Intelsat Urged to Oppose C-Band Clearing Plan Terms

"The token compensation offered to Intelsat is an affront when compared to the values achieved in auctions of comparable spectrum across the globe over the past decade," Appaloosa President David Tepper wrote Intelsat's board in a letter released Tuesday. The hedge fund -- which owns 7.4 percent of Intelsat's common stock -- said that some proposed terms are "manifestly unfair to Intelsat," including the requirement satellite operators "front billions of dollars of expenditures" to clear spectrum when reimbursement will start in May 2021 at the earliest, and that the bulk of the accelerated relocation payments come in the second phase, though the most useful and valuable spectrum portions will be cleared in the first. Appaloosa said it's also problematic that satellite operators are subjected "to an all-or-none requirement" under which if even a slight amount of spectrum isn't cleared by the deadline, they face big financial loss, while overlay licensees could get a windfall on a potential technicality.

Without getting fairer terms from the FCC, Intelsat's other option is "bankruptcy and litigation" to protect its spectrum license rights from an illegal modification, Tepper said.

The way the FCC described how the up-to $9.7 billion in accelerated spectrum clearing incentives would be divvied up -- with no specific formula or justification -- makes it clear Intelsat negotiated those terms with the FCC and other satellite operators, emailed spectrum and satellite consultant Tim Farrar. "So Intelsat would lose all credibility with the FCC if they walked away now."

Also resisting the draft order are small satellite operators ABS, Hispasat and Claro. In a docket 18-122 posting Tuesday, they said the band plan confiscates their spectrum usage rights without reimbursement and arbitrarily awards their competitors much more than allowed under a reasonable application of the emerging technologies framework. Expanding on their previous objections to the band-clearing plan (see 2002130061), the SSOs said losing access to most of the spectrum previously enjoyed under their licenses is the opposite of seeing their investment being reasonably protected, and making operators whole requires more than reimbursement of customer-relocation expenses. They argued against reimbursing Intelsat and SES for new satellites, saying the need for them "is in no way 'transition-related'" since most if not all would be launched anyway. The fixes are simple, they said: require spectrum bidders to compensate incumbent satellite operators for actual, not inflated, relocation costs; require relocation by the 2021 and 2023 deadlines using at most $2.2 billion in accelerated relocation incentives; and have bidders compensate incumbent satellite operators at least $1.2 billion for their lost spectrum usage rights.

Competitive issues are being raised by various parties in filings at the FCC, as is typical for auctions. The draft order portrays partial economic area licenses as a compromise because they're smaller than economic area licenses, the Wireless ISP Association said in a letter posted Tuesday. That “ignores the fact that there are other compromises available that could enable more meaningful participation by smaller companies, including WISPA’s members, that desire to serve rural counties,” the group said: “Allowing bidding at the county level instead of at the PEA level for up to four channel blocks strikes a better balance.”

The Competitive Carriers Association, NTCA, Incompas, WISPA and the Computer & Communications Industry Association filed a letter at the FCC Tuesday calling for limits on how much any bidder can buy. “The Commission’s draft Order asserts that an aggregation limit would ‘unnecessarily restrict providers’ ability to participate in the auction and acquire spectrum in this band,’” the letter says: “But the lack of an aggregation limit is far more likely to restrict participation in the auction. If operators do not believe that they have a genuine possibility of acquiring the spectrum that they need, they will be discouraged from participating at all.”

Verizon told the FCC it should avoid bright-line limits on how much C-band spectrum a single provider can buy. “Rigid pre-auction limits would flip existing precedent on its head,” Verizon said: “Arbitrary spectrum aggregation limits undermine innovation and investment by preventing operators from acquiring the spectrum needed to serve the marketplace.” T-Mobile earlier advocated “a spectrum aggregation limit for the initial tranche of one-third of the spectrum that will be made available in that tranche,” saying spectrum auctions in other countries “have highlighted the success of spectrum aggregation limits in promoting auction participation and competitive bidding.” Verizon said T-Mobile’s advocacy is ironic since it's likely to pick up large amounts of 2.5 GHz spectrum from its buy of Sprint.

The FCC should take a closer look at potential harmful interference to operations in the citizens broadband radio service band by C-band operations, the Industrial IoT Coalition said The coalition includes Motorola Solutions, utility groups and the Enterprise Wireless Alliance.