FCC to Study in New Docket Whether FSS Is Anticompetitive

Meeting federal communications goals depends significantly on satellite services, commissioners said in the two written statements filed with the report. With “the current state of these markets, the record is insufficient at this time to support a finding of ‘effective competition’ as required by Congress,” Commissioner Robert McDowell said. “On the other hand, as discussed in our recent order reforming part of the Universal Service Fund, the satellite industry is poised to play a key role in the broadband future. I look forward to continuing to develop opportunities to foster competition in this important market sector.”

Departing Commissioner Michael Copps expressed similar sentiments: “As the National Broadband Plan and our recent reform of the High Cost program make clear, satellite can play a key role in our broadband future. We must continue to foster competition in this unique and important sector of the communications market.” The withholding of findings of effective competition doesn’t bode ill for the accomplishment of current policy goals, and it has no implications for the possibility of additional regulation, officials of the FCC’s International Bureau, which produced the report, said on condition of anonymity.

Concerning FSS, “in some respects, the record contains insufficient information to allow us to make anything more than limited competitive findings and conclusions with respect to such key factors as satellite transponder capacity,” the report said. “Also, because of the limitations of the record before us, and because the evidence that is available has mixed implications, we cannot make meaningful findings at this time regarding the allegations of anticompetitive conduct made by resellers/integrators against FSS operator Intelsat. Yet, the complaints do raise sufficient public interest concerns to warrant additional analysis in a formal proceeding. Thus, we will initiate a follow-up proceeding to develop an adequate record that will allow for a more complete exploration of the anticompetitive issues raised.”

Bureau officials wouldn’t discuss the nature or timing of the proceeding, which also will look at another big FSS company, SES, and allegations of collusion between it and Intelsat. The work is of a kind that isn’t suited to inclusion in development of the competition report, said one. The FCC can undertake the proceeding under “multiple public-interest parameters” in “some of the authority of the Communications Act,” the official said, declining to elaborate.

The allegations against Intelsat go back years to a Defense Department contract award, noted Kalpak Gude, associate general counsel at the company. He called them meritless. Intelsat isn’t worried about the coming proceeding, because the company will be vindicated and the commission would have dealt with the same matters in the next competition report anyway, Gude said. “I have no idea why the FCC is pursuing this,” since it’s “not necessary or justified by the record,” he said, but “we are not worried about the results of the next proceeding.” SES didn’t get back to us right away, and a Satellite Industry Association spokeswoman said SIA executives were tied up running a conference.

"The report isn’t clear what a new proceeding would be intended to accomplish,” John Hane of the Pillsbury Winthrop law firm said by email. “Section 703 requires the FCC to report on satellite competition, but it doesn’t require or even authorize the FCC to regulate the market. And as a practical matter, any FCC regulations would be futile. Satellite is a global market, and operators can be licensed by any of dozens of countries. Access to the US market is governed by WTO commitments. So both legally and practically speaking, I don’t see much room for FCC action. This looks like a case of the FCC needing to get a report out, but not wanting to take a position on some of the allegations raised in the docket. There are dozens of orders in the FCC’s files that punt an unresolved issue to a future proceeding, but in many cases those proceedings never happen."

The FCC declined for different reasons in each case to characterize how competitive the satellite sectors are. The effects of outside forces on the one-player satellite radio market remain to be seen, and MSS is “in flux,” an official said.