FCC Probing Satellite Fleet Management Practices for Abuse
PARIS — The U.S. government telecommunications regulator has opened an inquiry into whether satellite fleet operatorand other large fleet owners are abusing their market position by holding on to orbital slots without making maximum use of them.
The inquiry was set in motion by complaints in 2010 that Intelsat’s vertical integration to include Intelsat General as a satellite-capacity sales agent to the U.S. government has led to anti-competitive discrimination against Intelsat General’s competitors, who often need access to Intelsat satellite capacity.
Those complaints, which held up the award of a $500 million contract to Intelsat General awarded by the U.S. Navy, appear to have evaporated in the intervening period. The protesters never made good on their threats to take the matter to the U.S. Justice Department for antitrust review, and the contract award to Intelsat General was eventually upheld.
Since then, the U.S. Government Accountability Office has reviewed the commercial satellite telecommunications sector and found no evidence of abuse by the major operators, whose market share by some measures has decreased in recent years.
The U.S. Federal Communications Commission (FCC) inquiry, published June 7, is in part the FCC’s way of keeping its word. It told those protesting the 2010 contract award — Harris CapRock of Fairfax, Va.; Artel Inc. of Reston, Va.; Globecomm Systems of Hauppage, N.Y.; and Segovia Inc. of Herndon, Va. — that while it could not address their concerns at the time, the FCC would take up the issue at some later date.
Three years later, it is not clear whether any of the protesting companies, some of which are now under new ownership, will pursue the allegations they made in 2010. The FCC has given them and others until July 7 to make their case.
Harris CapRock, whose complaints about Intelsat in 2010 formed the basis of the current inquiry, on June 14 issued a statement saying, in effect: Never mind.
“In April 2010, Harris CapRock, which was then a privately-held company, was one of several parties who provided comments in response to the public notice issued in preparation for the Eleventh Orbit Act Report. More than three years have passed since comments were filed with the FCC. We are now part of Harris Corporation and focused on other business matters. Harris CapRock supports level playing fields in all the markets we serve, and believes that competition benefits customers by driving innovative, cost-effective solutions.”
But the FCC is not only looking at Intelsat’s relationship with Intelsat General to assess whether vertical integration is good for the industry. Its inquiry has widened to include common fleet management practices adopted by all the major operators, not just Intelsat.
The specific issue is “warehousing” of capacity. In the example used by the FCC, a satellite fleet operator forced to replace a satellite nearing the end of its service life will occasionally send another aging satellite into the slot rather than systematically building a new spacecraft.
Satellite operators call this routine fleet management, but the FCC has heard complaints that the practice denies consumers of satellite capacity access to the latest technology at highly prized orbital positions.
According to this reasoning, the FCC’s long-standing practice of allowing a satellite operator to keep a given slot so long as a satellite is maintained there — international regulators also follow this policy — gives squatters’ rights to incumbent operators regardless of whether they are maximizing the use of the slot and its assigned frequencies.
“[W]e have seen a large increase in the number of license extension requests to operate particular satellites up to a decade beyond their original license terms,” the FCC says. “Since 2010, we have received nearly two dozen applications that involve potential warehousing issues.”
It also says operators sometimes leave slots vacant, holding on to the spectrum rights, while they decide what satellite to use as a replacement.
“[S]hould we adopt a rule that declares unused spectrum available for reassignment as soon as the service is terminated unless an operator can demonstrate it terminated the service because of a catastrophic, unforeseen circumstance?” the FCC asks. It suggests that a 90-day grace period would be allowed before an operator would be forced to surrender its rights to a previously occupied slot.
Most, but not all, of the examples of potential warehousing cited by the FCC involve Intelsat, which is headquartered in Luxembourg but has its main management and operations facility in Washington.
In a June 12 statement, Intelsat said it anticipated the FCC inquiry following the 2010 protests but sees no grounds for alleging that its management of its spectrum and orbital slots have constricted the market.
“There is no shortage of evidence supporting our view that the satellite industry is fully competitive, not the least of which is the number of new entrants launching satellites into orbital locations over the past several years,” the Intelsat statement says. “Our decisions with respect to the deployment of our satellite assets, in which we have invested over $3.5 billion over the 2008-2012 period, are based upon the competitive environment and the mission-critical communications needs of the customers. … We will provide comments [to the FCC] in due course.”
An official with one satellite fleet operator that regularly competes with Intelsat said Intelsat’s share of the global fixed satellite services telecommunications market in the past five years has shrunk, not grown, as has been the case forof Luxembourg, of France and Telesat of Canada, the other big fleet operators with near-global presence.
This official, who asked that his company not be named — “We’d prefer that this be seen as an Intelsat issue” — said moving satellites around in orbit is done to maximize revenue potential. “If we saw business opportunity that we were not seizing with a given satellite, why would we not put a new satellite there?”