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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** DA 95-944 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Advanced Communications Corporation Application for Extension of Time to Construct, Launch and Operate a Direct Broadcast Satellite System Application for Consent to Assign Direct Broadcast Satellite Construction Permit from Advanced Communications Corp. to Tempo DBS, Inc. Application for Modification of Direct Broadcast Satellite Service Construction Permit File Nos. DBS-94-11EXT DBS-94-15ACP DBS-94-16MP MEMORANDUM OPINION AND ORDER Adopted: April 26, 1995 Released: April 27, 1995 By the Chief, International Bureau: I. INTRODUCTION 1. For more than a decade, Advanced Communications Corporation ("Advanced") has had authorization to provide the public with Direct Broadcast Satellite (DBS) service. The Commission has allocated scarce public resources - - orbital positions and channels - - to Advanced so it could provide such service. Advanced paid nothing for these resources. It was obligated only to proceed with due diligence to provide the promised service. After more than a decade, Advanced has not provided, and is not close to providing, DBS service. It has failed to meet its due diligence obligation. Advanced must now return the public resources it holds to the public so that these resources can be put to use by others. 2. Advanced has filed an application for a second four-year extension of time in which to construct, launch, and initiate service from its DBS system. Advanced has also filed an application for consent to assign its construction permit to Tempo DBS, Inc. (Tempo DBS). Finally, Advanced has applied for authority to modify its construction permit to allow it to substitute satellites now being constructed for Tempo Satellite, Inc. Dominion Video Satellite, Inc. (DVS), EchoStar Satellite Corporation (EchoStar), DIRECTV, Inc. (DirecTV), and Directsat Corporation filed objections to Advanced's applications; Tempo Satellite and Nevada Direct Broadcasting System (Nevada) filed supporting comments. Advanced filed replies to the objections. 3. Advanced has had over ten years, including one four-year extension, in which to construct and launch its DBS system. It has failed to do so. It has thereby failed to meet the Commission's due diligence rules - - imposed a decade ago - - which are to ensure that the public receives prompt DBS service. In the meantime, the channels and orbital positions assigned to Advanced have gone unused. Other DBS licensees have already begun operations. 4. Only by enforcing the progress requirements of the Commission's rules can we ensure that allocated resources will be efficiently and expeditiously put into productive use. In the past, we have given DBS permittees latitude in meeting due diligence deadlines in order to ensure the development of DBS services. As the Commission has previously stated, however, such latitude is not appropriate in an era in which DBS licensees are successfully operating and are competing for subscribers. Accordingly, we deny Advanced's application for an extension of time and declare its construction permit null and void. We dismiss, as moot, the pending assignment and modification applications. II. BACKGROUND 5. In 1984, Advanced applied for authority to construct and launch a DBS system as part of the second processing round of DBS applications. The Commission granted the application subject to the condition that Advanced "proceed with the construction of its system with due diligence as defined in Section 100.19(b) of the Commission's rules." 47 C.F.R.  100.19(b). The due diligence requirement has two components. First, the DBS permittee must begin or complete contracting for construction of its satellites within one year of the grant of its construction permit. Second, the permittee must begin operation of the satellites within six years of the grant of its construction permit, unless otherwise determined by the Commission. Section 100.19(b) provides that a transfer of control of the permit is not a justification for extension of either of these deadlines. Orbital positions and channels are not assigned to a DBS permittee unless and until it demonstrates that it has fulfilled the first component of the due diligence requirement. Processing Procedures Regarding the Direct Broadcast Service, 95 F.C.C. 2d 250, 253 (1983). 6. In October 1986, the Commission found that Advanced had complied with the first component of the due diligence requirement by contracting for the construction of its first two DBS satellites. Advanced was ultimately assigned to the 110o W.L. orbit location (channels 1-23, 25, 27, 29, 31) and 148o W.L. (channels 1-17, 19, 21, 23, 25, 27, 29, 31). In February 1990, Advanced applied for a four-year extension of time, until February 1994, in which to construct and operate its DBS system. The Commission granted this request, extending the deadline until December 7, 1994. 7. In August 1994, Advanced applied for another four-year extension of time, until December 1998, in which to construct and operate its system. In September 1994, Advanced filed an application for consent to assign its construction permit to Tempo DBS. In October 1994, Advanced filed an application to modify its construction permit to change the technical design of the Advanced satellites to duplicate the design of satellites then under construction for Tempo Satellite under a separate DBS authorization. 8. Dominion, EchoStar, and Directsat oppose Advanced's extension request. They contend that Advanced has not met the first component of the due diligence requirement because Advanced's contract with Martin Marietta does not meet due diligence requirements, delays in construction were not due to circumstances beyond Advanced's control, and Advanced has "warehoused" its authorized frequencies. They argue that Advanced has no valid construction permit and that Advanced's applications for assignment and modification should be declared moot. Directsat and Echostar maintain that Advanced failed to initiate operation due to business decisions within its control, that Commission precedent precludes grant of an extension of time request based on Advanced's failure to attract investors, and that grant of the extension request would prejudice permittees who have significantly passed Advanced in progress toward initiation of DBS service. Dominion argues that under Commission rules, transfer of control of an authorization does not warrant grant of a request for extension of time. III. DIS CUSSION Extension Request 9. In adopting rules and policies for DBS service, we determined that a due diligence requirement would ensure that permittees would go forward expeditiously. Accordingly, Section 100.19(b) of the rules for DBS service, 47 C.F.R.  100.19(b), states that transfer of control of the construction permit will not justify extension of due diligence deadlines. We later noted that "the rule was intended to ensure the prompt initiation of DBS service for the public, and must be enforced where permittees are allowed to hold spectrum resource for which other applications exist." 10. During the "pioneering era" of DBS technology in the 1980's, the Commission granted numerous extensions of due diligence milestones. The Commission was reluctant to cancel construction permits where permittees failed to initiate DBS service "in accord with a pre-established timetable set without the benefit of experience." As technology developed, however, the Commission gave permittees notice that they could not expect additional extensions. We said in 1988, "[a]s circumstances have evolved and demand for DBS facilities may be increasing beyond the available supply of orbit/channel resource[s], there does now appear [to be] a need for stricter enforcement of the construction progress requirements of the DBS rules." 11. In ruling on requests for extensions of time, the Commission has stated that "[t]he totality of circumstances - those efforts made and those not made, the difficulties encountered and those overcome, the rights of all parties, and the ultimate goal of service to the public - must be considered." In granting Advanced's 1990 extension, the Commission relied on the substantial developments in DBS satellite technology, the Commission's development of its policy regarding channel and orbital assignments, and the Challenger and Ariane launch vehicle failures of the late 1980's. The Commission warned, however, that "continued reliance on experimentation, technological developments and changed plans will not necessarily justify an extension of a DBS authorization." It further warned that it would "closely scrutinize all requests for extension of time within which permittees must initiate DBS service." 12. Advanced asserts that a second extension is justified under the Commission's rules (and is consistent with similar extensions previously granted) because it has made "considerable efforts" to develop DBS service, it has pursued a joint venture agreement, and any delays have been due to circumstances beyond its control. Advanced also implies that the progress Tempo Satellite has made in constructing its satellites should be attributed to Advanced and that these efforts constitute a "proper showing" on which to base an extension. 13. Advanced first argues that an extension is warranted in light of its efforts to reach a joint venture agreement over a nearly three-year period beginning in 1992, even though these negotiations ultimately failed. The Commission has previously found that on-going negotiations do not justify an extension of due diligence milestones. Failed negotiations surely should fare no better. In denying an extension to another DBS permittee, we held that "failure to attract investors, an uncertain business situation, or an unfavorable business climate in general have never been adequate excuses for failure [to] meet a construction timetable in other satellite services." 14. Advanced also asserts that construction was delayed because it needed to modify its system design. In granting Advanced's first extension request, however, the Commission advised Advanced that its decision to modify its technical proposal was a business decision wholly within its control that would not generally excuse its failure to meet the due diligence requirement. To conclude otherwise would allow permittees to "extend indefinitely their nonperformance by repeated modifications of their proposals." DBS technology has evolved to the point where permittees can make design decisions and proceed with construction with relative assurance that their system will be technologically competitive when it is launched. In fact, two permittees have launched DBS systems, which are both already providing service. Advanced has not explained why it did not make similar design decisions for its system, or why such decisions were not wholly within its control. Accordingly, we do not find that continued modifications to Advanced's system warrant an extension of time. 15. Advanced further contends that an extension is justified because the company has expended considerable funds and "countless hours" to implement its system. Advanced asserts that the Commission has granted extensions under similar circumstances, citing United States Satellite Broadcasting Company, Inc. In that case, the Video Services Division of the Mass Media Bureau, in considering the "totality of the circumstances," found that the permittee, USSB, (1) had expended $23 million, including a substantial payment towards spacecraft construction; (2) had demonstrated that the remaining financing for the completion and launch of the satellite had been arranged; and (3) had executed launch and various supplier contracts. Advanced, in contrast, has not specified how much money it has spent, has not arranged financing, and has not procured a launch contract. Advanced has failed to show that its progress constitutes sufficient justification for a further extension of time. To the contrary, it appears that Advanced wants to abandon its business to Tempo DBS. 16. Advanced further states that it should be granted an extension because it has "remained in due diligence" since we found it had met the first component of the due diligence requirement by executing a construction contract. The facts belie this conclusory assertion. The due diligence requirement consists of two components. The fact that Advanced continues to have a binding construction contract, or that it has made all payments required by this contract, does not excuse its failure to meet the second part of its due diligence requirement: operation of its direct broadcast satellite system. Meeting the first due diligence requirement does not justify failing to fulfill the second. 17. Advanced also asserts that the Commission's formulation of its channel assignment policy and the delay in granting previous modification requests constitute circumstances beyond its control and warrants an extension of time. However, the channel assignment policy was clarified in 1989. Advanced's proposed modifications to its orbit locations and channel assignments were granted in 1991. Advanced has not cited any circumstances that impeded its ability to construct its system over the last four years. Advanced has failed to show that delay in meeting the second component of due diligence is due to circumstances beyond its control. 18. Finally, Advanced asserts that an extension of its construction permit would be in the public interest, since it is on the threshold of an advanced DBS system which will benefit the public, and because doing so will promote the efforts of those who have worked to create the DBS industry. To do otherwise, Advanced argues, would discourage innovators in all new technological industries. 19. A further extension would not serve the public interest. Advanced has made little progress in construction, launch, and initiation of a DBS system in the past decade. During the same period, two DBS satellites have been launched and construction of others is underway. There is no benefit to the public in allowing Advanced to continue to waste orbital locations and channels while two permittees have already initiated DBS service. 20. Advanced's current authorization required it to begin operation of a satellite by December 7, 1994. It failed to do so. The "totality of the circumstances" presented by Advanced in its extension request does not justify granting additional time in which to begin operation. Accordingly, we deny Advanced's request for an extension of time to construct, launch, and operate a direct broadcast satellite system. Because Advanced has failed to satisfy this express condition of its construction permit, the permit is null and void by its own terms. B. Other Applications 21. Inasmuch as we have concluded that Advanced's permit is null and void, its pending applications for assignment of that permit to Tempo DBS and related modification application are moot and are accordingly dismissed. To the extent Advanced suggests that construction progress on Tempo Satellite's DBS satellites should be considered favorably in evaluating Advanced's extension request, we disagree. The Commission has based previous extensions of time on a finding that the efforts made by the permittee "reveal[ ] no lack of capability or commitment" to establish its DBS system. Tempo Satellite's construction progress is irrelevant in determining whether Advanced should be granted an extension of time in which to construct and operate Advanced's satellites. Moreover, we believe it would contravene the public interest to consider Tempo Satellite's construction progress in assessing Advanced's extension request. To do so would reward permittees' inaction or failure to comply with implementation milestones. Such warehousing precludes the use of channel and orbital assignments by other service providers, and will ultimately result in delays in service to the public. 22. In its opposition to Advanced's petition for extension of time, DBSC requests that some of Advanced's cancelled channels be assigned to DBSC. DBSC's request was not made within any designated filing period for modification applications, and is hereby rejected. We will soon issue a notice regarding the reallocation of cancelled channels and available orbital positions. V. ORDERING CLAUSES 23. Accordingly, IT IS ORDERED, pursuant to Section 0.261 of the Communications Act of 1934, as amended, 47 U.S.C.  0.261, that the Application File No. DBS-94-11-EXT IS DENIED and the construction permit issued to Advanced Communications Corporation in Satellite Syndicated Systems, 99 F.C.C. 2d 1369 (1984) IS DECLARED NULL AND VOID. 24. IT IS FURTHER ORDERED, that Application File Nos. DBS-94-15ACP and DBS-94- 16MP are DISMISSED AS MOOT. FEDERAL COMMUNICATIONS COMMISSION Scott Blake Harris Chief, International Bureau