Senator criticizes FCC’s $9.7 billion C-band incentive payment program

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WASHINGTON — A key U.S. senator who stymied Intelsat and SES’s proposal last year to privately auction a swath of public airwaves to 5G wireless providers took aim Tuesday at the billions in incentives the satellite operators now stand to receive for vacating the spectrum ahead of schedule.

During a June 16 hearing on the FCC’s C-band auction plan, Sen. John Kennedy (R-La.) said he doesn’t object to covering satellite operators’ relocation costs for vacating 300 megahertz of public airwaves that Verizon, T-Mobile and others intend to bid for this December. 

However, Kennedy — who oversees FCC spending as the chairman of the Senate Appropriations financial services and general government subcommittee — criticized the FCC for promising $9.7 billion in incentives to motivate satellite operators to clear the way for new 5G services up to two years ahead of a 2025 deadline.

“It seemed reasonable to me that we should pay their moving expenses, but we’re paying them a lot more, about $9 billion in ‘walking around money,’ and that money could be used to expand broadband … or simply pay down our national debt,” Kennedy told FCC Chairman Ajit Pai. 

The FCC estimates moving costs for Intelsat, SES, Eutelsat, Telesat and Embratel Star One — the five operators that proved to the commission they have C-band customers in the U.S. — will be $3 billion to $5 billion. The money is intended to cover the cost of upgrading ground systems and building and launching replacement satellites designed to work with just 200 megahertz of C-band spectrum instead of the 500 megahertz currently reserved for satellite broadcasting and other services. 

The FCC’s $9.7 billion incentive program, approved in February, is in addition to those reimbursable costs. The FCC said it will require mobile network operators that submit winning C-band spectrum license bids to pay more to cover those payments. The incentives, or accelerated clearing payments, were included to motivate satellite operators to migrate their customers out of the lower portion of U.S. C-band (from 3,700-4,000 megahertz) by Dec. 5, 2023, two years earlier than mandated. 

Intelsat, SES, Eutelsat, Telesat and Embratel Star One have all opted to participate in the program. 

Kennedy took issue with the FCC not requiring satellite operators to waive the right to sue as a condition of participating in the accelerated clearing program, which was structured in part to placate satellite operators who stood to gain even more from a private auction.

“I want to get your general counsel in here and lawyers in here,” Kennedy said to Pai. “I’ve never heard of somebody giving $10 billion to keep them from suing without them waving their claims and causes of action.”

Pai said that the satellite operators, by opting into the accelerated clearing program, have essentially ruled out litigation. 

“Although the incumbents electing these payments have not technically waived their right to litigation, they have forfeited it by agreeing to the election,” he said. 

Pai said he is not convinced that three non-participating operators currently suing the FCC — ABS, Hispasat and Arsat — will succeed, since none proved they had C-band customers in the United States to qualify for incentive payments. Those operators want the FCC to scrap its auction plans, saying it robs them of their spectrum rights, since each operator has at least one satellite with partial coverage of the United States. 

“I don’t believe that’s an eventuality that we are going to face,” Pai said.

Kennedy expressed concern that ABS, Hispasat and Arsat could still upend the FCC’s auction, and criticized the FCC for the amount the accelerated clearing program provides to other operators. 

“These companies were willing to give up something they didn’t own in exchange for billions of dollars,” Kennedy said. “I guess I shouldn’t blame them for not thumping a free melon and taking advantage of the offer. I blame us for not negotiating a better deal.”

Pai: no FCC authority to enforce American satellite orders

Kennedy also voiced displeasure with the absence of a “buy American” mandate for replacement satellites, which, like the incentive payments, will also be funded directly by winning C-band bidders. 

Pai said the commission cannot legally require satellite operators to order U.S.-built satellites to replace existing C-band satellites even though the FCC is ensuring the reimbursement of those satellite costs. 

Intelsat and SES announced earlier this week that they have ordered a total of 10 C-band satellites from three U.S. manufacturers. The satellites will be optimized for operating in a narrower swath of C-band spectrum.

Intelsat plans to order one more such satellite, and SES plans to order two. Recent statements from the companies suggest not all the replacement satellites will be built in the United States. 

“They promised to buy American satellites, did they not?” Kennedy asked Pai.

Intelsat and SES, together with Eutelsat and Telesat, did say in 2018 that they would exclusively order U.S.-built C-band replacement satellites, when they were working together as the C-Band Alliance in pursuit of a private spectrum auction where they would keep the auction proceeds. At the time, Intelsat and SES planned to order four satellites each, and lease or otherwise provide capacity to Eutelsat and Telesat, which use significantly smaller amounts of C-band capacity to serve their U.S. customers. 

Since then, the FCC announced it would run its own public auction and increased the amount of spectrum operators would cede to 300 megahertz, up from 200 megahertz. The C-Band Alliance, meanwhile, effectively collapsed in February when Intelsat became the second member to withdraw, leaving only SES and Telesat.

In the wake of those changes, which drove up the number of replacement satellites, Intelsat and SES have avoided saying they would exclusively buy U.S.-built satellites. 

“While we obviously can’t speculate on future contracts, it’s important to note that Intelsat has contracted with American manufacturers for the past 25 of its satellite builds, and we look forward to continuing to drive additional U.S. economic growth with our future contracts,” Intelsat spokeswoman Meghan Macdonald told SpaceNews by email in May. 

SES CEO Steve Collar said in a June 5 interview that SES’s orders would “be a good thing for the U.S. space industry,” but declined to say if all of its C-band replacement satellites would be built in the United States.

Intelsat has ordered six satellites, four from Maxar Technologies and two from Northrop Grumman, and has one more in negotiations with manufacturers. SES has ordered four satellites, two from Boeing and two from Northrop Grumman. 

Pai, replying to Kennedy, said the FCC would need “some sort of national security justification” to make buying American a requirement for being reimbursed for the C-band replacement satellites.