PARIS — TerreStar Networks’ European subsidiary is seeking to overturn a European Commission decision to reject TerreStar’s bid for a license to provide S-band mobile satellite services in
Europe, saying commission officials apparently misunderstood a key element of the company’s bid.

The company has appealed to the European Court of First Instance in Luxembourg, asking the court to annul the May 14 European Commission selection of two TerreStar competitors, Solaris Mobile of Dublin, Ireland, and Inmarsat of London, to receive operating licenses in Europe.

The TerreStar move further complicates what was touted by European Telecoms Commissioner Viviane Reding as “the first pan-European [frequency] selection procedure, developed in close cooperation with the European Parliament and Member states.”

The other losing bidder, ICO Global of Reston, Va., had previously asked the same court to block the European Commission bidding process, saying the commission declined to recognize ICO’s legacy S-band rights resulting from the launch, in 2001, of a medium Earth orbit satellite.

ICO’s appeal has been viewed by some at the European Commission as a nuisance action insofar as ICO’s regulatory sponsor, Britain’s Ofcom agency, has indicated it would withdraw its support for ICO, which in recent years has made little progress in completing its intended 12-satellite constellation in medium Earth orbit.

London-based TerreStar Europe, a subsidiary TerreStar Networks of Reston, Va., is basing its court appeal on allegations that the commission – in what TerreStar said looks like a conscious decision to reject a U.S.-based bidder – confused one TerreStar satellite with another.

In a May 28 interview, TerreStar Networks General Counsel Douglas Brandon said TerreStar told the commission that it would use the TerreStar-2 satellite, on which initial work has begun, as the company’s European spacecraft.

TerreStar-1, featuring a 20-meter-diameter unfurlable antenna, has been shipped to Europe’s Guiana SpaceCenter spaceport in preparation for a late-June launch as the solo passenger aboard an Ariane 5 rocket.

Under its U.S. license, TerreStar must complete construction of a second satellite, to be stored as a ground spare, within one year of beginning TerreStar commercial service using an Ancillary Terrestrial Component, or ATC. An ATC is a network of ground-based repeaters that permit signal reception in urban canyons, inside tunnels and other areas where users are not in line-of-sight view of the satellite.

As is the case with other mobile satellite services providers in the United States, TerreStar has been unable to find strategic partners willing to invest the hundreds of millions of dollars needed to deploy a national ATC network.

That being the case, the work done on TerreStar-2 was integrated into TerreStar’s European S-band license application.

But according to TerreStar, the commission discounted TerreStar-2 and concluded that TerreStar had not met the deadline for start of a critical design review of the European satellite.

“The commission acted in breach of the principle of good administration by not even attempting to clarify” the situation, TerreStar said in a May 28 statement. TerreStar said that, as was required by the commission, the company provided excerpts of its satellite manufacturing agreement to prove that the critical-design-review milestone had begun.

“But the commission decided not to ask for the full copy of the agreement, preferring instead to exclude TerreStar from the selection,” TerreStar said in its May 28 statement. “Worse, the commission ignored the clarifications and copy of the agreement immediately submitted by TerreStar when it heard of the misunderstanding by the commission.”

In its May 14 announcement declaring the two winners, the commission said it made its ruling “with the assistance of independent external experts” who evaluated “whether the applicants demonstrated the required level of technical and commercial development of their satellite systems.”

Brandon said TerreStar has asked for, and been granted, expedited treatment by the Luxembourg court so as to avoid an undue slowdown of the licensing process.

Solaris Mobile has already launched its S-band satellite, although its coverage area does not include all 27 European Union nations as required by the commission. The second winner, Inmarsat, is no further along in the construction of its satellite than is TerreStar on TerreStar-2, and Inmarsat officials have said the company will not commit to a significant capital investment until it has struck deals with partners willing to co-invest in the project.

The European Commission is nonetheless sticking with its demand that all licensees complete deployment of their systems “by May 2011 at the latest.”

Peter B. de Selding was the Paris bureau chief for SpaceNews.