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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Federal Communications Commission DA 97- 1366 Before the Federal Communications Commission Washington, D.C. 20554 In re application of ) ) CONSTELLATION COMMUNICATIONS, INC. ) File Nos. 17-DSS-P-91(48) . ) CSS-91-013 ) 9-SAT-LA-95 ) 10-SAT-AMEND-95 ) 159-SAT-AMEND-96 For authority to construct, launch, and ) operate a low earth orbit Mobile Satellite ) System ) ORDER AND AUTHORIZATION Adopted: June 30, 1997 Released: July 1, 1997 By the Chief, International Bureau and the Chief, Office of Engineering and Technology: 1. With this order, we grant the application of Constellation Communications, Inc. for a license to construct, launch, and operate a satellite system pursuant to the rules governing the Above 1 GHz Mobile Satellite Service, more commonly known as the "Big LEO" service. 2. Constellation is a Delaware corporation. E-Systems, Inc. owns 30.7% of its voting stock, CTA Launch Services, Inc. owns 18.35%, and Bell Atlantic owns 8%. Ownership of the remaining voting stock is divided among 28 companies and individuals. 3. Constellation proposes to construct a 46-satellite system, which it refers to as "the ARIES satellite system." Eleven of the ARIES satellites will be placed in circular equatorial orbit at an altitude of 2000 kilometers, and the other 35 will be deployed, five per orbit, in seven circular inclined orbits, also at an altitude of 2000 kilometers. The system is designed to have a minimum capacity of more than 1,000 voice circuits per satellite, using code division multiple access ("CDMA") technology. 4. In accordance with the Big LEO service rules, Constellation proposes to use the 2483.5-2500 MHz band for transmission from the ARIES satellites to mobile terminals and plans to use the 1610-1621.35 MHz band for transmission to the satellites from mobile terminals within the United States. It also proposes to use 6825-7025 MHz for feeder-link transmission from the satellites to gateway earth stations and plans to use 5050-5250 MHz for feeder-link transmission in the opposite direction, from the gateway stations to the satellites. Discussion A. Financial Qualification 5. Constellation was one among six parties that applied in 1990 for authority to use the 1610-1626.5 MHz and 2483.5-2500 MHz bands for Mobile Satellite Service ("MSS"). Those spectrum bands were internationally allocated for MSS at the 1992 ITU World Administrative Radio Conference ("WRC"), and the FCC adopted a conforming domestic allocation in 1993. In October 1994, the Commission issued a Report and Order ("Big LEO Report and Order") promulgating technical, licensing, and operational rules for the Big LEO service, in which it concluded that five Big LEO systems -- one fewer than the number of applicants -- could be accommodated in the 1.6/2.4 GHz MSS bands. Because the band- sharing plan could not accommodate all of the pending applications and left little or no spectrum available for expansion of existing systems or the development of future MSS systems in the United States, the Commission concluded that it was necessary to ensure that the applicants that received licenses would be capable of providing service to the public. Accordingly, it adopted a strict financial qualification standard for Big LEO applicants. Applicants were required to demonstrate that they could meet the costs of building and launching all proposed system space stations and meet operating expenses for one year after the launch of the first satellite. More specifically, each applicant was required either to show that the value of its current assets and operating income in the most recent fiscal year exceeded the relevant costs, or show that it had obtained fully-negotiated, non-contingent financial commitments sufficient to cover those costs. 6. The Big LEO Report and Order established a two-tier processing rule. Applicants demonstrating financial qualification in amendments filed by November 16, 1994 would have first priority, but those unable to meet the requirement at that time would have until January 31, 1996 to comply. Five of the six Big LEO applicants, including Constellation, filed financial amendments on the first-tier deadline. (The sixth, AMSC, elected to withhold financial information pending the second-tier deadline.) In a series of decisions released on January 31, 1995, the International Bureau found three Big LEO applicants financially qualified based on information submitted in their November 1994 amendments and granted them licenses to construct, launch, and operate their proposed satellites. In other decisions issued on that date, the Bureau ruled that the financial information filed by Constellation and another applicant, Mobile Communications Holdings, Inc. ("MCHI"), was insufficient. The second-tier deadline was later postponed pending disposition of MCHI's application for Commission review of the Bureau's assessment of its initial financial showing and was ultimately reset to September 16, 1996. 7. Constellation and MCHI both filed additional financial amendments on September 16, 1996, but AMSC did not. Consequently, by letter dated January 31, 1997 the Bureau Chief dismissed AMSC's application. AMSC has not requested reconsideration of the dismissal or asked the Commission to review it. 8. The only new information in Constellation's September 1996 amendment was a revised schedule of estimated costs. Although it had previously represented that the costs of building, launching, and operating for one year would amount to $1.721 billion, Constellation asserted in the September 1996 amendment that the relevant costs would add up to only $1.15 billion. It explained that the previous estimate had included the projected costs of building and launching 8 in-orbit spares, but that it had eliminated those costs in calculating the revised estimate in light of the ruling in the Big LEO Report and Order that applicants need not demonstrate availability of funds for spare satellites. Constellation also asserted that the revised estimate reflected adjustments based on detailed cost proposals from vendors obtained during the past year. While maintaining that it had demonstrated that it was financially qualified, Constellation requested that if the Commission were to conclude otherwise it either grant a further opportunity to cure the perceived defects or waive the financial qualification requirement. 9. Constellation's amendment was placed on public notice on November 27, 1996, and the existing Big LEO licensees -- Motorola Satellite Communications, Inc., L/Q Licensee, Inc., and TRW Inc. -- filed petitions to deny. The petitioners contended that Constellation had not met the financial qualification standard and that there was no good reason for granting its alternative requests for a waiver or for a further chance to submit a curative showing. Constellation filed a Consolidated Opposition on January 23, 1997, which included copies of correspondence from investors. The petitioners filed replies on February 11, in which they maintained, again, that Constellation's application should be denied. 10. Assessment. Constellation has not submitted a current balance sheet, as required by Subsection 25.140(d)(1) of the FCC's rules. It chiefly relies on letters of support from Raytheon E-Systems, Inc. and Bell Atlantic, maintaining that both have agreed to fund the ARIES project and that each commitment is sufficient in itself to satisfy the financial qualification requirement. The most recent letter from Bell Atlantic, which is dated January 16, 1997, refers to a previous commitment letter dated November 16, 1994. The 1994 letter included, among other things, a proviso that "actual financial commitments would be subject to negotiation of satisfactory agreements; and our customary internal business approval procedures, including, if applicable, approval by the Board of Directors." The Bureau and the Commission held in their decisions concerning Constellation's initial financial showing that, as thus modified, the commitment in the 1994 letter was too tentative to be credited. As the 1997 letter merely reaffirms the earlier letter, without eliminating the material conditions noted in the previous decisions, we find, again, that Constellation has not shown that it has secured a reliable financial commitment from Bell Atlantic. 12. As evidence of a financial commitment from Raytheon E-Systems, Constellation has submitted a letter from that company's president, Dr. Terry W. Heil, dated January 22, 1997. The letter states that Raytheon E-Systems "reaffirms its intent to provide the necessary financial support for [Constellation's] LEO satellite project, subject to normal business reviews of market conditions and absent a material change of circumstances." The letter also includes the following statements: [W]e and CCI's other partners are working closely with [Constellation's] financial adviser, Bear, Stearns & Co., in developing a financial plan for [Constellation's] system implementation. It is our expectation that ... [Constellation's] funds for system implementation will be obtained from a combination of debt and equity provided from a variety of sources. Inability to implement the aforementioned capital plan for any reason, including financial institution demand for partner guarantee(s), shall be deemed to constitute a material change of circumstances. (Emphasis added.) In other words, Raytheon E-Systems is willing to provide financial support only if Constellation first secures some unspecified amount of funding from other sources, according to a financial plan of an undisclosed nature that, at last report, was still under development. That contingent commitment is patently unsatisfactory for purposes of the financial qualification rule, which explicitly declares that "financing arrangements contingent on further performance by either party, such as . . . raising additional financing," are insufficient. 13. Constellation has submitted two additional financial-commitment letters. In a letter dated January 23, 1997, the president of SpaceVest notes that his company has previously invested in Constellation and declares that it intends to invest "additional funds." This statement adds nothing to Constellation's showing because it does not express, or confirm the existence of, a non-contingent commitment to provide funds in any definite amount. 14. In another letter dated January 23, 1997, the chairman of CTA Incorporated states that "it is CTA's intent to the extent of its corporate capabilities, to provide the necessary financial support for implementation and operation of the [ARIES] project." Concerning his company's capabilities, the author asserts that CTA has annual revenues of $190 million, and an attached balance sheet indicates that its current assets are worth $63 million. The Commission has looked to operating income -- not annual revenues -- and current asset value for an approximate measure of fund-raising ability. We cannot determine from the information provided how much operating income CTA generated in the most recent fiscal year, and it has not been shown, in any case, that CTA is willing and able to invest an amount in ARIES on the order of magnitude of Constellation's estimated costs. 15. Constellation has presented several other letters from representatives of companies who express interest in the ARIES project, but none of these includes a statement of financial commitment. Thus, in sum, Constellation has not shown that it has any financial resources of its own and has not shown that it has access to funds from outside sources sufficient to cover its estimated costs of $1.15 billion. We therefore find that Constellation has failed to demonstrate that it is financially qualified. 16. Waiver request. Instead of dismissing its application, however, we are granting Constellation's alternative request for waiver of the financial requirement. Our reasons for granting this relief are essentially the same as the grounds for waiver expounded in our companion order granting MCHI's license application. As we indicated in that order, the dismissal of AMSC's application and the recent allocation of additional spectrum for MSS at 2 GHz are changed circumstances that warrant the grant of a waiver based on the availability of spectrum to accommodate all current applications and the possibility of entry by additional applicants in the future. Moreover, implementation of Constellation's system could promote the public interest by providing additional competition and consumer choice in the MSS market. B. Technical Considerations 17. Compliance with 25.143(b)(2). Subsection 25.143(b)(2) of the FCC's rules sets forth certain requirements that a Big LEO applicant must meet in order to to be found technically qualified. It must: (1) specify a non-geostationary satellite-system design; (2) demonstrate that the system will be capable of providing mobile satellite service to all locations between 70 North latitude and 55 South latitude for at least 75 percent of every 24-hour period; (3) demonstrate that the system will be capable of providing continuous service throughout the fifty states, Puerto Rico, and the U.S. Virgin Islands; and (4) demonstrate that the system will operate in compliance with applicable requirements in Section 25.213 concerning interference protection. Constellation's application, as amended, meets all of these requirements. 18. Service-link Polarization. Constellation proposes to use righthand circular polarization (RHCP) for space-to-Earth service-link transmission. TRW and MCHI have also specified RHCP for their space-to-earth service links; thus, three of the four CDMA Big LEO licensees are planning to use RHCP for transmission in the shared 2.4 GHz band. (Only L/Q has specified LHCP.) It is preferable for minimizing inter-system interference that the Big LEO systems sharing that band operate with opposite service-link polarity insofar as possible; if four CDMA systems are to share the band, then it would be best for two to use RHCP and two to use LHCP. Pursuant to the inter-system coordination policy announced in the Big LEO Report and Order, we will leave it to the licensees, in the first instance, to resolve the problem by agreeing on a mutually-compatible scheme of polarities. 19. Space-to-earth feeder links. Constellation's specification of the 6825-7025 MHz band for space-to-earth feeder-link transmission is consistent with the ITU's international table of frequency allocations, as amended at WRC-95, but not with the U.S. domestic table of allocations, which currently reserves the spectrum between 5925 and 7075 MHz for terrestrial services and Earth-to-space transmission in the Fixed-Satellite Service. Consistently with our analogous action in the order granting L/Q's request for space-to-earth feeder-link authorization, we will waive the rule that normally requires operating frequencies to be assigned consistently with the U.S. Table of Frequency Allocations so as to permit Constellation to make use of spectrum that has been internationally allocated for MSS feeder links, subject to any pertinent restrictions subsequently promulgated in a rulemaking to consider amendments to the U.S. Table of Allocations to conform to the international allocations in this respect. 20. Its specification of the upper portion of the internationally-allocated 6700-7075 MHz MSS feeder-link band is problematic, however, in light of other claims on that spectrum. L/Q is already licensed to use 6875-7055 MHz for space-to-earth feeder-link transmission for its "Globalstar" system, and MCHI similarly specifies 6875-7075 MHz for space-to-earth feeder links. It is unclear whether more than two MSS systems can use the same 6/7 GHz frequencies for co-directional feeder-link transmission without causing unacceptable mutual interference. Computer simulation studies conducted in preparation for WRC-95 indicated that two NGSO MSS systems could feasibly share spectrum for co- directional feeder-link transmission, but insufficient data was available to support a conclusion as to the feasibility of bi-directional sharing or co-directional sharing between three or more systems. We therefore grant Constellation a conditional authorization for space-to-earth feeder-link transmission in the 6875-7025 MHz band; before commencing operation Constellation must demonstrate that it can feasibly share that spectrum with all other persons or organizations with full or conditional authority to use any part of it for feeder-link transmission to gateway stations in the United States. There may also be international coordination issues with respect to use of these frequencies that will have to be addressed prior to commencement of ARIES operation. 21. Earth-to-space feeder links. Constellation indicated in its 1994 amendment that it planned to use 5050-5250 MHz for feeder-link transmission from gateway Earth stations to the ARIES constellation. We are granting authority to construct the ARIES satellites to receive the somewhat-narrower 5091-5250 MHz band that has been internationally allocated for NGSO MSS feeder links. This authorization should not be construed as a license for Earth-to-space transmission; such authority must be requested in an Earth-station application filed pursuant to 47 C.F.R. 25.130. Authorization for operation at 5091-5250 MHz will be subject to any pertinent restrictions promulgated in a rulemaking to consider amending the U.S. Table of Allocations, which does not currently designate that band for MSS feeder links, to conform it to the international allocation table. Such authorization will also be subject to the limitations in S5.444A of the ITU's regulations. Constellation will have to coordinate with other systems with respect to use of this frequency band, including any that have priority by virtue of previous publication of coordination requests with the ITU. 22. Earth-to-space service links. Under the Commission's band-sharing plan for the Big LEO service, the 1610-1621.35 MHz band is currently available for assignment to Constellation for transmission from mobile terminals to the ARIES satellites. The Commission noted in the Big LEO Report and Order that RTCA, Inc., an advisory committee to the FAA, was charged with developing recommendations for protecting GLONASS operations below 1610 MHz, when used as part of the Global Navigation Satellite System ("GNSS") for precision approach and landing, from out-of-band interference from transmissions of MSS mobile transceivers in the 1610-1626.5 MHz band. Although no consensus in this regard has emerged from the RTCA's deliberations, representatives of the aeronautical industry have advocated adoption of out-of-band emissions limits that could hinder one or more of the Big LEO systems from using the lower portion of the 1610-1626.5 MHz band. Our action here is without prejudice to any subsequent measures deemed necessary in light of further developments concerning out-of-band protection for GLONASS receivers used for precision approach and landing. In light of the fact that our waiver of the financial qualification requirement is predicated on the availability of adequate spectrum for five systems in the 1.6/2.4 GHz bands and for expansion or new entry in another band, if regulatory decisions concerning protection of GLONASS receivers diminish the amount of spectrum available to the CDMA Big LEOs, we will consider whether Constellation and MCHI should bear the principal burden of any operating constraints. In any event, we anticipate that Constellation would exhibit flexibility regarding any intersystem coordination concerns that may arise from regulatory decisions concerning protection of GLONASS receivers. If the ARIES mobile terminals cannot transmit in a lower segment of the 1610- 1621.35 MHz band compatibly with out-of-band emissions limits adopted hereafter by the Commission, Constellation should not expect that adjustments will be required of CDMA systems capable of compatible operation in a wider portion of the band in order to equalize system capacity. 23. The Commission devised a contingent interim band-sharing plan in the Big LEO Report and Order that was to take effect if use of the 1610-1612 MHz segment for Big LEO service in the United States were to be precluded in order to protect the GLONASS system prior to its anticipated shift to frequencies below 1606 MHz, which was expected to occur between 1998 and 2005. Accordingly, we indicated in the initial series of Big LEO license orders that in the event that 1610-1612 MHz became unavailable during the interim period prior to the shift, Big LEO authorizations for the 1.6 GHz band would be subject to the interim plan or any revision thereof adopted in response to pending petitions for reconsideration. In its subsequent decision on reconsideration of the Big LEO Report and Order, the Commission declined to address objections to the interim sharing plan, having concluded, in light of uncertainty as to domestic and international acceptance of GLONASS as part of the GNSS, that an interim plan was unnecessary. That conclusion has been contested in further petitions for reconsideration, however. If it becomes apparent that interim domestic protection of GLONASS will be necessary after all, it would be appropriate to review the concerns that have been raised about the previously-announced interim plan. Therefore, pending disposition of the petitions for reconsideration, we are imposing the same condition on Constellation. ORDERING CLAUSES 23. Accordingly, pursuant to authority delegated by Sections 0.241 and 0.261 of the FCC's rules, IT IS ORDERED that Constellation's request for waiver of Paragraph (b)(3) of Section 25.143 of the rules IS GRANTED. 24. IT IS FURTHER ORDERED that Application File Nos. 17-DSS-P-91(48), CSS- 91-013, 9-SAT-LA-95, 10-SAT-AMEND-95, and 159-SAT-AMEND-96 IS GRANTED, and Constellation IS AUTHORIZED to construct a mobile satellite system capable of operating in the 1610-1626.5/2483.5-2500 MHz frequency bands, with feeder links in the 6875-7025 MHz frequency band (space-to-Earth) and the 5091-5250 MHz band (Earth-to-space), in accordance with the technical specifications set forth in its application and consistently with our rules unless specifically waived herein. 25. IT IS FURTHER ORDERED that Constellation IS AUTHORIZED to launch and operate 48 non-geostationary satellites during the license term for the purpose of providing a mobile satellite service in the United States in the 1610-1621.35/2483.5-2500 MHz frequency bands, using the 6825-7025 MHz band for space-to-Earth feeder-link transmission, subject to the conditions stated herein, in accordance with the technical specifications set forth in its application, and consistently with our rules unless specifically waived herein. In the event that the 1610-1612 MHz band is not available for mobile satellite service operations in the United States, Constellation IS AUTHORIZED to operate in the 1612-1622.60/2483.5-2500 MHz bands subject to the interim sharing plan outlined in Amendment of the Commission's Rules to Establish Rules and Policies Pertaining to a Mobile Satellite Service in the 1610- 1626.5/2483.5-2500 MHz Frequency Bands, 9 FCC Rcd 5936  49-53 (1994), and revisions, if any, adopted in response to pending petitions to reconsider that plan. 26. IT IS FURTHER ORDERED that Constellation IS AUTHORIZED to construct and launch technically-identical replacement satellites during the license term. 27. IT IS FURTHER ORDERED that Constellation IS AUTHORIZED to offer space segment capacity on its satellite system on a non-common-carrier basis. 28. IT IS FURTHER ORDERED that the license term for the space stations is ten years, commencing on the date the licensee certifies to the Commission that the first system satellite has been successfully placed into orbit and that the first transmission to or from the satellite in an authorized frequency band has occurred. 29. IT IS FURTHER ORDERED that, unless extended for good cause shown, this authorization will become null and void in the event that the licensee fails to meet the following progress schedule: Construction Construction Fully Commenced Completed Operational First two system satellites July 1998 July 2001 Remaining system satellites July 2000 July 2003 30. IT IS FURTHER ORDERED that this authorization is subject to completion of consultations under Article XIV of the INTELSAT Agreement and Article 8 of the INMARSAT Convention. Upon completion of the consultations and notification by the Department of State that the United States has fulfilled its international obligations with respect to INTELSAT and INMARSAT, no further action by this agency will be required. 31. IT IS FURTHER ORDERED that Constellation shall prepare any necessary submissions to the International Telecommunications Union (ITU) and to affected administrations for coordination of the ARIES space stations pursuant to the ITU's Radio Regulations. 32. IT IS FURTHER ORDERED that the assignment of orbital planes or particular frequencies to Constellation is subject to change by summary order of the Commission on 30 days notice and does not confer any permanent right to use the orbit and spectrum. Neither this authorization nor the rights granted thereunder shall be assigned or otherwise transferred in violation of the Communications Act, and the rights granted herein are subject to the rights of use or control conferred by 47 U.S.C. 706. 33. IT IS FURTHER ORDERED that Constellation's Request for Expedited Action, filed on May 27, 1997, IS GRANTED to the extent indicated herein and IS OTHERWISE DENIED. FEDERAL COMMUNICATIONS COMMISSION Peter F. Cowhey Chief, International Bureau Richard M. Smith Chief, Office of Engineering and Technology