TELEDESIC WANTS FCC AND COURT TO LIMIT RELOCATION COMPENSATION

FCC said it modified rules on allocation of radio spectrum shared by satellite and terrestrial users in 18 GHz band to facilitate new uses of spectrum that wasn’t feasible when it was shared. To implement new allocation, Commission adopted limited grandfathering rules governing manner in which existing users could continue uses that were nonconforming under new allocation plan. FCC also adopted rules for new users. Commission made original determination in order based upon “need to provide incentive to terrestrial operators to clear spectrum,” for satellite operators, attorney said: “We had to balance a number of considerations. Relocation didn’t mandate windfalls.” Judges criticized Commission attorney because court wasn’t informed of Thurs. reconsideration order. They also seem to be concerned about pending rulemakings that could have negative effect on their final decision. Arguments were heard by Circuit Judges Harry Edwards and Raymond Randolph and Senior Judge Stephen Williams.

Commission said relocation policy wasn’t intended to provide just compensation for existing users that must relocate, as Teledesic argued. Rather, it said, it was spectrum management tool designed to make spectrum available to new services without disrupting or economically crippling equally valuable existing services. Requirement that new users such as Teledesic provide existing users with comparable facilities when they were required to relocate were reasonable and consistent with past FCC decisions, brief said. Commission has “broad discretion to make such judgments in rulemaking.”

Intervenor Fixed Wireless Coalition was disappointed court spent so much time on procedural issues raised by recent Commission reconsideration. “We would have rather the court grapple with substantive issues,"attorney Mitchell Lazarus told us. More important, he said, is deciding “appropriate compensation for relocation.” He said Teledesic’s market value and book value tests were “equally wrong.” Lazarus said “appropriate test for comparable equipment is equipment that lets the incumbent operator continue providing service without out of pocket” expenses: “We're not looking for gold-plated equipment. We just want to keep operating.” Lazarus said “fact that Teledesic is coming in shouldn’t cost us money. This equipment is very durable and works fine for many years after it’s depreciated.” It’s worth more than book value, he said.

Teledesic said fees didn’t take into account relocation costs and said Commission had failed to consider ways to mitigate costs before making ruling, even though it had received specific proposals. “Negotiation process guarantees windfall” for terrestrial incumbents, Grannis told 3-judge panel. Present rules will give companies “more money than their economic loss.” Commission should set fees at level that’s at level of their economic loss, Grannis said: “Under current rules, it’s not in the best interest of incumbent terrestrial companies to negotiate in good faith. They have no incentive to take anything less than an upgrade” for equipment. He said current rulemaking could cost Teledesic $150-$200 million. Fees could be prohibitive factor in meeting milestones to start service by Sept. 2004 initial rollout and 2007 deadline for entire system. “This case is about economic rationality, not technical questions of spectrum management,” Teledesic said.

Meanwhile, ICO Global and New ICO said they finalized merger agreement. ICO Global, previously known as ICO- Teledesic, also agreed with Teledesic to end proposed merger to allow both companies greater flexibility in current economic market. In May 2000, ICO Global proposed merger of companies. CEO Craig McCaw said it was “prudent to keep” ICO and Teledesic “independent as the needs for satellite services continue to evolve in the changing international landscape.” Merger of 2 may be re-evaluated in future, companies said. ICO Global-New ICO merger is subject to approval by ICO Global shareholders.