Rcd 20559, 20620, 153 (2002). Section 309(e)'s
requirement applies only to those applications to which Title III of the Act applies, i.e., radio station licenses. The
Commission is not required to designate for hearing applications for the transfer or assignment of Title II
authorizations when it is unable to find that the public interest would be served by granting the applications, see ITT
World Communications, Inc. v. FCC
, 595 F.2d 897, 901 (2d Cir. 1979), but of course may do so if we find that a
hearing would be in the public interest.
55 See, e.g., Verizon Wireless-Atlantis Order at 27; XM-Sirius Order, 23 FCC Rcd at 12364-65, 31; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12479, 28; AT&T-Dobson Order, 22 FCC Rcd at 20303, 12; AT&T-
BellSouth Order
, 22 FCC Rcd at 5673, 20; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11537, 18; Sprint-
Nextel Order
, 20 FCC Rcd at 13977, 21; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13064, 19; Cingular-
AT&T Wireless Order
, 19 FCC Rcd at 21544, 41
56 See, e.g., Verizon Wireless-Atlantis Order at 27; XM-Sirius Order, 23 FCC Rcd at 12364-65, 31; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12479, 28; AT&T-Dobson Order, 22 FCC Rcd at 20303-04, 12; AT&T-
BellSouth Order
, 22 FCC Rcd at 5673, 20; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11537, 18; Sprint-
Nextel Order
, 20 FCC Rcd at 13977, 21; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13064-65, 19;
Cingular-AT&T Wireless Order, 19 FCC Rcd at 21544, 41.
57 See, e.g., Verizon Wireless-Atlantis Order at 27; XM-Sirius Order, 23 FCC Rcd at 12364-65, 31; Verizon
Wireless-RCC Order
, 23 FCC Rcd at 12479, 28; AT&T-Dobson Order, 22 FCC Rcd at 20304, 12; AT&T-
BellSouth Order
, 22 FCC Rcd at 5673, 20; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11537, 18; Sprint-
Nextel Order
, 20 FCC Rcd at 13977, 21; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13065, 19; Cingular-
AT&T Wireless Order
, 19 FCC Rcd at 21544, 41.
58 47 U.S.C. 214(a), 310(d).
59 Vizada Petition at 16, citing EchoStar Communications Corp, General Motors Corp. and Hughes Electronics
Corp.,
Hearing Designation Order, 17 FCC Rcd 20559, 20575, 27 (2002).
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international mobile satellite services market.60 Furthermore, the Commission has previously classified
Stratos Global and the Stratos Licensees as non-dominant for regulatory purposes.61 We, thus, reject
Vizada's arguments and shall apply the standard balancing test in this proceeding.

B.

Timing of Application

20. As a threshold issue, we reject Vizada's argument that this Application is premature. Vizada
argues that filing the Application ten months before the earliest date on which Applicants could
consummate the transaction renders the Application defective. The Commission placed the Application
on public notice approximately nine months before the Applicants' target date for consummating the
transaction, and while we agree with Vizada that we do not favor premature applications, we do not find
the nine-month review period in this Application to be excessive. We note that this period is not much
longer than the Commission's six-month target for processing complex merger applications.62 We are,
thus, faced with a review period that is only three months longer than the Commission's target, and while
we agree with Vizada that the communications industry is subject to change, we find no reason to believe
that the industry will change so rapidly in those three months as to render the proposed transaction not in
the public interest.
21. We also reject Vizada's argument that we should delay consideration of this Application until
Inmarsat and its distributors have negotiated new distribution agreements.63 The existing distribution
contracts will expire automatically on April 14, 2009, irrespective of the proposed transaction.64 Whether
or not we approve Inmarsat's acquisition of Stratos Global, Vizada and the other distributors will have to
negotiate new contracts. We also note that the Commission has a long-standing policy of not interfering
with private contractual disputes.65
22. Finally, we reject Vizada's request that we postpone consideration of this proposed transaction
until after consideration of a possible offer by Harbinger Capital Partners Fund (Harbinger) to acquire
Inmarsat. 66 We find that a possible future transaction involving Harbinger has no bearing on the merits
of Inmarsat's proposal to acquire Stratos Global. We therefore find no reason to delay consideration of
the instant transaction.

C.

Qualifications of the Applicants

23. Next, we must determine whether the Applicants meet the requisite qualifications to hold and
transfer licenses under section 310(d) of the Act and the Commission's rules. In general, when evaluating
assignments under section 310(d), the Commission does not re-evaluate the qualifications of the
transferor, unless issues related to basic qualifications have been designated for hearing by the
Commission or have been sufficiently raised in petitions to warrant the designation of a hearing.67 This is


60 See Section III.D.3., infra.
61 2007 Stratos Order, 22 FCC Rcd at 21371, 106.
62 See http://www.fcc.gov/transaction/timeline.html; Inmarsat Opposition at 30, Stratos Global Opposition at 4-5,
citing the Commission's timeline for acting on merger applications.
63 Vizada Petition at 7.
64 Inmarsat Opposition at 6.
65 See, e.g., Decatur Telecasting. Inc., Memorandum Opinion and Order, 7 FCC Rcd 8622 (1992).
66 Vizada Petition at 13; Inmarsat Opposition at 30-31.
67 See, e.g., Verizon Wireless-RCC Order, 23 FCC Rcd at 12477-78, 27; AT&T-Dobson Order, 22 FCC Rcd at
20302, 11; ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11536, 17; Sprint-Nextel Order, 20 FCC Rcd at
13979, 24; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13063-64, 18; Cingular-AT&T Wireless Order, 19
(continued....)
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not the case here. In the 2007 Stratos Order, the Commission found that the Trust and the Trustee
possess sufficient financial, legal and technical qualifications to be a Commission licensee.68 As a result,
we need not here re-evaluate the basic qualifications of Trust or the Trustee.
24. Similarly, we see no reason to find that Inmarsat is unqualified to acquire the Stratos
Licensees. Although section 310(d) requires us to consider the qualifications of the proposed transferee
as if the transferee were applying for the license directly under section 308 of the Act,69 Vizada has not
challenged Inmarsat's financial, legal, technical or other basic qualifications to be a licensee under the
Communications Act. Inmarsat is already a Commission licensee, and we see nothing in the record
before us that suggests that Inmarsat would not be legally, technically or financially qualified to be itself a
distributor of its satellite services.

D.

Effect on Competition

1.

Introduction and Analytical Framework

25. We next consider the potential public interest harms, including potential harms to
competition, arising from this transfer of control. Consistent with Commission precedent, we consider
the competitive effects of the transaction on existing and future competition70 in the provision of mobile
satellite services, with reference also to fixed satellite and domestic terrestrial communications services.
26. In this section, we discuss whether Inmarsat's acquisition of Stratos Global has the potential
to adversely affect competition in the provision and distribution of mobile satellite services, ultimately
harming consumers of such services through excessive prices, lower quality, or restrictions in availability.
As we explain in detail below, we do not anticipate that the merger will adversely affect competition or
harm consumers. We expect that by rationalizing the distribution of Inmarsat services, the merger is
likely to make Inmarsat a more efficient competitor and may result in greater competition, with the end
results being lower prices, improved quality, and more widespread availability of mobile satellite
services.
27. Stratos Global distributes and resells the satellite services of several MSS and FSS operators,
but does not itself own or control any satellites or satellite systems. The retail market in which Stratos
(Continued from previous page)


FCC Rcd at 21546, 44. See also Stephen F. Sewell, Assignment and Transfers of Control of FCC Authorizations
under Section 310(d) of the Communications Act of 1934, 43 FED. COMM. L.J. 277, 339-40 (1991). The policy of
not approving assignments or transfers when issues regarding the licensee's basic qualifications remain unresolved
is designed to prevent licensees from evading responsibility for misdeeds committed during the license period. See
id
. The hearing designation is required under Section 309(e) of the Communications Act, 47 U.S.C. 309(e), only
if the record presents a "substantial and material question of fact" whether grant of the application would serve the
public interest, convenience, and necessity.
68 2007 Stratos Order, 22 FCC Rcd at 21340-1, 31.
69 Section 308 requires that applicants for Commission licenses set forth such facts as the Commission may require
as to citizenship, character, and financial, technical, and other qualifications. 47 U.S.C. 308. See also ALLTEL-
Midwest Wireless Order,
21 FCC Rcd at 11536-7, 17; Sprint Nextel-Nextel Partners Order, 21 FCC Rcd at 7362,
10; SBC-ATT Order, 20 FCC Rcd at 18379, 171; Verizon-MCI Order, 20 FCC Rcd at 18526, 183; ALLTEL-
Western Wireless Order,
20 FCC Rcd at 13063-4, 18; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21546,
44.
70 See ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11538, 19; SBC-ATT Order, 20 FCC Rcd at 18302, 18;
Verizon-MCI Order, 20 FCC Rcd at 18444, 18; Sprint-Nextel Order, 20 FCC Rcd at 13978, 22; ALLTEL-
Western Wireless Order,
20 FCC Rcd at 13065, 20; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21545, 44;
Verizon/MCI Merger Order, 20 FCC Rcd at 18444-45, 18; SBC/AT&T Merger Order, 20 FCC Rcd at 18302, 18.
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Global operates is competitive and includes numerous distributors and resellers.71 Inmarsat, however, is
required at present to distribute its services through "legacy distributors," i.e., former Inmarsat signatories
and their descendents, including Stratos Global and Vizada.72 Under current contracts with Inmarsat,
legacy distributors have the right to purchase Inmarsat's services at substantial discounts relative to other
distributors and resellers. In general, distributors and resellers, including the legacy distributors, resell
Inmarsat's services unbundled with other MSS products and without major enhancements.
28. Vizada raises two arguments about the effect of this transaction on competition. First,
Vizada argues that Inmarsat continues to enjoy dominant market power, and that many MSS customers
remain effectively "locked-in" to Inmarsat-based services, either because Inmarsat offers unique services
or because customers have already invested heavily in Inmarsat-based equipment.73 Second, Vizada
argues that distribution agreements with MSS distributors have prevented Inmarsat from exercising
market power, and that, post-acquisition, Inmarsat may harm Vizada and other distributors by extending
its market power downstream.74 The Applicants respond that Inmarsat does not have market power over
mobile satellite services and that Inmarsat is simply seeking to replace outdated and inefficient
distribution arrangements by acquiring Stratos Global, which is an independent distributor of mobile
satellite services.75 As we explain below, we reject each of Vizada's arguments, and find that it is
unlikely that Inmarsat's acquisition of Stratos Global will have a harmful effect on competition.
29. We note here that Inmarsat's acquisition of Stratos Global would not be a horizontal merger.
As we explained above, Stratos Global distributes and retails the satellite services of several MSS and
FSS operators, but does not itself own or control any satellites or satellite systems. Inmarsat owns a
mobile satellite system, but unlike Stratos Global, does not generally distribute or retail satellite services.
Thus the merger will not by itself result in greater concentration of control over mobile or fixed satellite
systems, their distribution or retail sales.


71 2007 Stratos Order, 22 FCC RCd at 21362, 64 n.197; Vizada Petition to Deny at 3 ("Currently, Vizada, Stratos
[Global], and other distributors obtain capacity from Inmarsat through distribution agreements that foster a
competitive market in Inmarsat services."]. See also Inmarsat/Stratos Global October 9 Ex Parte Letter at 11,
Figure 1.
72 Inmarsat Opposition at 4-5; Narrative at 6, n.11. See also Inmarsat/Stratos Global October 9 Ex Parte Letter at
11, Figure 1.
73 Vizada argues that this investment can take the form of "the requisite terminals and other equipment, training
personnel, and developing extensive and long-standing experience operating such equipment." Vizada Petition at
23.
74 The Commission has stated that it will consider only those harms that arise from the transaction in question. See,
e.g., News Corp. and the Direct TV Group, Inc. Transferors, and Liberty Media Corp., Transferee, for Authority to
Transfer Control,
MB Docket No. 07-18, Memorandum Opinion and Order, FCC 08-66, 23 FCC Rcd 3265, 3269,
26 (2008). See also Verizon Communications Inc., Transferor, and Amrica Mvil S.A. de C.V., Transferee, WT
Docket No. 06-113, Memorandum Opinion and Order and Declaratory Ruling, FCC 07-43, 22 FCC Rcd 6195, 6205,
22 (2007); Applications of WWC Holding Co., Inc., and RCC Minnesota, Inc., for Consent to Assignment of
Licenses,
File No. 0002849067, Memorandum Opinion and Order, 22 FCC Rcd 6589, 6598, 17 (2007). Inmarsat
asks that the Commission reject Vizada's competitive concerns because they are not specific to this transaction,
noting that they relate instead to the expiration of current distribution arrangements with Vizada and other legacy
distributors. Inmarsat Opposition at 19-23. Even if Vizada's allegations are not merger-specific, as Inmarsat
alleges, the Commission has continuing oversight authority with respect to the distribution arrangements of satellite
operators, including any exclusive arrangements with independent firms. The Commission therefore may consider
allegations of anticompetitive activity arising from such arrangements and, if necessary, require their termination.
75 Narrative at 7-8. See also Inmarsat Opposition at 3-7; Inmarsat/Stratos Global October 9 Ex Parte Letter at 16.
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30. The issue before us is whether Inmarsat's acquisition of Stratos Global is likely to result in
higher prices, lower quality, or restricted availability for Inmarsat's own products.76 Vizada makes such a
claim, asserting that Inmarsat has market power over mobile satellite services and that the merger will
augment its market power.77 Vizada argues that the competitive harms outweigh any enhanced
efficiencies resulting from the merger on the basis that Inmarsat has sufficient market power in the
upstream market to profitably foreclose the relevant product or service from its downstream rivals. The
record does not support Vizada's claim that Inmarsat has market power over mobile satellite services. In
addition, nothing in the record explains how a vertical merger between Inmarsat, a firm lacking market
power, and an independent distributor that itself has no market power in the downstream distribution
market would augment such market power.78
31.
Consistent with Commission precedent and the DOJ/FTC Merger Guidelines,79 we base
our market definition on considerations of demand substitutability among services. The various services
provided by MSS operators share a fundamental demand characteristic: they provide mobile
telecommunications connectivity to consumers in geographically diverse or remote areas.80 As we
explain in more detail below, each individual mobile satellite service varies somewhat in its consumer
demand characteristics, making the services imperfect substitutes for each other.81 U.S. consumers
purchase mobile satellite services for both domestic and international connectivity, but Inmarsat's
services and their close substitutes are primarily international in scope. The Applicants claim that
international mobile satellite services comprise a single market.82 Vizada argues, however, that there are
numerous relevant product markets, including (1) maritime low-speed data; (2) maritime voice; (3)


76 We note that no petitioner has raised the concern that Inmarsat's purchase of Stratos Global will reduce the ability
of other satellite operators to distribute or sell their services (e.g., as a result of the reduction in the number of
independent distributors and retail sales outlets). We rely on the Commission's analysis in the 2007 Stratos Order
that the merger will not reduce the ability of satellite operators to distribute or sell their services. Because Stratos
Global is only one of many distributors and retail sales outlets of satellite services, satellite operators will continue
to have a wide choice of other, independent distributors and retail sales outlets should they find distribution or retail
sales arrangements with Stratos to be unsatisfactory. See 2007 Stratos Order, 22 FCC Rcd at 21355, 61. See also
Inmarsat/Stratos Global October 9 Ex Parte Letter at 10-12.
77 Vizada Petition at 20-41.
78 See News Corporation and The DirecTV Group, Inc., Transferors, and Liberty Media Corporation, Transferee,
MB Docket No. 07-18, 23 FCC Rcd 3265 (2008). In Liberty Media, we discussed the potential for a vertically
integrated firm, as the result of a transaction, to foreclose downstream competitors from important inputs (e.g.,
programming) is the subject of substantial economic literature. Theoretically, where a firm that has market power in
an input market acquires a firm in the downstream output market, the acquisition may increase the incentive and
ability of the integrated firm to raise rivals' costs either by raising the price at which it sells the input to downstream
competitors or by withholding supply of the input from competitors. See Michael H. Riordan and Steven Salop,
Evaluating Vertical Mergers: A Post-Chicago Approach, 63 ANTITRUST L. J. 513, 527-38 (1995) ("Riordan and
Salop
"); see also Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals' Costs to
Achieve Power Over Price
, 96 YALE L. J. 209, 234-38 (1986).
79 See U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, 1992, rev. 1997
(DOJ/FTC Merger Guidelines).
80 Substitutes to services provided by MSS operators are available in some circumstances from FSS operators and
terrestrial radio systems, as explained below.
81 See 2007 Stratos Order, 22 FCC Rcd at 21361-62, 63. Mobile satellite services are consumed in different
environments (on the land, sea and in the air), at various data speeds, using various kinds of handsets or terminal
equipment, with varying coverage areas, etc.
82 Inmarsat Opposition at 8-9; Stratos Opposition at 8-12.
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maritime high-speed data; (4) aeronautical low-speed data; (5) aeronautical voice; (6) aeronautical high-
speed data; (7) land low-speed data; (8) land voice; (9) land high-speed data; as well as even more
specific markets involving low-speed data safety services and service segments in which customers are
uniquely "locked-in."83
32.
Based on the record before us, we conclude that given the shared fundamental demand
characteristics of the services, as well as their imperfect demand substitutability, international mobile
satellite services provided to consumers are a single market with differentiated products, and we define
the retail provision of international mobile satellite services to be a relevant market for purposes of our
analysis.84 Our analysis also focuses on the wholesale provision of international mobile satellite services,
which we define as an additional relevant market. We emphasize that we have adopted these market
definitions based on information currently available, and will consider revising them in future
proceedings should more economic evidence on demand substitutability or other factors be available at
that time.
33.
The Applicants claim that international mobile satellite services comprise a single market
and that this market definition is consistent with that used by the Commission in previous proceedings.85
Vizada cites a study by Tim Farrar of Telecom, Media and Finance Associates, which categorizes mobile
satellite services into the above nine categories, as support for its view that there are at least nine relevant
product markets.86 Vizada states that certain of Inmarsat's and Stratos' business materials also categorize
mobile satellite services into these or similar categories.87 The Farrar Study acknowledges, however, that
the nine categories it identifies may not qualify as market definitions for antitrust purposes and may more
appropriately be considered market segments.88 We agree. Vizada has not provided economic evidence
that these nine categories are distinct product markets and not merely segments of a broader mobile
satellite services market. For example, Vizada has not provided evidence that voice services (64 kbps)
and high-speed data services (128 kbps and above) are not adequate substitutes from a consumer
perspective. Nor has Vizada explained why the particular locale of consumption of mobile
telecommunications services (e.g., on land, sea, or in the air) should be decisive in delineating product
markets. We believe that Vizada's market definitions may be too narrow, absent further explanation or
evidence.


83 Vizada Petition to Deny at 27-28. See also Vizada Reply at 10-11, 12, 26-51. See below for a discussion of
Vizada's theory of customer "lock-in."
84 We note, however, that some satellite operators provide services limited in coverage to the United States or
individual foreign regions, and that such services may be substitutes for Inmarsat's services for some customers,
especially when integrated to provide broad international coverage by system integrators or the customers
themselves.
85 Inmarsat Opposition at 8-9; Stratos Global Opposition at 8-12. See also Inmarsat/Stratos Global October 9 Ex
Parte
at 2-4. See also Vodafone Americas Asia, Inc. (Transferor), Globalstar Corporation (Transferee); Consent to
Transfer Control of Licenses and Section 214 Authorizations and Petition for Declaratory Ruling Allowing Indirect
Foreign Ownership
, Order and Authorization, 17 FCC Rcd 12849, 12867, 54, 55 (2002); see also Motient
Services Inc. and TMI Communications and Company, LP (Assignors) and Mobile Satellite Ventures Subsidiary
LLC (Assignee)
, Order and Authorization, 16 FCC Rcd 20469, 20477-78, 24 (2001); see also Use of Returned
Spectrum in the 2 GHz Mobile Satellite Service Frequency Bands
, IB Docket Nos. 05-220 and 05-221, Order, FCC
05-204, 220 FCC Rcd 19696 (2005).
86 Vizada Reply at 12. See also Farrar Study at 4-5.
87 Vizada Reply at 31.
88 Farrar Study at 1.
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34.
We will, however, address below Vizada's allegations regarding inadequate competition
in the four specific market segments that Vizada contends are separate relevant product markets in which
Inmarsat has market power (maritime low-speed data service; aeronautical high-speed data services;
remote land-based high-speed data services; and maritime high-speed data services).89
2.

Market Power in the International Mobile Satellite Services Market

35. Vizada argues that, notwithstanding limited development of alternative MSS systems,
Inmarsat still continues to enjoy dominant market power and that many MSS customers remain
effectively "locked in" to Inmarsat-based services for important telecommunications requirements.90
Vizada claims that Inmarsat's market power derives from (1) Inmarsat's unique service offerings91 and
(2) MSS customers' pre-existing large investments in Inmarsat-specific terminals, equipment, training,
standardization, and operational experience.92 Vizada also provides the Farrar Study, which purports to
show that Inmarsat dominates certain market segments.93 We agree with the Applicants, however, that
Inmarsat has no significant market power over international mobile satellite services.94
36. We note that several major MSS operators provide service in competition with Inmarsat
(e.g., SkyTerra, Iridium, Globalstar) and several companies are developing major new MSS systems to
provide service in the future (e.g., ICO and Terrestar). These systems have sufficient spectrum with
which to compete with Inmarsat. Of the total of 145 megahertz of MSS spectrum authorized by the FCC,
Inmarsat has access to only 68 megahertz of L-band spectrum, which it must share with SkyTerra.95
There are also major MSS operators outside the United States that compete with Inmarsat in serving U.S.
customers in other regions of the world.96
37. Competition with Inmarsat is not limited to MSS operators. Technological progress has
enabled FSS operators in the C- and Ku-bands to become major competitors of Inmarsat in the provision
of mobile satellite services.97 For example, with regard to the important category of maritime broadband


89 Vizada Reply at 12. See also Farrar Study at 2.
90 Vizada Petition, Summary at 1.
91 Vizada alleges that Inmarsat offers a "unique global system footprint and network: only Inmarsat can offer the
combination of geographically ubiquitous coverage, with high data throughput, in a global service that is weather-
insensitive, certified for providing safety at sea and in flight, and reliably delivered by a firm with a long and
dependable performance record and a stable financial condition." Vizada Petition, Summary, at 1. See also Id. at 3,
17, n.17, and 21.
92 Vizada Petition, Summary at 1. See also Vizada Petition at 3-4, 17, n.17, and 23.
93 Farrar Study.
94 Inmarsat Opposition at 11, 18, n.50, 21; Stratos Global Opposition at 8-12.
95 The 145 megahertz of MSS band spectrum authorized by the FCC consists of 68 megahertz of L-band spectrum,
44 megahertz of Big LEO spectrum, 4 megahertz of Little LEO spectrum and 40 megahertz of 2GHz spectrum.
Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993: Annual Report and Analysis
of Competitive Market Conditions with Respect to Commercial Mobile Services
, WT Docket No. 07-71, Twelfth
Report, FCC 08-28, 23 FCC Rcd 2241, 2345-2352 259-289 (2008) (12th Annual CMRS Report).
96 Non-U.S. satellite operators include Thuraya, Telecomunicaciones de Mexico, Informcosmos, Optus MobileSat,
INSAT 3C, and N-Star. Inmarsat Opposition at 14. These MSS operators provide service to U.S. customers seeking
regional coverage outside the United States.
97 See Inmarsat Opposition at 12-13. Recent innovations reducing the size and increasing the pointing accuracy of
satellite antennas in the C- and Ku-bands have allowed their use in mobile applications. See, e.g., Procedures to
Govern the Use of Satellite Earth Stations on Board Vessels in the 5925-6425 MHz/3700-4200 MHz Bands and
(continued....)
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(i.e., high-speed data) services, many of the largest and most valuable Inmarsat users have replaced
Inmarsat services with VSAT services using stabilized antennas.98 Competition is also emerging from
terrestrial wireless providers. For example, Aircell is using terrestrial stations to provide aeronautical
broadband services in competition with Inmarsat and other MSS operators.99
38. Despite the presence of other MSS and FSS operators, Vizada argues that Inmarsat offers
unique services that effectively restrict the ability of customers to choose alternatives because there are no
exact substitutes, and that this results in market power for Inmarsat.100 As the Commission explained in
the 2007 Stratos Order, mobile satellite services are highly differentiated, and competition occurs through
the clash of imperfect substitutes.101 The fact that there are no exact substitutes to Inmarsat's services
does not confer significant market power on Inmarsat. Each mobile satellite service competes for
customers on the basis of a distinct profile of advantages and disadvantages, including commercial
availability, signal coverage, latency, portability, spectrum bandwidth, reliability, etc. For example, while
Inmarsat's maritime services offer several advantages to customers, Inmarsat is limited by the amount of
spectrum it has available, and is therefore relatively expensive for large volume users.102 Inmarsat's
(Continued from previous page)


14.0-14.5 GHz/11.7-12.2 GHz Bands, IB Docket No. 02-10, Report and Order, FCC 04-286, 20 FCC Rcd 674
(2005), recon. pending (Earth Stations on Vessels Order) (establishing licensing and service rules for Earth Stations
on Vessels (ESVs) operating in the C- and Ku-band frequencies, and noting that ESVs have been utilized for several
years to provide telecommunications services, including Internet access, to cruises, merchant ships, ferries, barges,
yachts and U.S. navy vessels); Amendment of Parts 2 and 25 of the Commission's Rules to Allocate Spectrum and
Adopt Service Rules and Procedures to Govern the Use of Vehicle-Mounted Earth Stations in Certain Frequency
Bands Allocated to the Fixed-Satellite Service
, IB Docket No. 07-101, Notice of Proposed Rulemaking, FCC 07-86,
22 FCC Rcd 9649 (2007) (VMES NPRM) (seeking comment on the use of vehicle-mounted earth stations as an
application of the fixed satellite service in the conventional and extended Ku-band frequencies).
98 Greg Berlocher, "Maritime Market," Via Satellite Magazine, Nov. 2008, at 23. ("During the 1980's, Inmarsat was
the sovereign of the seas, charging $10 per minute for voice and telex connectivity... Energy companies were quick
to adopt VSAT [very small aperture terminal] services using stabilized antennas... With a global reach, these
companies expanded into commercial shipping and other maritime markets... The impact of broadband VSAT
services on Inmarsat and the maritime industry has been profound... While the penetration into Inmarsat's market
by VSAT operators was and remains small in terms of absolute numbers, VSAT has effectively cream-skimmed the
customer base, taking the largest and most valuable users and dominating each of the segments it addresses...")
(Quotation marks removed, brackets added.)
99 See AirCell website at http://www.aircell.com/.
100 Vizada Petition, Summary at 1. See also Vizada Petition at 3-4, 13, 16, 17, n.17, 20-21, 34.
101 This is in contrast to commodity markets, in which competing products are perfect or near-perfect substitutes.
With differentiated products, firms compete by selling products with unique profiles of advantages (and
disadvantages). Substitutes need not be perfect to prevent the emergence of significant market power. A hallmark
of a differentiated product market is that market segments within the product market tend to become sufficiently
narrow such that a single provider can earn no more than a competitive rate of return even if it dominates the entire
market segment. In commodity markets, competitors seek profitability by competing over price and quality for a
strictly defined commodity. In differentiated product markets, in contrast, competitors seek profitability by dividing
and controlling ever-narrowing market segments. See Vizada December 8 Ex Parte Letter at 13-14 (noting that
"modest revenue" is unlikely to "bring aggressive competition").
102 Greg Berlocher, "Maritime Market," Via Satellite Magazine, Nov. 2008. pp. 23-24. ("Inmarsat's major
advantages in the maritime market include its coverage, spectrum, Global Maritime Distress Safety System role,
distribution and service networks, range of products, price of user equipment, and not least, the company's
established brand and name... On the downside, the company is limited in terms of the amount of spectrum L-band
affords it and this, in turn, means that bandwidth is relatively expensive when compared to fixed satellite services
capacity. Consequently, Inmarsat's services are mostly charged by volume whether this is in minutes or megabits
(continued....)
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ability to provide maritime broadband data services on a near-global scale does not confer significant
market power on Inmarsat, because imperfect substitutes exist to constrain Inmarsat's power to restrict
supply and raise price. In the case of maritime broadband services, there are several viable alternatives,
including a combination of regional FSS broadband services that provide extensive international
coverage.103 Such systems may have less portable antennas than Inmarsat's and may require a system
integrator, but may offer higher usage volumes at lower prices. Another option for customers seeking
maritime broadband services is Iridium's recently inaugurated MSS offering OpenPort,TM which is global
in coverage and very portable but has lower data speeds than some of Inmarsat's services.104
39. We also disagree with Vizada's claim that Inmarsat derives significant market power from
MSS customers' pre-existing large investments in Inmarsat-specific terminals, equipment, training,
standardization, and operational experience.105 As a general matter, businesses often switch suppliers.
Such ordinary commercial behavior typically involves the retirement or sale of supplier-specific
equipment, new training, etc. Vizada offers no explanation why investments in Inmarsat mobile satellite
terminals, equipment, training, etc. are so costly or otherwise indispensable as to preclude switching to
one of its competitors. Specifically, Vizada cites the U.S. Navy as a prime example of an Inmarsat
customer "locked in" to Inmarsat services.106 The U.S. Navy, however, based on public information, is
considering replacement of its Inmarsat-based infrastructure with a new service.107 Regardless of the
(Continued from previous page)


per second and heavy volume users can face very large monthly bills as a result. Prior to the current liberalized
broadband world, this was a limitation, but not a critical one... However, the environment today is very different
with high levels of connectivity and low prices available to the majority of the world's population.") (Quotation
marks and brackets removed.)
103 According to the Applicants, FSS systems are being deployed on ships and airplanes to provide voice and
broadband connectivity to both passengers and crew over satellite networks with global coverage. Inmarsat
Opposition at 12-13; Stratos Opposition at 11; Inmarsat/Stratos Global December 17 Ex Parte Letter, Annex A at 2,
4-5. Inmarsat also claims that Vizada is one of many satellite services providers to offer, in direct competition with
Inmarsat, earth station on vessel service in FSS bands at speeds of up to 8 Mbps and with global coverage. Inmarsat
Opposition at 12-13. See also the Applicants' description of Orbit Technology Group's recent test of oceanic
coverage for an integrated Ku-band satellite system. Inmarsat/Stratos Global October 9 Ex Parte Letter at 7-8. See
also
Greg Berlocher, "Maritime Market," Via Satellite Magazine, Nov. 2008. p. 24 (describing successful tests of
seamless maritime broadband service provided by a combination of FSS operators). Note that only some customers
need global coverage. Vizada disputes the importance of maritime broadband competition from FSS operators. See
Vizada Reply at 37-42; Vizada December 8 Ex Parte Letter at 9-11. See also Farrar Study at 8-10.
104 See Iridium's description of OpenPortTM at http://www.iridiumopenport.com/. See Inmarsat Opposition at 14.
See also Farrar Study at 9-10; Inmarsat/Stratos Global October 9 Ex Parte Letter at 6.
105 Vizada Petition at 22. ("Given Inmarsat's legal monopoly situation in the past, it is not surprising that many
major government and commercial users invested enormous sums in purchasing Inmarsat-specific antennas,
terminals, transceivers, other onboard or ground equipment, software, etc. that is compatible only with Inmarsat
satellite services. These users also invested large sums and immense amounts of employee time in testing that
equipment, training personnel, developing training and operational manuals and guides, working with Inmarsat and
its distributors to develop customized communications and ancillary services, and so forth. Understandably, it would
be highly improbable for these users to abandon their enormous investment in Inmarsat-based service and start anew
with a different satellite services supplier.") (Paragraph indentation removed.)
106 Vizada Petition at 23.
107 Turner Brinton, "Industry Gears Up for Big U.S. Navy Commercial Bandwidth Procurement," Space News, Oct.
20, 2008, p.6. ("The Navy intends to award a single, end-to-end services contract that includes C-, Ku- and X-band
satellite capacity, ground station services, terrestrial connectivity, and operations and maintenance... The program
will replace the Navy's current commercial L-band service provided by Inmarsat," and that the Navy's procurement
(continued....)
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status of the procurement,108 the U.S. Navy's actions demonstrate that customers have other options than
Inmarsat's services and that such customers are not necessarily locked in by extensive investment in
Inmarsat facilities and training.
40. Finally, Vizada cites the Farrar Study in claiming that Inmarsat has market power over four
specific service categories: (1) maritime low-speed data services; (2) aeronautical high-speed data
services; (3) remote land-based high-speed data services; and (4) maritime high-speed data services.109
We disagree. There are no major legal, regulatory or technological barriers to entry in these service
categories and, as we explained above, there is sufficient MSS spectrum available as well as FSS capacity
for mobile satellite applications.110 Moreover, Inmarsat has major competitors for each of the above
service categories,111 and several MSS incumbents and new entrants are developing state-of-the-art
broadband satellite systems that will compete with Inmarsat in the future.112 Although the Farrar Study
(Continued from previous page)


solution seeks to provide "a 10-fold increase in throughput capacity.") (Paragraph indentation removed.) See also
Stratos Global Opposition at 3-4, 11-12.
108 Vizada Reply at 41 (arguing that "indications are that the Navy will continue to use Inmarsat").
109 Vizada Reply at 12; Vizada December 8 Ex Parte Letter at 7-14.
110 We note that certain ships are required by international agreement to have global maritime distress safety system
(GMDSS) capability, which Inmarsat alone is certified to provide at this time. Vizada Reply at 34-36. Inmarsat
includes the capability in certain low-speed data terminals and provides GMDSS service as a public service at no
charge. Vizada claims that because GMDSS service is bundled with other low-speed maritime data services,
Inmarsat's GMDSS monopoly confers market power on Inmarsat. Id. at 34-36. See also Vizada December 8 Ex
Parte
Letter at 7. According to the Farrar Study, low-speed maritime data services account for about 4 percent of
MSS satellite operators' annual revenue. Farrar Study at 16. Although Inmarsat's unique position as a provider of
GMDSS service appears to give it a competitive advantage, we are not persuaded that it confers significant market
power on Inmarsat in the provision of low-speed maritime data services. The issue is whether bundling GMDSS
capability into low-speed data terminals allows Inmarsat to charge a monopoly premium for packages of low-speed
maritime data services that include GMDSS. Even if these service packages have no adequate substitutes among
those offered by other satellite operators due to unique importance of GMDSS, these service packages also compete
against Inmarsat's own higher-speed maritime data services, which are themselves subject to extensive competition.
Thus low-speed service packages bundled with GMDSS are pigeonholed into a particular pricing slot that would
unlikely afford Inmarsat much upward pricing flexibility. We also note that Iridium currently provides aeronautical
safety services and has the technical capability to provide GMDSS in the future should it be profitable to do so.
Farrar Study at 11.
111 Competitors to Inmarsat in the provision of maritime low-speed data service include Iridium, Globalstar, and
Orbcomm. See Inmarsat/Stratos Global October 9 Ex Parte Letter at 6-7. See also Farrar Study at 6-7.
Competitors to Inmarsat in the provision of aeronautical broadband services include Aircell and FSS service
providers such as Row 44. Aircell won the FCC's 800 MHz air-to-ground spectrum licensing auction (Auction 65)
in 2006 and has deployed an aeronautical broadband network across the United States. See Inmarsat Opposition at
13. See also Farrar Study at 11-12; Inmarsat/Stratos Global October 9 Ex Parte Letter at 8. Competitors to
Inmarsat in the provision of remote broadband land mobile services include FSS service providers such as Hughes,
General Dynamics, and ViaSat, as well as Thuraya (outside the United States). See Farrar Study at 12-15. See also
Inmarsat/Stratos Global October 9 Ex Parte Letter at 9-10. Competitors to Inmarsat in the provision of maritime
broadband services currently include C- and Ku-band FSS providers and Iridium (through its recently inaugurated
OpenPortTM service). See Inmarsat Opposition at 13. See also Inmarsat/Stratos Global October 9 Ex Parte Letter at
4-6; Farrar Study at 8-10.
112 Incumbents Iridium, SkyTerra, and Globalstar are moving forward with plans to launch next generation satellite
networks, all promising advanced mobile broadband offerings. See Inmarsat Opposition at 14. See also Farrar
Study
at 14. SkyTerra is preparing to launch several satellites "that are expected to among the largest and most
powerful commercial satellites ever built" and that will provide broadband coverage to aeronautical, land mobile,
and maritime customers over much of the Western hemisphere. See Telecommunications Industry Association, TIA
(continued....)
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indicates that Inmarsat has large revenue shares in the four service categories listed above, the data in the
study exclude FSS operators, which are major competitors to Inmarsat.113 The revenue shares also do not
reflect the likely impact in the near future of recently introduced services such as Iridium's OpenPortTM
and Aircell's aeronautical broadband offerings.
3.

Vertical Integration

41. Vizada also claims that competition between the distributors of Inmarsat's services
constrains Inmarsat's ability to exercise market power, and that post-acquisition Inmarsat will "leverage"
its market power downstream, eliminating this "intra-brand" competition and forcing up prices.114 Vizada
alleges that once Inmarsat's acquisition of Stratos Global is consummated and its agreements with other
distributors (including Vizada) expire in April 2009, Inmarsat will be in a position to harm Vizada and the
other distributors by unilaterally imposing major wholesale price increases and, by eliminating volume
discounts, effectively force up prices to consumers.115 The Applicants, on the other hand, argue that the
expiration of legacy distribution agreements in April 2009 will allow Inmarsat to replace the current
volume discounts that disproportionately favor the legacy distributors such as Vizada with volume
discounts available to all resellers of Inmarsat service, ultimately resulting in lower prices to
consumers.116 The Applicants also argue that Inmarsat's acquisition of Stratos Global will allow Inmarsat
to adopt a more efficient distribution structure, ultimately benefiting consumers.117 As we explain below,
having rejected Vizada's claim that Inmarsat has significant market power, we also reject Vizada's claim
that Inmarsat could leverage that market power downstream after Inmarsat's acquisition of Stratos Global.
42. As the Commission previously has recognized, vertical transactions may generate significant
efficiencies.118 A firm may choose to integrate vertically into its distribution chain in order to improve
efficiency, reduce distribution costs, including transaction costs, and possibly offer lower prices and a
more competitive service to consumers.119 Additionally, in this case, Inmarsat's acquisition of Stratos
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2008 Telecommunications Market Review and Forecast, 2008, p. 215 (2008 TIA Market Report). Iridium reportedly
will spend more than $2 billion developing its next-generation satellite constellation, Iridium NEXT, to provide
more bandwidth, enabling enhanced services to its customers. 2008 TIA Market Report, pp. 218-19. In addition,
new entrants ICO Global Communications ("ICO") and Terrestar Networks ("Terrestar") are developing mobile
broadband systems utilizing 40 megahertz of spectrum authorized by the FCC in the 2 GHz band to cover North
America. See 12th Annual CMRS Report at 269. See also 2008 TIA Market Report, p. 215-17. See also Inmarsat
Opposition at 15; Stratos Opposition at 8-9; Farrar Study at 14. ICO launched its first satellite on April 14, 2008
and plans to provide video entertainment services as well as terrestrial navigation and emergency services. See
ICO's website at http://www.ico.com/_about/. Terrestar plans to launch a mobile broadband network for terrestrial
use in late 2009. See Terrestar's website at http://www.terrestar.com/company/index.html.
113 See Farrar Study at 16 (Figure 5).
114 Vizada Petition, Summary at 1; Vizada Petition at 5-6, 9, 11, 16, 28-30; Vizada Reply, Summary at 2; Vizada
Reply at 16-17, 20, 36, 39, 44, 51-54, 57; Vizada December 8 Ex Parte Letter at 4, 16.
115 Vizada Petition at 11, 30-41. See also Vizada Reply at 11, 51-55.
116 Inmarsat Opposition at 6-7; Inmarsat/Stratos Global October 9 Ex Parte Letter at 10-14.
117 Narrative at 6-9; Inmarsat Opposition at 6-7, 26-28; Inmarsat/Stratos Global October 9 Ex Parte Letter at 10-14.
118 See AT&T-BellSouth Order, 22 FCC Rcd at 5767, 211; General Motors Corporation and Hughes Electronics
Corporations, Transferors, and the News Corporation, Transferee
, MB Docket No. 03-124, Memorandum Opinion
and Order, FCC 03-330, 19 FCC Rcd 473, 507-08, 70 (2004) (NewsCorp.- Hughes Order).
119 AT&T-BellSouth Order, 22 FCC Rcd at 5767, 211; NewsCorp-Hughes Order, 19 FCC Rcd at 507-08, 70. As
the Commission has observed in both the First and Second Annual Report & Analysis of Competitive Market
Conditions with Respect to Domestic & International Satellite Communications Services,
substantial fixed and sunk
(continued....)
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Global corrects the inefficient effect of the current distribution arrangement involving the purchase of
Inmarsat services by legacy distributors. Inmarsat's current distribution contracts do not permit Inmarsat
to sell directly to consumers, and require Inmarsat to use legacy distributors, such as Vizada and Stratos
Global. These arrangements grant the legacy distributors exclusive access to Inmarsat services. Such
exclusive access provides the distributors preferred discounts on Inmarsat services. Until these
distribution agreements are terminated, Inmarsat, which is required to use the legacy distributors, has not
been able to use or develop other, more competitive methods of offering service to consumers.120 Under
these circumstances, Inmarsat's acquisition of Stratos Global creates a new, pro-competitive alternative to
the legacy distribution agreements.
43. Vizada cites previous Orders in which the Commission has considered the effects of
previous vertical mergers and has placed conditions on vertical mergers where necessary to protect
competition.121 The cases cited by Vizada each involve vertical integration resulting in a firm with
market power in an upstream market able to engage in anticompetitive behavior in a downstream market,
either by raising the cost of inputs or by withholding a critical input.122 Vizada alleges that Inmarsat
similarly will use its market power to engage in anticompetitive behavior in the market for satellite
distribution, and that the Commission should therefore impose conditions designed to protect
competition.123 However, these cases are inapplicable here: Inmarsat lacks significant market power in
the upstream market and therefore cannot leverage any market power to increase prices in a downstream
market.
44. We recognize that the expiration of Inmarsat's distribution agreements with its legacy
distributors and its proposed acquisition of Stratos Global may change the relationship between Inmarsat
and Vizada, and that this change may occur to Vizada's detriment. Vizada and other distributors
currently receive volume discounts on Inmarsat products.124 While Vizada and other legacy distributors
are concerned about the potential loss for them of preferred status of distributors receiving lucrative
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costs are intrinsic to the satellite communications industry and explain the prevalence of certain business behaviors
regarding the pricing of services and the allocation of investment risk between satellite operators and customers. See
Annual Report and Analysis of Competitive Market Conditions with Respect to Domestic and International Satellite
Communications Services
, IB Docket No. 06-67, First Report, 22 FCC Rcd 5954 (2007) (First Satellite Report);
Second Annual Report and Analysis of Competitive Market Conditions with Respect to Domestic and International
Satellite Communications Services,
IB Docket No. 07-257, Second Report, FCC 08-247 (rel. Oct. 16, 2008).
Inmarsat's acquisition of Stratos Global may minimize or eliminate the need to negotiate numerous, complex
contracts with independent distributors; simplify the links in the chain between the supplier and the customer; and,
hence, reduce the transactions cost of delivering mobile satellite services from Inmarsat to its customers.
120 For example, Inmarsat has stated that it intends to revise its discount structure to include a larger number of
distributors. Inmarsat Opposition at 21 (citing Preliminary 2007 Inmarsat plc Earnings Presentation, March 6,
2008).
121 Vizada Petition to Deny at 18 (citing XM/Sirius Order; News Corporation and The DirecTVGroup, Inc.,
Transferors, and Liberty Media Corporation, Transferee
, MB Docket No. 07-18, 23 FCC Rcd 3265, 3285-332,
64-121 (Liberty Media-DirecTV Order); Applications for Consent to the Assignment and/or Transfer of Control of
Licenses from Adelphia Communications Corporation to Time Warner Cable, Inc. and Comcast Corp
oration, MB
Docket No. 05-192, Memorandum Opinion and Order, FCC 06-105, 21 FCC Rcd 8203, 8256-66, 115-91 (2006)
(Adelphia Order); see also Vizada Petition to Deny at 20, 30-43 (citing NewsCorp-Hughes Order).
122 See Liberty Media-DirecTV Order, 23 FCC Rcd at 3294-5, 66-71; Adelphia Order, 21 FCC Rcd at 8256,
116, NewsCorp.-Hughes Order, 19 FCC Rcd at 543, 147.
123 Vizada Petition to Deny at 29-42.
124 Inmarsat Opposition at 6-7; Vizada Petition to Deny at 36-37, n.50.
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discounts on Inmarsat products as a result of the new distribution arrangements, however, our focus is on
the effect of the transaction on competition and consumer welfare.125 The loss of these discounts may
harm some legacy distributors, including Vizada, but it does not follow that such a change in distribution
arrangements would harm consumers.
45. We find Inmarsat's stated reasons to integrate vertically with Stratos Global are plausible
and pro-competitive. As the Applicants state, Inmarsat today relies entirely on third parties to distribute
its mobile satellite services.126 According to Inmarsat, "[b]y acquiring control of Stratos [Global] and its
mature distribution network, Inmarsat will be able to immediately incorporate into its business the same
type of distribution channel that is available to every other satellite operator."127 The Applicants claim
that Inmarsat's acquisition of Stratos Global will decrease Inmarsat's distribution costs by increasing the
efficiency of its distribution network.128 As the Commission stated in the 2007 Stratos Order and we
affirm in this Order, Inmarsat's acquisition of Stratos Global could yield significant economic efficiencies
by streamlining the distribution of Inmarsat's services. 129 Inmarsat argues that the acquisition will
improve Inmarsat's distribution arrangements and lower its distribution costs, resulting in more
competition in the MSS industry and, ultimately, benefits to MSS consumers.130 The Applicants provide
several examples of efficiencies that would result from the acquisition, including the elimination of
redundant earth stations inherited from Inmarsat's legacy distribution arrangements, the ability of
Inmarsat to sell directly to retailers and end-users, and the extension of uniform discounts by Inmarsat to
all resellers in place of discount arrangements favoring legacy distributors.131
46. In its December 8 Ex Parte Letter, Vizada provides an extensive list of harms that it claims
Inmarsat could cause Vizada and other rivals post-acquisition. According to Vizada, Inmarsat could (1)
discriminate against rivals through its pricing of wholesale service inputs; (2) abuse information regarding
rivals' customers that it receives in its capacity as a wholesaler; (3) withhold timely information from
rivals regarding new product developments, etc.; (4) provide itself preferential access to space segment
resources or reduce service quality to rivals; (5) provide more favorable terms and conditions for


125 2007 Stratos Order, 22 FCC Rcd at 21355, 62.
126 Narrative at 6; Inmarsat/Stratos Global October 9 Ex Parte Letter at 10-14.
127 Narrative at 6-7.
128 Inmarsat Opposition at 17; Inmarsat/Stratos Global October 9 Ex Parte Letter at 10-14.
129 "[T]he vertical integration of Stratos Global with Inmarsat would alter the current wholesale business model,
whereby Inmarsat depends on entities, such as Stratos Global, to offer its retail satellite services to end-users. In that
case, Inmarsat would be able to offer both wholesale and retail satellite services to its customers, and realize the
recognized economic efficiencies that vertical integration can offer. Such a change in business model and business
organization is not intrinsically anticompetitive; in fact, it can be viewed as a response to, or consequence of,
increasing competition in the markets for various satellite services, including mobile satellite services. Such a
change in business organization could improve coordination between the deployment and assignment of satellite
capacity and the sales and marketing of retail satellite services." 2007 Stratos Order, 22 FCC Rcd at 21355, 62.
130 According to the Applicants, "...any potential harm to `middlemen' would not represent a harm to competition
itself. It would simply enhance the efficient provision of Inmarsat services by flattening the distribution structure"
so that it "matches the efficiencies that other satellite operators enjoy today." Inmarsat/Stratos Global October 9 Ex
Parte
Letter at 13.
131 According to the Applicants, "[T]he distribution of Inmarsat services has been inefficient since its inception. In
the 1980's and 1990's, approximately 40 land earth stations were built when two or three would have been sufficient
to serve the entire world." Inmarsat/Stratos Global October 9 Ex Parte Letter at 13. See also Id. at 10-14; Inmarsat
Opposition at 6-7, 25. See also Inmarsat/Stratos December 17 Ex Parte Letter at 8, n.35.
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commercial contracts to its wholly-owned distributor than to its rivals; and (6) deny rivals access to
important technical, regulatory or product developments.132
47. We are not persuaded, however, that we should deny the Application based on these
potential harms. According to the Applicants, Inmarsat already has entered into distribution agreements
with several distributors that include non-discrimination and confidentiality provisions, and Inmarsat has
offered Vizada the same terms, which would prevent Inmarsat from discriminating against Vizada or
other distributors.133 Furthermore, Vizada is free to establish distribution arrangements with any of
Inmarsat's competitors should it find such arrangements superior to those offered by Inmarsat.
48. Vizada claims that as part of intra-brand competition with Stratos Global, both Vizada and
Stratos Global offer customers rival account management software,134 and that customers may lose the
option to use the Vizada software post-merger. While Vizada's software may be useful to customers, a
potential change in the availability or variety of account management tools is a normal outcome of
competitive changes in distribution arrangements and should not pose a significant problem to MSS
customers.
4.

Conclusion to Analysis of Effect on Competition

49. As indicated above, Vizada has failed either to demonstrate that Inmarsat has significant
market power in the provision of international mobile satellite services or to show how Inmarsat's
acquisition of Stratos Global would increase its market power to the detriment of consumers.135
Accordingly, we conclude that Vizada has not shown that this transaction is likely to harm competition or
consumers. Rather, we have found that Inmarsat's services compete with other mobile satellite services
on a level playing field. As a result, we find that there is no need to single out Inmarsat's services as
requiring a special type of distribution arrangement to promote "intra-band" competition. Based on the
above considerations, we find it unlikely that Inmarsat's acquisition of Stratos Global will adversely
affect competition or harm consumers. On the contrary, we expect that by rationalizing the distribution of
Inmarsat services, the acquisition may make Inmarsat a more efficient competitor, with the end results
being lower prices, improved quality, and more widespread availability of international mobile satellite
services to consumers.
5.

Competition Conditions

50. Because we find that Inmarsat's acquisition of Stratos Global is unlikely to give Inmarsat the
ability or the incentive to engage in anticompetitive conduct with respect to its distributors, we reject
Vizada's argument that we need to attach competitive safeguards such as structural separation or non-
discrimination guarantees.136 Competition safeguards such as structural separation are something we have
only imposed where we have found a company to be dominant (i.e., to possess individual market power).
Requiring structural separation could increase Inmarsat's costs and minimize the efficiencies of vertical


132 Vizada December 8 Ex Parte Letter at 16-18. See also Vizada Petition to Deny at 30-42.
133 Inmarsat/Stratos Global December 17 Ex Parte Letter at 9.
134 Vizada Petition at 29, n.35, 32; Vizada Reply at 2, 15-16, 22. But see Inmarsat Opposition at 25, n.70 (arguing
that the software is not relevant to consumers because it is merely a tool to allow resellers to which Vizada
wholesales to perform billing and activation-related activities, and is not unique to Vizada); see also
Inmarsat/Stratos Global December 17 Ex Parte Letter at 10, n.4.
135 With Inmarsat lacking market power over the provision of mobile satellite services, the vertical merger of
Inmarsat and Stratos Global, which is an independent distributor that itself has no market power, is not likely to
create market power.
136 Vizada Petition at 43-4.
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integration.137 We would entertain the imposition of structural separation only upon a clear showing that
Inmarsat is dominant and that separation is the only way to control that dominance, and Vizada failed to
do so.
51. Similarly, we decline to attach specific non-discrimination safeguards or controls on
Inmarsat's use of Vizada's proprietary information. The proprietary information of Vizada and other
distributors is currently protected by confidentiality safeguards in Inmarsat's contracts with those
distributors, and Vizada has remedies under contract law should Inmarsat fail to adhere to its contractual
confidentiality requirements. Inmarsat has said that it values Vizada's expertise in providing satellite
services and its relations with important customers and that it intends to continue to use Vizada to
distribute some of its satellite services.138 Were Inmarsat to discriminate against Vizada post-acquisition,
it might lose the benefit of Vizada's expertise, thereby harming its ability to deliver service to end users.
In fact, Inmarsat states that, because it has an interest in maintaining a vibrant and effective network of
distributors, confidentiality protections will be part of the new contracts it is negotiating with its
distributors.139 Inmarsat states that it has already entered into new distribution contracts with several of
its distributors that include non-discrimination and confidentiality provisions and has offered the same
terms to Vizada.140 Vizada confirms that Inmarsat has indeed offered it the same non-discrimination and
confidentiality terms as Inmarsat has offered the other distributors.141 However, as we noted above,
should Vizada find Inmarsat's confidentiality protections to be inadequate, Vizada is free to deal with any
of Inmarsat's competitors that will give it more beneficial distribution arrangements. Therefore, we see
no need to impose on Inmarsat special provisions regarding the proprietary information it receives from
Vizada.

E.

Potential Public Interest Benefits

52. The Commission applies a "sliding scale approach" to evaluating public interest benefit
claims.142 Under this sliding scale approach, where potential harms appear "both substantial and likely,
the Applicants' demonstration of claimed benefits also must reveal a higher degree of magnitude and
likelihood than we would otherwise demand."143 On the other hand, where potential harms appear to be
less likely or less substantial, as in this case, we will accept a lesser showing to approve the transaction.144
As the Commission has found before, because we do not find substantial public interest harms with this


137 Inmarsat Opposition at 23, 27.
138 Id. at 28.
139 Inmarsat Opposition at 28-9.
140 Inmarsat/Stratos Global December 17 Ex Parte Letter at 9.
141 Vizada December 8 Ex Parte Letter at 1.
142 XM-Sirius Order, 23 FCC Rcd at 12384 76; Verizon Wireless-RCC Order, 22 FCC Rcd at 12506, 95; AT&T-
Dobson Order,
22 FCC Rcd at 20332, 77; AT&T-BellSouth Order, 22 FCC Rcd at 5671, 203; ALLTEL-Midwest
Wireless Order
, 21 FCC Rcd at 11565, 109; ALLTEL-Western Wireless Order, 20 FCC Rcd at 13102, 137;
Cingular-AT&T Wireless Order, 19 FCC Rcd at 21600, 206.
143 EchoStar/DirecTV Order, 17 FCC Rcd at 20631, 192 (quoting SBC/Ameritech Order, 14 FCC Rcd at 14825,
256); cf. DOJ/FTC Guidelines 4 ("The greater the potential adverse competitive effect of a merger . . . the greater
must be cognizable efficiencies in order for the Agency to conclude that the merger will not have an anticompetitive
effect in the relevant market. When the potential adverse competitive effect of a merger is likely to be particularly
large, extraordinarily great cognizable efficiencies would be necessary to prevent the merger from being
anticompetitive.").
144 Verizon/MCI Order, 20 FCC Rcd at 18531, 196; SBC/AT&T Order, 20 FCC Rcd at 18385, 185.
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proposed transaction, we find the benefits that are likely to result from the transfer of control are
sufficient for us to find that the transaction will serve the public interest.145
53. We find Inmarsat's acquisition of Stratos Global is likely to give rise to public interest
benefits. We believe that the vertical integration, such as is proposed here, can make Inmarsat's provision
of its satellite services more efficient by streamlining the process by which its services are brought to
market. As described above, we anticipate such efficiencies as the elimination of transactions costs that
arise from distributing through an unaffiliated distributor; the elimination of redundant earth stations; the
ability of Inmarsat to sell directly to resellers and end-users; and the extension of uniform discounts by
Inmarsat to all resellers in place of discount arrangements favoring legacy distributors. The Commission
already recognized these benefits in authorizing the transfer of Stratos Global to the Trust, where it said
that Inmarsat's potential acquisition of Stratos Global would allow Inmarsat "to offer both wholesale and
retail satellite services to its customers and realize the recognized economic efficiencies that vertical
integration can offer."146 The Commission also found that vertical integration could "improve
coordination between the deployment and assignment of satellite capacity and the sales and marketing of
retail satellite services."147 We see nothing in the record now before us that would require us to change
those views. Furthermore, as we found above, we do not believe that the transaction will harm
competition or the public interest in the provision of Inmarsat satellite services.148
54. We note that, even were we to deny Inmarsat's request to acquire Stratos Global, Inmarsat
would be free to integrate vertically by creating its own affiliated distributor of its satellite services after
the restrictions in its contracts expire on April 14, 2009. Inmarsat's proposal to acquire an existing
distributor, rather than creating its own distributor affiliate, simply allows it to accelerate its ability to
provide end-user service. The current restriction is unique to Inmarsat and is a legacy of its prior status as
an IGO forbidden to compete with its owners.149 As Applicants note, all other providers of satellite
services currently have the ability to distribute their own satellite services.150 Authorizing Inmarsat's
acquisition of Stratos Global will merely put Inmarsat on the same footing as its competitors. Applicants
assert that Inmarsat "intends to integrate Stratos [Global] into the Inmarsat family of companies, while
continuing to utilize Inmarsat's existing network of third party distributors," thereby "facilitat[ing]
Inmarsat's ability to compete with all other satellite operators, using all of the same methods of
distribution [those operators] currently employ."151 If true, such a result should enhance the existing


145 Application of PacifiCorp Holdings, Inc. and Century Telephone Enterprises, Inc. for Consent to Transfer
Control of Pacific Telecom, Inc., a Subsidiary of PacifiCorp Holdings, Inc.
, Report No. LB-97-49, Memorandum
Opinion and Order, 13 FCC Rcd 8891, 8893-84, 3 (WTB 1997) (finding that the public interest standard was met
even though the Applicants had not established the existence of substantial pro-competitive efficiency benefits to
consumers).
146 2007 Stratos Order, 22 FCC Rcd at 21355, 62.
147 Id.
148 See Section III.D.5, supra.
149 As noted supra 7, the INMARSAT IGO did not distribute its satellite services to end users, relying instead on
the Signatories for that function. When INMARSAT privatized in 1999, the former INMARSAT Signatories, who
owned more than 95 percent Inmarsat, retained their status as sole distributors of Inmarsat services for five years. In
2003, when Inmarsat decided to become a publicly traded company, its offer of stock to non-Signatory stockholders
had the effect of diluting the stock holdings of those Signatories. The former Signatories conditioned their consent
to the conversion upon Inmarsat's agreeing to extend their special distributor status for an additional five years, until
April 14, 2009. Inmarsat Opposition at 4-5.
150 Narrative at 6-7.
151 Id. at 9.
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competition in the satellite industry. Accordingly, we find that Inmarsat's acquisition of Stratos Global
will provide public-interest benefits. 152

F.

Section 310 Foreign Ownership Review

55. Applicants request a declaratory ruling under section 310(b)(4) of the Act that it would serve
the public interest to allow up to 100 percent indirect foreign ownership of Stratos Offshore and Stratos
Communications, subsidiaries of Stratos Global that hold Title III common carrier licenses.153 In the
2007 Stratos Order, the Commission required Inmarsat, should Inmarsat Finance decide to exercise its
Option to acquire the stock of CIP UK (and, thereby, indirectly acquire control of Stratos Global), to seek
a declaratory ruling under section 310(b)(4) of the Act to permit indirect foreign ownership by Inmarsat
and its shareholders.154 As explained above, Inmarsat Finance has decided to exercise its Option and
intends to consummate the proposed transaction on or shortly after April 15, 2009.155
56. Stratos Offshore and Stratos Communications hold common carrier earth station and terrestrial
wireless licenses.156 We therefore examine the foreign ownership interests that will be held indirectly in
Stratos Offshore and Stratos Communications through their controlling U.S. parent company, Stratos
Holdings, Inc. (Stratos Holdings) pursuant to the Commission's public interest analysis under section
310(b)(4) of the Act and the Commission's foreign ownership policies established in the Foreign
Participation Order
.157 As part of that analysis, we consider any national security, law enforcement,
foreign policy, or trade policy concerns raised by the foreign investment.158 Relying on Commission
precedent, we find that the proposed transfer of control does not raise any issues under sections 310(a) or


152 In reaching this conclusion, we reject Vizada's request that we require Inmarsat to provide copies of (i) all
documents discussing its proposed acquisition of Stratos Global, and (ii) all other documents produced by or for
Inmarsat since June 2006 discussing competition, market shares, and competitive entry and expansion of other
operators in the MSS industry. Vizada December 8 Ex Parte at 2.
153 47 U.S.C. 310(b)(4). Petition for Declaratory Ruling at 1, 2. See File No. ISP-PDR-20080618-00013.
154 2007 Stratos Order, 22 FCC Rcd at 21370-71, 101-102. The 2007 Stratos Order approved, inter alia, up to
100 percent indirect foreign equitable ownership of Stratos Offshore and Stratos Communications by Inmarsat,
Inmarsat Finance, CIP UK and CIP Canada as part of the transfer of control of the domestic and international
section 214 and Title III licenses held by subsidiaries of Stratos Global from Stratos Global to the Trust. Id.
155 See supra Section II.B.
156 Petition for Declaratory Ruling at 1.
157 47 U.S.C. 310(b)(4); Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, IB
Docket No. 97-142, Report and Order and Order on Reconsideration, FCC 97-398, 12 FCC Rcd 23891 (1997)
("Foreign Participation Order"), Order on Reconsideration, 15 FCC Rcd 18158 (2000). Section 310(b)(4) governs
only common carrier, broadcast, aeronautical en route and aeronautical fixed radio licenses. Therefore, we do not
consider specifically in our discussion here the proposed transfer of the private radio licenses held by Stratos
Offshore and Stratos Communications. Our findings with respect to competitive effects, see supra Section III.D.
our section 310(b)(4) public interest determination for the common carrier licenses, see infra Section III.F. and
Executive Branch resolution of any national security, law enforcement and public safety concerns, see infra Section
III.J., collectively suffice to resolve any public interest implications related to foreign ownership, outside our review
under section 310(b)(4), to the extent there are any, for the private radio licenses.
158 The Commission considers national security, law enforcement, foreign policy and trade policy concerns when
analyzing foreign investment pursuant to sections 310(b)(4) and 310(d). Foreign Participation Order, 12 FCC Rcd
at 23918-21, 59-66. See also infra Section III.J. (National Security, Law Enforcement and Public Safety
Concerns).
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310(b)(1)-(3) of the Act.159 Our analysis focuses on issues raised under section 310(b)(4). Based on the
record before us, we conclude that, subject to certain conditions, it would not serve the public interest to
withhold consent to the proposed transaction because of the foreign equity and voting interests that will
be held indirectly in Stratos Offshore and Stratos Communications.
1.

Legal Standard for Indirect Foreign Ownership of Radio Licensees

57. Section 310(b)(4) of the Act establishes a 25 percent benchmark for investment by foreign
individuals, corporations, and governments in U.S.-organized entities that control U.S. common carrier
radio licensees. This section also grants the Commission discretion to allow higher levels of foreign
ownership if it determines that such ownership is not inconsistent with the public interest.160 The
presence of aggregated alien equity or voting interests in a common carrier licensee's U.S. parent in
excess of 25 percent triggers the applicability of section 310(b)(4)'s statutory benchmark.161 Once the
benchmark is triggered, section 310(b)(4) directs the Commission to determine whether the "public
interest will be served by the refusal or revocation of such license."162
58. In the Foreign Participation Order, the Commission concluded that the public interest would
be served by permitting greater investment by individuals or entities from World Trade Organization
(WTO) Member countries in U.S. common carrier and aeronautical fixed and aeronautical en route radio


159 Section 310(a) prohibits any radio license from being "granted to or held by" a foreign government or its
representative. See 47 U.S.C. 310(a). In this case, no foreign government or its representative will hold any of the
radio licenses at issue. Section 310(b)(1)-(2) of the Communications Act prohibit common carrier, broadcast,
aeronautical fixed and aeronautical en route radio licenses from being "granted to or held by" aliens or their
representatives, or foreign corporations. See 47 U.S.C. 310(b)(1)-(2). We find that no alien, representative of an
alien or foreign corporation will hold any of the radio licenses at issue in this matter. Accordingly, we find that the
proposed transaction is not inconsistent with the foreign ownership provisions of sections 310(a) or 310(b)(1)-(2) of
the Communications Act. See Applications of VoiceStream Wireless Corp., Powertel, Inc., Transferors, and
Deutsche Telekom, Transferee
, IB Docket No. 00-187, Memorandum Opinion and Order, 16 FCC Rcd 9779, 9804-
09, 38-48 (2001). Additionally, because the foreign investment in Stratos Offshore and Stratos Communications
will be held through a controlling U.S. parent, Stratos Holdings, the proposed transaction does not trigger section
310(b)(3) of the Communications Act, which places a 20% limit on alien, foreign corporate or foreign government
ownership of entities that themselves hold common carrier, broadcast, aeronautical fixed or aeronautical en route
Title III licenses. Compare 47 U.S.C. 310(b)(3) with 47 U.S.C. 310(b)(4); Request for Declaratory Ruling
Concerning the Citizenship Requirements of Section 310(b)(3) and (4) of the Communications Act of 1934, as
amended
, Declaratory Ruling, 103 FCC 2d 511, 520-22, 16-20 (1985) (Wilner & Scheiner I), reconsidered in
part
, 1 FCC Rcd 12 (1986); see also Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantis
Holdings LLC For Consent to Transfer Control of Licenses, Authorizations, and Spectrum Manager and De Facto
Transfer Leasing Arrangements and Petition for Declaratory Ruling that the Transaction is Consistent with Section
310(b)(4) of the Communications Act,
WT Docket No. 08-95, Memorandum Opinion and Order and Declaratory
Ruling, FCC 08-258 at 231 n.798 (rel. Nov. 10, 2008).
160 47 U.S.C. 310(b)(4). The calculation of foreign ownership interests under section 310(b)(4) is a two-pronged
analysis in which the Commission examines separately the equity interests and the voting interests in the licensee's
direct or indirect parent. See BBC License Subsidiary L.P., Memorandum Opinion and Order, 10 FCC Rcd 10968,
10973, 22 (1995) (BBC License Subsidiary). The Commission calculates the equity interest of each foreign
investor in the parent and then aggregates these interests to determine whether the sum of the foreign equity interests
exceeds the statutory benchmark. Similarly, the Commission calculates the voting interest of each foreign investor
in the parent and aggregates these voting interests. Id. at 10972, 20, 10973-74, 22-25.
161 See id. at 10973-74, 25.
162 47 U.S.C. 310(b)(4).
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licensees.163 Therefore, with respect to indirect foreign investment from WTO Members, the Commission
adopted a rebuttable presumption that such investment generally raises no competitive concerns.164 In
evaluating an applicant's request for approval of foreign ownership interests under section 310(b)(4), the
Commission uses a "principal place of business" test to determine the nationality or "home market" of
foreign investors.165
59. In light of Commission policies adopted in the Foreign Participation Order, we begin our
evaluation of the indirect foreign ownership of Stratos Offshore and Stratos Communications under
section 310(b)(4) by calculating the foreign equity and voting interests that will be held in their U.S.
parent, Stratos Holdings, upon consummation of the proposed transaction. We then determine whether
these foreign interests properly are ascribed to individuals or entities that are citizens of, or have their
principal places of business in, WTO Member countries.
60. In calculating alien equity interests in a parent company, the Commission uses a multiplier to
dilute the percentage of each investor's equity interest in the parent company when those interests are
held through intervening companies. The multiplier is applied to each link in the vertical ownership
chain, regardless of whether any particular link in the chain represents a controlling interest in the
company positioned in the next lower tier.166 By contrast, in calculating alien voting interests in a parent
company, the multiplier is not applied to any link in the vertical ownership chain that constitutes a
controlling interest in the company positioned in the next lower tier.167 When evaluating foreign voting
interests in the U.S. parent company of a common carrier licensee, it is possible that multiple investors
will be treated as holding the same voting interest in a U.S. parent company where the investment is held
through multiple intervening holding companies. Our purpose in identifying the citizenship of the
specific individuals or entities that hold these interests is not to increase the aggregate level of foreign
investment, but rather to determine whether any particular interest that a foreign investor proposes to
acquire raises potential risks to competition or other public interest concerns, such as national security or
law enforcement concerns.168


163 Foreign Participation Order, 12 FCC Rcd at 23896, 9, 23913, 50, 23940, 111-112. In evaluating an
applicant's request for approval of foreign ownership interests under section 310(b)(4), the Commission uses a
"principal place of business" test to determine the nationality or "home market" of foreign investors. See id., at
23941, 116 (citing Market Entry and Regulation of Foreign-Affiliated Entities, Report and Order, 11 FCC Rcd
3873, 3951, 207 (1995) (Foreign Carrier Entry Order)).
164 Foreign Participation Order, 12 FCC Rcd at 23913, 50 and 23940, 111-112. The Commission stated, in the
Foreign Participation Order, that it will deny an application if it finds that more than 25 percent of the ownership of
an entity that controls a common carrier radio licensee is attributable to parties whose principal place(s) of business
are in non-WTO Member countries that do not offer effective competitive opportunities to U.S. investors in the
particular service sector in which the applicant seeks to compete in the U.S. market, unless other public interest
considerations outweigh that finding. See id. at 23946, 131.
165 To determine a foreign entity's home market for purposes of the public interest determination under section
310(b)(4), the Commission will identify and balance the following factors: (1) the country of a foreign entity's
incorporation, organization or charter, (2) the nationality of all investment principals, officers, and directors, (3) the
country in which the world headquarters is located, (4) the country in which the majority of the tangible property,
including production, transmission, billing, information, and control facilities, is located, and (5) the country from
which the foreign entity derives the greatest sales and revenues from its operations. Foreign Participation Order, 12
FCC Rcd at 23941, 116 (citing Foreign Carrier Entry Order, 11 FCC Rcd at 3951, 207).
166 See BBC License Subsidiary, 10 FCC Rcd at 10973-74, 24-25.
167 See id. at 10973, 23; see also Wilner & Scheiner I, 103 FCC 2d at 522, 19.
168 See Foreign Participation Order, 12 FCC Rcd at 23940-41, 111-15.
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2.

Attribution of Foreign Ownership Interests

61. As explained in Section II.B., under the terms of the proposed transaction, CIP Canada, a
Canadian corporation, will hold after consummation of the proposed transaction 100 percent of the shares
of Stratos Global. Stratos Global will continue to wholly own Stratos Offshore and Stratos
Communications through Stratos Global's direct and indirect wholly-owned subsidiaries, Stratos Wireless
and Stratos Holdings, respectively. Stratos Global and Stratos Wireless are both organized under the laws
of Canada, while Stratos Holdings is organized in the United States.
62. CIP Canada is wholly owned by CIP UK, which will become a wholly-owned subsidiary of
Inmarsat Finance, itself wholly owned by Inmarsat. CIP UK, Inmarsat Finance and Inmarsat are
companies formed under the laws of England and Wales. Applicants further state that each of the entities
in the organizational structure between Stratos Offshore and Stratos Communications and up to and
including Inmarsat will hold 100 percent of the equity and voting interests of the entity below it.
63. Consistent with the Commission's foreign ownership policies and precedent discussed above,
we examine below the foreign equity and voting interests that will be held, directly or indirectly, in
Stratos Holdings based on the information and representations submitted by the Applicants. First, we
calculate that, upon closing of the proposed transaction, Stratos Wireless and its direct parent, Stratos
Global, will continue to hold, directly and indirectly, 100 percent of the equity and voting interests in
Stratos Holdings. Based on the information in the record, we find that Stratos Wireless and Stratos
Global have their principal places of business in the United States or Canada, a WTO Member country.169
64. We next calculate the indirect foreign equity and voting interests that will be held in Stratos
Holdings by CIP Canada and its direct parent, CIP UK. We attribute individually to CIP Canada and to
CIP UK, a 100 percent indirect equity and voting interest in Stratos Holdings. Based on the information
in the record and the totality of the circumstances,170 we find that CIP Canada and CIP UK principally
conduct business in WTO Member countries, specifically, the United Kingdom, Canada, and/or the
United States.171
65. We analyze next the indirect foreign equity and voting interests that will be held in Stratos
Holdings by and through Inmarsat Finance. We attribute individually to Inmarsat Finance and to its
direct parent, Inmarsat, a 100 percent indirect equity and voting interest in Stratos Holdings. We find,


169 Stratos Wireless's officers and directors are Canadian citizens; its world headquarters is in Canada, where the
majority of its tangible property is located; and it derives the greatest amount of its sales and revenues from its
operations in Canada. Petition for Declaratory Ruling at 5. Stratos Global's current officers and directors are U.S.
or Canadian citizens; its world headquarters is in the United States; and as a holding company, it has no material
tangible property of its own, nor does it have sales or revenues of its own. Id.
170 See Foreign Carrier Entry Order, 11 FCC Rcd at 3951-2, 207 ("If all five of [the] factors indicate that the same
country should be considered to be the entity's home market, it will be presumed to be so, subject only to rebuttal on
clear and convincing evidence to the contrary. If these five factors yield inconsistent results, however,[the
Commission] will balance them, as well as any other information that is particularly relevant to the case, to
determine the appropriate home market under the totality of the circumstances.").
171 According to the Applicants, it is anticipated that at closing CIP Canada's officers and directors will be citizens
of the United States, Canada, the Netherlands, France or the United Kingdom; its world headquarters is in Canada;
and as a holding company, it does not have sales or revenues of its own, nor will it have material tangible property
of its own. Petition for Declaratory Ruling at 5-6. Applicants also state that it is anticipated that, at closing, CIP
UK's officers and directors will be citizens of the United States, Canada, the Netherlands, France or the United
Kingdom; its world headquarters is in the United Kingdom; and as a holding company, it has no material tangible
property of its own, nor does it have sales or revenues of its own. Petition for Declaratory Ruling at 6.
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based on the information in the record, that Inmarsat Finance and Inmarsat each has its principal place of
business in the United Kingdom, a WTO Member country.172
66. We also find, based on information Applicants submitted for the record, that citizens of, or
entities that principally conduct business in, the United States and other WTO Member countries hold at
least 75 percent of the equity and voting interests in Inmarsat. In accordance with the UK Companies
Act, to which Inmarsat is subject, and at Inmarsat's request in the ordinary course of business,
JPMorganCazenove Limited (Cazenove) surveys Inmarsat shareholders that own 100,000 or more
shares.173 Cazenove investigates shareholdings in Inmarsat to identify, where possible, the underlying
beneficial ownership of Inmarsat shares.174 Applicants state that, in accordance with the UK Companies
Act, "this investigation typically involves writing to the named shareholder requesting that it provide the
relevant information relating to the underlying ownership."175 Cazenove also takes steps to determine the
country of "domicile" for Inmarsat's shareholders and any third parties that manage those shareholdings.
According to Applicants, in determining the "domicile" of an entity, Cazenove "conducts research to look
beyond the street address associated with the shares. Among other things, Cazenove looks to available
information such as: investment purpose, country of organization, location of headquarters, and country
from which the funds being managed were contributed."176 We find that the information Inmarsat has
relied on to establish a "domicile" for the beneficial owners of its shares provides a reasonable basis for
identifying a principal place of business for these shareholders for purposes of our section 310(b)(4)
analysis in this case.
67. Cazenove most recently conducted a survey of Inmarsat shareholders in May 2008.177 Based
on the results of this survey, Applicants have categorized and calculated Inmarsat's equity and voting
interests as follows:178 (1) certain individuals in Inmarsat senior management who are citizens of the


172 Inmarsat Finance's officers and directors are citizens of the United States or the United Kingdom; its world
headquarters is in the United Kingdom; the majority of its tangible property is located in the United Kingdom; and
aside from income from its loan to CIP UK, Inmarsat Finance has no sales or revenues of its own. Petition for
Declaratory Ruling at 6. Inmarsat is a public limited company listed on the London Stock Exchange. Inmarsat's
officers and directors are citizens of Australia, the United States or the United Kingdom; its world headquarters is in
the United Kingdom; the majority of its tangible property is located in the United Kingdom; and it derives the
greatest amount of its sales and revenues from Canada. Petition for Declaratory Ruling at 6-7.
173 Petition for Declaratory Ruling at 7. Shareholdings of 100,000 or less each represent only approximately 0.02%
of the issued and outstanding shares of Inmarsat, which is considered de minimis for Cazenove's review purposes.
Cazenove also does not analyze holdings of private individuals. Certain members of Inmarsat's senior management,
however, own in the aggregate approximately 1.08% of Inmarsat shares and are citizens of the United States and
other WTO Member countries. Id. at 7-8. These "known" shareholdings are included in our foreign ownership
analysis. See infra 66-7.
174 See Petition for Declaratory Ruling at 8. According to the Applicants, in many instances, Inmarsat shares are
managed by a different entity than the beneficial owners, with the investment manager typically exercising the
voting power. Id. Applicants explain that, in certain cases in which the beneficial owner is known, either it is not
certain whether that beneficial owner relies on a manager, or Inmarsat does not have complete information about the
manager that might exercise voting power. In the aggregate, those circumstances exist for approximately 1% of
Inmarsat shares. Id. at 9 n.12.
175 Petition for Declaratory Ruling at 8.
176 Petition for Declaratory Ruling at 8.
177 Petition for Declaratory Ruling at 7.
178 All percentages listed are approximate. Petition for Declaratory Ruling at 9.
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United States or other WTO Member countries (1.08% equity and voting);179 (2) banks, insurance
companies, pension plans, and foundations/endowments organized in the United States and controlled by
U.S. entities or individuals (0.78% equity and 0.29% voting);180 (3) foreign banks, insurance companies,
pension plans, foundation/endowments organized in WTO Member countries or controlled by foreign
individuals or entities that have their principal place of business in a WTO Member country (13.89%
equity and 13.49% voting);181 (4) private equity funds and management investment companies (including
holdings by analogous entities such as hedge funds and unit trusts) that are organized in the United States
and have their principal place of business in the United States (13.60% equity and 33.19% voting);182 (5)
foreign private equity funds and management investment companies (including holdings by analogous
entities such as hedge funds and unit trusts) that are organized in WTO Member countries and have their


179 These individuals are citizens of Australia, the United Kingdom or the United States. Petition for Declaratory
Ruling at 10.
180 Shares of Inmarsat that fall under this category, where it is unknown whether the beneficial owner relies on a
manager that exercises voting power, comprise approximately 0.5% of the outstanding equity interest in Inmarsat.
The Applicants do not include these shareholdings in calculating known voting power. Petition for Declaratory
Ruling at 10, n.15.
181 Shares of Inmarsat that fall under this category, where it is unknown whether the beneficial owner relies on a
manager that exercises voting power, comprise approximately 0.4% of the outstanding equity interest in Inmarsat.
The Applicants do not include these shareholdings in calculating known voting power. Petition for Declaratory
Ruling at 10, n.16. Entities that fall under this category have their principal places of business in the following
countries, all of which are WTO Members: Channel Islands, Finland, France, Germany, Ireland, Italy, Luxembourg,
Norway, Scotland, Switzerland, or the United Kingdom. Shares of Inmarsat that fall under this category, where the
beneficial owners' shares are managed by an entity with its principal place of business in a different country,
comprise approximately 0.6% of the outstanding equity interests in Inmarsat. In each such case, the manager has its
principal place of business in one of the WTO Member countries listed in this footnote. Id. at 11, n.17. See Global
Crossing, Ltd. (Debtor-in-Possession), Transferor, and GC Acquisition Limited, Transferee
, IB Docket No. 02-286,
Order and Authorization, DA 03-3121, 18 FCC Rcd 20301, 20322, 25 n.99 (IB/WTB/WCB 2003) (citing Cable &
Wireless USA, Inc., Application for Authority to Operate as a Facilities-Based Carrier in Accordance with the
Provisions of Section 63.18(e)(4) of the Rules Between the United States and Bermuda
, Order, Authorization and
Certificate, DA 00-311, 15 FCC Rcd 3050, 3052, 7 (IB 2000) (relying on an opinion provided by the U.S.
Department of State that the 1994 Marrakesh Agreement Establishing the World Trade Organization applies to all
British territories)).
182 Of the 33.19% voting interests included in this category, Applicants ascribe 19.59% to Harbert Fund Advisors,
Inc. ("Harbert"), an Alabama corporation. Harbert serves as an investment advisor to an entity that serves as an
investment manager to Harbinger Capital Partners Master Fund I, Ltd. ("Harbinger Master Fund"), a fund organized
in the Cayman Islands that holds 19.59% of Inmarsat's shares. See Petition for Declaratory Ruling at 11, n.18 and
Narrative at Appendix B. Based on the record in this proceeding, we find that the voting rights associated with
Harbinger Master Fund's 19.59% equitable ownership interest in Inmarsat are properly treated in the first instance as
foreign (and, therefore, should be included instead in category 5, above) for purposes of our foreign ownership
calculations under section 310(b)(4) of the Act because Harbinger Master Fund is a foreign-organized company.
(We note that Applicants treat Harbinger Master Fund's 19.59% equity interest in Inmarsat as foreign and, therefore,
properly include the interest in category 5 above.) At the same time, we also find on the basis of publicly available
information that Harbinger Master Fund principally conducts business in WTO Member countries. See File No.
ISP-PDR-20070314-00004, Letter from Tom W. Davidson, Counsel for SkyTerra Communications, Inc. and Bruce
Jacobs, Counsel for Mobile Satellite Ventures Subsidiary LLC, to Marlene H. Dortch, Secretary, FCC, dated Oct. 5,
2007 at 1-4 and Attachment 1. This document may be viewed on the FCC web-site through the International Bureau
Filing System (IBFS) by searching for ISP-PDR-20070314-00004 and accessing the "Attachment Menu" from the
Document Viewing Area.
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principal place of business in WTO Member countries (53.81% equity and 33.94% voting);183 (6) other
foreign investors not covered above (7.1% equity and voting including 1.32% non-WTO).184
68. Thus, Applicants have accounted for approximately 90 percent of Inmarsat's equity and
approximately 89 percent of its voting interests. Of these amounts, Applicants ascribe approximately 89
percent of Inmarsat's equity and approximately 88 percent of its voting interests to the United States and
other WTO Member countries, and approximately 1.32 percent of its equity and voting interests to non-
WTO Member countries.185 We find the information submitted by Applicants sufficient to conclude that
at least 75 percent of Inmarsat's equity and voting interests are held by individuals that are citizens of, or
entities that have their principal places of business in, the United States or other WTO Member countries.
69. In summary, consistent with the Commission's foreign ownership case precedent, we calculate
that the following foreign-organized entities will hold, directly or indirectly, 100 percent of the equity and
voting interests in Stratos Holdings upon consummation of the proposed transaction: Stratos Wireless,
Stratos Global, CIP Canada, CIP UK, Inmarsat Finance and its parent Inmarsat. We find that these
entities have their principal places of business in Canada, the United Kingdom, or the United States, all of
which are WTO Member countries, and that at least 75 percent of Inmarsat's equity and voting interests
are properly ascribed to the United States and other WTO Member countries. Accordingly, we find that
Stratos Offshore and Stratos Communications are entitled to a rebuttable presumption that their indirect
foreign ownership resulting from the transaction will not pose a risk to competition in the U.S. market.
We find no evidence in the record that rebuts this presumption, and, as discussed in Section III.D.
above,186 we find no basis to conclude that the proposed transaction will harm competition. We also


183 As discussed supra note 182, we find that the voting rights associated with Harbinger Master Fund's 19.59%
equity interest in Inmarsat are properly treated in the first instance as foreign and therefore should be added to the
33.94% foreign voting interests included in this category (for a total 53.53% foreign voting interest). Shares of
Inmarsat that fall under this category, where it is unknown whether the beneficial owner relies on a manager that
exercises voting power, comprise approximately 0.28% of the outstanding equity interest in Inmarsat. The
Applicants do not include these shareholdings in calculating known voting power. Petition for Declaratory Ruling at
12, n.19. Entities that fall under this category have their principal places of business in the following countries, all
of which are WTO Members: Australia, France, Germany, Ireland, Isle of Man, Italy, Luxembourg, Norway,
Scotland, Switzerland, or the United Kingdom. Id. at 12; see also supra note 180. Shares of Inmarsat that fall under
this category, where the beneficial owners' shares are managed by an entity with its principal place of business in a
different country, comprise approximately 20.58% of the outstanding equity interests in Inmarsat. In each such
case, the manager has its principal place of business in the United States or one of the other WTO Member countries
listed in this footnote. Petition for Declaratory Ruling at 12, n.20.
184 These "other" foreign investors are either representatives of governments or privatized telecommunications
companies. Id. at 12. Of the approximately 7.1% equity and voting interests held in Inmarsat by these other foreign
investors, 5.78% are owned and voted by entities that have a principal place of business in the following WTO
Member countries: Bangladesh, China, Gabon, Italy, Japan and Vietnam. The remaining 1.32% equity and voting
interests represent non-WTO investment from Liberia (0.14%), Libyan Arab Mamahiriya (0.03%), and Russian
Federation (1.15%). These non-WTO investors are legacy shareholders that have not traded any of their original
shareholdings in Inmarsat as of the date the Application was filed. Id. at 12-13.
185 Applicants have not ascertained the citizenship or principal place of business of shareholders that hold the
balance of Inmarsat's equity (10%) and voting (11%) interests. For purposes of our foreign ownership calculations
and the declaratory ruling issued in this Order, we treat these unidentified interests as investment from non-WTO
Member countries. See Foreign Ownership Guidelines for FCC Common Carrier and Aeronautical Radio Licenses,
Public Notice, 19 FCC Rcd 22612, 22624 (Int. Bur., 2004), erratum, 21 FCC Rcd 6484 (Int. Bur. 2006), petition for
recon. pending.

186 See supra Section III.D.
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determine in Section III.J. below that the 2001 Executive Branch Agreement and the 2007 Amendment 1
to that Agreement address any national security, law enforcement, or public safety concerns.187
3.

Declaratory Ruling

70. Accordingly, this declaratory ruling permits the indirect foreign ownership of Stratos Offshore
and Stratos Communications by Stratos Wireless, Stratos Global, CIP Canada, CIP UK, Inmarsat
Finance, and Inmarsat (individually, up to and including 100 percent of the equity and voting interests)
and Inmarsat's shareholders (collectively, up to and including 100 percent of the equity and voting
interests). Stratos Offshore and Stratos Communications may accept up to and including an additional,
aggregate 25 percent indirect equity and/or voting interests from other foreign investors without seeking
prior Commission approval under section 310(b)(4) subject to the following conditions. First, Stratos
Offshore and Stratos Communications shall obtain prior Commission approval before their indirect equity
and/or voting interests from non-WTO Member countries exceeds 25 percent.188 Second, Stratos Global
and Stratos Communications shall obtain prior approval before any foreign individual or entity, with the
exception of those named above, acquires an indirect equity and/or voting interest in excess of 25 percent.
71. We emphasize that, as Commission licensees, Stratos Offshore and Stratos Communications
have an affirmative duty to monitor their foreign equity and voting interests, calculate these interests
consistent with the attribution principles enunciated by the Commission, and otherwise ensure continuing
compliance with the provisions of section 310(b) of the Act.189

G.

International Dominant Carrier Regulation

72. Applicants state that the Stratos Licensees, which are authorized to provide U.S.-international
telecommunications services, will remain affiliated with six foreign carriers after the proposed
transaction: (1) Stratos Wireless, a Canada-based provider of mobile satellite services; (2) Stratos Global,
Ltd., a Great Britain-based provider of mobile satellite services and very small aperture terminal (VSAT)
services; (3) Stratos Aeronautical Limited, a Great Britain-based provider of mobile satellite services; (4)
Xantic B.V. (Xantic), based in the Netherlands and authorized to provide mobile satellite services and
fixed satellite services in the Netherlands, Australia and Brazil; (5) Plenexis Holding GmbH (Plenexis),
based in Germany and authorized to provide VSAT services in Germany, Hungary, Russia, Sweden,
Turkey and the United Kingdom; and (6) Navarino Telecom SA and NTS Maritime, Ltd. (collectively,
Navarino), a provider of common carrier telecommunications services in Greece.190 Applicants state that


187 See infra Section III.J.
188 For purposes of this declaratory ruling, Stratos Offshore and Stratos Communications shall treat unascertained
equity or voting interests in Inmarsat as investment from non-WTO Member countries. See supra note 186
189 Verizon Communications, Inc., Transferor and America Mvil, S.A., de C.V., Transferee, Application for
Authority to Transfer Control of Telecomunicaciones de Puerto Rico, Inc. (TELPRI)
, WT Docket No. 06-113,
Memorandum Opinion and Order and Declaratory Ruling, FCC 07-43, 22 FCC Rcd 6195, 6225 68 (2007); Stratos
Global Corporation, Transferor, Robert M. Franklin, Transferee, Consolidated Application for Consent to Transfer
Control,
WC Docket No. 07-73, Memorandum Opinion and Order and Declaratory Ruling, FCC 07-213, 22 FCC
Rcd 21328, 21371, 102 (2007), petition for recon. pending; Mobile Satellite Ventures Subsidiary LLC and
SkyTerra Communications, Inc., Petition for Declaratory Ruling Under Section 310(b) of the Communications Act
1934, as Amended, File No. ISP-PDR-20070314-00004, Harbinger Capital Partners Master Fund I, Ltd. and
Harbinger Capital Partners Special Situations Fund, L.P., Petition for Expedited Action for Declaratory Ruling
Under Section 310(b) of the Communications Act of 1934, as Amended,
Order and Declaratory Ruling, FCC 08-77,
23 FCC Rcd 4436, 4443, 16 (2008).
190 International 214 Transfer Applications, ITC-T/C-20080618-00275 and -00276, Attachment 1, at 2-3.
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the proposed transaction will not result in the Stratos Licensees acquiring any additional foreign carrier
affiliations.191
73. According to the Application, the Stratos Licensees are authorized to provide service between
the United States and foreign countries in which their foreign carrier-affiliates are authorized to provide
telecommunications services. Applicants note that all of these countries are Members of the WTO and
assert that none of the Stratos Licensees' affiliates has a 50 percent or greater share of the markets for
international transport or local access in any country in which they operate.192
74. Applicants assert that, notwithstanding the above affiliations, the Stratos Licensees qualify for
a presumption of non-dominance under section 63.10(a)(3) because all of the foreign carrier affiliates lack
a 50 percent share of the local access and international transport markets in the relevant geographic
markets.193
75. We note that, in the 2007 Stratos Order, we found that the Stratos Licensees at that time
consisting of Stratos Communications, Stratos Mobile and Stratos Offshore should be classified under
section 63.10 of the Commission's rules as non-dominant.194 Applicants assert that nothing in this step of
the transaction would change that status.195 Vizada did not challenge that assertion. From the record
before us, we find that this step of the transaction will create no new foreign carrier affiliations and that
none of the foreign carriers with which the Stratos Licensees will remain affiliated has a 50 percent or
greater share of the international transport or local access markets in the countries in which they operate.
We therefore conclude that we should again classify the Stratos Licensees as non-dominant for regulatory
purposes under section 63.10 of the rules.

H.

Pending and Future Applications of Stratos Global

76. The Application notes that Stratos Global has a number of applications pending before the
Commission, some of which may be granted while the Application is being considered.196 Applicants
ask, therefore, that a grant of this Application include authority to transfer control of authorizations issued
to, and filings made by Stratos Global or its subsidiaries subsequent to the filing of the Application but
prior to consummation of the proposed transaction on or shortly after April 15, 2009 (the "Interim
Period"). We find that grant of the Applicants' request is consistent with Commission precedent.197
Accordingly, our grant of this Application shall include authority to transfer control of (1) any license or
authorization issued to Stratos Global or its subsidiaries during the Interim Period; (2) construction
permits held by such companies that mature into licenses after closing; and (3) applications filed by such
companies after the date of this Application and that are pending at the time of the consummation of the
proposed transaction.198 Pursuant to Section 1.65 of the rules, Applicants should amend any current


191 Id. at 3.
192 Id. at 4.
193 47 C.F.R. 63.10(a)(3) (2008).
194 2007 Stratos Order, 22 FCC Rcd at 21371, 106.
195 Narrative at 11.
196 Narrative at 12.
197 See ALLTEL-Midwest Wireless Order, 21 FCC Rcd at 11572, 133; General Motors Corporation and Hughes
Electronics Corporation, Transferors, and The News Corporation Limited, Transferee,
19 FCC Rcd 6309, 6311-12,
6 (IB/WTB/OET 2004).
198 See Narrative at 16.
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pending applications, as well as applications that were acted on between the filing date of this Application
and the consummation date, to reflect the transaction as approved by this Order and Declaratory
Ruling.199

I.

Transfer of Accounting Authority Certification

77. Along with the Transfer of Control Application, Stratos Mobile Networks, Inc. filed a Form 44
Application for Certification as an Accounting Authority200 under section 3.51 of the Commission's
rules.201 Section 3.51 requires that, "[w]hen an accounting authority is transferred, merged or sold, the
new entity must apply for certification in its own right . . . ."202 In its Form 44, Stratos Mobile notes that
it is currently certified as an Accounting Authority203 and states that "[b]y this application, Stratos Mobile
does not seek to assign or otherwise encumber its Accounting Authority, but rather it simply seeks to
update the ownership and control information for its Accounting Authority."204 Stratos Mobile further
states that the reason for the filing is that "control of Stratos Mobile's ultimate parent corporation, Stratos
Global Corporation, is changing from the Trustee Robert M. Franklin to Inmarsat plc" but that this
change "will have no impact on the [Applicant's] day-to-day Accounting Authority functions . . . ."205
Finally, Stratos Mobile states that "it will not be ceasing its operations as an Accounting Authority as a
result of the transaction and it hereby continues to accept and process all accounts . . . currently being
administered under AAIC Code US09."206
78. We see no evidence that a grant of the requested transfer would harm the public interest.
Vizada did not address the transfer of Stratos Mobile's existing Accounting Authority. Stratos Mobile
included in its Form 44 filing financial information that shows that it will continue to have the legal and
financial qualifications to serve as an Accounting Authority. We therefore grant the request to update
Stratos Mobile's ownership and control information.

J.

National Security, Law Enforcement and Public Safety Concerns

79. When analyzing a transfer of control or assignment application in which foreign investment is
involved, the Commission also considers any national security, law enforcement, foreign policy, or trade
policy concerns raised by the Executive Branch.207 In 2007, when the Commission authorized the transfer
of control of Stratos Global to the Trust, it conditioned the transfer upon Applicants' abiding by a
Network Security Agreement dated August 7, 2001, between various Stratos Global subsidiaries and the


199 47 C.F.R. 1.65 (2008).
200 Stratos Mobile Networks, Inc., Application for Certification as an Accounting Authority (Form 44), Attachment
A, at 1. (filed June 18, 2008) (Form 44) at 1.
201 47 C.F.R. 3.51 (2008).
202 Id. at 3.51(a).
203 Stratos Mobile holds Accounting Authority Identification Code (AAIC) US09. Narrative at 11.
204 Letter from Marc A. Paul, Steptoe & Johnson LLP, Counsel for Stratos Mobile Networks, Inc., to Accounting
Authority Certification Officer, FCC, dated June 13, 2008.
205 Form 44, Attachment A at 1.
206 Id.
207 Foreign Participation Order, 12 FCC Rcd at 23918, 58; Amendment of the Commission's Regulatory Policies
to Allow Non-U.S. Licensed Space Stations to Provide Domestic and International Satellite Service in the United
States,
IB Docket No. 96-111, FCC 97-399, 12 FCC Rcd 24094, 24170, 178 (1997).
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Agencies, as amended by Amendment No. 1, to that Agreement, dated August 14, 2007.208 The Agencies
state that Agreement, so amended, adequately addressed their national security and public safety
concerns.209
80. In the present matter, the DOJ/DHS Petition to Adopt Conditions states that the Agencies have
no objection to a grant of the transfer of control of Stratos Global from the Trust to Inmarsat, provided
that the Commission conditions its consent to the transfer of control on the agreement of Inmarsat and its
direct and indirect subsidiaries to abide by the commitments and undertakings set forth in the new
Network Security Agreement, dated September 23, 2008, between Inmarsat and Stratos Global and the
Executive Branch Agencies.210 The DOJ/DHS Petition notes that the Commission has already considered
and granted an earlier Petition to Adopt Conditions with respect to Stratos Global, filed on August 9,
2001, by DOJ and FBI, which sought to condition authorizations and licenses of Stratos Global upon
compliance with an agreement Stratos Global had entered into with DOJ, FBI and DHS to address those
agencies' national security, law enforcement and public safety concerns (2001 Agreement).211 The
Petition further notes that the Commission approved the above-referenced Amendment No. 1 to that
Agreement on December 7, 2007. After discussions with the Applicants, DOJ, FBI and DHS state that
they have obtained agreement from Inmarsat and its subsidiaries to the above-referenced Network
Security Agreement to supplement the August 7, 2001 Agreement and the September 23, 2007,
Amendment No. 1. DOJ, FBI and DHS state that the commitments in the 2001 Agreement, coupled with
the additional commitments in the 2007 Amendment 1, and the 2008 Network Security Agreement, will
continue to help ensure that the Agencies and other entities with responsibility for enforcing the law,
protecting the national security and preserving public safety can proceed appropriately to satisfy those
responsibilities.212 The Agencies, therefore, have asked the Commission to condition the grant of
authority to transfer control of Stratos Global upon Inmarsat's compliance with the September 23, 2008,
Network Security Agreement, and Stratos Global's continued compliance with the 2001 Agreement and
the 2007 Amendment No.1.213

K.

Deadline for Closing the Transaction

81. Under Section 1.948(d) of the Commission's rules, transfers and assignments that require prior
Commission approval must be consummated within 180 days of notice of public approval.214 Under
Section 25.119(f) of the Commission's rules, however, transfers of control involving earth station
applications must be completed within 60 days from the date of authorization.215 As we noted above,
Inmarsat states that it does not intend to close this transaction until after April 15, 2009, which falls
outside of the 60 day period established by Section 25.119(f) for purposes of consummating the earth
station license transfer.216 Inmarsat has requested the Commission consolidate the timeframe for closing
with respect to all of the Stratos Licensees' various authorization types, and provide the applicants up to


208 DOJ/DHS Petition to Adopt Conditions at 4.
209 Id.
210 Id. at 1-2.
211 Comsat Corporation d/b/a Comsat Mobile Communications, 16 FCC Rcd 21661, 21714, 122.
212 DOJ/DHS Petition at 4.
213 Id. at 4-5.
214 47 C.F.R. 1.948(d) (2008).
215 47 C.F.R. 25.119(f) (2008).
216 See supra 10.
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180 days from the date of consent to consummate the transaction.217 We will grant Inmarsat's request and
extend the deadline for filing notice of consummation pursuant to Section 25.119(f). We will therefore
require the Applicants to consummate this transaction within 180 days of notice of public approval.

IV.

CONCLUSION

82. Upon review of the Transfer of Control Application and the record in this proceeding, we
conclude that approval of this transaction is in the public interest. We find that the Application is not
premature and that we need not wait for the parties to negotiate new contracts to act on the transfer of
control. We further find that Vizada has not shown that Inmarsat has significant market power in the
international mobile satellite services market or that its acquisition of Stratos Global would give it
significant market power. Accordingly, we find no reason to impose competition conditions, such as
structural separation, on Inmarsat. Based on our analysis under section 310(b)(4) of the Act, we conclude
that it would not serve the public interest to prohibit the indirect foreign ownership of Stratos Global and
its subsidiaries, subject to Applicants' compliance with their commitments to DOJ, FBI and DHS set forth
in Appendix B.218

V.

ORDERING CLAUSES

83. Accordingly, having reviewed the Transfer of Control Application, the petitions, and the
record in this matter, and pursuant to authority delegated to the International Bureau in sections
0.261(a)(3) of the Commission's rules, 47 C.F.R. 0.261(a)(3), and pursuant to sections 4(i) and (j), 214,
309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), (j), 214, 309,
310(d), IT IS ORDERED that the Transfer of Control Application for consent to transfer control of the
licenses and authorizations from Robert M. Franklin to Inmarsat plc is GRANTED, to the extent specified
and as conditioned in this Memorandum Opinion and Order and Declaratory Ruling.
84. IT IS FURTHER ORDERED, pursuant to sections 4(i) and (j), and 310(b) of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), (j), 310(b), and section 1.2 of the
Commission's rules, 47 C.F.R. 1.2, that the Petition for Declaratory Ruling requested by the Applicants
is GRANTED to the extent set forth herein.
85. IT IS FURTHER ORDERED that this authorization and any licenses related to the
Application for Transfer of Control are subject to compliance with the provisions of the Agreement
attached hereto between Inmarsat on the one hand and the U.S. Department of Justice (DOJ) and the
Department of Homeland Security on the other, dated September 23, 2008, which Agreement is intended
to enhance the protection of U.S. national security, law enforcement, and public safety. Nothing in this
agreement is intended to limit any obligation imposed by U.S. Federal law or regulation.
86. IT IS FURTHER ORDERED that the ownership and control information associated with the
Accounting Authority certification of Stratos Mobile Networks, Inc., is updated to reflect the grant of the
Transfer of Control Application and the consequent transfer of Stratos Mobile Networks, Inc., from the
Trust to Inmarsat plc.
87. IT IS FURTHER ORDERED that the above grant shall include authority for Inmarsat plc to
acquire control of (1) any license or authorization issued to Stratos Global or its subsidiaries during the
Commission's consideration of the Transfer of Control Application or the period required for
consummation of the transaction following approval and issuance of this Order; (2) construction permits
held by such companies that mature into licenses after closing; and (3) applications filed by such


217 Application at 12, n.26.
218 See supra 79-80.
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companies after the date of the Transfer of Control Application and that are pending at the time of
consummation of the proposed transfer of control.
88. IT IS FURTHER ORDERED that, pursuant to sections 4(i) and (j), 309, and 310(d) of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), (j), 309, 310(d), the Petition to Deny
filed VIZADA SERVICES LLC ARE DENIED for the reasons stated herein.
89. IT IS FURTHER ORDERED that this Memorandum Opinion and Order and Declaratory
Ruling SHALL BE EFFECTIVE upon release. Petitions for reconsideration under section 1.106 of the
Commission's rules, 47 C.F.R. 1.106, may be filed within thirty days of the date of public notice of this
order.
90. IT IS FURTHER ORDERED that that the deadline for consummation of the transaction,
pursuant to 47 C.F.R. 25.119 (f) of the Commission's rules, IS EXTENDED, and that, within 180 days of
public notice of approval of the transaction, the applicants shall notify the Commission by letter of the
date of consummation and the file number of the applications involved in the transaction.
FEDERAL COMMUNICATIONS COMMISSION
Helen Domenici
Chief, International Bureau
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APPENDIX A

Authorizations and Licenses Included in the Transfer of Control Application

I.

INTERNATIONAL AUTHORIZATIONS

The following applications for consent to the transfer of control of international section 214
authorizations to Inmarsat plc have been assigned the file number listed below:

File No.

Authorization Holder

Authorization Number


ITC-T/C-20080618-00276
Stratos Holdings, Inc.

A.

International Facilities-Based and Resale Services Authorizations:

ITC-214-20000426-00773
(Associated with ITC-MOD-
2004-0624-00241)
ITC-214-19980828-00591
ITC-214-19980326-00205
ITC-214-19980121-00028
ITC-214-20010220-00657
ITC-MOD-20040624-00241
ITC-214-20050826-00351

B.

Mobile Network Authorizations:

ITC-214-19981214-00859
ITC-214-19970924-00580
ITC-214-19970804-00455
ITC-214-19970627-00356
ITC-214-19961003-00481
ITC-214-19980130-00053
ITC-214-19910301-00010*
(Formerly ITC-90-088)
ITC-214-19901030-00011*
(Formerly ITC-91-012)
ITC-214-19910615-00009*
(Formerly ITC-91-157)
ITC-214-19911206-00008*
(Formerly ITC-92-058)
ITC-214-19911206-00007*
(Formerly ITC-92-059)
ITC-214-19921026-00124*
(Formerly ITC-93-013)
ITC-214-19921026-00123*
(Formerly ITC-93-014)
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ITC-214-19910201-00255*
(Formerly ITC-93-141)
ITC-214-19931001-00254*
(Formerly ITC-93-142)
ITC-214-19930511-00253*
(Formerly ITC-93-188)
ITC-214-19950526-00034*
(Formerly ITC-95-359)
ITC-214-19951001-00033*
(Formerly ITC-95-565)
ITC-214-19951001-00032*
(Formerly ITC-95-569)
ITC-214-19960101-00012*
(Formerly ITC-96-041)
*
The above File Numbers for the section 214 authorizations marked with an * are new numbers
assigned under the IBFS system. The former number for each such authorization is shown below the new
number.

C.

Offshore Services Authorizations:

ITC-T/C-20080618-00275
Stratos Offshore Services Company
ITC-214-19991220-00815
ITC-214-19980914-00636

II.

DOMESTIC AUTHORIZATION

Applicants filed two applications for consent to transfer control of the domestic section 214
authority of Stratos Communications and Stratos Offshore from Robert Franklin, Trustee to Inmarsat.
The first is for Stratos Communications, Inc., an indirect subsidiary of Stratos Global, which provides
nationwide mobile satellite services where the originating and terminating points may both be in the
United States. The second is for Stratos Offshore Services Company, a Stratos Communications, Inc.
affiliate, which provides wireline services in the United States, primarily in the Gulf of Mexico region.

III.

SECTION 310(D) APPLICATIONS

A.

Part 25-Satellite Earth Station, VSAT, and Space Station Authorization
Applications

The following applications for consent to the assignment and transfer of control of satellite earth
station, VSAT, and space station authorizations from Robert Franklin (Trustee) to Inmarsat plc have been
assigned the file numbers listed below:

File No.

Licensee

Call Sign(s)

Mobile Earth Terminal Authorizations:

SES-T/C-20080618-00818
Stratos Communications, Inc.
E010050
E010049
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E010048
E010047
E000180
E050249

B.

Fixed Satellite Service (FSS) Authorizations:

SES-T/C-20080618-00821
Stratos Offshore Services Company
E010263
E070189

C.

Very Small Aperture Satellite (VSAT) Authorizations:

SES-T/C-20080618-00820
Stratos Offshore Services Company
E950149

Earth Station on Board Vessels (ESV) Authorizations:

SES-T/C-20080618-00819
Stratos Offshore Services Company
E980235
E070114

IV.

PART 90-WIRELESS LICENSES

The following application for consent to the transfer of wireless service licenses from Robert M.
Franklin (Trustee) to Inmarsat plc has been assigned the file number listed below:

File No.

Licensee

Lead Call Sign

0003453455
Stratos Offshore Services Company
KD41151

V.

APPLICATION FOR ASSIGNMENT OF ACCOUNTING AUTHORITY STATUS

Form Number

Licensee

Lead Call Sign

FCC 44
Stratos Mobile Networks, Inc.
US09
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APPENDIX B

EXHIBIT A

Network Security Agreement, dated September 23, 2008

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