FCC’s $9.7 billion C-band incentive hinging on Intelsat and SES participation 

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WASHINGTON — The FCC says it will scrap a $9.7 billion spectrum clearing incentive package approved last week if Intelsat and SES don’t both agree to the terms. 

Satellite operators Intelsat, SES, Eutelsat, Telesat and Embratel Star One are eligible collectively to win up to $9.7 billion in accelerated payments if they can clear 300 megahertz of C-band spectrum by Dec. 5, 2023 — two years faster than the FCC’s deadline.

But according to a final plan the FCC released March 3, companies eligible for at least 80% of the accelerated clearing payments must participate in order for the program to proceed.

Eutelsat, Telesat and Embratel Star One only account for 9% of the accelerated clearing payments, meaning the FCC’s threshold requires Intelsat and SES involvement. 

Payment allocations set

The FCC is offering the $9.7 billion in accelerated clearing payments to encourage satellite operators to vacate 300 megahertz of C-band spectrum more quickly to make way for cellular networks’ 5G services. The clearing payments are in addition to relocation costs, estimated at up to $5.2 billion in the FCC’s plan. Relocation costs include buying new spacecraft, satellite dishes and other equipment to continue offering service with less spectrum. 

Intelsat is eligible for $4.87 billion in accelerated clearing payments, up $13.6 million from the FCC’s original plan, but a far cry from the $5.8 billion to $6.5 billion the company sought in recent weeks. 

Virginia and Luxembourg-based Intelsat has a shareholder, Appaloosa, that took a 7% stake in the company last month with the express purpose of pushing Intelsat to argue for a bigger chunk of clearing payments, even compelling the debt-riddled company to choose bankruptcy and litigation over FCC’s proposed deal. 

In the final plan released March 3, the FCC made small adjustments to the amount each company can receive for quickly vacating spectrum.

Intelsat remains eligible for 50% of the total $9.7 billion. SES’s potential winnings decreased by $23.7 million, but the Luxembourg company is still eligible for 41% ($3.97 billion). 

The FCC reduced SES’s amount and Canadian operator Telesat’s amount to provide modest increases in what Paris-based Eutelsat Communications and Brazilian operator Embratel Star One can earn. 

Eutelsat, which had lobbied for a tripling of its potential allotment, received a $39 million increase to $507 million. Embratel Star One’s amount increased by $1.4 million to a maximum of $15.1 million. 

Telesat’s accelerated clearing prize potential decreased by $30.4 million to a total of $344.4 million. 

The FCC said it was unconvinced by Intelsat’s argument that it deserves significantly more than half the $9.7 billion in accelerated clearing payments. Intelsat never voiced concerns about its amount of work to clear spectrum when it was part of the C-Band Alliance with SES, Eutelsat and Telesat in 2018, the FCC said. 

The four companies undertook a study in 2019 that became the basis for the FCC ruling on how alliance members would divide auction proceeds. At the time, the C-Band Alliance members were collectively pushing for a private auction where their gains would be higher than those under the public auction the FCC is now pursuing. 

Even though Eutelsat quit the alliance last year and Intelsat declared the group dead in February, the report remains the “single best proxy that we have for determining the relative contribution of each” satellite operator, according to the FCC. 

Late penalty reduced

The FCC’s Final Order on C-band did include a significant relaxation to the terms for companies that fail to meet the 2023 accelerated clearing deadline. 

Under the FCC’s draft rules, any company that missed the deadline would have forfeited all payments, a caveat satellite operators opposed. 

The FCC has adopted a sliding scale. Operators will keep most of their payments for small schedule slips and penalties increase for serious delays. Operators will forfeit 5% of their accelerated clearing payments if they are up to 30 days late, with losses accruing every additional 30 days. Any operator that is 121 to 150 days late would lose half their accelerated clearing payments. Any operator more than 180 days late would lose all payments.