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End of2cf XU W ",tB^ f ^6=U\\===\====\\\\\\\\\\==Qs~sm=Gsizbsw===\\=Q\Q\Q=\\33\3\\\\DG3\\\\QQ\Q\0\\\\\=\\\\\\\\\3QQQQQz~QsQsQsQsQ=3=3=3=3\\\\\\\\\\Q\\\\\i\Q\Q}Q}Q~\~\nrQs\s\rQ\\\\\\\=3\\\\=\f\\\r3rBs\u7r3\j\\\\yByBz\cFcFcFb\rBr3s\\\\\\\\uQuQuQ\s\\b\s\\n=\\===WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN\\\=QKK\\\\\\@\\\\@==__\00\\pp\\\mff=_\@"\_\4\==p=\\f\z\=\Q\iwUzpNm\QQ====psfpfzQsGwQ\Q=3QzffQz\Qpi\p\\sQQzpfppps=\pQpppp==\\\\\\\p=i\Q=Tgnj}}ccyyTjcc;T;TXFu2of djh&h8",tB^ f ^6=U\\===\====\\\\\\\\\\==\zznGXznfzz===\\=\fQfQ@\f3=f3f\ffQG=f\\\Q\\\\0\\\\\=\\\\\\\\f3\\\\\QzQzQzQzQG3G3G3G3f\\\\ffff\\g\\\\nf\\\QQ\\}yQz\z\yQ\\\\\ffF3\f\\Gfi\\fy3yIz\zGz3ggf\\QQ\gFfGgFf\yIy>z\fgffgf\yQzQyQfz\ff\z\\}=\\===WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN\\\=\NN\\\\\\@\\\\@==ii\00\\pp\\\sff=i\@"\i\4\==p=\\f\z\=\Q\i~XzpNm\\\====pzfpfzQzGzQQQG3QzffQz\Qpp\p\\zQQzpfpppzG\pQpppp==\\\\\\\p=p\Q=Tgnj}}ccyyTjcc;T;TXFu2 f ofhKZ{",tB^ f ^6=X\\===\====\\\\\\\\\\==\nnzni=Qzfznn\fnnff===\\=\\Q\Q3\\33Q3\\\\FF3\QzQQFQ\Q\0\\\\\=\\\\\\\\\3n\n\n\n\n\zzQnQnQnQnQ=3=3=3=3z\\\\\\\\\fQn\\\\fQ\n\n\n\n\yQyQz\z\nnQn\n\nQ\\\\\\\>3\\\\=\\\\z\g3gBf\g3g3y\ny\z\\\znFnFn\\F\F\F\\gBg3f\\\\\\\zf\gFgFgF\f\z\\\f\f\n=\\===WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN\\\=\UU\\\\\\@\\\\@==\\\33\\pp\\\b\\=\\@"\[\4\==p=\p\f\z\=\Q\iwUzpNm\QQ====pppfpfzQpGfQ\Q=3zQzffzQz\Qpp\p\\fQfQzppfppppp=\ffpQpppp==\\\\p\\\fffp=i\Q=Tgnj}}ccyyTjcc;T;TXFu S-  QK xP-#c PE37MP#Q #&m PE37&P#` `  hh,Vpp  DA 961943JO t!V Before the  Federal Communications Commission  S-Washington, D.C. 20554 lU  T-In the Matter of the Applications ofhh,V) ` `  hh,V)  T- ECHOSTAR SATELLITEhh,V ) pp File Nos.  36DSSLA94  Tq-CORPORATION  hh,V)pp  37DSSP/LA94  TJ -` `  hh,V)pp  154SATAMEND95  T" - ` `  hh,V)  T -For Authority to Construct, Launch and V)  T -Operate Space Stations in the Domestic V)  T -FixedSatellite Service hh,V)  S -  MEMORANDUM OPINION AND ORDER lU  T- Adopted: November 20, 1996hh,VppReleased: t!V  November 21, 1996 t!V  By the Chief, International Bureau:  S-C Introduction ĐlU  T-1. ` ` On May 7, 1996, we authorized the construction, launch, and operation of eleven satellites in the domestic fixedsatellite ("domsat") service and assigned them to satellite orbit  TR-locations,.R# P<ԍ#c PE37MP#` ` See Assignment of Orbital Locations to Space Stations in the Domestic FixedSatellite Service,  zP-DA 96713 (May 7, 1996) ("May 7 Order").#c PE37MP#(#` . with separate opinions addressing the merits of each application to follow. We issue this  T*-MO&O for the conditional authorizations granted to EchoStar Satellite Corporation to construct,  T-launch, and operate two Kuband3# P<ԍ#c PE37MP#` ` For purposes of this opinion, the Kuband encompasses the 11.712.2/14.014.5 GHz bands.(#` Ƹ domestic fixedsatellites at the 830 W.L. and 1210 W.L. orbital positions. These conditional authorizations require EchoStar to submit additional documentation of its financial qualifications. If the conditions are met, EchoStar will be unconditionally authorized to enter the domestic fixedsatellite service market, increasing competition and service options to the public.  S -E Background ĐlU  T"-2.` ` EchoStar Communications Corporation ("ECC"), as the parent company of EchoStar""0*((&"  T-Satellite Corporation, holds space station licenses in the Direct Broadcast Satellite ("DBS") service. In the 1996 processing round, EchoStar applied for a domsat authorization. It requested authority to  T-construct, launch, and operate two Kuband satellites, FSS1 and FSS2.k# P<ԍ#c PE37MP#` ` EchoStar has requested that certain estimated investment, annual revenue, and annual operating  xP-costs be treated as confidential. No one has opposed this request. Based on the current record  zP-nondisclosure is consistent with our rules. See 47 C.F.R.  0.461. (#` ƴ  Ta- 3.` ` The National Broadcasting Company, Inc., Hughes Communications Galaxy, Inc. ("HCG"), and GE American Communications, Inc. ("GE Americom") filed comments concerning EchoStar's applications. For the reasons discussed below, we granted EchoStar's applications, with  T-conditions. # P <ԍ#c PE37MP#` `   HCG and NBC also raised technical issues related to EchoStar's request for orbital  zP] -assignments in the "high power density arc." In the May 7 Order, we found that because   new  yP' -generation satellites are  operating at comparable   power densities, there was no longer a need to reserve certain portions of the orbital arc for "higher" power density satellites. We assigned EchoStar to orbit locations outside the traditional high power arc and need not, therefore,  xP-address HCG's and NBC's comments here.#c PE37MP#(#`   T-4.` ` Echostar's proposed satellites will each have 16 Kuband transponders. These Ku Tq-band transponders each have a selectable bandwidth of 27 or 54 MHz, a space station transmitter  TI -power of 130 watts , and a maximum effective isotropically radiated power ("EIRP") of 52.54 dBW.I # Pp<ԍ#c PE37MP#` ` The maximum EIRP level here is relatively high, therefore, we expect EchoStar to coordinate the operation of its Kuband transponders with licensees of adjacent satellites.(#`   T! - EchoStar proposed to provide coverage to the 48 contiguous states ("CONUS"), parts of Canada, and northern Mexico. It estimated the cost to construct and launch both satellites, and to operate them for  T -one year to be $270.7 million. # Pa<ԍ#c PE37MP#` ` EchoStar's Minor Amendment, dated September 22, 1995, modified its cost estimate from $352.4 million, cited in its April 29, 1994 application, to $270.7 million.(#`  It requested the 79o W.L. and 1350 W.L. orbit locations. It proposed  T -to launch FSS1 and FSS2 within 30 and 36 months, respectively, of authorization.  T -  S2-IP Discussion ĐlU  S- A.   FSS1 and FSS2  T-5.` ` Our rules permit us to assign new licensees "up to two orbital locations in each pair  Tj-of frequency bands proposed"yjY# Pc#<ԍ#c PE37MP#` ` 47 C.F.R.  25.140(f).(#` y if the applicant is legally, technically, and financially qualified to hold  TB-a space station license.B# P%<ԍ#c PE37MP#` ` See 47 C.F.R.  25.140(b).(#` ƃ To this end, each domsat applicant must demonstrate its ability to finance"B0*(("  T-proposed satellite construction, launch, and firstyear operating costs. # Ph<ԍ#c PE37MP#` ` 47 C.F.R.  25.140(c) and (d).(#` Ɓ Because Echostar's financial  T-demonstration was incomplete we granted EchoStar, in our May 7 Order, an authorization to construct, launch, and operate each of its two proposed inorbit satellites, FSS1 and FSS2, conditioned on it providing additional financial information.  T8-6.` ` Our rules stipulate that an applicant may demonstrate financial ability by submitting the following financial information: (1) Current balance sheet and documentation of any financial commitments that show current assets and operating revenues sufficient to meet these costs; or (2) irrevocably committed debt or equity financing, sufficient to meet the costs of construction and launch  T-of all planned satellites and operating them through the first year.i i# N <ԍ#c PE37MP#` ` Id.(#` i  TH -7.` ` To demonstrate its financial qualifications EchoStar submitted its corporate parent's,  T - ECC, balance sheet which showed current assets and operating income totalling $94.9 million,  # P<ԍ#c PE37MP#` ` The March 31, 1994 unaudited balance sheet of EchoStar Satellite Corporation showed total  xP-current assets of $33,000.#&m PE37&P# (#`  and communication from investment bankers expressing their interest and belief that the necessary funds  T -could be raised. q# P<ԍ#c PE37MP#` ` See EchoStar Application (April 29, 1994).(#` Ɛ Later, it filed an amendment stating that if it were unable to raise sufficient financing from outside sources, EchoStar's President, Charles Ergen, would fund the remaining costs. Specifically, EchoStar stated that Mr. Ergen owns over 29 million shares of EchoStar Class B stock,  TX-which are convertible to Class A common stock on a onetoone basis. 1X# P <ԍ#c PE37MP#` ` EchoStar claimed that Charles Ergen owned approximately 31,356,784 shares of class B  xP-common stock, 29,804,401 of which were convertible to class A common stock on a oneto xP-one basis. As of March 28, 1996, EchoStar's class A common stock was trading at $34 a  xPs-share.  (#`  EchoStar further represent ed that Mr. Ergen has unconditionally agreed to liquidate or pledge this stock to secure adequate  T-financing. According to EchoStar, as of April 9, 1996, Charles Ergen's convertible Class B shares had a market value of $1,058,056, 235. EchoStar also noted that, as a result of an offering memorandum and debt offering, EchoStar had raised its current assets to $206.6 million. It indicated  T-that it would file financial statements reflecting this as soon as they were prepared.i # P; <ԍ#c PE37MP#` ` See letter from Pantelis Michalopoulos, Attorney for EchoStar Satellite Corporation, to  xP!- William F. Caton, Acting Secretary, Federal Communications Commission (April 10, 1996).  xP!- These financial statements have not yet been submitted.(#` Ǝ  T@-8.` ` GE Americom and HCG argued that EchoStar's initial showing was not sufficient to  T-demonstrate its financial qualifications. We agree that the record does not provide clear  T-documentation showing adequate current assets. Specifically, EchoStar's showing of $94.9 million in current assets and operating income falls far short of the $270.7 million EchoStar projects its system will cost. We further note, the Commission has repeatedly held that letters from potential investors stating an interest and/or intent to raise money do not satisfy our requirement for noncontingent"x<0*(("  T-financing.W# Ph<ԍ#c PE37MP#` ` See, e.g., Cablesat General Corp., 103 F.C.C.2d 597 (1985) where an assurance that once the Commission authorized Cablesat's system the broker would try to raise money, was not enough. In effect, this was an assurance contingent upon the success of the broker's efforts.  zP-It provided no assurance the necessary funds would be obtained. Equatorial Communications  zP-Services, 103 F.C.C. 2d 631 (1985); National Exchange, Inc., 103 F.C.C. Rcd. 836 (1985).  zPe- Constellation Communications, DA 95129 (released January 31, 1995). In these cases, we held that a financier's intention to raise money some time in the future provides no assurance  xP-the funds will actually be obtained .(#` ƈ Consequently, we look to Mr. Ergen's commitment to determine whether EchoStar is  T-financially qualified to hold a domsat license. In particular, we must find that Mr. Ergen is capable  T-of selling or pledging sufficient stock to make up the $175.8 million shortfall in EchoStar's financial showing.  T8-9.` ` HCG contends that the representation regarding Mr. Ergen's stock are not adequate to  T-cure the deficit in EchoStar's demonstration.# P<ԍ#c PE37MP#` ` EchoStar asserts that HCG did not raise the financial qualification issue in its February 15, 1995 reply and, therefore, cannot raise it here. HCG disagrees. It contends that it addressed the issue in its March 15, 1995 response to GE Americom's February 15, 1995 petition to dismiss or deny EchoStar's applications. HCG also states that the issue was addressed in its April 3, 1995 response to EchoStar's March 15, 1995 reply. In any event, HCG argues, since  xP-EchoStar reopened the issue with its minor amendment, HCG's comments are timely. (#` Ơ It asserts that the value of Mr. Ergen's stock cannot be based upon the current Class A common stock share price. According to HCG, if Mr. Ergen decided to raise the needed financing by "flooding" the market with millions of his shares, the stock's  T-value could quickly change.1p # P<ԍ #c PE37MP#` ` HCG asserted that approximately 30,000 shares of ECC class A common stock are traded per day. In EchoStar's April 27, 1994 application (balance sheet at appendix C) it noted that 3,830,001 class A common stock shares and 47,240,384 class B common stock shares have been issued and are outstanding.(#` Ɯ It further argues that a bank would be unlikely to consider Mr. Ergen's  Tp-Class B shares as sufficient collateral for a loan. HCG also notes that the Securities Act of 1933,  TH -Rule 144(e), restricts the number of shares Mr. Ergen can sell in any three month period, which ,  T - according to HCG, casts doubt on whether EchoStar has the "current" ability to finance its system. Finally, HCG argues that such an outflow of capital could "devastate EchoStar financially."  T - 10.` ` In considering the sufficiency of Mr Ergen's commitment, we are not concerned about  T -whether Mr. Ergen can sell only a specified number of shares in a given time period. In adopting  TX- satellite financial qualification requirements in 1985, the Commission did not intend to require companies to demonstrate that the internal or external sources of financing relied upon are liquid and  T-will be set aside, in full, immediately upon grant . Rather, the Commission stated that its intention was to evaluate a company's ability to finance its system promptly. The Commission stated that "[c]urrent assets which include cash, inventory, and accounts receivable provides a general  T-measure of a company's ability to raise funds on the basis of its ongoing operations."i# P%<ԍ#c PE37MP#` ` See Licensing Space Stations in the Domestic FixedSatellite Service, 50 Fed. Reg. 36071 (August 29, 1995) at  13.(#` In other words, we require a company to demonstrate that it has sufficient resources to cover its projected"h0*(("  T-costs, or receive an irrevocable commitment from lenders and equity investors who have concluded  T-that the applicant is credit worthy under the particular circumstances.Wi# N@<ԍ#c PE37MP#` `  See Amendment of the Commission's Rules to Establish Rules and Policies Pertaining to a  zP-Mobile Satellite Service in the 16101626.5/2483.52500 MHz Frequency Bands, 9 F.C.C. Rcd. 5936 (1994) at  3132.(#` W Consequently, if the value of  T-Mr. Ergen's shares meets or exceeds the $175.8 million shortfall needed from a stock sale, we would  T-find EchoStar financial ly qualified.0# P!<ԍ#c PE37MP#` ` If EchoStar provides an uptodate balance sheet indicating that ECC's current assets are over  xP-$200 million, as EchoStar now represents, the financing shortfall would be $65 million.(#` 0  T8- 11. Mr. Ergen holds over 31 million shares of Class B stock. Almost 30 million of these shares are convertible into Class A Stock. As of March 28, 1996, the Class A stock was trading at  T-$34 per share. EchoStar states, therefore, that Mr. Ergen's stock is worth over $1 billion.  T-EchoStar's March 31, 1994 balance sheet, however, indicated that only 3.8 million shares of the  T-Class A stock have been issued and are outstanding.#c PE37MP##&m PE37&P#b# P<ԍ#c PE37MP#` ` See EchoStar Application (April 27, 1994) at appendix C.(#` Ƥ Consequently, an infusion of millions of  Tp-additional shares into the market as EchoStar represents it might do, if necessary, may affect the per  TH -share price by likely causing it to drop significantly. We, therefore, conditioned EchoStar's licenses  T -upon its submission of additional documentation, in our May 7 Order.  T - 12.` ` Specifically, EchoStar must submit an independent market valuation of Mr. Ergen's  T -Class B shares showing that the shares' value is sufficient to cover its proposed system costs.  T - EchoStar must submit this information within 60 days of the release of this order. Failure to do so or to submit other documentation evidencing its financial qualifications will result in an automatic cancellation of EchoStar's conditional licenses. In the alternative, EchoStar may submit documentation justifying a waiver of our financial requirements. The waiver request should include specific information regarding attempts to obtain adequate financing and an explanation as to why such financing could not be obtained. In evaluating any waiver request we will, among other things,  T-consider whether qualified entities seek to operate satellite systems in the orbital locations to which  Th-EchoStar is assigned.1h# N <ԍ#c PE37MP#` `  See Amendment to the Commission's Regulatory Policies Governing Domestic Fixed Satellites and Separate International Satellite Systems and DBSC Petition for Declaratory Rulemaking  zP-Regarding the Use of Transponders to provide International DBS Service, 11 F.C.C. Rcd.  xPt-2429  (1996) at  42.(#`   S- Conclusion and Ordering Clauses ĐlU  T- 13.` ` We find pursuant to Section 309 of the Communications Act, 47 U.S.C  309, that  Tx-grant of EchoStar's FSS1 and FSS2 applications, subject to the condition specified in paragraph 16,  TP-will serve the public interest, convenience, and necessity. As specified in the May 7 Order, we have  T(-assigned EchoStar FSS1 and FSS2 to the 83o W.L. and 121o W.L. orbital locations, respectively. " 0*((K"Ԍ T- 14.` ` Accordingly, IT IS ORDERED that application file Nos. 36DSSLA94, 37DSS T-P/LA94, and 154SATAMEND95 ARE CONDITIONALLY GRANTED, as discussed in this order, and EchoStar Satellite Corporation IS CONDITIONALLY AUTHORIZED to construct two  T-Kuband fixed satellites, in accordance with the conditions and technical specifications set forth in its  T`-applications.  T-15.` ` IT IS FURTHER ORDERED that EchoStar Satellite Corporation IS CONDITIONALLY AUTHORIZED to launch and operate two space stations in the fixedsatellite  T-service in accordance with the Assignment of Orbital Locations to Space Stations in the Domestic  T-FixedSatellite Service, DA 96713 (May 7, 1996), as well as the relevant terms and conditions of all previous orders and authorizations concerning the operation of space stations. These requirements  TH -include the filing of annual reports on the progress of space station construction, traffic on inorbit  T -satellites and  transponder use. See Streamlining the Commission's Rules and Regulations for Satellite  T -Application and Licensing Procedures, IB Docket No. 95117 (adopted October 29, 1996).  T -16. ` ` IT IS FURTHER ORDERED that these authorizations ARE CONDITIONED upon  T -EchoStar Satellite Corporation submitting, within 60 days of the release of this order, either an independent market valuation of Charles Ergen's class B common stock shares, as addressed in  T4- paragraph 12, or other evidence of EchoStar's financial qualifications. Failure to do so, or to present  T -documentation that justifies a waiver of our financial requirements, will AUTOMATICALLY  T-RENDER these CONDITIONAL authorizations NULL AND VOID.  T-17.` ` IT IS FURTHER ORDERED that unless extended by the Commission for good cause shown, each of the authorizations shall become NULL AND VOID in the event the space station is not constructed, launched, and successfully placed into operation in accordance with the technical parameters and terms and conditions of the authorizations by the following dates:  T-` `  Construction CommencedConstruction Completedxx-Launched  T|-X` hp x (#%'0*,.8135@8: