NEWS Report No. IN 97-4 INTERNATIONAL ACTION March 3, 1997 FCC ANNOUNCES PLAN FOR SATELLITE DARS (IB Docket No. 95-91) Today the Federal Communications Commission announced a plan to license two providers of satellite digital audio radio service ("satellite DARS"), which plan to use satellites to provide continuous nationwide radio programming with compact disc quality sound. The Commission will conduct a closed auction among four pending applicants to resolve any mutual exclusivity for the two satellite DARS slots. Satellite DARS licensees will operate in the S-band, between 2320 and 2345 MHz, in spectrum adjacent to that which will be auctioned in April of this year for Wireless Communications Services (WCS). Licensees must complete detailed coordination with existing services in neighboring countries to prevent mutually unacceptable interference. The Commission today also issued auction, technical and service rules for Satellite DARS, including public interest requirements. Satellite DARS applicants will be required to supplement their applications within five days of the publication of the Report and Order in the Federal Register. The auction for Satellite DARS will be held on April 1, 1997. Chairman Hundt and Commissioner Ness issued separate statements indicating, inter alia, that they would have allowed new applicants to participate in the DARS auction. Action by the Commission, March 3, 1997, by Report and Order, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking (FCC 97-70). Chairman Hundt, Commissioners Quello and Chong with Commissioner Ness approving in part and concurring in part. Chairman Hundt and Commissioners Ness and Chong issuing separate statements. - FCC - News media contact: Meribeth McCarrick at (202) 418-0256 International Bureau contact: John Stern at (202) 418-0746 Wireless Telecommunications Bureau contact: Amy Zoslov at (202) 418-0639 Statement of Chairman Reed E. Hundt Establishment of Rules and Policies for the Digital Audio Radio Satellite Service, IB Docket No. 95-95, GEN Docket No. 90-357, RM No. 8610 The Commission today sets rules for licensing the digital audio radio service (DARS). With one exception, we are unanimous on the new rules. The Commission unanimously applies to DARS licensees the candidate-access rules of Sections 312 and 315 of the Communications Act and it puts DARS licensees on clear and explicit notice that the Commission may adopt additional public interest obligations, including the 4-7 percent educational set-aside that applies to Direct Broadcast Satellite operators. To my dismay, however, the Commission lacks a majority to allow any company that believes it can make a business of DARS to participate in the upcoming auction. The Commission is deadlocked two-to-two over whether the auction for two 12.5 MHz DARS licenses will be limited to the four companies that submitted applications five years ago. Because I do not want to delay the launch of DARS, I very reluctantly have voted to allow the item to move forward with that limitation. In the three and one-half years I have been at the FCC I have dissented three times. In each case I disagreed with a Commission decision to reject the possibility of assigning spectrum by open auction. For the reasons well described in the Spectrum Policy Paper issued last month, auctions are by far the best way to assign spectrum licenses. They are fast, fair and efficient, and they recover for the public fair value for the use of their property. On each past occasion, the Commission majority offered a demonstrably flawed rationale for its decision. For example, in the cellular unserved proceeding, the majority was of the view that an auction would be pointless because there was little or no valuable spectrum available. Based on a staff analysis, it is now clear that the Commission gave away licenses that could have been auctioned for approximately $22 million. In this proceeding the fundamental reasons for my disagreement with my colleagues are the same: I would prefer to assign spectrum licenses through an auction open to all. Closing the auction is the wrong result. In view of the amount of time that has passed since the window for applications closed in 1992, there is no guarantee that the four applicants are the companies that have or can develop the best plans for making DARS a success. If other companies value the spectrum more but are arbitrarily excluded from the auction, it is safe to predict that the auction winners will simply sell their licenses to those companies. We have, however, rightly rejected the idea that private auctions of the public's spectrum are a suitable replacement for public auctions. If companies other than the fortunate four are interested in becoming DARS providers, we should not exclude them from the auction. We could hold such an auction as early as May. New applicants would bring additional competition to the service, with all the associated benefits to consumers. The decision to keep the auction door closed may needlessly cost the public millions of dollars. This is not a criticism of the existing DARS applicants. They may well be the businesses that value the DARS spectrum the most. If so, however, there is no cost to opening the auction, except the cost to the public. Fortunately, the decision against reopening the application window is of no precedential value because it does not have the support of a majority of the Commission. In addition, the rationale of the decision of my two colleagues is limited to the unique circumstances of satellite licensing and, indeed, the unique circumstances of this service. March 3, 1997 Approving in Part, Concurring in Pa rt Statement of Commissioner Susan Ness Re: Digital Audio Radio Service The adoption today of this Report and Order for the rules governing a new, satellite-delivered digital audio radio (DARS) service enables the Commission finally to proceed to auction two nationwide licenses in the S-band. This completes the process begun at the 1992 World Administrative Radio Conference. There, together with industry, we successfully fought for this spectrum allocation for the United States, because the L-band, allocated world-wide for DARS, was unavailable for commercial use in this country. It is now high time that the DARS service succeed or fail in the marketplace. Opening the Auction to All Qualified Candidates The rules we adopt provide for the four existing applicants to compete at auction for the two licenses available. As I noted at the NPRM stage, I would have strongly preferred that we hold an open auction, where any potential bidder would compete for the two licenses. The four applications were filed several years ago, before we had allocated spectrum or adopted service rules governing its use. Others might now wish to compete in the auction to provide a different package of DARS services to consumers. They should be allowed to do so. But, because two of my colleagues firmly disagree on allowing all qualified applicants to bid for satellite DARS licenses, I reluctantly concur in the result for the sole reason that I do not wish to further delay the launch of DARS. Public Interest Obligations Throughout our proceedings, I have endeavored to ensure that the rules we adopt will maximize the unique public benefits of satellite DARS, yet minimize the potential for harm to locally-licensed, free, over-the-air AM and FM broadcast on which consumers rely for news and information. Each applicant has pledged to use the inherent ability of satellite to aggregate small audiences nationwide to address the special needs of under-served populations. We have allowed licensees a measure of flexibility to supplement their offerings with ancillary services, provided that the service generally is consistent with the international allocation for DARS satellite. Licensees will be subject to our Equal Employment Opportunity (EEO) and political broadcasting rules. Because licenses for this nascent service are being auctioned, I have declined at this time to take an over-regulatory approach and impose additional, explicit public interest requirements, such as a capacity set-aside. I prefer to give the competitive marketplace -- without government intervention -- a chance to provide programming that is in the public interest. However, applicants are on notice that the Commission may revisit this issue at a later time. Terrestrial Broadcasting As we pave the way for DARS service, I note that terrestrial broadcasters have not yet found a viable way to convert from analog to digital transmission. I believe that competition within the existing AM and FM terrestrial radio services would be enhanced by such a conversion. In 1990, when we initiated our proceeding on digital radio, we addressed both terrestrial and satellite services. If engineers working on in-band digital technologies cannot fashion an acceptable transmission system, we need to explore other options. While I prefer to use the existing bands, it remains to be seen how terrestrial radio broadcasters will get to a digital world if a satisfactory solution is not derived. March 3, 1997 SEPARATE STATEMENT OF COMMISSIONER RACHELLE B. CHONG Re: Amendment of the Commission's Rules with Regard to the Establishment and Regulation of New Digital Audio Radio Services, Gen. Doc. No. 90-357 It is with great pleasure that I support the Commission's decision to move forward with the auction and licensing of Satellite Digital Audio Radio Service ("DARS"). I believe that licensing this service will help to fulfill the mandate of Section 151 of the Communications Act of 1934 that this Commission make available a rapid, efficient, nation-wide communications service. As we have explained in the order, we anticipate that many benefits will flow from this new satellite radio service. Digital technology will produce better quality sound for listeners and make more efficient use of the spectrum. Moreover, satellite delivery of radio programming will provide service to areas that are unserved or underserved. In short, DARS will provide better service for the public. The public deserves the opportunity to receive this service. I write separately to clarify two aspects of this decision. First, with regard to public interest programming obligations for the eventual DARS licensees, my colleagues and I chose not to impose quantified programming obligations. In my view, such regulation would improperly place the heavy hand of government on the programming decisions of the DARS providers. While we have put the licensees on notice that the FCC could in the future decide to initiate a proceeding to consider imposing programming obligations, I wish to emphasize that such a proceeding is not imminent. I believe that the Commission should think long and hard before deciding to embark on such a highly regulatory course. At this time, we do not know which of the DARS applicants will win a license, nor do we know whether the service will be subscription or advertiser supported. Moreover, Congress has not directed the Commission to impose such obligations and I see no evidence of a compelling need to do so. Second, with regard to reopening of the application window before auctioning the two satellite DARS slots, I have voted to go forward immediately to auction among the four existing applicants. As we explain in the item, it would be inequitable to reopen the application process at this time. These applicants have been ready and willing to move forward for some time. They have expended considerable resources in developing this technology. The first of these applications was filed seven years ago. Our decision to allocate the spectrum for satellite DARS was more than two years ago. These applicants have been the victims of regulatory delay and that delay should not continue. In my view, reopening would not bring any benefit to consumers, but would only create new uncertainty and undermine the likelihood that this service will become a reality.