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DBS9411EXT  c -Launch, and Operate a Direct Broadcast Satellitehpp)  c -System` `  hh@hpp) x` `  hh@hpp)  c}-Application for Consent to Assign Direct Broadcastpp)   DBS9415ACP  cf-Satellite Construction Permit from Advanced hpp)  cO-Communications Corporation to Tempo DBS, Inc.pp) x` `  hh@hpp)  c!-Application for Modification of Direct Broadcasthpp)   DBS9416MP  c -Satellite Service Construction Permit@hpp)  c-  _-  MEMORANDUM OPINION AND ORDER  c-T T  c-TPxAdopted: October 16, 1995@hppReleased: October 18, 1995  cR-By the Commission: Commissioner Quello dissenting and issuing a statement at a later date; Commissioner Barrett dissenting and issuing a statement; Commissioners Ness and Chong issuing separate statements.(#  _- TABLE OF CONTENTS  c -T;x!Para. X(#  c"-X(#P I. xINTRODUCTION p"(#Q1  cp$- II.xBACKGROUND p"(#Q5  cF&-xA.` ` The Evolution of the DBS Servicep"(#Q5  c/'-xB.` ` ACC's History as a DBS Permitteep"(#Q8"/'0*((P("Ԍ c-ԙ III.xDISCUSSION p`"(#J17  c-  c-xA.` ` Due Diligence Obligations(#` p`"(#J18  c-x` ` 1. Delegated Authorityp`"(#J18  c-x` ` 2. Application of the Due Diligence Standardp`"(#J28  c|-x` `  a.ACC's Effortsp`"(#J30  cf-x` `  b.The ACC/TCI Capacity Purchase Agreementp`"(#J38  cP-x` `  c.Negotiations with EchoStarp`"(#J43  c:-x` ` 3. Commission Precedentp`"(#J46  c$ -x` `  a.USSB IIp`"(#J47  c -x` `  b.Directsatp`"(#J54  c -xB.` ` Method for Future Assignments of DBS Resources(#` p`"(#J64  c -xC.` ` EchoStar's Request as to Prohibited Ex Parte Communications(#` p`"(#J75  c -IV.x ORDERING CLAUSES p`"(#J80  _s- I. A. 1. a.(1)(a) i) a) I. 1. 1. a.(1)(a) i) a)E I. INTRODUCTION T TPx1. Before us are several Applications for Review of a Memorandum Opinion and Order issued by the International Bureau that: (1) denied Advanced Communications Corporation ("ACC") an extension of time in which to construct, launch, and operate its Direct Broadcast Satellite ("DBS") system; and (2) dismissed as moot ACC's applications for consent to assign its DBS construction permit to Tempo DBS, Inc. and to modify its permit to conform to the specifications of satellites currently under construction for Tempo Satellite,  c-Inc. g4-ԍXx#D  P7jQP#Advanced Communications Corp., 77 Rad. Reg. 2d (P&F) 1160 (DA 95944, April 27, 1995)("Bureau  oY'-Order").(# Tempo Satellite is an affiliate of Tempo DBS and a current DBS permittee; both Tempo Satellite and Tempo DBS are wholly owned by TeleCommunications, Inc. ("TCI"), the country's largest cable multiple systems operator ("MSO"). These Applications for Review have been opposed by a number of parties, including most other DBS permittees. x2. We affirm the International Bureau's finding that ACC failed to meet its due diligence obligation of proceeding expeditiously with construction and launch of its DBS system. In 1984, the Commission assigned to ACC scarce public resources orbital positions and channels at no cost, requiring only that ACC proceed with due diligence to provide the DBS service it had promised. As the Bureau found, after more than a decade, including one fouryear extension of time, ACC has not met the Commission's due diligence standards. Accordingly, we affirm the Bureau's decision to cancel ACC's construction permit. Because we deny the extension requested by ACC, its assignment and modification""K0*((#" applications have been rendered moot, and thus will be dismissed. The channels and orbital locations previously assigned to ACC will therefore revert to the public for reassignment. x3. With this decision, we also announce that before the end of this month we will initiate a rulemaking to establish a new methodology for reassigning DBS channels and orbital positions that become available as a result of either cancellation by the Commission or surrender by permittees. Our thinking at this point is that opening a window for new applications for DBS authorizations for these channels (and orbital positions), and then deciding among mutually exclusive applications by auction, will best serve the public interest. Since one of our primary goals is to expedite the provision of additional DBS service in order to foster competition both among DBS providers and between DBS and cable, we intend to meet the following timetable:  c -xOctober 27, 1995hhNotice of Proposed Rulemaking issued  c -xDecember 12, 1995hhFinal Report & Order issued  cy-xJanuary 17, 1996hhNew rules become effective  cK-xJanuary 18, 1996 hhChannels reassigned; if competitive bidding chosen, auction begun and completed in one day(#h This is an ambitious timetable, but we are committed to achieving an expedited reassignment in order to minimize or avoid altogether any disruption in the development of the DBS service or in the business plans of those eager to participate in that development. By devising and implementing a system for reassigning ACC's channels within three months, we will resolve the reassignment issue in time for any potential recipient of those channels to proceed with its business plans with little or no interruption. x4. In making this decision, we also deny a request by EchoStar Satellite Corporation  cN-for an investigation of and sanctions for alleged improper and undisclosed ex parte contacts in  c8-this proceeding.M8 g-ԍXx#D  P7jQP#In both its Opposition and in a June 13, 1995 letter to the Managing Director, EchoStar requested, inter  qY-alia, an investigation into whether additional undisclosed prohibited ex parte communications had occurred in the proceeding, and for imposition of sanctions against those who have already admitted to making such prohibited communications.(# Since the prohibited ex parte presentations were promptly disclosed once their significance became known, and since the arguments made in those presentations have been raised by petitioners in this proceeding and fully addressed by EchoStar and other opponents, we conclude that no harmful prejudice has occurred.  c -" 0*((!"  _-` II. BACKGROUND  c-T  c-TPA.xThe Evolution of the DBS Service  c-  c-x5. In 1982, we granted the first authorizations for DBS service satellite systems  c-that would deliver video programming "direct to home" via backyard receiving dishes.c g-ԍXx#D  P7jQP#Direct Broadcast Satellite Service, 90 F.C.C.2d 676 (1982). DBS is a radiocommunication service in which signals from earth are retransmitted by high power, geostationary satellites for direct reception by small, relatively inexpensive earth terminals.(#c Our primary goals in initiating this new service were to provide additional competition to existing program providers such as cable television, to provide improved service to remote areas of  cH-the country, and to encourage innovative new programming and services.tH g -ԍXx#D  P7jQP#Id. at 68082.(#t DBS operators would transmit satellite signals from one or more of the eight orbital positions allocated to the United States pursuant to the Region 2 Plan adopted at the 1983 Regional Administrative  c -Radio Conference ("RARC83").  g-ԍXx#D  P7jQP#See Processing Procedures Regarding the Direct Broadcast Satellite Service, 95 F.C.C.2d 250 (1983)  oYu-("DBS Processing Order"). The Region 2 Plan adopted at RARC83 allocates orbital positions and channels for use in the Broadcast Satellite Service ("BSS") in the Western hemisphere. The eight U.S.  oY-orbital positions, proceeding from east to west, are 61.5oW.L., 101oW.L., 110oW.L., 119oW.L.,  oY-148oW.L., 157oW.L., 166oW.L., and 175oW.L.(#Ɛ Thirtytwo channels were available for use at each orbital location. With digital compression, each such "channel" currently can yield up to six channels of consumer programming.  c -x6. Pursuant to our DBS rules and in lieu of stringent financial showings and subsequent Commission analysis, each DBS permittee must satisfy a twoprong due diligence  cy-requirement before a DBS license can be awarded.y  g-ԍXx#D  P7jQP#See 47 C.F.R.  100.19(b); Direct Broadcast Satellite Service, 90 F.C.C.2d at 719.(# The first prong of our due diligence requirement mandates that each DBS permittee must begin construction or complete contracting for construction of its system within one year of grant of its construction permit. The second prong requires that each permittee must begin operation of its system within six years after receipt of its construction permit. Specific orbital positions and channels are assigned on a firstcome, firstserved basis upon a determination that the permittee has  c-satisfied the first prong contracting requirement. Thus, specific orbital/channel assignments are made in the order that firstprong due diligence demonstrations are received from"d 0*(("  c-permittees.K gy-ԍXx#D  P7jQP#DBS Processing Order, 95 F.C.C.2d at 253. Permittees apply separately for launch and operational authority once satellite construction is nearly complete. A license to operate a DBS satellite, for a five oY4-year term, may be granted upon successful satellite launch and operation of the DBS service. See,  oY-e.g., Hughes Communications Galaxy, Inc., DA 95979 (May 1, 1995).(# These requirements were intended to permit more orderly processing of  c-applications and to ensure prompt and effective use of DBS spectrum resources. gu-ԍXx#D  P7jQP#DBS Processing Order, 95 F.C.C.2d at 253; see also CBS, Inc., 99 F.C.C.2d 565, 568 (1984).(#  c-x7. There have been five processing rounds for DBS applicants, the last in 1989. Prior to the last processing round, the limited number of applicants and channels requested, coupled with the flexibility of the international allocation of DBS resources in the Region 2  cv-Plan, allowed us to grant authorizations at variance with that plan. Kv g -ԍXx#D  P7jQP#For example, we had authorized the operation of two satellites at the same orbital location, with one  oY-satellite serving the eastern part of the country and one serving the western part of the country. #D  P7jQP#See  oYx-Continental Satellite Corp., 4 FCC Rcd 6292, 6293 (1989), partial recon. denied, 5 FCC Rcd 7421  oY@-(1990)("Continental").(# In the last round of DBS applications, however, requests for orbital/channel resources exceeded the available supply.  cH-In our 1989 order in Continental, we decided to assign halfCONUS4 H  g-ԍXx#D  P7jQP#Signals from DBS satellites that cover half of the continental Untied States are referred to as "halfCONUS" signals; those that cover the entire continental Untied States are referred to as "fullCONUS" signals.(#4 channels only in east/west pairs, so that each applicant could provide fullCONUS service. Service to the eastern half of the United States was to be provided from the four eastern orbital locations, and service to the western half of the country was to be provided from the four western locations. Accordingly, beginning in 1989, new applicants received paired east/west assignments, and existing construction permits were modified to comply with the new assignment scheme. However, we authorized conditional fullCONUS coverage from the eastern orbital positions, provided that such service proved feasible and in keeping with  c-United States treaty obligations.t   g5-  0ԍXx#D  P7jQP#Continental, 4 FCC Rcd at 629293. At that time, the Commission did not have the resources necessary   to determine whether fullCONUS service could be provided in technical compliance with the Region 2  oY-Plan. Id.(#t   cb-B.xACC's History as a DBS Permittee x8. In 1984, we granted a sixyear DBS construction permit to ACC, subject to the condition that it "proceed with the construction of its system with due diligence as defined in  c-Section 100.19 of the Commission's rules." ? g&-ԍXx#D  P7jQP#Satellite Syndicated Systems, Inc., 99 F.C.C.2d 1369, 1387 (1984).(#ƨ In 1986, we determined that ACC had" 0*((" satisfied the first prong of the due diligence requirement by contracting for the construction  c-of two satellites.  gb-ԍx#D  P7jQP#Tempo Enterprises, Inc., 1 FCC Rcd 20, 2122 (1986)("Tempo I"). Accordingly, we granted ACC's request for 16 channels at each of two  c-orbital locations: 110o and 148o. g-ԍXx#D  P7jQP#Continental, 4 FCC Rcd at 6304 n.42.(#Ɗ In a 1986 application to modify its construction permit,  c-ACC requested assignment of additional channels at these locations. Pursuant to the  c-assignment scheme adopted in Continental, we reserved (but did not assign) eleven additional pairs of channels for ACC, conditioned upon ACC's satisfaction of the first prong contract  cv-due diligence requirement for this modified DBS system.[v> ge -  NԍXx#D  P7jQP#Id. at 6301. Thus, the Commission held 11 additional pairs of channels for ACC, which would be given   ]specific assignments if and when ACC demonstrated contracting due diligence with respect to those new channels.(#[ x9. In October 1989, ACC submitted satellite contract information in compliance with the first due diligence requirement for its modified system. In 1990, ACC requested a fouryear extension of time, until December 7, 1994, to construct and operate its DBS system. ACC cited "factors outside its control" in support of its extension request: (1) that designs made obsolete by technological advances necessitated numerous modifications; and (2) that changes and uncertainty in the Commission's channel allocation policy had delayed construction. ACC said that it had nonetheless spent "considerable" energy and funds in  c -advancing satellite technology, including DBS digital technology.  g-  kԍXx#D  P7jQP#Request for Additional Time to Construct and Launch Direct Broadcast Satellites, DBS8401EXT/8805MP (filed Feb. 16, 1990). (# x 10. In April 1991, we granted ACC's extension request and assigned ACC 11  cb-additional channels at 110o and 8 additional channels at 148o, based on our determination that it had satisfied the first prong contracting due diligence requirement for its modified  c4-system.qK4  g-  nԍXx#D  P7jQP#Advanced Communications Corp., 6 FCC Rcd 2269, 2272 (1991), recon. denied, 6 FCC Rcd 6977  oY-  (1991)("Advanced"). We assigned only eight channels at 148o since no more were available at that  oY-  location. We denied ACC's request for three channels at 157o because ACC did not complete contracting  oYt -for a fifth satellite at this location. Id. Three channels remain reserved for ACC but not yet assigned.(#q The due diligence finding was based in part on ACC's contract payment schedule, under which it would have paid 14% of the total contract price by January 1992, 58.5% of the contract price by April 1993, and 83.5% of the contract price by January 1994, at which time its first satellite was scheduled for delivery. In granting the extension request, we  c-specifically stated that "[i]n the future, continued reliance on experimentation, technological developments and changed plans will not necessarily justify an extension of a DBS"0*(("  c-authorization," and noted that "there does now appear [to be] a need for stricter enforcement  c-of the construction progress requirements of the DBS rules." gc-ԍXx#D  P7jQP#Id. at 2274 (emphasis added).(#Ɖ x 11. In August 1994, just four months before its construction permit was to expire, ACC requested a second fouryear extension of time, based on the following assertions: (1) its threeyear negotiation to reach a joint venture agreement; (2) modifications in its system design that delayed construction; (3) the "considerable" funds and "countless" hours expended to implement its system; and (4) regulatory delays in formulating channel assignment policy  cJ-in Continental which affected the timing of the grant of ACC's modification requests.J g~ -  lԍXx#D  P7jQP#Request for Additional Time to Construct and Launch Direct Broadcast Satellites, DBS8401/9411EXT (August 8, 1994).(#  c -x 12. Seven weeks later, or just two months before its permit was to expire, ACC  c -requested consent to assign its DBS construction permit to Tempo DBS,  g-ԍXx#D  P7jQP#Request for Consent to Assign DBS Authorizations, DBS9415ACP (September 28, 1994).(#ƴ which would in  c -turn lease or sell the transponders at the 110o orbital position to Primestar Partners L.P.  g`-  NԍXx#D  P7jQP#TCI owns twentytwo percent of Primestar. The cable system operators that have ownership interests in   Primestar are TCI, Time Warner, Inc., Cox Enterprises, Comcast Cable, Continental Cablevision, and   Newhouse Broadcasting Corporation. GE American Communications, Inc., which owns the satellite that  oY-  is currently used to provide Primestar service, is also an equity partner in Primestar. See United States  oY-v. Primestar Partners, L.P., 19941 Trade Cas. (CCH)  70,562 (S.D.N.Y. 1994).(#ƾ The proposed assignment would permit Primestar's migration from mediumpower directtohome fixed satellite service ("FSS") using approximately 36 to 40 inch receiving dishes, to  c -highpower DBS service using 18 inch receiving dishes.  g-ԍXx#D  P7jQP#Tempo DBS App. for Review at 22.(#ƀ  c{-x 13. In anticipation of this assignment, ACC also filed an application to modify its permit to conform to the specifications of two satellites being built under Tempo Satellite's  cM-DBS permit for an elevenchannel DBS system to be operated at the 119o orbital location.MW  gU -  ԍXx#D  P7jQP#Application for Modification of Construction Permit, DBS9416MP (October 14, 1994). In November   1994, ACC filed an amendment to this modification request. Amendment of Application for Modification of Construction Permit, DBS9416MP (November 16, 1994). (#Ɓ The practical effect of this request is that neither ACC nor Tempo DBS would build the two satellites ACC had contracted to purchase from Martin Marietta that had been the basis for ACC's due diligence showings. Instead, ACC or Tempo DBS would use two satellites being built for Tempo Satellite under Tempo Satellite's construction permit. ACC asked the"0*((" Commission to give it credit for Tempo Satellite's efforts in determining whether ACC had  c-met its due diligence obligations. gb-ԍXx#D  P7jQP#See, e.g., ACC's Consolidated Opp. to Petitions to Deny at 1518 (filed Nov. 23, 1994).(#ƽ x 14. Included with ACC's assignment application was a Capacity Purchase Agreement ("CPA") between ACC and TCI. Under the CPA, TCI would provide ACC with the two satellites being built for Tempo Satellite, and pay over $45,000,000 in TCI common stock along with other monetary incentives. In return, ACC would irrevocably sell all of its rights to the transponder capacity on those satellites. This agreement was an alternative to the  cH-outright assignment of ACC's construction permit to Tempo DBS.H g| -ԍXx#D  P7jQP#ACC App. for Review at 19; Tempo DBS App. for Review at 3 n.4, 6 n.10.(#Ʀ  c -x15. In April 1995, the International Bureau found that ACC had failed to comply with its due diligence obligations, and therefore denied ACC's request for extension of time  c -to begin DBS operations.~ > g-ԍXx#D  P7jQP#Bureau Order at  919.(#~ The Bureau concluded that ACC's failure to make any significant progress toward the launch and operation of its DBS system was the result of ACC's own business decisions, and that ACC also could not rely upon Tempo Satellite's investment in its satellites to satisfy ACC's due diligence obligations. Accordingly, ACC's DBS construction  c-permit was cancelled, and its requests to assign and modify its permit were deemed moot.| g:-ԍXx#D  P7jQP#Id. at  2021.(#|  cy-ACC and others have filed Applications for Review of that decision by the Commission,Ky g-  ԍXx#D  P7jQP#The following parties filed Applications for Review ("App. for Review") on May 22, 1995: ACC; Tempo   DBS, Inc.; Primestar Partners L.P.; General Instruments Corporation ("GIC"); and Cable   Telecommunications Association ("CATA"). Some or all of these parties may be collectively referred to as "petitioners."(#  cb-and these applications are opposed.b  g-  !ԍXx#D  P7jQP#Dominion Video Satellite, Inc. filed an Opposition ("Opp.") to the Applications for Review on May 26,   ]1995. The following parties filed Oppositions on June 6, 1995: EchoStar Satellite Corporation; Directsat   {Corporation; DIRECTV, Inc.; MCI Telecommunications Corporation; Entertainment Made Convenient  oY] -  (Emc3) U.S.A., Inc.; Consumer Federation of America and the Center for Media Education; and the   National Rural Telecommunications Cooperative. United States Satellite Broadcasting Company ("USSB")   also filed Comments on the same date. Others filed informal comments in this proceeding as well. Some   or all of these parties may be collectively referred to as "opponents." Also, as noted above, on June 13,   1995, EchoStar requested that the Managing Director undertake an investigation to determine whether any  qYE$-  kadditional ex parte communications not permitted under our rules had occurred, and requested that sanctions   be imposed against those who had admittedly engaged in prohibited presentations. The Managing Director  qY%-has referred this matter to the full Commission. We address this matter in  7579, infra.(# "K V0*((*"Ԍx16. DIRECTV asserts that CATA, GIC, and Primestar lack standing in this proceeding. None of these petitioners participated in the first stage of this proceeding. In such circumstances, Section 1.106(b)(1) of our rules, 47 C.F.R. 1.106(b)(1), requires that they "show good reason why it was not possible for [them] to participate in the earlier stages of the proceeding." These three petitioners have not made this showing, and their respective applications for review will be dismissed. All of their arguments have been raised by the other petitioners, however, and so are addressed in full.   _H- III. DISCUSSION T TPx17. In support of their Applications for Review, petitioners argue, as detailed below,  c -that the Bureau Order: (1) exceeds the Bureau's delegated authority; (2) conflicts with Commission precedent for considering due diligence and requests for extension of time; and  c -(3) contravenes the Commission's goal of prompt initiation of competitive DBS service.  gN-ԍXx#D  P7jQP#ACC App. for Review at 11, 18; Tempo DBS App. for Review at 1124.(#Ƣ To the contrary, we find that the Bureau did not exceed its delegated authority, and it correctly applied Commission precedent in holding that ACC had failed to meet its due diligence obligations.   cb-A.XxDue Diligence Obligations(#  b4-x1.` ` Delegated Authority.(#` x18. Petitioners contend that the Bureau exceeded its delegated authority in denying  c-ACC's application for an extension of time. g#-  !ԍXx#D  P7jQP#Pursuant to Section 0.261 of the Commission's Rules, 47 C.F.R.  0.261, the Chief of the International   \Bureau is delegated a wide range of authority to perform most of the functions of the bureau, which include   "administer[ing] policies . . . [for] domestic and international satellite systems" and "monitor[ing]  oY-  compliance with the terms and conditions of authorizations" such as those at issue in this proceeding. See   {47 C.F.R.  0.51(c)(d). This delegated authority is subject to specific limitations that preclude action on   Napplications that present novel questions of fact, law, or policy that cannot be resolved under outstanding  oY-precedents or guidelines, or that appear to justify a change in Commission policy. Id. at  0.261(b).(# They assert that the Bureau Order constitutes an "unprecedented and inexplicable" break with Commission precedent, since it is the first time that a DBS construction permit has been cancelled based on a permittee's failure to meet  c-the second prong of the due diligence rule.  gI"-ԍXx#D  P7jQP#See, e.g., ACC App. for Review at 1, 1214; Tempo DBS App. for Review at 1113.(#Ƶ For the reasons stated below, we find that the  c-Bureau's action was consistent with our precedent.!  g$-  kԍXx#D  P7jQP#In addition, we note that since we are now deciding this case on the merits, the issue of whether the Bureau exceeded its delegated authority is moot.(# "| , !0*((|"Ԍx19. At the inception of DBS service, the Commission established a minimal number  c-of rules designed to foster the development of the fledgling service." gb-ԍXx#D  P7jQP#There are only nine regulations directly applicable to DBS service. See 47 C.F.R. Part 100.(# The Commission determined that the public interest would best be served by affording DBS permittees maximum flexibility in order to facilitate the introduction of a new service that was untried  c-and unproven, both technically and financially.# g-ԍXx#D  P7jQP#Direct Broadcast Satellite Service, 90 F.C.C.2d at 70608.(#Ơ Among the few rules imposed was the twopart due diligence requirement, to which exceptions would be allowed only in the "most  cv-extraordinary circumstances."$v> ge -ԍXx#D  P7jQP#DBS Processing Order, 95 F.C.C.2d at 254.(#Ə x20. Under the first prong of our due diligence rule, we have taken action against applicants who failed to go forward with the construction of a DBS system. Since the rule "was intended to ensure the prompt initiation of DBS service for the public," we said that it "must be enforced where permittees are allowed to hold spectrum resource for which other  c -applicants exist."%  g-ԍXx#D  P7jQP#CBS, Inc., 99 F.C.C.2d at 57172. (#Ɖ As a result, between 1984 and 1989, a total of seven permittees were  c -stripped of their permits for failure to comply with the first due diligence requirement.&K  g:-  ?ԍXx#D  P7jQP#See CBS, Inc., 99 F.C.C.2d at 566, 57173 (CBS and Graphic Scanning Corp.); Tempo I, 1 FCC Rcd at  oY--  {21 (NEXSAT); RCA American Communications, Inc., 2 FCC Rcd 1204, 1205 (1987)(RCA Americom,  oY-  Antares Satellite Corp., and Digital Paging of Texas, Inc.); Continental, 4 FCC Rcd at 6296 (1989)(DBSC).(# In addition, we recently cancelled the orbital positions and channels (but not the construction permit) assigned to Dominion Video Satellite, Inc. for failure to demonstrate compliance the  c-first due diligence requirement in a timely manner.\'  g-  ԍXx#D  P7jQP#Dominion Video Satellite, Inc., 8 FCC Rcd 6680, 6687 (1993), recon. denied, FCC No. 95421 (Oct. 5,  qY-1995)("Dominion"). The Dominion decision is discussed more fully in  25, infra.(#\ x21. Nevertheless, throughout the first decade of DBS's existence what we have  cK-previously described as the "pioneering era" of this service(KL gH!-ԍXx#D  P7jQP#E.g., Advanced, 6 FCC Rcd at 2274.(#Ǝ the Commission exercised flexibility where the public interest so required. The Commission was reluctant to cancel construction permits for failure to initiate DBS service "in accord with a preestablished  c-timetable set without the benefit of experience.") g%-ԍXx#D  P7jQP#United States Satellite Broadcasting Co., 3 FCC Rcd 6858, 6860 (1988)("USSB I").(#Ƽ For example, in granting ACC's first fouryear extension, we based our decision on the substantial developments in DBS satellite technology, the Commission's development of its policy regarding channel and orbital" )0*(("  c-assignments, and the Challenger and Ariane launch vehicle failures of the late 1980's.* gy-ԍXx#D  P7jQP#Advanced, 6 FCC Rcd at 2274.(#Ƃ Such factors, which would have been outside any permittee's control, were the type of "extraordinary circumstances" that justified extension. x22. But even as we granted such extensions, we separately cautioned that extensions would be more difficult to obtain in the future. We noted that: XxX` ` [a]s circumstances have evolved and demand for DBS facilities may be increasing beyond the available supply of orbit/channel resource, there does now appear [to be] a need for stricter enforcement of the construction requirements of the DBS  c -rules.+  g7-ԍXx#D  P7jQP#USSB I, 3 FCC Rcd at 6861 (quoted in Advanced, 6 FCC Rcd at 2274). (#ƶx` We stated that it is "imperative that inefficient use of DBS assignments, whether intentional  c -or inadvertent, be prevented, particularly if it becomes evident that incumbent permittees are unjustifiably preventing additional promising parties from attempting to deliver DBS  c-services."k,> g-ԍXx#D  P7jQP#Id. (#k We also explicitly put permittees on notice that uncertainties in or  cy-miscalculations of the business climate are not factors beyond permittees' control that could justify an extension, but rather are risks that each permittee must bear alone: "[n]either other existing or potential DBS participants nor the Commission can, or should be expected to,  c4-accommodate their mistaken projections or modified expectations."r-4 g-ԍXx#D  P7jQP#Id. at 6859.(#r x23. Four years ago, we said that "DBS continues to be 'unproven as a technology  c-and as a commercial enterprise.'". gT-ԍXx#D  P7jQP#Advanced, 6 FCC Rcd at 2273 (quoting USSB I, 3 FCC Rcd at 6859).(#Ƭ In granting ACC's request for a fouryear extension that year, however, we explicitly warned that "[t]here will soon come a time when the pioneering  c-era of the development of DBS technology and service will come to an end."r/o  g!-ԍXx#D  P7jQP#Id. at 2274.(#r  c-x24. The last four years have ushered in that new era. Two permittees (DIRECTV0*  gn%-  ԍXx#D  P7jQP#DIRECTV is a whollyowned subsidiary of GM Hughes Electronics and an affiliate of Hughes   Communications Galaxy, Inc. ("Hughes"). Hughes is a Commission licensee in the highpower DBS   |service, and DIRECTV is the DBS operating, customer service, and programming acquisition arm of")'/0*((0'" Hughes. Both Hughes and DIRECTV are subsidiaries of General Motors.(#" X00*((" and USSB) already have their DBS systems in operation, and a third (EchoStar/Directsat) is to launch one satellite this fall and another in 1996. Tempo Satellite is scheduled to launch in June 1996. Under these circumstances, a permittee's inability or unwillingness to proceed with construction of its system weighs even more heavily against allowing it to retain its  c-permit.1X g-ԍXx#D  P7jQP#See USSB I, 3 FCC Rcd at 6858.(#Ɗ x25. ACC argues that the Commission has applied a "flexible policy" as recently as  c_-1993, when we issued our Dominion order.2_ g# -ԍXx#D  P7jQP#See ACC App. for Review at 15.(#Ƅ In that order, we stripped Dominion of its orbital/channel assignments because of its failure over a twoyear period to respond to one Commission order and several requests from the staff for information necessary to  c -demonstrate compliance with the first due diligence requirement.3  g-ԍXx#D  P7jQP#Dominion, 8 FCC Rcd at 6687.(#Ƃ Dominion's inordinate delay in submitting the required information caused a prejudicial delay of assignments to other DBS permittees who were behind it in the assignment queue. The appropriate sanction in that situation was revocation of Dominion's assignments and sending it to the end of the assignment queue. In the same order, we also extended Dominion's DBS permit based on  c -the "reasonable degree of continuity in [Dominion's] efforts to establish its DBS system."r4  g-ԍXx#D  P7jQP#Id. at 6688.(#r We noted that Dominion had developed a financing program, contracted for home receiving  cy-equipment, and obtained a contract for launch services all part of satisfying the second  cc-prong of due diligence.i5cD  gX-ԍXx#D  P7jQP#Id.(#i None of the demonstrated progress toward an operational DBS  cL-system that justified our flexibility in Dominion is present in this case. x26. It is true, however, that the Commission has never denied an extension of time to  c-a DBS permittee for failure to progress toward compliance with the second due diligence  c-requirement.6  g!-  0ԍXx#D  P7jQP#The Bureau Order erroneously stated that certain language quoted from USSB I was used in denying an  oY"-  extension to another DBS permittee. See Bureau Order at  13 (quoting USSB I, 3 FCC Rcd at 6859).   This misstatement does not detract from the logic of the order, which was based on the Commission's   oftenexpressed desire for stricter enforcement of due diligence requirements, rather than the outcome of any particular case.(#ƅ From this, ACC argues that any decision to take such an action would be an  c-"unprecedented and inexplicable" departure from Commission precedent .7 ge'-ԍXx#D  P7jQP#See ACC App. for Review at 1.(#ƃ" 70*(("Ԍx27. We disagree. Consistency with prior precedent is not determined by whether the  c-same outcome has been reached. Rather, it is determined by whether the Commission's rules and orders have been applied faithfully. We have repeatedly expressed our commitment to enforcing the due diligence rules. The fact that others have demonstrated sufficient  c-commitment to justify extensions does not require us to grant every such request. As we explain below, if warranted under the circumstances of this case, we do not consider it a departure from precedent to cancel a DBS construction permit based on the permittee's failure to demonstrate sufficient progress toward compliance with the second prong of the due diligence requirement. We now turn to the question of whether the facts of this case justify cancellation of ACC's permit.   b -x2.` ` Application of the Due Diligence Standard(#` x28. As we stated in granting ACC its first extension, "[t]he Commission closely  c -scrutinizes all requests for extensions of time within which to comply with its rules and  c -policies."8  g"-ԍXx#D  P7jQP#Advanced, 6 FCC Rcd at 2274.(#Ƃ In ruling on a request for extension of time, the Commission must assess the  c-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  cd-public."9d g-ԍXx#D  P7jQP#USSB I, 3 FCC Rcd at 6861.(#ƀ The Bureau concluded from its assessment of the totality of the circumstances that  cM-ACC had made little progress in construction, launch, and initiation of a DBS system in the past decade particularly during its fouryear extension and therefore that an extension  c-was not justified.:> g-ԍXx#D  P7jQP#Bureau Order at  1320.(#ƅ Upon close scrutiny of ACC's extension request, we conclude that the Bureau was correct.  c-x29. ACC contends that it has not been "warehousing" its DBS authorizations. ACC has focused its argument upon three areas: (1) the efforts made by ACC in developing its DBS system; (2) the agreement between ACC and TCI for construction and launch of a satellite licensed to ACC; and (3) ACC's negotiations for a joint venture with another DBS permittee, EchoStar. In addition, ACC asserts that the circumstances of this case are indistinguishable from those of two other cases in which the Commission either granted an  cP-extension or allowed a transfer of control._;P g"-ԍXx#D  P7jQP#Id. at 1920 (citing United States Satellite Broadcasting Co., 7 FCC Rcd 7247 (Vid. Svc. Div. 1992)  qY#-("USSB II") and Directsat Corp., 10 FCC Rcd 88 (1995)). These cases are discussed infra,  4663.(#_ "9~;0*((L"Ԍ b-x` ` a. ACC's Efforts(#  c-x30. ACC argues that the Commission should consider its efforts "to make DBS a reality," including: (1) the promotion of digital transmission technology; (2) the development of plans to provide educational programming; (3) advocacy of interactive service by DBS systems; and (4) participation in legislative, regulatory, and publicity efforts to promote the  cv-development of DBS.q<v g-ԍXx#D  P7jQP#Id. at 68.(#q  cH-x31. For purposes of our due diligence analysis, we must recognize that none of the efforts cited by ACC involves the actual construction of a DBS satellite or arrangement for launch and operationrelated services. While promotional efforts may be laudable, those efforts are not an adequate substitute for the concrete progress toward the construction and operation of a DBS system that is required under our rules.  c -x32. In the past, we have specifically deemed such generalized efforts toward promoting the DBS service insufficient to satisfy the first due diligence prong. For example, although we "recognize[d] the efforts CBS has made to date in developing DBS and HDTV technology," we held that CBS had not met its due diligence obligation for the simple reason  cc-that it did not have a signed contract for the construction of its satellite.=c g-ԍXx#D  P7jQP#CBS, Inc., 98 F.C.C.2d at 1069.(#ƅ Similarly here, without demonstrated concrete progress toward construction and operation of a DBS system, we cannot say that the initial assignment of scarce public resources to ACC continues to be justified.  c-x 33. Since 1991, when we cautioned ACC and all other permittees that extensions  c-would be more difficult to obtain in the future,>> g-ԍXx#D  P7jQP#See Advanced, 6 FCC Rcd at 2274.(#ƌ we have granted extensions on only two occasions. The record in those cases demonstrated that the permittees had made significant progress toward the realization of a DBS system, including substantial monetary investment, arranging for financing for completion and launch of the system, contracting with suppliers of  c}-DBS home receiving equipment, and contracting for satellite launch services.?} g'!-ԍXx#D  P7jQP#See Dominion, 8 FCC Rcd at 6688; USSB II, 7 FCC Rcd at 7251.(#Ʈ These are the kinds of indicia of progress that we look for in evaluating an extension application. Neither these nor any comparable indicia are present in this case.  c!-x!34. ACC asserts that it was the first to advocate the implementation of digital transmission technology, which it began to incorporate into planning for its system as early as" ?0*((,"  c-1986.@ gy-ԍXx#D  P7jQP#ACC App. for Review at 6.(# ACC seeks credit for persevering in its efforts to drag the industry to this higher standard, noting the resistance of other permittees such as DIRECTV that ultimately came to  c-adopt the same technology.qA g-ԍXx#D  P7jQP#Id. at 67.(#q We do not disparage these efforts. It is more notable, however, that DIRECTV, which originally opposed this technology, had sufficient time since we approved ACC's use of digital technology in 1991 not only to change its design to incorporate digital transmission, but also to construct and launch a satellite based on that  cv-design.Bv> ge -ԍXx#D  P7jQP#See Hughes' Application for Minor Modification of Construction Permit and Technical Showing Regarding Compliance with International Requirements, FCC File No. DBS9102MP/Minor (July 15,  oY -1991); Hughes Communications Galaxy, Inc., 8 FCC Rcd 8116 (1993)(launch authorization).(#ƒ During the same three year period, ACC which by its own admission had a fiveyear head start failed to progress toward the realization of its DBS system.  c1-x"35. ACC also argues that the Bureau erroneously ignored ACC's continued  c -compliance with the first due diligence requirement.zC  gT-ԍXx#D  P7jQP#ACC App. for Review at 12.(#z In order to satisfy the first prong of the due diligence requirement for its first 16 paired channels, ACC submitted a construction contract that provided for complete construction of its two satellites by December 1990 and  c -June 1991, respectively.D D  g-ԍXx#D  P7jQP#See Tempo I, 1 FCC Rcd at 21.(#Ɖ After our order in Continental, ACC filed a due diligence showing for its 11 additional paired channels in October 1989 that provided for completion of  c -its first satellite by June 1993, which six months later was revised to January 1994.E  gW-ԍXx#D  P7jQP#See ACC SemiAnnual Report (dated April 4, 1990); Advanced, 6 FCC Rcd at 227072.(#ƽ But in May 1993, ACC submitted an amended contract with an updated timetable showing that construction on its first satellite would not begin until October 1993 (almost three years after it was originally supposed to be finished), with progress payments stretching until  cK-approximately September 1995.FK  g-ԍXx#D  P7jQP#See ACC SemiAnnual Report (dated May 10, 1993).(#Ɩ In April 1994, ACC submitted yet another amended  c4-contract that set April 1995 (four and a half years after the original completion date) as the  c-new date for beginning construction, with progress payments stretching until March 1998.Gu gD#-ԍXx#D  P7jQP#See ACC SemiAnnual Report (dated April 27, 1994).(#Ƙ ACC states that it paid some still undisclosed amount for the "Systems Design and Definition Phase," nonetheless it has not made any progress payments for actual construction. Meeting the first due diligence requirement does not justify failing to fulfill the second. Otherwise,"0G0*((" permittees could extend indefinitely their nonperformance by repeated modifications of their  c-proposals. As we previously advised ACC, "construction must begin at some point."H gb-ԍXx#D  P7jQP#Tempo I, 1 FCC Rcd at 20.(#  c-x#36. In granting ACC its first fouryear extension, we recognized that practical impediments beyond ACC's control justified flexibility. However, as ACC acknowledges, it has had at least three years since the Commission definitively established the orbital locations  cv-and technical parameters of ACC's permit.Iv g -ԍXx#D  P7jQP#See ACC App. for Review at 910.(#Ɔ ACC has cited no factors outside its control to explain its lack of significant progress toward construction and launch of its satellites over that period, which comprised almost all of the fouryear extension we previously granted. Due to its extended inaction and apparent lack of commitment to operating its own system, ACC is not "much closer to the threshold of providing service than any nonpermittee," and  c -thus has no claim to any comparative advantage that could justify an extension.JM > g-ԍXx#D  P7jQP#See USSB I, 3 FCC Rcd at 6860. ACC's reliance on the CPA to support its "threshold" argument is specious; any other entity that had been assigned ACC's channels and orbital locations could enter into  oY-the same agreement and instantly be just as close to initiating service as is ACC. See discussion of the  qYu-CPA in Section III.A.2.b, infra.(#  c -x$37. The bottom line is that ACC has not achieved any concrete progress toward the actual construction and operation of its DBS system. While its other activities may be laudable, our precedent makes it clear that diligent progress toward actual operation which must be the touchstone for our analysis of whether to grant an extension.   bb-x` ` b. The ACC/TCI Capacity Purchase Agreement(#  c4-x%38. In their Applications for Review, petitioners assert that the Bureau ignored the Capacity Purchase Agreement ("CPA"), which they characterize as a binding contract for the launch, deployment, and operation of satellites by ACC. They further aver that the $250 million spent by Tempo Satellite on the satellites TCI agreed to provide to ACC should be attributed to ACC, and that it is TCI that is contributing to ACC's DBS program not the  c-other way around.KS g -ԍXx#D  P7jQP#See ACC App. for Review at 19; Tempo DBS App. for Review at 710. #D  P7jQP#The CPA was not submitted as part of original extension application, but rather as part of the assignment application filed seven weeks later just before the end of its fouryear extension.(#Ɩ  c-x&39. Under the CPA, ACC would not pay for the construction, the launch, or the operation of any DBS satellites. ACC would not own any satellites. Its sole contribution would be the FCC permit. Indeed, the CPA provided for the complete and immediate liquidation and dissolution of ACC upon the consummation of this "sale" of transponder"N K0*((\"  c-capacity.L gy-ԍXx#D  P7jQP#See CPA at  2.3. Upon dissolution, ACC would transfer its permit to its sole shareholder, Daniel  oYl-Garner. Id. at  9.1.2.(# In these circumstances, the CPA cannot fairly be characterized by petitioners as an arrangement by ACC for the launch, deployment, and operation of its own satellite  c-system.MK g-ԍXx#D  P7jQP#Some opponents assert that the CPA transaction would result in an unauthorized de facto transfer of  oY-control from ACC to TCI. See DIRECTV Opp. at 11; EchoStar Opp. at 10. Our resolution of this case on due diligence grounds has rendered that contention moot, and therefore we do not reach it.(#ƥ  c-x'40. TCI, by contrast, would be responsible for virtually every aspect of the transaction and subsequent operation of the DBS system. Pursuant to the CPA, TCI would pay all costs for the "design, construction, launch, deployment, operation, and insurance of  c_-the satellite," and would be its actual owner.NK_ g-ԍXx#D  P7jQP#See CPA at  3.1, 3.3. The CPA provides that TCI's services in constructing and operating the  oY-satellites are "subject to ACC's ultimate control as holder of the FCC Authorization." Id. This does not lessen the inference that TCI, and not ACC, was to be responsible for paying for and providing virtually all relevant aspects of DBS operations.(# TCI would also be responsible for arranging and paying for appropriate facilities for tracking, telemetry, and control ("TT&C") of the  c1-satellite, and for performance of the TT&C functions once in operation.lO1  g-ԍXx#D  P7jQP#Id. at  3.4. #D  P7jQP#In addition to providing one or more satellites and all related services necessary to their operation, TCI also agreed to: (1) make a nonrefundable payment to ACC's sole shareholder, Daniel Garner, in the amount of $600,000; and (2) deliver to ACC certificates representing 2,000,000 shares  oY-of Class A common stock of TCI, with a current market value in excess of $45,000,000. See CPA at Recital C and  2.2. TCI also made an interestfree loan of $2,000,000 to Garner, and has been paying  oY-him $30,000 per month since October 1994 for his services as a consultant. See ACC Agreement and Plan of Reorganization at  3.4; Consulting Agreement at  2(a).(#l  c -x(41. ACC's assertion that the CPA demonstrates significant progress toward its  c -construction and operation of its DBS system is not persuasive. The staff correctly focused on the fact that ACC's sole contribution to this DBS system appears to be its authorization to  c -use public resources. Bureau Order at 6 n.24. ACC will have no part in the ongoing operation of the DBS system that will use its 27 channels at the 110$ orbital location. Not only has ACC contracted away all control over the use of those channels as part of the  c{-CPA,zP{ g@"-ԍXx#D  P7jQP#See CPA at  2.1.(#z but it has also agreed to immediately dissolve as part of the transaction. Moreover, the two satellites for which ACC seeks due diligence credit are currently part of Tempo  cM-Satellite's due diligence progress toward construction and operation of its DBS system.QM g%-ԍXx#D  P7jQP#See Tempo Satellite's SemiAnnual Report at 1 (dated May 18, 1995).(#Ʃ  c7-This agreement cannot be characterized as a demonstration of ACC's due diligence. "!Q0*(( "Ԍ c-x)42. ACC also faults the Bureau for considering the extension request apart from the modification application and the assignment application, since the Commission assertedly  c-"eschewed such a piecemeal approach" in USSB II.R gK-ԍXx#D  P7jQP#See ACC App. for Review at 19 (citing USSB II, 7 FCC Rcd at 7249).(#Ƶ ACC's argument ignores a critical part  c-of our reasoning in USSB II. Although the Commission found that granting USSB's extension and modification requests would serve the public interest, in order to grant them we  c-first had to determine that USSB was in compliance with its due diligence obligations.S g-ԍXx#D  P7jQP#USSB II, 7 FCC Rcd at 7250.(#Ɓ Here, in contrast, the Bureau conducted its compliance analysis first, and its conclusion obviated the need for any further inquiry into the merits of the modification and assignment applications. This approach conforms fully with the Commission's longstanding policies on  c1-assignment of authorizations.+T1> g -ԍXx#D  P7jQP#See Jefferson Radio Co. v. FCC, 340 F.2d 781, 783 (1964)(proposed assignment will not be considered until the Commission has determined that the assignor has not forfeited its authorization).(#+ In any event, reliance upon the proposed assignment to justify an extension would be futile, since our rules in the DBS service specifically provide that "[t]ransfer of control of the construction permit shall not be considered to justify  c -extension of these [due diligence] deadlines."U  g^-ԍXx#D  P7jQP#See 47 C.F.R.  100.19(b).(#ƃ   b -x` ` c. Negotiations with EchoStar(#  c-x*43. ACC also cites as grounds for an extension its efforts from early 1992 to late 1994 to form a joint venture with another DBS permittee, EchoStar efforts that ultimately  cb-proved unsuccessful.Vb| g-ԍXx#D  P7jQP#See ACC App. for Review at 1011. In progress reports to the Commission, ACC said, in April 1992, that it was engaged in "serious negotiations" that it expected to complete in "the next month or two."  oYJ-In August 1992, ACC reported it had signed a letter of intent that called for execution of an agreement  oY-within sixty days. In October 1992, ACC explained that negotiations were continuing, and in April  oY-1993, stated it expected to reach an agreement within the next month. In May 1993, it reported it was  oY-still in "complex negotiations," and in October 1993, it claimed that negotiations were continuing.  oYj-However, on December 30, 1994, ACC indicated that negotiations had failed.(#Ƭ During those negotiations, ACC initially amended its construction contract to delay the start of construction on its first satellite until October 1993, and then  c4-delayed the start date until April 1995.W4 g"-ԍXx#D  P7jQP#See  35, supra.(# "W0*(( "Ԍ c-x+44. We note that for over three years prior to its extension request, ACC had enough  c-channels in a prime orbital location to create a robust DBS system.X gb-ԍXx#D  P7jQP#DIRECTV operates with 27 channels. USSB, which has 5 channels, operates independently. Of all existing DBS permittees, only DIRECTV has as many channels as ACC.(# ACC nonetheless made a business decision to put off construction of its own satellites for three years while it negotiated to form a joint venture. That decision was ACC's to make, but it must bear the consequences of its actions in failing to proceed toward the launch and operation of its system during an extended period.  c_-x,45. As the Bureau noted, the Commission has previously found that ongoing negotiations do not justify an extension of DBS due diligence milestones: "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  c -services."Y K g-ԍXx#D  P7jQP#USSB I, 3 FCC Rcd at 6859.(#ƀ Accordingly, failed negotiations, and the associated delays they may entail, cannot provide any greater justification. These negotiations do not constitute adequate justification for the requested extension.   c -x3.` ` Commission Precedent(#`  cz-x-46. Petitioners also contend that the denial of ACC's assignment application directly conflicts with Commission precedent approving mergers and buyouts of DBS permittees. Specifically, petitioners argue that our actions in approving the sale of transponders from  c5-DIRECTV to USSB,Z5 g-ԍXx#D  P7jQP#See USSB II, 7 FCC Rcd at 725051.(#Ǝ and the transfer of control of a DBS permit from Directsat  c-Corporation to EchoStar,[ g-ԍXx#D  P7jQP#See Directsat Corp., 10 FCC Rcd 88 (1995).(#Ɩ mandate extension of ACC's construction permit. Upon review of these cases, we believe that neither case mandates such a result.   b-x` ` a. USSB II  c-x.47. The Commission first granted USSB's DBS construction permit in 1982.\| g!-ԍXx#D  P7jQP#See CBS, Inc., 92 F.C.C.2d at 64.(#ƍ In  c-1988, we granted a fouryear extension of that permit.]7  g|$-ԍXx#D  P7jQP#See USSB I, 3 FCC Rcd at 685961.(#ƍ We thereafter determined that USSB had complied with the first prong of the due diligence rules, and in 1990 assigned"} ]0*(("  c-USSB channels at three orbital positions, including five channels at 101$.^ gy-ԍXx#D  P7jQP#United States Satellite Broadcasting Co., 5 FCC Rcd 7576, 7577 (1990). USSB also was assigned three  oYl-channels at 110$ and eight channels at 148$. Id.(# On April 30,  c-1991, we assigned the remaining 27 channels at that orbital position to DIRECTV._K g-ԍXx#D  P7jQP#See Advanced, 6 FCC Rcd at 2270.(#ƌ In July 1991 less than three months later USSB and DIRECTV proposed joint use of a satellite then being constructed for DIRECTV to implement their respective DBS systems. The Commission approved that proposal, including the requested extension and modification of  c-USSB's permit.` gD -ԍXx#D  P7jQP#USSB II, 7 FCC Rcd at 7251.(#Ɓ  c_-x/48. Petitioners argue that the staff ignored parallels between ACC's requests and the  cH-Commission's approval of the USSB/DIRECTV transaction.aH g-ԍXx#D  P7jQP#See ACC App. for Review at 1516; Tempo DBS App. for Review at 1516.(#ƫ They say that USSB, like ACC, requested a second extension of time and modification of its construction permit to facilitate a cooperative venture. They say that USSB, like ACC, relied on a satellite planned for use in another permittee's DBS system to initiate its own DBS system. We disagree.  c -x049. First, USSB had made a significant investment in its own DBS system, while ACC had not. Prior to grant of USSB's requests in 1992, USSB had accomplished the following: (1) spent more than $23 million for a portion of a satellite, which constituted approximately forty percent of the price of its fivechannel payload on the satellite; (2) arranged to finance the remaining completion and launch costs of the satellite; and (3)  cb-executed contracts with various suppliers of DBS home receiving systems.bb| g-ԍXx#D  P7jQP#USSB II, 7 FCC Rcd at 7250.(#Ɓ  c4-x150. By contrast, ACC's efforts to establish its own DBS system since the grant of its first extension of time have been minimal at best. Payments on ACC's satellite construction contract with Martin Marietta at the time of its application amounted to less than one percent  c-of the contract price.{c7  g -ԍXx#D  P7jQP#ACC SemiAnnual Report (dated May 10, 1993). ACC's semiannual report dated April 27, 1994, notes that eleven payments have been made; neither this nor any other filing subsequent to May 1993, however, states specific amounts or percentages of the contract price paid. Moreover, under both the CPA and the assignment agreement, TCI is obligated to reimburse any payment made by ACC on its  oY"$-construction contract after September 8, 1994. See CPA at  13.16; Agreement and Plan of Reorganization at  13.16.(#{ Although the Bureau's ruling relied upon ACC's apparent failure to make substantial payment toward construction and operation of a satellite system and contrasted it with USSB's $23 million investment ACC has failed to specify how much"c0*(("  c-money it actually invested in the construction of its satellites.d gy-ԍXx#D  P7jQP#To the extent ACC has submitted its construction contract with its semiannual reports, it has redacted  qYl-the figures for progress payments. Despite a request for these figures during an ex parte meeting with ACC, the company has not provided the requested information.(#Ɔ Nor has ACC proffered any other contract for launch or operationsrelated services under which ACC must make any further investment in its system. ACC's efforts (up to and including its agreements with TCI and Tempo DBS) consisted principally of negotiations for a merger or transfer of its construction permit rather than development of its own DBS system.  cv-x251. Second, with regard to reliance on another permittee, USSB entered a cooperative venture while ACC proposes to dissolve the two are not the same. USSB constructed and owns part of a satellite and operates its own system independently of DIRECTV, with "full operational control" over the transponders it purchased and "sole  c -discretion" as to the content of the programming to be transmitted over its channels.e  g-ԍXx#D  P7jQP#USSB II, 7 FCC Rcd at 7249.(#Ɓ USSB has constructed its own national broadcast center, initiated and entered into its own contracts with programmers, and bears financial responsibility for its proportionate share  c -(5/32) of the costs incurred in the development of a transmit/receive encryption system.}f  gV-ԍXx#D  P7jQP#See USSB Comments at 4.(#} Moreover, USSB had paid $1.3 million for development of the satellites to be used for USSB's channels at the two other orbital locations that it does not share with DIRECTV, and  c-had made separate arrangements for launch of those satellites.rg g-ԍXx#D  P7jQP#Id. at 7251.(#r By contrast, ACC would own no part of the satellites to be launched: its control over the channels is irrevocably contracted away under the CPA and sold outright under the assignment agreement. ACC would also abandon its rights under its own satellite construction contract with Martin  c4-Marietta.hK4F  g+-ԍXx#D  P7jQP#After consummation of either the CPA and the transfer agreement, ACC would be obligated to maintain the construction contract in effect "for the benefit of TCI" if necessary to maintain the construction  oY-permit, and TCI would reimburse ACC for any payments made on that contract. See CPA at  7.2, 13.16; Agreement and Plan of Reorganization at  7.3, 13.16.(# USSB's partial satellite ownership and independent operation are not comparable to ACC's arrangements either to "sell" transponder capacity to TCI or to assign its entire permit to Tempo DBS.  c-x352. Finally, the timing of ACC's extension, assignment, and modification requests indicates that it did not intend to implement its DBS system alone or in cooperation with other permittees. ACC requested assignment of its permit just eleven weeks before it would have expired. Prior to that request, ACC had repeatedly revised its construction schedule to"Y h0*(("  c-delay milestones and payments.i gy-ԍXx#D  P7jQP#See  35, supra.(# USSB, on the other hand, made its arrangements to share a satellite with DIRECTV at least a year in advance of the scheduled expiration of its construction permit, and less than three months after DIRECTV received its channel assignments at the common orbital location. Moreover, USSB made payments to DIRECTV totalling forty percent of the contract price before the Commission approved an extension of time, and continued to pay for development of two additional satellites, investing in the ultimate success of its own DBS system rather than speculating on the possibility of being rescued at the eleventh hour by a suitor.  c1-x453. USSB's investment in an independent DBS operation using a portion of DIRECTV's satellite is not analogous to ACC's proposal either to sell transponder capacity on a satellite that it never contracted to build, or to transfer its permit outright and have no further involvement in the DBS service. As Tempo DBS said, "ACC does not propose to  c -make any contribution to the Tempo program."j  g -ԍXx#D  P7jQP#See Tempo DBS App. for Review at 10. (#ƌ We consider the lack of ongoing involvement a key distinction between these two cases.   b-x` ` b. Directsat  cb-x554. Directsat received its DBS construction permit in August 1989.kb> gQ-ԍXx#D  P7jQP#Continental, 4 FCC Rcd at 6300.(#ƅ We determined that Directsat had satisfied the first due diligence requirement in November 1993,  c4-and accordingly assigned it 10 channels at 119$.l4 g-ԍXx#D  P7jQP#Directsat Corp., 8 FCC Rcd 7962 (Vid. Svc. Div. 1993). Directsat was also assigned one channel at  oY-110$ W.L. and 11 channels at 175$ W.L. Id.(# Five months later, Directsat sought to transfer control of its permit to the parent company of EchoStar, which held 11 channels at  c-the same orbital position.m| g3-ԍXx#D  P7jQP#Directsat, 10 FCC Rcd at 88.(#Ƃ We granted authorization for that transfer, specifically approving the forprofit nature of the transaction.  c-x655. ACC and the other petitioners have argued that our resolution of the Directsat  c-case mandates approval of ACC's extension application.n7  g#-ԍXx#D  P7jQP#ACC App. for Review at 21; Tempo DBS App. for Review at 1719.(#ƞ We disagree.  c|-x756. First, unlike ACC, Directsat did not request an extension of its DBS construction permit. Second, as we noted in granting the transfer application, Directsat's investment in the development of its DBS system had been "substantial," and its progress toward actual"O n0*((z"  c-implementation had been "steady and consistent with the schedule established in its  c-construction contract."o gc-ԍXx#D  P7jQP#Directsat, 10 FCC Rcd at 89 (emphasis added).(#Ɠ By contrast, ACC has consistently delayed the schedule established  c-in its construction contract.p g-ԍXx#D  P7jQP#See  35, supra.(#  c-x857. ACC argues that it has done as much as Directsat did, thus it too has proceeded  c-with "due diligence."zq> g~ -ԍXx#D  P7jQP#ACC App. for Review at 21.(#z This contention is not supported by the facts. First, the measure of what constitutes due diligence is different depending on where the permittee is in the term of its construction permit. Put another way, we expect an applicant to have accomplished more  cJ-at the end of a permit's life than in the middle.vrJ g-ԍXx#D  P7jQP#As we previously advised ACC, "the grant of Advanced's extension request is not dependent upon a comparison between its showing and that of [another DBS permittee], but is instead dependent upon the  oY-merits of its showing." Advanced, 6 FCC Rcd at 2274.(#v Second, even without this distinction, Directsat accomplished more than ACC has to date.  c -x958. We recognize that a DBS permittee could encounter significant difficulty in proceeding with the construction of its system prior to receiving its specific orbital/channel assignments. Such information enables satellite contractors to order parts that are available only on several months' notice, complete satellite designs, and begin construction based on a  c -particular satellite configuration.s D  g-ԍXx#D  P7jQP#See Dominion Video Satellite, Inc., DA 951734 (August 4, 1995).(#Ƭ Until a permittee receives its orbital/channel assignments, there is a practical limitation on the progress it can make toward construction of its satellites. Moreover, a permittee without specific assignments is in no position to negotiate with other permittees for joint or coordinated development of their systems. Thus, we draw a distinction between the progress we expect from permittees who have received orbital/channel assignments and those who are awaiting such assignments.  c-x:59. In this case, ACC received channel and orbital assignments, based on its 1990 due diligence showing, in April 1991, over three years prior to the expiration of its permit. Directsat submitted its due diligence showing five months after ACC, but received its channel and orbital assignments in November 1993 two and a half years after ACC and less than two years prior to the expiration of its construction permit. Despite ACC's early receipt of orbital/channel assignments, it failed to commence satellite construction or come to terms with any DBS permittee on joint development of a DBS system. ACC's merger negotiations with EchoStar continued for almost three years, from early 1992 through late 1994, during which time ACC repeatedly deferred its satellite construction milestones. Directsat, by"P s0*((k" contrast, successfully negotiated a merger with the same permittee, EchoStar, within five months of the award of its channel assignments.  c-x;60. When the Commission found that Directsat had satisfied the first prong of the due diligence obligation, it had a contract for delivery and launch of its first satellite in November  c-1997 and its second satellite in May 1998.t g-ԍXx#D  P7jQP#Directsat Corp., 8 FCC Rcd at 7964 n.4.(#ƍ When the Commission granted the transfer of control to EchoStar, Directsat was still proceeding toward construction under the same  c_-contract with virtually the same timetable.u_ g -ԍXx#D  P7jQP#See Directsat SemiAnnual Report (dated August 16, 1994)(schedule calls for delivery of first satellite on January 2, 1998, and second satellite on July 2, 1998).(# At the time the Commission found that ACC  cH-had met the first due diligence requirement as clarified in our Continental order, ACC's  c1-contract provided for delivery of its first satellite in January 1994.v1 g-ԍXx#D  P7jQP#Advanced, 6 FCC Rcd at 2272.(#Ƃ By May 1993, the  c -delivery date had slipped to June 1996. By April 1994, construction was not even to start until April 1995, with delivery scheduled for the spring of 1998. All other payments and  c -activities had been deferred accordingly.w  g_-ԍXx#D  P7jQP#ACC SemiAnnual Reports (dated May 10, 1993 and April 27, 1994).(#Ơ Unlike Directsat, ACC was not proceeding on the contract that we had previously considered and used as a basis for assessing due diligence. ACC essentially abandoned construction of its DBS system during its negotiations with EchoStar. ACC could have struck a deal earlier. Alternatively or in tandem, it could have proceeded to build its system. It made a business decision to do neither until its permit was about to expire.  cL-x<61. The forprofit sale of a construction permit for an unbuilt radio or television  c5-broadcast station is prohibited by the Commission's rules.x5| gb-ԍXx#D  P7jQP#See 47 C.F.R.  73.3597(c)(2).(#Ƈ In Directsat, we said that the reasons underlying this restriction maintaining the integrity of the application process and promoting the expeditious inauguration of new service serve important Commission objectives. But we held that a similar restraint need not be applied to DBS precisely because we had adopted due diligence and semiannual reporting requirements to accomplish these  c-same ends.y7  g"-ԍXx#D  P7jQP#Directsat, 10 FCC Rcd at 89.(#Ƃ  c-x=62. Directsat stands for the proposition that there is no per se rule against selling a DBS construction permit for profit. It does not suggest that a construction permit should be extended for a party that has not been proceeding with due diligence, simply because that  cP-would allow the party to sell the permit for profit. In fact, the contrary is true. Directsat"P y0*((z" allows forprofit sales of permits based on the assumption that our due diligence rules will  c-suffice to prevent warehousing.z gb-ԍXx#D  P7jQP#The Commission's policy against warehousing is "designed to prevent an entity from acquiring, or retaining, orbital spectrum on the basis of speculative demand at the expense of other potential users."  oY-GTE Corp. and Southern Pacific Co., 94 F.C.C.2d 235, 261 (1983).(#ƅ For this assumption to make any sense, we must enforce our due diligence rules, not extend the permit of those who have not met their obligations.  c-x>63. Directsat negotiated and consummated a transaction with EchoStar in five months that had eluded ACC for almost three years. While negotiating, Directsat continued to progress toward construction and operation of its DBS system, whereas ACC did not. Even ignoring the fact that Directsat did not request an extension of its permit, the circumstances of its case differ so markedly from the circumstances of this case that it serves only to  c1-demonstrate that a different outcome is appropriate here. {K1 g -ԍXx#D  P7jQP#Petitioners assert that if we apply the same due diligence standard to Directsat as was applied to ACC, we will be forced to deny the extension requested by Directsat, whose permit expired on August 15,  oY-1995. See ACC App. for Review at 18 n.38; Tempo DBS App. for Review at 20. We will apply the same criteria to Directsat as we have applied to ACC in determining whether an extension is justified.(#  Our Directsat decision therefore lends no support to ACC's position.  c -B.XxMethod for Future Assignments of DBS Resources(# x?64. The DBS due diligence rules were designed to ensure that permittees would go forward expeditiously with the development of their systems. In this case, ACC's lack of due diligence has resulted in a warehousing of spectrum from which it now seeks to profit. Such a result would be contrary to the public interest in the prompt and efficient use of DBS spectrum to provide a competitive service to the public. Since ACC has failed to fulfill its due diligence obligations, its DBS construction permit will be cancelled and the associated orbital channel assignments will revert to the public for reassignment.  c-x@65. In our Continental order, we stated that, XxX` ` in the event the permit of any of these applicants, or of any of the current permittees, is surrendered or cancelled, the remaining permittees from this group will have the first right to additional allocations, apportioned equally, up to the number  c|-requested in their applications.||& gS#-ԍXx#D  P7jQP#Continental, 4 FCC Rcd at 6299.(#ƅx` At that time, we determined that such an assignment scheme would result in the most prompt disposition of the thenpending applications, and therefore would be preferable to any"7 |0*((=" available comparative procedure. In almost six years since that decision, we have not had occasion to reassign any surrendered or cancelled channels. xA66. Echostar, Directsat, DBSC, and Continental ask that we reassign ACC's channels to the remaining DBS permittees, in accordance with the assignment policy announced in  c-Continental.} g-ԍXx#d6X@DQ @## D  P7jQP#Letter from EchoStar to William F. Caton, dated May 12, 1995; Letter from Directsat to William F. Caton, dated May 13, 1995; Letter from Continental to William F. Caton, dated June 19, 1995; and Letter from DBSC to William F. Caton, dated July 7, 1995.(#Ƅ However, based on the record in this proceeding, the development of DBS service and technology since 1989, and our new auction authority granted by Congress, we believe this assignment method appears no longer to serve the public interest. For the  cH-reasons discussed below, we are currently of the view that the Continental assignment scheme should be abandoned, and that recaptured channels (and associated orbital locations) should be subject to a new window for applications for DBS authorizations. This window would be open to new entrants and current permittees alike, and mutually exclusive applications would be decided by auction. Accordingly, we intend to issue a Notice of Proposed Rule Making that reflects this approach by the end of this month, and to reach a final determination before the end of the year. xB67. In this order, we have discussed three important policy goals for DBS service: (1) efficient use of a valuable public resource (DBS channels); (2) promotion of DBS as a competitor to cable; and (3) prompt delivery of DBS service to the public. It appears that the current DBS assignment policy involves inherent administrative delay and uncertainty, and hence does not facilitate the rapid use of DBS spectrum resources for delivery of service to the public. The failure of existing procedures to produce numerous DBS operators has also  c-impeded progress toward our goal of having DBS compete directly with cable. ~ g-ԍXx#D  P7jQP#This goal is shared by Congress, which indicated in the Cable Act of 1992 its strong support for  oY-services (like DBS) that compete with cable. See 47 U.S.C.  748.(#  Moreover, the current assignment scheme appears to hamper implementation of viable DBS systems and may not reflect the evolution of the DBS industry since its adoption, and therefore may no longer be consistent with these goals. Nor is it consistent with the public interest in "recover[ing] for the public of a portion of the value of the public spectrum resource made  c-available for commercial use." g -ԍXx#D  P7jQP#See 47 U.S.C.  309(j)(3)(C). We note that MCI has stated that it wold submit an opening bid of $175  oY!-million for the 27 reclaimed channels at the 110$ orbital location. See Letter from Gerald H. Taylor, President and Chief Operating Officer of MCI, to Hon. Reed E. Hundt (dated Oct. 10, 1995).(#ƭ xC68. In 1989, when the number of orbital locations and channels sought exceeded the number available in the last DBS processing round, lotteries and comparative hearings were"N 0*((M"  c-the only options for assigning these resources. gy-ԍXx#D  P7jQP#Continental, 4 FCC Rcd at 6293.(#ƅ Each of the thenavailable options for resolving mutuallyexclusive applications involved complex processing procedures and significant regulatory delay. We resolved the issue by granting each application only to the extent that it was possible to award an equal number of channel reservations to each  c-applicant.v g-ԍXx#D  P7jQP#We reserved eight paired channels (the total number requested) for USSB and eleven paired channels  oY-each for ACC, Continental, EchoStar, Directsat, DBSC, Tempo Satellite, and Hughes/DIRECTV. Id. at 630001 and 6304 n.43. These channel reservations were 5 paired channels fewer than had been requested by ACC, EchoStar, Directsat, Tempo Satellite, DBSC, and DIRECTV, respectively, and 5  oY# -paired and 8 fullCONUS channels fewer than had been requested by Continental. Id. at 629597.(#v This assignment scheme favored mergers over mutual exclusivity among DBS permittees by assigning fewer channels than were sought by each permittee for construction of an independent DBS system.  cH-xD69. This method of accommodating all applicants appears to have created significant delay in making DBS orbital/channel assignments. Unlike fixedsatellite service operators, which receive construction authorizations and orbital location assignments at the same time, DBS permittees are assigned specific channels and orbital locations on a first come, first  c -served basis only after demonstrating proper satellite construction contracting.P ^ g-ԍXx#D  P7jQP#See, e.g., Assignment of Orbital Locations to Space Stations in the Domestic FixedSatellite Service, 3  oY-FCC Rcd 6972 (1988); American Satellite Co., 3 FCC Rcd 6969 (1988); see also Establishment of  oY-Rules and Policies for the Digital Audio Radio Satellite Service in 23102360 MHz Frequency Band, FCC No. 95229, June 15, 1995 (proposed rules provide for simultaneous grant of applications and assignment of orbital locations).(#P The due diligence analysis on which these assignments are based is timeconsuming and exacting. While some permittees proceed apace as assignments are made, other permittees may seek to negotiate mergers or cooperative ventures, and put construction of a DBS system on hold while waiting for a clearer picture of ultimate orbital/channel assignments to emerge. Even  cy-sincere efforts to forge a cooperative DBS venture can involve delay as parties negotiate  cb-agreements and seek the necessary Commission approval of a merger or sale.Kb9  gL-ԍXx#D  P7jQP#We reemphasize here that, while some delays may result during negotiations on mergers or cooperative arrangements, the negotiating parties must still comply with our due diligence requirements, and failure to make appropriate progress towards completion of an operational system is not excused by such negotiations.(#ƛ Moreover, requests for extension of time, modification requests, and transfers or assignments all require independent review by the Commission, in addition to the analysis of each permittee's due diligence demonstration.  c-  c-xE70. It appears that such delays would only be perpetuated by reassignment of ACC's  c-channels under the policy announced in Continental. In that case, six permittees (other than ACC) received a total of 30 paired and 8 fullCONUS channels fewer than they had"L0*(("  c-requested. gy-ԍXx#D  P7jQP#See footnote 129, supra.(#Ƅ Under Continental, each of those permittees would have the first right to a pro  c-rata distribution of ACC's cancelled channels. As a result, six permittees would be assigned four paired channels each, further complicating the already fractured distribution of DBS  c-channels. g-ԍXx#D  P7jQP#For example, Directsat has been assigned a single channel at 110$, and USSB has three channels at the  qY-same location. See footnotes 94 and 108, supra.(# Since four channels may not provide sufficient capacity to operate a viable  c-system,Q g_ -ԍXx#D  P7jQP#Tempo Satellite has recently indicated that even the 11 channels it has at 119$ "are not sufficient for a  oYR -competitive system." See letter from Richard E. Wiley to Hon. Reed E. Hundt at 2 (dated August 15, 1995).(#Q such piecemeal assignment of channels could render the potentially fullCONUS orbital location at 110$ unusable by any single permittee. We could then anticipate further delays as the permittees negotiated to aggregate a sufficient number of channels (by merger or buyout) to justify the expense of launching a DBS service at that location. In the meantime, the public would suffer as these valuable DBS resources went unused.  c -xF71. In addition, we fear that assigning channels pursuant to Continental will indefinitely delay completion of the last DBS processing round. This is a real prospect because the requests for a total of 30 paired and 8 fullCONUS channels of the six permittees  c -who received fewer channels than requested in Continental could not be satisfied by distributing ACC's 27 cancelled pairs of channels. Absent a change in policy, these requests could only be satisfied upon cancellation or surrender of another's permit. Thus, existing  c-DBS processing procedures, in combination with the policy adopted in Continental, have not fostered the swift construction and operation of DBS systems. xG72. It is our current opinion that opening a window for new applications for DBS  c6-permits to use reclaimed channels (and orbital positions), and then deciding among mutually exclusive applications by auction, will best serve the public interest. EchoStar argues that the  c-Commission may not revisit the Continental decision without prior notice to the public and a  c-complete record on the issue of channel/orbital assignments.S g-ԍXx#D  P7jQP#See EchoStar Opp. at 3233; Letter from EchoStar to William F. Caton, dated June 16, 1995.(# Our decision to initiate a  c-rulemaking proceeding on these issues (see  66, supra) obviates these concerns. Moreover, our commitment to expedite that rulemaking will ensure that the cancelled channels are reassigned, either by auction or some other method, in January 1996. X` hp x (#%'0*,.8135@8: g -ԍXx#D  P7jQP#See Public Notice No. 54107 (Int'l Bur. May 26, 1995)("Ex Parte Notice"). Our rules provide that "the Commission retains the discretion to issue public notices setting forth modified or more stringent  qY-ex parte procedures." 47 C.F.R.  1.1200(a). In this instance, because the application proceedings raised "complex legal and policy issues" and concerned "rapid developments in the DBS service, the  qYY-Bureau determined that modification of the ex parte rules would "assist the Commission in developing a more complete record on which a wellreasoned decision can be made." Ex Parte Notice at 1. Although EchoStar questions the wisdom of the Bureau's reclassification of this proceeding, we decline to undo the Bureau's reasonable exercise of its discretion.(#ƕ and EchoStar subsequently used the opportunity afforded by this reclassification to hold discussions with Commission personnel, EchoStar contends that this "cannot cure the potential harm caused by prior prohibited efforts to influence the  c -process." u  g-ԍXx#D  P7jQP#Letter from Philip L. Malet to Andrew Fishel, Managing Director, dated June 13, 1995, at 3.(#ƻ It therefore requests that the Commission issue an order to show cause why the  c -Commission should not draw inferences adverse to the positions advocated in the ex parte communications, as a sanction for violation of the Commission's rules.  c}-xM78. We see no reason to conduct an investigation into whether additional prohibited  cf-ex parte communications may have occurred. We note that as soon as Commission personnel learned that the proceeding in question was a restricted matter, appropriate disclosure of the oral contacts was made. We further note that as soon as GIC realized that its written  c"-presentation was not permissible under the Commission's ex parte rules, GIC itself promptly notified the Managing Director of the communications and served copies of the prohibited presentation upon the parties to the proceeding. In view of these circumstances, we have no reason to believe, and EchoStar has not offered evidence to suggest, that any additional presentations not permitted under the rules have occurred. We therefore deny EchoStar's request for an investigation.  c-xN79. We also deny EchoStar's request that we issue an order to show cause why the  ck-Commission should not draw inferences adverse to the positions taken in the improper ex"k0 0*((l"  c-parte communications. EchoStar has identified two specific arguments that it asserts were made in those presentations: (1) that grant of ACC's applications is necessary to ensure competition to DIRECTV; and (2) that grant of ACC's applications will provide digital  c-programming capability to rural cable systems. g5-ԍXx#D  P7jQP#See EchoStar Opp. at 4243.(#Ɓ We note that the persons who made the prohibited communications were not parties at the time the presentations were made and that, even though they have subsequently attempted to become participants in this proceeding, they  cw-have failed to satisfy the requirements for party status.w g -ԍXx#D  P7jQP#See  16, supra.(# In any event, we are not persuaded that any harmful prejudice has occurred that would warrant the requested sanction. The substance of the prohibited presentations were fully disclosed soon after they were made, similar arguments were made on the record of the proceeding, and EchoStar has thus had a full opportunity to respond to the substance of these claims both orally and in written submissions. We therefore deny EchoStar's request for sanctions.   _ - IV. ORDERING CLAUSES T TP  c-xO80. Accordingly, IT IS ORDERED that the Applications for Review filed by Advanced Communications Corporation and Tempo DBS, Inc. are DENIED.  cL-xP81. IT IS FURTHER ORDERED that the Applications for Review filed by Primestar Partners, L.P., Cable Telecommunications Association, and General Instruments Corporation are DISMISSED for lack of standing.   c-xQ82. IT IS FURTHER ORDERED that the Motion for Expedited Action filed by Tempo DBS, Inc. is DISMISSED AS MOOT.  c-xR83. IT IS FURTHER ORDERED that the Request by EchoStar Satellite Corporation  c-for an investigation into and imposition of sanctions for prohibited ex parte communications in this proceeding is DENIED. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhWilliam F. Caton x` `  hhActing Secretary" >0*((!" x` `  hh@hpp    c- DISSENTING STATEMENT T JbOF T  _c-I COMMISSIONER ANDREW C. BARRETT TP  c5-Th  _ - In Re: 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 Corporation to Tempo DBS, Inc.; Application for Modification of  _ -Direct Broadcast Satellite Service Construction Permit (File Nos. DBS9411EXT, DBS _ -9415ACP, DBS9416MP). xPursuant to today's action, the Commission affirms the International Bureau's ("Bureau") determination that Advanced Communications Corporation ("ACC") failed to meet its due diligence obligation of proceeding expeditiously with the construction and launch of its  c!-direct broadcast satellite ("DBS") system.! g-ԍ Advanced Communications Corp., 77 Rad. Reg. 2d (P&F) 1160 (DA 95944, April 27, 1995). As a result, the channels and orbital locations previously assigned to ACC will revert to the public for reassignment. Further, the Commission has chosen to initiate a rule making to establish a new methodology by deciding upon mutually exclusive applications for the reassignment of DBS channels and orbital positions. As a result of my disagreement with the Commission's due diligence findings in this case, I feel compelled to dissent from today's decision. In the past when reviewing due diligence efforts by DBS permittees, the Commission has heretofore granted extensions to several permittees in an effort to encourage the delivery of DBS service to the public. To that end, over the years, the Commission has exercised greater flexibility when reviewing the due diligence criteria for various DBS permittees, even though these somewhat relaxed expectations may have proven unacceptable for other video programming providers in the marketplace. It would therefore, in my opinion, seem entirely   unreasonable, and indeed, irresponsible, for the Commission to disregard its primary objectiveto encourage competition amongst DBS providers in order to enhance consumer choiceby forestalling yet another viable and prepared DBS competitor from entering the marketplace in the immediate future. ""!v0*((#"Ԍ The Commission's due diligence requirements have two components. First, the  c-Commission requires that a DBS permittee begin construction or complete contracting for construction of the satellite station within one year of the grant of its construction permit. Secondly, the permittee must begin operation of the satellite station within six (6) years of the  c-grant of its permit, unless otherwise determined by the Commission.MI g-ԍ See 47 C.F.R.  100.19(b).M In denying ACC's request for an extension, the Bureau concluded that, from its assessment of the totality of the circumstances, ACC had made little progress in the construction, launch and initiation of a DBS system in the past decade. The  c1-record indicates that in 1984 , the Commission granted ACC's application for authority to construct and launch a DBS system, subject to its fulfillment of the Commission's due  c -diligence requirements. In October 1986, the Commission found that ACC had complied with the first due diligence component by contracting for the construction of its first two DBS  c -satellites. As a result, the Commission granted ACC's request for sixteen (16) channels at each of two orbital locations. In addition, ACC requested additional channels at these  c -locations as part of its modification application. The Commission reserved, but did not assign, eleven (11) additional pairs of channels for ACC conditioned upon ACC's satisfaction of the first prong of due diligence. In February 1990, Advanced applied for a four year extension of time to construct and operate its DBS system. The Commission  cO-granted this request in April 1991 (extending the deadline to December 7, 1994), and assigned ACC nineteen (19) additional channels. Importantly, as the record indicates, ACC did not receive its final channel assignments until April 1991. Therefore, I believe it is imperative that we focus our review on ACC's actions subsequent to that date. Despite ACC's efforts in developing its DBS system, to wit: ACC's failed negotiations for a joint venture with another DBS permittee, Echostar Satellite Corporation ("Echostar")  c-as well as its contractual agreement with Tempo DBS, Inc. ("Tempo")iI g-ԍ Tempo DBS is an affiliate of TeleCommunications, Inc. ("TCI").i for the construction  c-and launch of a satellite, the Bureau concluded that these actions did not amount to the actual construction of a DBS satellite or arrangement for the launch and operation of DBS service. I am puzzled as to why the Bureau determined to apply a different set of criteria for ascertaining due diligence than were used for other permittees with respect to the launch of service in reaching its finding that ACC had not met the due diligence requirements. I do not believe that ACC's efforts are patently distinguishable from the efforts made by those permittees in cases in which the Commission either granted an extension request or a transfer of control application. For example, in July 1991, United States Satellite Broadcasting, Inc. ("USSB") filed an extension request and a minor modification of its construction permit concerning its authorization to operate a DBS satellite on five (5) channels at a specific orbital location. In its minor modification application, USSB stated that""">0*((#" it had entered into an agreement with another entity, Hughes Communications Galaxy, Inc., ("Hughes"), to purchase a payload of five (5) transponders. Significantly, these transponders  c-were not on one of USSB's constructed and launched satellites, but on one of Hughes'  c-satellites,  to be located at the same orbital location as USSB's channels. As a result, USSB sought authority to implement its five (5) channel service by utilizing five (5) transponders on  c-one of Hughes' satellites  rather than constructing and launching a separate fivechannel GE  cz-AstroSpace satellite as previously proposed and approved.zI g-č See In re Applications of United States Broadcasting Company, Inc., 7 FCC Rcd 7247, 7249 (1992). In addition, USSB sought to modify the technical specifications of its authorization to conform to the specifications of the Hughes satellite. It should be noted that USSB's DBS system was required to be in operation by December 1992, while Hughes' system was not required to be in operation until December 1994. As a result, USSB requested that its completion date be reconciled with that of Hughes. In that case, the Commission applied an analysis that led to the conclusion that the ultimate goal of service to the public would be advanced by a grant of USSB's request for  c -extension of time.< vI g-ԍ Id. at 7250.<  c - In this Order, the Commission also concludes that ACC's due diligence efforts were  c-different from those of Directsat Corporation ("Directsat").1I gv-ԍ See In re Application of Directsat Corporation and  Echostar Communications  gi-Corporation, 10 FCC Rcd 88 (1994). I am not persuaded by the Commission's findings. Directsat received its DBS construction permit in August 1989. The Commission determined that Directsat had satisfied the first due diligence requirement in November 1993 and accordingly assigned it ten (10) channels. Only five months later, Directsat sought approval for transfer of control of its permit to Echostar's parent company. Interestingly, Echostar held eleven (11) channels at the same location as those held by  c -Directsat. The Commission granted that authorization in November 1994. I g-ԍ It should also be noted that Directsat was permitted to profit from its sale of the permit. Because of my unwillingness to support our finding of no due diligence here, I am persuaded that ACC should have been afforded the same opportunity. It appears that the Commission credits Directsat for negotiating and consummating a transaction with Echostar in a much more expeditious fashion than ACC. While I acknowledge that an uncertain business situation, or an unfavorable business climate in  c-general have not been adequate explanations for failure to meet a construction timetable, I g%-ԍ See In re Applications of United States Broadcasting Company, Inc., 3 FCC Rcd 6858, 6859 (1988). I"#.0*((" do believe that, under these circumstances, the Commission must remain cognizant about the practicalities of the marketplace. A period of lengthy negotiations does not necessarily denote a clear intention to delay. Indeed, negotiations between Echostar and ACC failed within one (1) year of the grant of ACC's April 1991 extension. Clearly, the negotiations between ACC and Echostar involved a substantial transaction that finally resulted in protracted litigation. As evidenced by the record, both parties proceeded to conduct negotiations with other parties. Unfortunately for ACC, such events transpired near the expiration of its construction permit. On the other hand, we note that Directsat immediately consummated a deal with Echostar. What the Commission fails to acknowledge is that Directsat and Echostar had the same orbital location and thus derived the benefit of economic efficiencies. On the other hand, the Commission also fails to note that negotiations between Tempo and ACC advanced to the point where Tempo began to commence construction of its  c -satellites to accommodate the 110- orbital location.  I ge -ԍ I make this observation only for purposes of demonstrating an intention by the parties to proceed with a DBS system without undue delay.  c - Although the Commission in the instant Order seeks to elaborate on various differences between ACC's and USSB's and Directsat's actions, I am not wholly persuaded that the distinctions are as obvious as espoused. In my view, a review and analysis of the Gordian knot of issues in this case will reveal certain distinctions. For instance, one may argue that the public would have also benefited from the sale of ACC's permit to Tempo by increasing the choice of DBS providers. Therefore, I do not believe that ACC's efforts are substantially incongruent with those of USSB and Directsat so as to warrant a finding of no due diligence and the revocation of ACC's permit. By comparison with the other pertinent instances, I am not convinced that ACC did not satisfy the due diligence requirements. Unfortunately, I believe that Commission precedent in this area is murky enough so as to elicit persuasive arguments in this case for both sides. Based on the public policy concerns, however, it is clear that the Commission, in the past, gave DBS permittees greater flexibility, based on the fact that DBS service was a relatively fledgling industry in which there were very few players and in the interest of making DBS service available to the public. As a result, until such time as the Commission had established and clearly stated a definitive and inflexible approach to the due diligence standard, I believe the Commission should have used a similar basis for determining ACC's due diligence compliance. As a consequence, I would have approved an assignment of ACC's permit to Tempo.  c-  c-  REASSIGNMENT OF CHANNELS  c - The Commission has announced that it intends to initiate an expedited rulemaking proceeding to establish a new methodology for reassigning DBS channels and orbital positions. Based on the assumption that auctions will be used to reassign the reverted"#$v 0*(($" channels, the Commission has proposed to hold the DBS auction within the next three (3) months. Based on the Commission's past experiences with auctions and the complexities involved in developing acceptable service and auction rules, I firmly believe that such a timetable is wholly unrealistic. Moreover, I am convinced that today's decision as well as any rules promulgated for auctions in this service will be subject to judicial challenge that will considerably delay additional DBS service to the public. The Commission has, on prior occasions, indicated that one of its primary goals in the DBS area is to promote the prompt initiation of DBS service. Although I am loathe to prejudge a rulemaking for reassignment of the reverted channels, I am skeptical about the Commission's timetable for establishing a new methodology for the reassignment of DBS channels that will not further delay service to the public. Therefore, I will review the comments for the rulemaking which will be initiated in the immediate term with great interest. " % 0*(( "  `}(#October 17, 1995 Separate Statement Nof  Commissioner Susan Ness T  cH-Re: Advanced Communications Corporation  By our actions today, the Commission upholds the requirement of due diligence in satellite construction by cancelling the Direct Broadcast Satellite (DBS) permit of Advanced Communications Corporation (Advanced) and expresses its preliminary view that auctions should be used to reassign DBS channels and orbital positions a solution that is simple and, above all, fairest to all parties.  b-  cz-Failure to Meet Due Diligence Today's ruling affirms the determination by the International Bureau of lack of due diligence by Advanced. This result is compelled by the evidence before us. In 1991 the Commission granted Advanced's first request for a fouryear extension of time to construct a DBS system, but warned that future extension requests for DBS permits would require a showing of concrete progress. I have combed the record, seeking supporting documentation for the proposition that Advanced heeded the Commission's clear warning in 1991. Regrettably, I have found no credible evidence. Advanced never even began construction of a satellite much less commenced DBS operations during the four additional years for which the Commission had extended Advanced's initial sixyear permit. In its 1991 order, the Commission stated that "continued reliance on experimentation, technological developments and changed plans will not necessarily justify an extension of a  c8-DBS authorization."8I X-#Xj\  P6G; DXP#эXxAdvanced Communications Corp., 6 FCC Rcd. 2269, 2272, recon. denied, 6 FCC Rcd 6977 (1991).(# This admonition applied to all construction permits for which an extension might be sought after 1991. The message should have been especially clear to any  c -party contemplating a request for a second extension. Nonetheless, Advanced relies upon technological developments and changed plans to justify its extension request. An applicant cannot claim it has met every milestone and deadline in a contract for satellite construction, when every meaningful milestone and deadline repeatedly is pushed into the future by contract amendment. ""&b0*((#"ԌThe facts recounted in the Memorandum Opinion and Order establish conclusively, in my mind, the lack of due diligence on the part of Advanced.  b-    c-Disposition of Returned DBS Orbital Assignments and Channels Once the factual issue of due diligence is resolved, the more difficult issue becomes the disposition of Advanced's DBS channels and orbital locations. This requires the Commission to weigh a complex array of competing considerations. Some argued that, notwithstanding a finding of lack of due diligence, the Commission should allow Advanced to transfer its construction permit to a party of its own selection. Others argued that the channels should be publicly auctioned by the Commission to allow all interested parties the opportunity to participate. I have weighed these alternatives carefully but have not been persuaded that the public interest would be served by allowing Advanced to transfer its construction permit to Tempo DBS, Inc. (Tempo). In particular, I have evaluated claims that allowing the transfer to Tempo will expedite the availability of an alternative supplier of DBS service, that cancelling the construction permit will disrupt business plans of a number of parties, and that recapture and auction of the channels would cause an entrepreneur who showed great vision and contributed significantly to the development of DBS to be left emptyhanded. These arguments certainly have some merit. But ultimately I find that they are outweighed by the need for credible enforcement of our rules and evenhanded treatment of potential DBS suppliers. I have determined that the lack of due diligence requires us to cancel Advanced's permit. I do not believe that a licensee who has clearly failed to comply with Commission rules should be given the right to choose the party to receive its permit, particularly where the demand for the commercially valuable spectrum at issue twentyseven full CONUS DBS channels far exceeds the supply. Tempo's progress toward construction of a satellite for its assigned DBS channels at a different orbital location is not a substitute for Advanced's failures. I believe that the better approach is to make prompt preparations to offer the opportunity to construct and operate a DBS satellite from Advanced's orbital locations to all interested parties.  b-  c-Conclusion Although I do not subscribe to the notion that auctions are the best solution in every circumstance, in this instance an auction may be the quickest and fairest means of distributing the channels to those who value them the most. Advanced and Tempo will be free, of course, to bid at an auction. It is my intention to move expeditiously to establish a new method for reassigning DBS channels so that all prospective bidders will have an opportunity to compete. In my judgment, no other approach comports as well with our mandate to serve the public interest."#''0*((P("  c-x` `  hh@hpp#Xxjp P7 XP## XR  P7jQ6MXP#October 18, 1995  #djp P7 XP#ѐ ^-T# Xxjp P7 XP# T eSTATEMENT OF TP #COMMISSIONER RACHELLE B. CHONG  Yv-TP  bH-# XR  P7jQ6MXP#Re:Xx Advanced Communications Corporation, File Nos. DBS9411EXT, et al.(#  c1- xI write separately in this matter to amplify my reasons for our decision. I found this to be a perplexing case that required particularly painstaking analysis. There were many legitimate interests to balance. As I explain below, I believe that the result that the majority has reached is correct as a matter of law, fair to all interested parties and will encourage the swift delivery of additional Direct Broadcast Satellite (DBS) service to consumers.  _y- Due Diligence  cb- xI fully support the portion of this decision that concludes that Advanced Communications Corporation ("Advanced") did not meet our due diligence requirements. Section 1 of the Communications Act of 1934 charges the Commission with the job of  c-ensuring United States citizens a "rapid, efficient, Nationwide, and worldwide wire and  c-radio communication service."I gh-ԍ#&J\  P6Q &P#Xx47 U.S.C.  151 (emphasis added).(#Ƅ The warehousing of spectrum by our licensees does not serve to encourage an efficient use of the scarce and valuable public airwaves. The Commission has repeatedly expressed our commitment to discourage spectrum warehousing by enforcement of our due diligence rules. xThe Commission's rules at the inception of DBS service were designed to foster this fledgling service. Despite some flexibility given to DBS permittees in the early years, however, the Commission did impose a twopart due diligence requirement to which  c7-exceptions would be allowed only in the "most extraordinary circumstances."7I gk -ԍx#&J\  P6Q &P#Processing Procedures Regarding the Direct Broadcast Satellite Service, 95 FCC 2d 250, 254 (1983). The Commission has enforced seven times its due diligence requirements as to the first prong of the due diligence rule. The instant case implicates the second prong of our due diligence requirement which goes to construction and launch of the DBS system. xIn my view, Advanced knew, or should have known, from the Commission's rules and orders that a DBS permittee was required to make reasonable progress toward"!(0*((e""  c-construction and launch of its DBS system in order to maintain its authorization. The decision sets out in detail all the public statements in which the Commission made clear to all DBS licensees that sufficient progress towards the construction, launch and initiation of a DBS system was required to meet our due diligence rules. xUpon careful review of the record in this case, it is apparent to me that, while Advanced did make some effort to promote the DBS concept and participate in legislative, regulatory and publicity efforts to promote DBS development, it was not making adequate efforts to actually construct, launch and initiate a DBS system. It is the latter and not the former that our rules require.  _ - Remedy xHaving concluded that Advanced did not meet its due diligence obligation, the next issue became how best to proceed. In my view, when a DBS permittee fails to meet its due diligence requirements, the appropriate remedy is for the government to recover the channels and orbital slots assigned to that permittee and make them available to others who are committed to using them to serve the public interest. To do otherwise would allow permittees to improperly warehouse spectrum. Again, given the demand for spectrum, it should not be allowed to lie fallow. xWe recognize in this order that our method of reallocating these channels should take account of the current state of the DBS industry and our regulatory authority. With this in  c-mind, I find the reallocation method set forth in our 1989 Continental decisionI gh-ԍ x#&J\  P6Q &P#Continental Satellite Corp., 4 FCC Rcd 6292 (1989), partial recon. denied, 5 FCC Rcd 7421  S[-(1990). In Continental, the FCC stated that it would distribute any recovered channels among other permittees, up to the number of channels requested in their applications. 4 FCC Rcd at 6299. unsatisfactory. Much has changed since we adopted that order. The DBS industry has moved well beyond its nascent stage with two DBS providers in the sky. Moreover, the development of digital technology has changed the potential uses for this spectrum. There are many entities who stand ready, willing and able to use these channels. xFurther, Congress has given this agency authority to choose licensees through auctions. We have successfully used auctions to choose licensees in other services. We have found that auctions are an efficient and effective means of licensing. The auction approach also produces a tangible monetary benefit for the American public. Such benefits should not be overlooked. xGiven these changes, I believe that it is incumbent on the FCC to consider carefully how best to reallocate these channels. While I recognize that some argue that there could be additional delay associated with recovery of the spectrum and reallocating the spectrum, I do not believe that the delay need be substantial. At this time, I believe that the fairest thing to"")30*((#" do in this case is to recover these channels, conduct a swift rulemaking that will allow us to make the channels available to new entrants, and ultimately award the license to an entity with the financial wherewithal and vision to put the channels to use in the public interest.