FCC GRANTS R/L DBS 3-YEAR EXTENSION FOR SERVICE
R/L DBS Co., formerly Continental Satellite Corp., received 36-month extension from FCC Thurs. to start alternative DBS service that has struggled to get off ground during past 4 years. R/L argued in request for extension that legal haggling, FCC delays and changes in market had made it difficult to raise money to launch satellite and meet milestones. Company said it has invested $30 million in DBS business, including $14 million toward design and construction of satellite. EchoStar, which opposed Commission action, questioned whether $14 million payment “constituted significant effort” toward building $250 million satellite. EchoStar also said $15 million went toward acquisition of Continental stock by Loral and R/L DBS hasn’t made additional progress toward arranging remaining financing for satellite. Under terms of its construction permit, R/L DBS originally was required to be in operation by Aug. 15, 1999. Commission said additional time will allow company opportunity to implement “innovative, regionally targeted” DBS service.
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With lower channel capacity than DBS incumbents EchoStar and DirecTV, R/L plans to serve “niche” market that’s being “overlooked.” Plans call for R/L DBS to offer package of locally oriented programming to major metropolitan markets in eastern U.S. Service requires 17 different spot beams, and delays were justified because R/L DBS was waiting for new technology. While half-CONUS R/L DBS satellite has “geographic limitations,” Commission said proposed service offers consumers “unprecedented” DBS offering which could “enhance commercial viability” of R/L DBS. FCC said “prodigious number of legal struggles” and “cloud of uncertainty” prevented company from developing “definitive” business plan.
R/L was engaged in litigation for past 4 years over who owns assets and rights to spectrum license. Issue was resolved in May, 1997, when former adversaries Rainbow and Loral formed R/L DBS joint venture to develop Continental system that was being disputed. Combined venture inherited right to purchase Continental’s DBS permit outright. FCC said licenses had “long and tortuous history” that stems from efforts by Continental to obtain equipment and programming for its system. In comments, former Continental CEO James Dixon supported 2-year extension, but opposed alternative lease arrangement. He also objected to assignment of DBS assets to R/L DBS.
FCC originally issued license to Continental Satellite Corp. for 2 satellite DBS system and International Bureau assigned 11 DBS channels to Continental at 166 degrees W.L. and 61.5 degrees W.L. in Aug. 1995. In Nov. 1995, Continental received 4-year extension because govt. delay in assigning channels had made it difficult for company to proceed with construction of satellite. Continental voluntarily surrendered 11 western channels at 166 degrees W.L. Before that, Continental entered into agreement with Ford Aerospace in July, 1990 for construction of DBS satellite in exchange for 51% of Continental stock if payments for satellite were waived. When payments were waived, Ford and its successor, Loral Aerospace, gained paid options to acquire controlling interest of Continental, but in April 1992 Continental signed alternative contracts with Rainbow Programming Holdings to obtain video programming for its service. Under contracts, Continental would either lease or assign its DBS system to Rainbow. Shortly after Rainbow agreements were executed, Dixon was removed by shareholders. New management team attempted to reverse Ford/Loral and Rainbow contracts which started flurry of legal activity.