WASHINGTON — Intelsat, SES and other satellite operators could receive up to $14.7 billion to cover the cost of losing C-band spectrum and to expedite transitioning those airwaves to 5G cellular networks.
The FCC plans to auction 280 megahertz of satellite C-band spectrum to 5G cellular networks Dec. 8, and will allow satellite operators to collect up to $9.7 billion in incentive payments if they help speed up the spectrum transfer, Chairman Ajit Pai said Feb. 6.
Those incentive payments would be in addition to $3 billion to $5 billion to pay for new satellites, signal filters and other technologies needed to ensure satellite operators can provide with just 200 megahertz of spectrum the services they currently provide with 500 megahertz.
“It’s only fair that every single reasonable cost should be covered,” Pai said at an event hosted by the Information Technology And Innovation Foundation here. “So, under my draft rules, the winning bidders in the C-band auction would be required to reimburse satellite operators for their reasonable relocation costs.”
The commission is justified in offering incentive payments to satellite operators, on top of those clearing costs, because their assistance in clearing C-band would make the spectrum available faster than the FCC could otherwise anticipate, Pai said.
Without incentive payments, the FCC calculates it could have 280 megahertz of C-band repurposed for 5G by September 2025. Satellite operators will get incentive payments if they can clear the first 100 megahertz of the C-band by September 2021, and the remaining 180 megahertz by September 2023, he said. Another 20 megahertz would serve as a guard band.
“We aren’t just asking the incumbents to move their services to the upper 200 megahertz of the C-band; we want them to do that quickly, in order to free up spectrum for 5G sooner rather than later,” Pai said. “This transition will be much faster if we can create powerful incentives for incumbent operators to expedite that transition, and to make sure they follow through. They would only be paid the full amount if in fact they did so.”
Pai said those incentive payments would come from 5G cellular bidders who want the spectrum. The FCC will vote on its plan at a Feb. 28 open meeting.
The FCC was not motivated to allow incentive payments based on the financial health of the companies it might affect, Pai said.
“The balance sheets of private companies are not my concern,” he said. “I favor accelerated relocation payments because they are in the public interest.”
The day before the FCC’s Feb. 6 announcement, Intelsat’s stock price dropped by a third at one point after Bloomberg reported the satellite operator had hired the law firm Kirkland & Ellis LLP to prepare a Chapter 11 bankruptcy filing in the event Intelsat, which has $14.7 billion in debt, cannot obtain significant incentive payments.
Intelsat vice president of investor relations Dianne VanBeber did not respond to a Feb. 6 SpaceNews inquiry about the Bloomberg report.
In a Feb. 6 news release, Intelsat CEO Steve Spengler said Pai’s draft order “represents a significant milestone in a process that we began in 2017.”
“We look forward to reviewing the draft order, once issued, to place Chairman Pai’s comments in full context,” Spengler said. “We note with appreciation the hard work of all stakeholders to get to this juncture, and the work to come leading up to the Commission’s vote on February 28, 2020.”
The C-Band Alliance, comprised of Intelsat, SES and Telesat, issued a similar statement.
“Today’s comments by Chairman Pai are a significant development in this important proceeding,” the alliance said Feb. 6. “We look forward to reviewing the draft order, once issued, to place Chairman Pai’s comments in full context.”
Pai said the FCC sees no need to wait for Congress to legislate a decision on C-band, believing it has a “strong legal foundation” under the Communications Act of 1934 to proceed with the auction.
“Waiting for Congress to act first isn’t the best strategy,” he said. “In fact, some might call it the absence of a strategy.”
Last month, Sens. John Kennedy (R-La.), Brian Schatz (D-Hawaii) and Maria Cantwell (D-Wash.) introduced the Spectrum Management And Reallocation for Taxpayers (or SMART) Act, that would cap spectrum clearing reimbursements at $6 billion, inclusive of $1 billion in accelerated clearing incentive payments.
A competing bill, The 5G Spectrum Act of 2019 (S. 2881), introduced by Senate Commerce Committee Chairman Roger Wicker (R-Miss.) in November, would require at least 50% of any C-band proceeds go to the U.S. treasury, but would place no cap on what satellite operators could receive. The bill cleared the Senate Commerce Committee in December, but lacked bipartisan support.