[Federal Register Volume 78, Number 139 (Friday, July 19, 2013)]
[Proposed Rules]
[Pages 43118-43122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17395]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 25

[IB DOCKET NO. 13-147; FCC 12-79]


Allegations of Anticompetitive Behavior in Satellite Industry

AGENCY: Federal Communications Commission.

ACTION: Notice of Inquiry.

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SUMMARY: The Federal Communications Commission (Commission) seeks 
comment on whether, and, if so, to what extent, incumbent satellite 
operators are

[[Page 43119]]

inhibiting competition in the market for satellite services, 
particularly in the fixed-satellite services (FSS) arena. Specifically, 
the Commission seeks comment on whether FSS operators are warehousing 
satellite orbital locations and frequency assignments, and preventing 
competitors from purchasing capacity on incumbent-owned satellites.

DATES: Comments are due on or before August 19, 2013, and reply 
comments are due on or before September 17, 2013.

ADDRESSES: You may submit comments, identified by IB Docket No. 13-147, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web site: http:///
www.fcc.gov/cgb/ecfs. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC by email to 
request reasonable accommodations (accessible format documents, sign 
language interpreters, CART, etc.): [email protected]; or phone 202-418-
0530; or TTY: 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Alan Thomas (202) 418-2338, Satellite 
Division, International Bureau, Federal Communications Commission, 
Washington, DC 20554. For additional information concerning the 
information collection(s) contained in this document, contact Judith B. 
Herman at 202-418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Inquiry (Notice) in IB Docket No. 13-147, adopted June 5, 2013, and 
released on June 7, 2013. The full text of the Notice is available for 
public inspection and copying during regular business hours at the FCC 
Reference Information Center, Portals II, 445 12th Street SW., Room CY-
A257, Washington, DC 20554. This document may also be purchased from 
the Commission's duplicating contractor, Best Copy and Printing, Inc., 
Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone 202-488-5300, facsimile 202-488-5563, or via email 
[email protected].
    Initial Paperwork Reduction Act of 1995 Analysis: This document 
does not propose revised information collection requirements.

I. Summary of Notice of Inquiry

A. Background

    In this Notice of Inquiry (Notice) the Commission seeks comment on 
whether, and, if so, to what extent, incumbent satellite operators are 
inhibiting competition in the market for satellite services, 
particularly in the fixed-satellite services arena. This Notice results 
from comments submitted in response to two Congressionally-mandated 
reports: The Orbit Act Report and the Satellite Competition Report.
    Pursuant to the Open-Market Reorganization for the Betterment of 
International Telecommunications Act (Orbit Act),\1\ the Commission is 
required to submit an annual report to Congress concerning the progress 
made with regard to the privatization of INTELSAT and Inmarsat. Some of 
the comments submitted in preparation of the Eleventh Orbit Act Report 
\2\ raised two allegations of anticompetitive behavior: First, that 
Intelsat and other dominant satellite operators are warehousing scarce 
orbital resources, i.e., hoarding satellite orbital locations and 
frequency assignments by failing to replace aging satellites on a 
timely basis or otherwise failing to provide transponder capacity that 
reflects current technology. The second allegation is that Intelsat is 
now a vertically integrated company, i.e. able to provide its customers 
both space and ground communications services, that discriminates 
against competitors. As a vertically integrated company, Intelsat not 
only provides satellite services to integrators (resellers) who need 
satellite bandwidth to fashion their own customer-specific service 
offerings, but Intelsat also competes against integrators because 
Intelsat is now able to fashion its own customer-specific service 
offerings. Consequently, some integrators allege that this dual role 
has resulted in them being vertically foreclosed or barred by Intelsat 
from securing satellite bandwidth capacity.
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    \1\ Open-Market Reorganization for the Betterment of 
International Telecommunications Act, 47 U.S.C. Sec. Sec.  701, 
706(e) (2000).
    \2\ FCC Report to Congress as Required by the ORBIT Act: 
Eleventh Report, FCC 10-112, 25 FCC Rcd 7834, 7857-7861(2010)
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    The Commission noted that the Eleventh Orbit Act Report was not the 
appropriate forum in which to resolve such allegations, and stated that 
the allegations would be addressed in an appropriate forum.
    The allegations were again raised in comments considered in the 
Third Satellite Competition Report,\3\ a report the Commission annually 
delivers to Congress regarding the state of competition in the 
satellite industry.\4\ In the Third Satellite Competition Report, one 
commenter expanded upon the warehousing and vertical foreclosure 
allegations it made in the Eleventh Orbit Act Report; the Commission, 
however, determined that it was unable to reach conclusions regarding 
these allegations for two reasons. First, the factual record for the 
Third Satellite Competition Report was limited with regard to the 
warehousing allegations and, second, the evidence was inconclusive 
whether Intelsat restricts or prevents integrators from obtaining 
satellite bandwidth capacity. The Third Satellite Competition Report 
concluded that these allegations warranted additional analysis in a 
separate proceeding where a more detailed record could be developed and 
explored.
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    \3\ Third Report and Analysis of Competitive Market Conditions 
with respect to Domestic and International Satellite Communications 
Services, Report and Analysis of Competitive Market Conditions with 
respect to Domestic and International Satellite Communications 
Services, FCC 11-183, IB Docket Nos. 09-16 and IB 10-99, 26 FCC Rcd 
17284, 17346-17353 (2011).
    \4\ Amendment to Communications Satellite Act, Public Law 109-
34, 119 Stat. 377 (2005), codified at 47 U.S.C. Sec.  703.
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B. Warehousing Allegations

a. Gaps in Service
    In the Notice, the Commission identified four types of potential 
warehousing scenarios. In the first scenario, warehousing can result 
from gaps in service when an operator de-orbits or relocates an in-
orbit satellite, but does not immediately place another satellite into 
the vacated orbital location. Whether such a gap is the result of 
warehousing or a legitimate exercise of operator flexibility is a 
determination the Commission makes on a case-by-case basis. In the 
Notice, the Commission asks, for example, whether it should adopt a 
rule that declares unused spectrum available for reassignment as soon 
as service is terminated, unless an operator can demonstrate that it 
terminated service because of an unforeseen catastrophic circumstance. 
Alternatively, the Commission asks whether permitting some gap in 
service would strike a better balance between providing an operator 
flexibility in managing its fleet while still safeguarding against 
warehousing.
    Gaps in service often result in satellite operators inserting 
replacement satellites that do not operate on all the frequency bands 
used by the retired or relocated satellite; and while satellite 
operators sometimes specify the frequencies used by both incoming and 
outgoing satellites, often they do not,

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thus requiring that the Commission expend resources and time in order 
to sort out which frequencies are operational at a particular orbital 
location. Thus, the Commission asks, for example, whether each 
replacement application should include a table that lists the 
frequencies used by both the original and the replacement space 
station, and whether an application should be considered incomplete if 
it does not include such a table. The Commission also seeks comment on 
how to expeditiously address situations where incomplete frequency 
information is provided.
    Additionally, there are instances where a gap in service is caused 
by unforeseen circumstances. Under the Commission's current rules, 
requests for emergency replacement satellites are considered on a case-
by-case basis and, generally, the Commission grants authority for 
emergency replacement satellites as long as an operator timely launches 
a new satellite or relocates an in-orbit satellite into the vacant 
orbital location. Where the failure of a fully functional five-year old 
in-orbit satellite would be viewed as a catastrophic failure that 
excuses a gap in service, the Commission asks, for example, whether the 
same should be true of a fourteen-year old satellite that fails a few 
months earlier than expected; relatedly, the Commission asks whether in 
a non-emergency situation, the satellite operator should have made 
significant progress on construction of and have concrete launch plans 
for a replacement satellite, particularly given that it takes two-to-
five years to construct and launch a satellite. The Commission also 
asks, for example, whether it should require satellite operators to 
submit, in their annual reports, end-of-life projections for all in-
orbit satellites, and asks for comment on whether it should propose 
rules that may allow it to expedite consideration of requests for 
emergency replacement satellites.
b. Older Replacement Satellites
    In the second scenario, warehousing can arise when there is no gap 
in service but a satellite operator decides to relocate an older, in-
orbit satellite to serve as a replacement for a satellite it has de-
orbited or moved to another location. These situations potentially 
restrict transponder capacity and result in an underutilization of 
spectrum resources because newer technology is not brought into use at 
that orbital location. As with other potential warehousing situations, 
the Commission must evaluate these requests on a case-by-case basis; 
thus, the Commission seeks comment on, for example, the use of older 
satellites as replacement satellites and whether this practice 
restricts transponder capacity and results in an underutilization of 
spectrum resources. Additionally, the Commission requests comment on 
whether or to what extent allowing operators to use older satellites as 
replacements precludes the use of newer technologies that can provide 
improved services to consumers.\5\ For example, the Commission asks 
whether it should permit an operator to replace a 13- or 14- year old 
satellite with another satellite that is 13- or 14-years old, and 
whether it should be more concerned about the health of the replacement 
satellite, rather than its age.
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    \5\ Most satellite operators are required to submit annual 
reports to the Commission detailing the status of their space 
stations. Depending on the service, the operator may have to provide 
the status of satellite construction and expected launch dates, and 
a detailed description of the utilization of in-orbit satellites, 
including outages, and any transponders not available for service. 
See 47 CFR Sec. Sec.  25.142(c), 25.143(e), 25.145(f)(1), 25.146(l), 
and 25.210(l). The Commission has proposed to consolidate these 
reporting requirements into a single rule. See Comprehensive Review 
of Licensing and Operating Rules for Satellite Services, FCC 12-117, 
Notice of Proposed Rulemaking, 27 FCC Rcd 11619 (2012). 
Comprehensive Review of Licensing and Operating Rules for Satellite 
Services, Proposed Rules, 77 FR 67172 (Nov. 8, 2012).
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c. License Extensions
    With an increase in the useful life of satellites, the third 
potential warehousing scenario is evidenced by the increase in the 
number of requests made of the Commission to extend a satellite's 
license term well beyond its initial license term. While it may be 
possible for a satellite to operate an additional decade or more beyond 
its original license term, the Commission asks whether lengthy 
extensions allow inefficient or partially-functioning satellites to 
block customer access to newer, state-of-the art satellites. 
Additionally, the Commission asks whether, for example, prior to 
granting a license extension, it should require the operator to submit 
information regarding the satellite's health, and how it might apply 
license extension limitations to non-U.S. licensed satellites granted 
market access to the United States.
d. Underutilized Satellites
    The fourth potential warehousing scenario concerns underutilized 
satellites. Regardless of age and for a variety of reasons, satellites 
may not be operating at full capacity. The Commission seeks comment on 
whether this creates a concern that the operator is warehousing 
spectrum, and asks whether it should propose a rule that automatically 
terminates a space station license if the percentage of unused capacity 
exceeds a certain amount. Even if the authorization for an 
underutilized satellite is not cancelled, the Commission asks whether, 
at a minimum, the unused spectrum should be made available for 
reassignment. Additionally, the Commission asks whether there are 
instances in which such ``non-use'' may be acceptable.
2. Vertical Foreclosure Allegations
    Although some integrators allege that a vertically-integrated 
Intelsat has foreclosed them from securing satellite bandwidth 
capacity, the Commission's focus is on protecting competition rather 
than protecting particular competitors. Thus, loss of business and 
profits to integrator firms themselves is not considered a public 
interest harm if end users, i.e., customers and/or consumers, are not 
harmed.
a. Analytical Framework
    In the Third Satellite Competition Report, the Commission described 
a multi-step framework for examining the vertical foreclosure 
allegations and determining whether end users are being harmed. The 
framework, for example, seeks to determine: (1) Whether the alleged 
foreclosure conduct has or might lessen competition by excluding 
integrators from acquiring bandwidth capacity, and whether integrators 
have access to adequate alternatives to satellite bandwidth; (2) 
whether Intelsat has the ability to compete effectively as a provider 
of satellite services as well the ability to foreclose competitors; (3) 
whether Intelsat's vertical integration creates procompetitive cost 
savings and efficiencies likely to be passed on to end users; or, 
instead, is likely to result in increased price or degraded service 
quality; (4) whether any resulting efficiencies from vertical 
integration are likely passed on to end users; and (5) whether the 
Commission must determine if vertically integrated satellite operators 
will, to their advantage and to the detriment of integrators, purchase 
bandwidth from each other, and whether that relationship might have an 
impact on competition.
b. Issues for Inquiry
    In addition to seeking comment on the multi-step framework, the 
Commission seeks additional information that can help it evaluate 
adequately the warehousing and vertical foreclosure allegations. For 
example, the Commission seeks more details on the nature and scope of 
the alleged

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foreclosure, asking that commenters detail the time period, the 
geographic routes involved, the amount and type of bandwidth capacity 
(Ku-band, C-band, etc.) involved, and the size of the disputed 
business, either in absolute terms or relative to the size of the 
excluded integrators' business, the FSS operators' business, or the 
total demand of the affected customer(s). The Commission asks whether 
integrators, for example, have viable options other than using 
satellite bandwidth capacity, whether integrators can launch their own 
satellites, and how non-satellite bandwidth options compare to service 
provide by satellite operators.
    The Commission asks commenters about various types of pricing 
information; information that will aid in measuring cost savings and 
efficiencies that, if any, result from vertical integration; data on 
why vertical integration does not reduce costs and create efficiencies; 
data that quantifies the effect of the vertical integration on the 
services provided to end users (including changes in the number of 
bidders, the features and quality of service provided by the selected 
bidder, and bid rates); data on whether Intelsat vertical integration 
was facilitated by horizontal collusion among satellite operators, and/
or whether the vertical integration has enhanced or deterred 
coordinated interactions among potential bidders; and comment on 
appropriate remedies that could be implemented by the Commission.

II. Regulatory Impact Conclusion

    This Notice seeks data which will be used to assess the warehousing 
and vertical foreclosure allegations. It does not propose any changes 
to existing rules.

III. Procedural Matters

A. Ex Parte

    The proceeding this Notice initiates shall be treated as a 
``permit-but-disclose'' proceeding in accordance with the Commission's 
ex parte rules. Persons making ex parte presentations must file a copy 
of any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

B. Initial Regulatory Flexibility Act

    This document does not propose any economic impact on small 
entities.

C. Initial Paperwork Reduction

    This document does not propose new or modified information 
collection requirements, and does not propose to eliminate any existing 
information collection requirements.

D. Filing of Comments and Reply Comments

    Pursuant to sections 1.415 and 1.419 of the Commission's rules, 47 
CFR Sec. Sec.  1.415, 1.419, interested parties may file comments and 
reply comments on or before the dates indicated on the first page of 
this document. When filing comments or reply comments, please reference 
IB Docket No. 13-147. Comments may be filed using: (1) The Commission's 
Electronic Comment Filing System (ECFS), (2) the Federal Government's 
eRulemaking Portal, or (3) by filing paper copies. See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ 
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers 
should follow the instructions provided on the Web site for submitting 
comments.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th Street SW., Room TW-A325, Washington, DC 20554. All hand 
deliveries must be held together with rubber bands or fasteners. Any 
envelopes must be disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW., Washington DC 20554.
    People With Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer and Governmental Affairs Bureau at 202-418-0530 (voice) or 
202-418-0432 (TTY). Contact the FCC to request reasonable 
accommodations for filing comments (accessible format documents, sign 
language interpreters, CART, etc.) by email at: [email protected]; phone: 
202-418-0530 or TTY: 202-418-0432.

IV. Ordering Clauses

    Accordingly, it is ordered that, pursuant to sections 1, 4(i), 
4(j), 4(o), 301, and 403 of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 154 (i)-(j) & (o), 301, and 403, section 1.430 of the 
Commission's Rules, 47 CFR 1.430, this Notice of Inquiry in IB Docket 
No. 13-47 is adopted.
    It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center shall send a 
copy of this Notice of Proposed Rulemaking, including the initial 
regulatory flexibility act analysis, to the Chief Counsel for Advocacy 
of the Small

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Business Administration, in accordance with Section 603(a) of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. (1981).

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2013-17395 Filed 7-18-13; 8:45 am]
BILLING CODE 6712-01-P