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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC 97-308 In re Application of VOLUNTEERS IN TECHNICAL ASSISTANCE For Authority To Construct, Launch and Operate a Non-Voice, Non-Geostationary Mobile-Satellite System File No. CSS-91007(3) MEMORANDUM OPINION AND ORDER Adopted: August 28, 1997 Released: September 11, 1997 By the Commission: I. INTRODUCTION 1. By this Order, we deny an Application for Review filed by Leo One USA Corporation ("Leo One"). Leo One requests that the Commission review the Order and Authorization, released on July 21, 1995, in which the Chief, International Bureau, granted, in part, the application of Volunteers in Technical Assistance ("VITA") to construct, launch and operate a non-voice, non-geostationary, mobile-satellite service ("Little LEO") system in specific frequency bands below 1 GHz. We also deny Orbital Communications Corporation's ("Orbcomm") Petition for Reconsideration of the Bureau's Order and Authorization. II. BACKGROUND 2. VITA is a non-profit, humanitarian aid organization that provides services to developing nations around the world. It will use its satellite to provide educational, health, environmental, disaster relief, and technical communications services in developing countries. In the early 1980's, VITA was instrumental in the development of LEO satellite technology, and in particular, the application of that technology to meet the data communications needs of non- profit and humanitarian organizations. In 1988, we authorized VITA to construct, launch and operate a Little LEO satellite on an experimental basis. 3. On September 20, 1990, VITA filed an application to implement its complete system. VITA's system proposal consisted of two LEO satellites, VITASAT-I and VITASAT-II. VITA contemplated that the system would have an operational life of three to five years. VITA's application, along with two other system applications, were considered part of the first Little LEO processing group. On November 16, 1993, we adopted service rules for the Little LEO service and permitted applicants to file amendments to bring their applications into compliance with the newly adopted rules. In addition, we issued a "Pioneer's Preference" to VITA for its work in developing and demonstrating the utility of a LEO system using VHF frequencies for civilian communications purposes. On April 25, 1994, VITA filed its "conforming" amendment. In that amendment, VITA stated that it had entered into an arrangement with CTA Commercial Systems, Inc. ("CTA") that provided that CTA would construct, launch, and provide certain operational services for VITASAT-I in return for commercial use of 50% of the satellite's capacity. 4. Starsys Global Positioning, Inc. ("Starsys"), Orbcomm, and dbX Corporation opposed VITA's application, arguing, among other things, that VITA's financial showing was insufficient and that CTA's involvement with VITA constituted a de facto change in ownership. In addition, Leo One filed an Emergency Motion to Dismiss and Cease and Desist Order Request seeking dismissal of VITA's application on the ground that VITA had constructed its space station without appropriate authority. 5. By Order dated July 21, 1995, the Bureau authorized VITA to construct, launch and operate VITASAT-I and established construction and launch milestones for that satellite. In doing so, the Bureau examined VITA's financial qualifications under Section 25.142(a)(4) of the Commission's Rules that require Little LEO applicants to show current assets or non-contingent financing sufficient to meet construction, launch and first year operating costs for the first two satellites in its proposed system. 6. VITA estimated its construction, launch, and first-year operating costs for two satellites to be $5.4 million. VITA acknowledged it had not met our "two satellite" requirement and requested a waiver of this requirement. VITA maintained it was financially qualified to implement one satellite, VITASAT-I. VITA's balance sheet showed current assets of $1.4 million and a copy of its contract with CTA. Under the contract, CTA would construct, launch and provide operational services for VITASAT-I in return for commercial use of 50% of the satellite's capacity. The agreement also provided that VITASAT-II may be implemented "at CTA's option." 7. Because the record demonstrated that VITASAT-I was scheduled for imminent launch, the Bureau held that it would be superfluous to examine additional information related to VITA's financial ability to construct VITASAT-I. On that basis, the Bureau found that VITA had demonstrated the financial ability to implement one satellite, VITASAT-I. The Bureau required VITA to complete the construction and launch of VITASAT-I by October 31 and November 30, 1995, respectively, and stated that failure to adhere to these milestones would render its license null and void. 8. The Bureau granted VITA's request for a waiver of the "two satellite" requirement, noting VITA's non-commercial status and that its system proposal consisted of only two satellites. The Bureau also found that, even though VITA's arrangement with CTA did not constitute a transfer of control, neither VITA nor CTA had demonstrated a commitment to the construction of VITASAT-II. Therefore, the Bureau did not issue a license for VITASAT-II. Rather, it granted VITA an additional ninety days from the release of the VITA Order to submit a statement demonstrating its financial qualifications to build and launch VITASAT-II. In addition, the Bureau rejected assertions that VITA had engaged in premature construction or had exhibited a lack of candor. 9. On August 15, 1995, VITASAT-I was launched, unsuccessfully. On August 21, 1995, Leo One filed an Application for Review alleging the Bureau erroneously concluded in its VITA Order that (i) a de facto transfer of control of VITA's application to CTA did not occur; (ii) VITA was financially qualified; and (iii) VITA had not engaged in unauthorized or premature construction of the VITASAT-I satellite. Leo One also maintained that, as a general matter, the Bureau's decision would have serious adverse policy implications on satellite and non-satellite communications services. For these reasons, Leo One asks us to reverse the Bureau's findings and deny VITA's application, or alternatively, to designate the application for evidentiary hearing on the issue of whether the arrangement with CTA constituted a de facto transfer of control. Orbcomm also challenged the Bureau's Order regarding financial qualification, transfer of control and premature construction issues. In addition, Orbcomm argues that VITA's November 16, 1994 amendment to its system proposal should not have been considered as part of its first round application since the amendment was filed after the September 21, 1990 first round Little LEO application cut-off date. 10. In response to the challenges filed by Orbcomm and Leo One, VITA maintains that the Bureau correctly concluded that there was no transfer of control from VITA to CTA, that VITA was financially qualified, and that VITA did not engage in premature construction of its satellite. VITA also maintains that its November 16, 1994 amendment did not remove VITA's underlying application from the first round processing group. In response, Orbcomm and Leo One assert that VITA's opposition failed to rebut their arguments that the Bureau erred in granting VITA a license. 11. On January 16, 1996, following the termination of its agreement with CTA, VITA filed a Notification of its intention to launch a replacement for its VITASAT-I satellite pursuant to an agreement between VITA and Final Analysis, Inc. ("FAI"), entered into on November 15, 1995. To the extent the arguments raised by Leo One rely on the arrangement between VITA and CTA which has been terminated, those issues arguably, may be considered moot. We will, nevertheless, address the issues raised by Leo One and Orbcomm even though the circumstances surrounding the Bureau's initial authorization have changed significantly. III. DISCUSSION A. De Facto Transfer of Control 12. Leo One and Orbcomm argue that the Bureau's transfer of control analysis is flawed. Specifically, Leo One asserts that the Bureau erroneously applied the criteria enunciated in Intermountain Microwave, and other precedent, and incorrectly concluded that there was no de facto change in control from VITA to CTA. Alternatively, Leo One suggests that there are substantial and material questions of fact as to whether VITA's arrangement with CTA constituted an unauthorized change in ownership sufficient to warrant an evidentiary hearing. Leo One asserts the Bureau's failure to designate these issues for an evidentiary hearing is inconsistent with the Commission's treatment of similar facts in Ellis Thompson Corporation. 13. We find that the Bureau applied the Intermountain factors correctly. The Bureau carefully scrutinized each of the Intermountain indicia of control, namely: (i) whether the licensee has unfettered use of all facilities and equipment; (ii) who controls the daily operations; (iii) who determines and carries out the policy decisions, including preparing and filing applications with the Commission; (iv) who is in charge of employment, supervision and the dismissal of personnel; (v) who is in charge of the payment of financing obligations, including expenses arising out of operating; and (vi) who receives money and profits from the operation of the facilities. 14. In applying these criteria to the VITA/CTA arrangement, the Bureau found that no single criterion was dispositive here. For example, the Bureau held that VITA enjoyed unfettered use of the satellite since it was to direct the operation of the satellite, the use of its signals and the TT&C functions of the satellite. Although CTA would carry out the day-to-day operations, it would do so under VITA's direction and in accordance with VITA's specifications. All policy decisions would be made by VITA, including all employment decisions for personnel that it employs directly. The Bureau also found that VITA was required to pay up to $45,000 per annum in satellite operating expenses and fund the construction and operation of its gateway earth stations. Furthermore, the evidence demonstrated that CTA was responsible for receiving payments and for preparing a quarterly statement of revenues to deliver to VITA. After expenses were applied toward operating and capital expenditures, remaining funds were to be divided evenly between VITA and CTA. 15. While the Bureau acknowledged that CTA would play a significant role in the venture, based on the totality of these circumstances, it concluded that the evidence supported the finding that de facto ownership remained with VITA. In addition to the Intermountain criteria, the Bureau considered several other factors that led it to conclude that VITA would retain control over the content of 50% of VITASAT-I's capacity that is dedicated to VITA's non-commercial purposes. First, VITA's arrangement with CTA would not affect VITA's provision of non- commercial and humanitarian services. In addition, the arrangement with CTA was similar to the types of excess capacity leasing arrangements the Commission has previously recognized between non-commercial and commercial entities. Further, the Bureau found the evidence did not show this to be the type of case in which there is any reasonable inference that the transaction was structured to avoid Commission requirements, such as ownership limits. 16. We also find that the Bureau carefully reviewed the extent of CTA's control under each of the Intermountain criteria, and correctly concluded that the arrangement did not constitute a change in ownership. In reviewing each criteria, the Bureau examined the role that both VITA and CTA played in the venture. While the Bureau recognized that CTA would play an influential role in the venture, it concluded that this role was not significant enough to constitute a de facto transfer of ownership. We agree with the Bureau's conclusion. 17. We also disagree with Leo One's assertion that an evidentiary hearing was warranted. As the Bureau correctly observed, questions of de facto control are evaluated on a case-by-case basis, by examining the facts and circumstances in a particular case. Moreover, we have found that there is no exact formula for determining control. Questions of control turn on the specific circumstances of an individual case. Application of the Intermountain criteria in one case may not require the same result in all cases. 18. We find that the Bureau's decision was consistent with the standards enunciated in Astroline Communications Company Limited Partnership v. FCC, for determining whether the circumstances warrant designation of an evidentiary hearing. Section 309(d) of the Communications Act provides that a petition to deny must "set forth specific allegations of fact sufficient to show ... that a grant of the application would be prima facie inconsistent with the public interest, convenience and necessity." If we determine that a prima facie case has been made, then and only then, must we take the second step and determine whether a substantial and material question of fact has been presented. If we find that no substantial and material question of fact has been presented, no evidentiary hearing need be held. 19. Our prima facie inquiry is limited to consideration of the allegations in the petition to deny and any supporting affidavits. This inquiry is based upon the assumption that the specific facts set forth by the petitioner are true. The allegations of de facto change in ownership, considered alone and assumed to be true, would alter our public interest determination. However, after consideration of the allegations raised and the evidence submitted to support these allegations, we find the allegations insufficient to raise a substantial and material question of fact. The material facts underlying the asserted violations were clear. The evidence before the Bureau was sufficient to make an informed and reasoned decision on the merits of the allegations raised without engaging in a further fact-finding process. 20. We also find that Leo One's reliance on Ellis Thompson Corporation is misplaced. In ETC, we found the evidence disclosed a pattern of circumstances which raised substantial and material questions as to whether Ellis Thompson, an applicant for a cellular license, permitted American Cellular Network Corporation (Amcell), a third party, to become the real party-in- interest to the Thompson cellular application, contrary to Commission rules. We further held that the Common Carrier Bureau's decision failed to adequately take into account these circumstances, and thus rendered the Intermountain analysis incomplete, erroneously leading to the conclusion that no substantial and material question existed. Consequently, we concluded that Amcell's status as the prospective purchaser of the cellular system, the failure of Thompson to receive profits, Amcell's substantial financial exposure, Amcell's specific assumption of control over litigation related to its management, Amcell's broad management responsibilities under a long term agreement, and the consolidation of the facilities and staff of the Atlantic City system and Amcell's operations in adjacent areas, were circumstances that -- in view of the evidence as a whole -- raised sufficient doubt to warrant a further evidentiary hearing as to the true relationship between Mr. Thompson and Amcell. 21. Unlike ETC, the application of the Intermountain criteria to the circumstances in VITA showed there was sufficient evidence to support a reasonable conclusion that VITA would enjoy the unfettered use of VITASAT-I, direct the day-to day operations, be responsible for policy decisions, as well as employment decisions relating to its personnel, provide operating expenses for the satellite, and receive funds from the satellite's operation. However, in ETC, we held the circumstances, taken as a whole, did not, without a further evidentiary hearing, support a conclusion as to the issue of control. B. Financial Qualifications 22. Leo One and Orbcomm assert that the Bureau erred in concluding that VITA was financially qualified. The fact that VITASAT-I was scheduled to be launched imminently, they argue, does not demonstrate VITA's ability to sustain the satellite's operations for one year. Leo One further asserts that VITA was not entitled to a waiver of our "two satellite" requirement based on its non-commercial and humanitarian status. 23. We believe the Bureau had ample evidence to conclude that VITA was financially qualified to implement one satellite. Our rules require Little LEO applicants to demonstrate financial qualifications for two satellites before any authorization is issued. VITA asserted that it was financially qualified to implement one satellite and requested a waiver of the "two satellite" financial showing requirement. VITA estimated its construction, launch, and first year operating costs for its two satellite system were estimated to be $5.4 million. Its balance sheet showed current assets of $1.4 million. The terms of the VITA/CTA agreement specifically provided that CTA would provide certain operational services for VITASAT-I in return for commercial use of 50% of the satellite's capacity. 24. We agree with the Bureau's conclusion that VITA demonstrated its financial ability to implement one satellite. In adopting the financial requirements for Little LEOs, we observed that VITA could seek a waiver - at which time we would consider the size of its system and the noncommercial nature of its operations. As the Bureau noted, it was reasonable for VITA to have explored other financing alternatives, such as the CTA arrangement, given VITA's non- commercial status. In light of VITA's non-commercial status, the fact that 50% of the satellite's capacity will be used for non-profit services and the fact that VITA contemplated only a two- satellite system, the Bureau reasonably concluded that a waiver of the "two satellite" requirement was justified. Moreover, the Bureau appropriately imposed various conditions on VITA's license. Indeed, contrary to Leo One's assertion that the Bureau attempted to fashion novel relief for VITA, we have been responsive to the unique financial position of non- commercial entities and have modified our licensing processes in the past to accommodate non- commercial entities. C. Premature Construction Allegations 25. Leo One and Orbcomm disagree with the Bureau's conclusion that VITA had not engaged in the unauthorized construction of its VITASAT-I satellite. Specifically, Leo One asserts that until VITA's modification application to its experimental radio authorization (KE2XAH) was granted on November 10, 1994, its experimental authorization specified technical parameters of an entirely different satellite from VITASAT-I. Leo One, therefore, argues that any construction by CTA that occurred prior to November 10, 1994 was not authorized and contrary to the Commission's Policy Statement on Experimental Satellite Applications. Consequently, Leo One urges us to rescind the grant of VITA's modified license for KE2XAH because it engaged in premature construction of the satellite in violation of Section 319(a) of the Communications Act, 47 U.S.C.  319(a). Leo One also asks that we impose a monetary forfeiture for the alleged unauthorized construction of VITASAT-I. 26. VITA was granted an experimental license to operate a LEO satellite in 1988. In June 1993, it filed a modification to its experimental license to include a second satellite in its system. It stated its intent to use the second satellite on an experimental basis until it could implement the second satellite as a non-experimental Little LEO authorization. The application contemplated the purchase of the satellite from the University of Surrey. The modification application was granted in August, 1993. The modified license did not specify from whom the satellite was to be purchased. VITA did not conclude its arrangement for the purchase of the satellite with the University of Surrey. Rather, it arranged with CTA to construct the satellite. On June 20, 1994, VITA filed an application to modify its experimental license to specify technical parameters for the second experimental satellite identical to the technical parameters proposed for VITASAT-I. The technical parameters of VITASAT-I had been specified in the April 1994 amendment to VITA's regular LEO application. The modification application did not disclose that CTA would manufacture the satellite. This modification application was granted in November, 1994. 27. Experimental authorizations include authority to construct the experimental radio stations. It is uncontroverted that VITA possessed such an authorization. Any construction by VITA, in accordance with its arrangement with CTA, was unauthorized only to the extent it deviated from its outstanding experimental authorization. The experimental license granted to VITA in August 1993 did not specify the identity of the vendor of VITA's satellite. VITA initially contemplated the purchase of a second satellite from the University of Surrey, and later arranged with CTA to construct a satellite. However, this does not constitute unauthorized construction. Moreover, we agree with the Bureau's view that VITA's use of its experimental authorization to implement its non-experimental Little LEO system does not violate the Commission's Policy Statement. As the Bureau explained, VITA did not substitute its experimental authority for the normal Commission licensing process. The use of an experimental license that leads to implementation of a regular Little LEO system does not violate the Policy Statement. For these reasons, we agree with the Bureau's conclusion that VITA did not engage in unauthorized construction of VITASAT-I. D. Amendment To VITA's Application 28. The application cut off date for the first round Little LEO processing group was September 21, 1990. Orbcomm argues that VITA's November 16, 1994 amendment to its application constituted a "major amendment," and therefore was cut off from consideration as part of its first round application. The Bureau, Orbcomm says, should have dismissed VITA's application from the first Little LEO processing group. 29. Section 25.116(a)(1) of our rules provides that an amendment will be considered "major" if it increases the potential for interference, or changes the proposed frequencies or orbital locations to be used. The Bureau stated that because the November 1994 amendment proposed a new satellite to operate on frequencies in addition to those proposed for VITA's first two satellites, the amendment was a "major" amendment under our rules. In that case, to the extent that the application was for additional frequencies, VITA's application was treated as ineligible for consideration as part of the first round Little LEO processing group, however. We agree with the Bureau's view that the November amendment protected VITA's right to request expansion frequencies in the second processing round, and to that extent, enhanced, but did not alter, VITA's first round system proposal. Consequently, it was reasonable for the Bureau to consider VITA's November 1994 amendment in conjunction with its first round application. 30. We also find that Orbcomm's reliance on LEOSAT Corporation is misplaced. In that case, LEOSAT Corp. filed an application to provide low earth orbit satellite services in frequency bands below 1 GHz. The application was filed on September 21, 1990, the cut-off deadline for first round Little LEO applications. However, the application was subsequently returned to the company because it was not accompanied by the requisite FCC Fee Processing Form, FCC Form 155. Upon review, we denied reconsideration of the dismissal and request for reinstatement of the application nunc pro tunc on the ground that our fee rules are clear as to the consequences of failure to file a correctly completed FCC Form 155 with the appropriate fee. In VITA's case, we deferred to the second processing round consideration of the amendment because the amendment was viewed as protecting VITA's right to request expansion frequencies, and consequently was appropriate for consideration in the second processing group. It did not alter VITA's first round system proposal. E. Miscellaneous Issues 31. Finally, Leo One asserts that the Bureau's Order failed to consider the "adverse policy implications" of its decision for all Commission-licensed satellite and non-satellite communications services in the areas of financial qualifications, small business preferences, transfer of control, and unauthorized construction. Leo One's allegation is vague, insufficiently explained, and unsupported by any evidence. The Bureau adequately explained the underlying reasons for its conclusions and the record demonstrated evidence sufficient to support those findings. IV. CONCLUSION 32. For the foregoing reasons, we find the evidence supports the Bureau's conclusions that (1) a de facto transfer of control of VITA's application to CTA did not occur; (2) that VITA was financially qualified to construct, launch and operate VITASAT-I, and (3) VITA did not engage in the unauthorized or premature construction of VITASAT-I. V. ORDERING CLAUSES 33. Accordingly, IT IS ORDERED that the Application for Review filed by Leo One USA Corporation is DENIED. 34. IT IS FURTHER ORDERED that the Petition for Reconsideration filed by Orbital Communications Corporation is DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary