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INTELSAT's owners contribute capital in proportion to their relative use of the system and receive a return on their investment. Any nation may use the INTELSAT system, whether or not it is a  xP'member. (#( INTELSAT's capacity is predominately used for FSS services such as transmission of voice,  TY4data, and video programming from a fixed location in one country to a fixed location in another.e YN V xPG'ԍINTELSAT Annual Report, 1997 at 4.e INTELSAT's Signatories and, in some countries, providers with direct access to INTELSAT space segment capacity provide communications services to individual homes and businesses on a retail  T4basis as well.I V xP_!'ԍINTELSAT Web Page.I Although INTELSAT originally provided basic telephone connectivity and television feeds, it has added new services over time, particularly multipoint and highspeed data communications. "in 0*%%88 "Ԍ S4 `` ` A. Creation of New Skies  T44.In 1998, INTELSAT created New Skies as a separate, private satellite company. International negotiations among the members of INTELSAT culminated with a March 1998` INTELSAT Assembly of Parties Decision that spun New Skies off from INTELSAT as a separate but  T84affiliated company.P 8V xP'ԍXAssembly Decision at 5.(#P  T45.The United States provisionally associated with the Assembly Decision, and acknowledged that numerous uncertainties regarding the restructuring of New Skies remained and that resolution of these uncertainties will ultimately determine whether the creation of New Skies advances or frustrates competition in the satellite services market. The United States stated: XX` ` We fully expect the outcome to be procompetitive. But, if it is not, each Party will have the prerogative, and indeed the obligation, to take whatever corrective measures it deems appropriate to protect against or prevent the distortive effects of a non T 4competitive outcome. XV xP'ԍXStatement of the Party of the United States ("U.S. Statement") to the Assembly Decision.(#Ƒ(#`  TX46.The United States further stated that the FCC would need to issue authorizations for earth stations to operate with New Skies's satellites, and that the FCC would base its review of the applications on statutory public interest requirements, competition policy factors, and Commission  T4rules implementing the WTO Basic Telecom Agreement.B V zPh'ԍXId.(#B  T47.New Skies was incorporated in the Royal Kingdom of the Netherlands (The Netherlands) on  Th4April 23, 1998.chzV xP'ԍXNew Skies Annual Report, 1998 at 28.(#c New Skies became operational November 30, 1998, after INTELSAT transferred  T@4to New Skies various assets including five operational satellites.t@ V zP'ԍXSupra note 1; see also Assembly Decision at 1. New Skies's satellite system currently consists of four geostationary satellites and one inclinedorbit satellite transferred to it by INTELSAT, with a sixth planned to be launched in the fourth quarter of 1999 (the KTV satellite). Of the four operational satellites, only three are positioned to provide international services to and from the United States; a fourth in orbit satellite (NSS513) is severely inclined and is not well suited for serving U.S. points because of the inclination or the location. (#t  T48.The company was formed through the issuance of 9,000,000 shares of common stock to  T4INTELSAT for 9,000,000 Dutch Guilders.i V xP$'ԍ9,000,000 Dutch Guilders are approximately $4.6 million.i New Skies was paid 4,500,000 Dutch Guilders upon"0*%%881" incorporation with the remaining 4,500,000 Dutch Guilders paid prior to the asset transfer discussed  T4above.UV xP@'ԍNew Skies Annual Report, 1998 at 13.U New Skies and INTELSAT entered into an agreement whereby INTELSAT received an additional 1,000,000 shares of New Skies's stock in exchange for the contribution of certain assets, including five operational satellites and one satellite under construction (KTV satellite), related  T`4assignments with associated frequencies to New Skies, and a cash contribution of $60 million.`XV zPX'ԍXSubscription Agreement between New Skies and INTELSAT at 2 ("Subscription Agreement"). See  zP"'also New Skies's Annual Report at 28.(# Most of the customer service contracts were assigned to New Skies or continued through "leaseback"  T4arrangements.XV zPd 'ԍXSee infra  63.(#X New Skies and INTELSAT also entered into several service agreements by which INTELSAT provides, on a transitional basis, operational and other support to continue satellite  T4services until New Skies can provide such functions on its own.IFV xP'ԍAssembly Decision at 13.I  Tp49. INTELSAT incurred costs related to the study and creation of New Skies and incurred  TH 4internal costs associated with the construction of the KTV satellite totaling $22,000,000.dH V xP'ԍXNew Skies Annual Report, 1998 at 28 and 32.(#d A note agreement was signed on November 30, 1998 between INTELSAT and New Skies obligating New Skies to reimburse INTELSAT for these costs. The $22,000,000 note bears interest at six percent payable semiannually, and repayment of the note is required in full within thirty days following an  T 4initial public offering by New Skies. f V xP'ԍXIf New Skies does not hold its IPO, it must pay the note by December 31, 2000.(#Ƈ On the closing date (November 30, 1998), INTELSAT distributed 90 percent of its shares in New Skies to its investment shareholders (its Signatories).  TX4INTELSAT holds the remaining 10 percent interest in New Skies in a nonvoting trust.NX V xP'ԍAssembly Decision at 6.N  S4 ` ` B. Continuity of Services  T4 10.The Assembly Decision endorsed several means to ensure continuity of services once satellites were transferred to New Skies. These measures included contract novation or assignment, leaseback  Th4arrangements or other "temporary measures."Ah V zP!'ԍId. at 13.A The Assembly Decision recognized that: "@0*%%88"ԌXX` ` the issuance of landing rights or operating licenses and any limits on their scope and duration is the sovereign right of each country to determine and actions by  T4governmental authorities may be guided by competition principles.:V zP'ԍId.:(#`  T`4 11.Following New Skies's creation, the Commission notified U.S. earth station licensees, previously authorized to operate with the INTELSAT satellites transferring to New Skies, that they would need to modify their licenses in order to continue to serve the United States using a New Skies  T4satellite.7XZV xP 'ԍXJune 1998 Public Notice. Modification applications were filed pursuant to 47 C.F.R. 25.117 and Section 309 of the Communications Act. The applications addressed in this Order and the authorizations granted are for FSS services (excluding DTH) only.(#7 The Commission stated that it would consider these applications subject to the framework  T4established in the Commission's DISCO II Order implementing the U.S. WTO Basic Telecom Agreement's satellite commitments appended to the World Trade Organization's General Agreement  Tr4on Trade in Services (GATS).FJrzV zP'ԍXAmendment of the Commission's Regulatory Policies to Allow Non U.S. Licensed Space Stations to  zPV'Provide Domestic and International Satellite Services in the United States, Report and Order, 12 FCC  zP 'Rcd 24094, 24112 (1997) ("DISCO II Order"), petitions for reconsideration pending, petition for  zP'review pending sub nom. COMSAT Corp. v. Federal Communications Commission, Case No. 1011  zP'(D.C. Cir.). The DISCO II Order recognized that the U.S. commitments under the WTO Basic Telecom Agreement, did not include market access commitments for DTH, DBS, and DARS and adopted the ECOSat test for requests involving provision of DTH, DBS, and DARS by nonU.S. licensed satellites.(#F The Commission subsequently released a second Public Notice listing the modification applications that had been accepted for filing and establishing a pleading cycle  T" 4to accept comments from interested parties.3\" V zPN'ԍXSatellite Radio Applications for Earth Stations to Operate with INTELSAT Satellites Transferring to New  zP'Skies Satellites N.V. Accepted for Filing, Public Notice, Report No. DS1874, Aug. 17, 1998 (August 1998 Public Notice).(#3  T 4 12.In order to continue providing services to customers after the asset transfer but prior to a Commission decision on the modification applications, licensees also submitted requests for Special Temporary Authority (STA) to operate pursuant to Section 309 of the Communications Act and  TZ4Section 25.120 of the Commission's rules.SZV zP'ԍSee June Public Notice at 2.S "2B0*%%88"Ԍ T4 13.On November 30, 1998, the International Bureau released an Order granting over 90 STA  T4requests upon transfer of the satellites to New Skies.V zP@'ԍXIn the Matter of Requests for Special Temporary Authority to Operate INTELSAT Satellites Transferring  zP 'to New Skies Satellites, N.V., Report and Order, DA 982431, November 30, 1998, ("STA Order"); In  zP'the Matter of Requests for Special Temporary Authority to Operate INTELSAT Satellites Transferring to  zP'New Skies Satellites, N.V., Order and Authorization, DA 991012 (rel. May 28, 1999) (extending the  zPh'term of the STAs from May 29, 1999 to June 30, 1999); In the Matter of Requests for Special  zP2'Temporary Authority to Operate INTELSAT Satellites Transferring to New Skies Satellites, N.V., Order and Authorization, DA 991263 (rel. June 29, 1999) (extending the term of the STAs from June 30,  zP'1999 to July 30, 1999); In the Matter of Satellite Radio Applications for Earth Stations to Operate with  zP 'INTELSAT Satellites Transferred to New Skies Satellites, N.V., Order and Authorization, DA 991515 (rel. July 30, 1999) (extending the term of the STAs from July 30, 1999 to August 29, 1999). (# In the STA Order, the Bureau stated that in order to evaluate the modification applications, in accordance with the framework adopted in the  T4DISCO II Order, it would need a complete record that includes final copies of all support service agreements negotiated between INTELSAT and New Skies as well as other relevant documentation. The STA Order ensured that earth station licensees could continue operations using the New Skies  T4satellites, pending final action on the underlying modification applications.@p V xP"'ԍSTA Order at 3.@ In addition, on June 9, 1999, the Bureau granted STA requests for earth stations seeking to access the New Skies satellites,  T4for the first time, to provide new services.F  V zPb'ԍ#c PE37 P#XIn the Matter of the Satellite Radio Applications for Earth Stations To Operate with INTELSAT Satellites  zP,'Transferred to New Skies Satellites, N.V., Order and Authorization, DA 991093 (rel. June 9, 1999).(#F  Tr4 14.PanAmSat Corporation (PanAmSat) filed a Petition to Deny the earth station applications  TJ 4seeking to access New Skies's satellites.!J \ V xPF'ԍXPanAmSat's Petition to Dismiss, Deny, or Defer, September 18, 1998 ("PanAmSat's Petition to Deny").(#Ɯ New Skies, Kelly Broadcasting Systems, Inc. (Kelly Broadcasting), BT North America, Inc. (BTNA), Comsat Corporation (Comsat) and USA Teleport,  T 4Inc. (USA Teleport) filed Oppositions to PanAmSat's Petition to Deny. " V xPN'ԍXOpposition of New Skies to PanAmSat's Petition to Deny, October 13, 1998 ("New Skies's Opposition"); Opposition of Kelly Broadcasting, October 9, 1998 ("Kelly Broadcasting's Opposition"); Opposition of BT North America, Inc. to PanAmSat's Petition to Deny, Oct.13, 1998 ("BTNA's Opposition"); Opposition of Comsat Corporation, Nov. 12, 1998 ("Comsat's Opposition"); USA Teleport Opposition to PanAmSat's Petition to Deny, Oct. 1, 1998 ("USA Teleport's Opposition").(#  The Royal Netherlands Embassy and the European Commission filed letters in support of New Skies's entry into the U.S.  T 4market.#  dV xP"'ԍXLetter from Eduard V. Sierp, Counselor for Transportation, Royal Netherlands Embassy, Oct. 13, 1998; Letter from H.F. Beseler, Director General, External Relations: Commercial Policy and Relations with North America, the Far East, Australia and New Zealand, European Commission to Stuart E. Eizenstat, Under Secretary for Economic, Business and Agricultural Affairs, Department of"%"0*%%$" State, June 16, 1999; Letter from Robert Verrue, DirectorGeneral, Information Society: Telecommunications Markets, TechnologiesInnovation and Exploitation of Research, European Commission to William Kennard, Chairman, Federal Communications Commission, June 17, 1999; Letter from Robert Verrue, DirectorGeneral, Telecommunications Markets, Innovation and Exploitation of Research, European Commission to William Kennard, Chairman, Federal Communications Commission, July 30, 1999.(# PanAmSat filed Reply Comments.$ @V xP'ԍXConsolidated Reply Comments of PanAmSat Corporation, Oct. 23, 1998 ("PanAmSat's Reply Comments").(#ƚ BTNA, New Skies, and Comsat also filed Reply" $0*%%88q "  T4Comments.&%@V xP8 'ԍXLetter from Cheryl L. Schneider and Eric H. Loeb, Attorneys for BT North America, Inc. to Magalie Roman Salas, Secretary, Federal Communications Commission, Nov. 13, 1998 ("BTNA Letter"); Reply Comments of Comsat Corporation, Oct. 13, 1998 ("Comsat's Reply Comments"); USA Teleport, Inc. Opposition, Nov. 9, 1998 ("USA Teleport's Opposition"); New Skies and USA Teleport filed additional Oppositions against a second PanAmSat Petition to Deny filed in response to additional earth station modification applications put on public notice. USA Teleport Opposition to PanAmSat, Nov. 9, 1998 and New Skies's Opposition to PanAmSat's Petition to Deny, Nov. 12, 1998. These two additional Oppositions raise the same arguments as the original Oppositions.(#& In February of 1999, New Skies filed documents requested by the Bureau in the STA  T4Order.<&ZV xP'ԍXLetter from Stephen L. Goodman, Counsel for New Skies to Regina Keeney, Chief, International Bureau, regarding "Supplemental Materials Concerning the Applications to Use the New Skies  zP'SatellitesEx Parte Submission," Feb. 1, 1999. (#< New Skies has filed additional ex parte letters on several subsequent occasions.'lV xP:'ԍXLetter from Stephen L. Goodman, Counsel for New Skies to Regina Keeney, Chief, International Bureau, regarding "Supplemental Materials Concerning the Applications to Use New Skies Satellites zP'Ex Parte Submission," Feb. 22, 1999 ("Articles of Association Letter"); Letter from Stephen L. Goodman, Counsel for New Skies to Regina Keeney, Chief, International Bureau regarding  zP\'"Supplemental Materials Concerning the Applications to Use the New Skies SatellitesEx Parte Submission," March 11, 1999 ("March 11 Letter"); Letter from Stephen L. Goodman, Counsel for New Skies to Magalie Roman Salas, Secretary, FCC regarding "Supplemental Materials Concerning the Applications to Use the New Skies SatellitesConfidentiality Request," March 12, 1999 ("March 12, 1999 Letter"); Letter from Stephen L. Goodman, Counsel for New Skies to Magalie Roman Salas, Secretary, FCC regarding "Supplemental Materials Concerning the Applications to Use the New Skies SatellitesConfidentiality Request," March 22, 1999 ("March 22, 1999 Letter"); Letter from Andrew R. D' Uva, Associate General Counsel, New Skies to James Ball, Associate Chief, Policy, International Bureau, FCC, April 8, 1999 ("April 8, 1999 Letter"); Letter from Daniel Goldberg, General Counsel and Andrew R. D' Uva, Associate General Counsel, New Skies to Rod Porter, Acting Bureau Chief, International Bureau, FCC, May 17, 1999 ("May 17, 1999 Letter"); Letter from Daniel Goldberg, General Counsel and Andrew R. D' Uva, Associate General Counsel, New Skies to Rod Porter, Acting Bureau Chief, International Bureau, FCC, May 27, 1999 ("May 27, 1999 Letter"); Letter from Daniel Goldberg, General Counsel and Andrew R. D' Uva, Associate General Counsel, New Skies, to Rod Porter, Acting Bureau Chief, International Bureau, FCC, June 16, 1999 ("June 16, 1999 Letter"); Letter from Stephen L. Goodman, Counsel for New Skies Satellites to Magalie Roman Salas, Secretary of FCC, June 22, 1999 ("June 22, 1999 Letter"); Letter from Stephen L. Goodman,"$&0*%%#" Counsel for New Skies Satellites to Donald Abelson, Chief, International Bureau, FCC, July 26, 1999 ("July 26, 1999 Letter").(# PanAmSat" '0*%%88"  T4filed a response to New Skies's ex parte letters. (X V xP'ԍXLetter from Kalpak S. Gude, Vice President and Associate General Counsel, PanAmSat to Chairman William E. Kennard, Chairman, Federal Communications Commission, June 10, 1999 ("June 10, 1999 PanAmSat Letter").(#  Columbia Communications Corporation (Columbia)  T4and Ellipso, Inc. (Ellipso) filed ex parte letters asking the Commission to defer action on the New Skies applications until New Skies can make a showing that it has been privatized and is operating  T4independent of INTELSAT.)@V xPl 'ԍXLetter from Kenneth Gross, President and Chief Operating Officer, Columbia Communications Corporation to Chairman William E. Kennard, Federal Communications Commission, June 16, 1999 ("Columbia Letter"); Letter from Gerald B. Helman, Vice President, International and Government Affairs, Ellipso, Inc., to Chairman William E. Kennard, Federal Communications Commission, June 30, 1999 ("Ellipso Letter").(# Williams Communications, Inc., also filed an ex parte letter asking the  Tf4Commission to approve the New Skies applications.*f V xP'ԍXLetter from Benjamin J. Griffin, Counsel for Williams Communications, Inc., to Donald Abelson, Chief, International Bureau, July 21, 1999 (Williams Letter).(# We also have received letters from Members of Congress, some supporting New Skies's entry into the U.S. market and others expressing their  T4opposition to New Skies's entry into the U.S. market."+ H V xP'ԍX Letter from Peter Deutsch, 20th District, Florida, House of Representatives to Chairman William Kennard, FCC, June 24, 1999 (opposing grant of permanent authority to New Skies to access the U.S. market as currently structured); Letter from Tom Bliley, Chairman and Edward J. Markey, Ranking Democrat, Subcomm. on Telecommunications, Committee on Commerce, House of Representatives, to William E. Kennard, Chairman, FCC, July 15, 1999 (opposing grant of permanent authority to New Skies to access the U.S. market because it may undercut legislative efforts on satellite reform); Letter from Ernest F. Hollings and Ted Stevens, Committee on Commerce, U.S. Senate, July 20, 1999 (opposing grant of permanent authority to New Skies to access the U.S. market because it may undercut legislative efforts on satellite reform); Letter from John D. Dingell, Ranking Member, Committee on Commerce, House of Representatives, to Chairman William Kennard, FCC, July 23, 1999 (supporting unconditional grant of permanent authority to U.S. earth stations accessing the New Skies satellites); Letter from Billy Tauzin, Chairman, House Subcomm. and Consumer Protection to Chairman, William Kennard, FCC, July 29, 1999 (supporting New Skies unconditional entry to the U.S. market); Letter from John McCain, Chairman, Committee on Commerce, U.S. Senate, August 4, 1999 (asking the Commission carry out its statutory responsibilities by issuing an opinion and observing the terms of the WTO Basic Telecommunications Agreement).(#" PanAmSat, however, requests that the Commission authorize New Skies for a limited twoyear term because of various competitive  T4concerns.,ZV xP"'ԍXPanAmSat's Petition to Dismiss, Deny, or Defer at 13 (arguing that New Skies should be given one  zP#'year within which to demonstrate compliance with the DISCO II entry criteria); PanAmSat's Reply Comments at 2 (upon reviewing other comments in the proceeding, PanAmsat revised its views and"$+0*%%o$" argued that New Skies should be granted a twoyear temporary license). (#" X,0*%%88"Ԍ  S4h III. DISCUSSION Đc  T415.New Skies was created to provide multiregional video distribution, interactive multimedia  T`4services to residential and business customers and DTH satellite services.H-`XV xPX'ԍAssembly Decision at 5.H The intent, according to New Skies, was to create a new, effective competitor free from the constraints INTELSAT has experienced as an IGO in responding to competition, but not having the attributes that INTELSAT's competitors have contended give an IGO competitive advantages. The Assembly Decision states that the Assembly's goal was to create a new company that ultimately would become independent of  T4INTELSAT.H.V xP 'ԍAssembly Decision at 7.H The United States supported the Assembly Decision, provided that it would result in  Tp4true separation and independence between INTELSAT and New Skies.L/pxV xP'ԍU.S. Statement at  2. L  T 416.The United States had two primary concerns during negotiations to create New Skies: (1) that New Skies not be accorded preferential market access or unfairly benefit from its INTELSAT heritage; and (2) New Skies and INTELSAT not be able to engage in collusive or market distorting behavior through crosssubsidization and other means. Additionally, the United States recognized that the benefits of introducing a new competitor would not be fully realized if New Skies operated as a mirror image of INTELSAT. These concerns and the U.S. policy goal that New Skies be  T04independent of INTELSAT were reflected in our 1997 DISCO II Order implementing the WTO Basic  T 4Telecom Agreement. The action we take here, under the Commission's DISCO II standard, is intended to be consistent with and ensure the fulfillment of the 1998 Assembly Decision. " /0*%%887"Ԍ S4 ` ` A. DISCO II Standard  T417.In November 1997, the Commission issued regulations implementing our commitment under the WTO Basic Telecom Agreement to open the United States's FSS and mobile satellite service  Tc4markets to satellites licensed by WTO countries.~0cV zP'ԍXDISCO II Order, 12 FCC Rcd 24094, 24102; see also General Agreement on Trade in Services, WTO  xP'Agreement, Annex 1B, The Results of the Uruguay Round of Multilateral Trade  xP]'Negotiations: The Legal Texts 325 (GATT Secretariat 1994), 33 I.L.M. 1167 (1994) [hereinafter GATS]. Under Article II of the GATS, all WTO members must provide "MostFavoredNation" (MFN) treatment to like services and service suppliers from other WTO members, regardless of the commitments undertaken by any individual member. The MFN obligation precludes a WTO member from discriminating among services or service suppliers of other members. It means that a WTO member that commits to open its market for a certain service cannot close its market on a selective basis to like services or service suppliers from any WTO member. In addition to the MFN obligation, all WTO members must comply with the transparency obligations of Article III of the GATS, which requires prompt publications of all laws and regulations applicable to the provision of services. (#~ In the DISCO II Order we adopted a presumption  T=4in favor of entry for nonU.S. satellites licensed by a WTO member.j1=* V zP'ԍXDISCO II Order, 12 FCC Rcd at 2410724113. (#j We also stated that the presumption could be rebutted by a showing of potential for competitive harm. In these cases, we  T4reserved the right to attach conditions to any grant of authority.:2 V zPI'ԍId.: In the DISCO II Order, we also held that, in the exceptional case, in which an application would pose a very high risk to competition  T4in the U.S. satellite market, we would deny the application.<3N V zP'ԍId. <  TO 418.In the DISCO II Order, we recognized that prospective affiliates of IGOs, such as INTELSAT  T) 4or Inmarsat, raised special competition concerns because of their unique institutional heritage.J4) V zP'ԍId. at 2415024155.J Thus, we set forth specific criteria to apply in determining whether an application to serve the U.S. market by an IGO affiliate, with satellites authorized by a WTO country, raises the potential for competitive harm. Specifically, we stated that we would consider any potential anticompetitive or market distorting consequences of continued relationships or connections between the IGO and its affiliate,  Ta4particularly, the risk or likelihood of collusive behavior or crosssubsidization.5arV zPs 'ԍXId. "In determining whether an application to serve the U.S. market by an IGO affiliate raises the potential for competitive harm, we will consider any potential anticompetitive or market distorting consequences of continued relationships or connections between an IGO and its affiliate. For example, we will look at whether the affiliate is structured to prevent practices such as collusive behavior or crosssubsidization."(# "9 $50*%%88"Ԍ T419.We stated that we would evaluate the ownership structure of the IGO affiliate, including its affiliation with INTELSAT, the effect of INTELSAT and Signatory ownership, and whether the affiliate can directly or indirectly benefit from IGO privileges and immunities. We also stated we  T4would evaluate whether an arm'slength relationship exists between the IGO and the affiliate.:6V zP'ԍId.: This evaluation would consider the extent to which there are separate directors, officers, employees, and accounting systems, as well as fair market valuing for permissible business transactions, verifiable by  T4an independent audit and consistent with normal commercial practices.7ZV xP 'ԍX"Permissible business transactions" are transitional services that would be consistent with an arm's length relationship such as tracking, telemetry, and control (TT&C) services. (# We noted that, in conducting our analysis, we would consider other issues, such as the extent of common marketing or recourse to the IGO's assets for credit or capital, and whether the IGO registers or coordinates spectrum or  T4orbital locations on behalf of its affiliate.^8V zP 'ԍDISCO II Order, 12 FCC Rcd 24154.^  Tp4  TH 420.Finally, the DISCO II Order stated that the Commission, when considering the competitive impact of the IGO affiliate's entry into the U.S. market, would specifically consider any arrangements  T 4agreed to by the United States as a result of any international negotiations.:9 DV zP'ԍId.: Thus, we must consider  T 4the effect of the Assembly Decision in applying our DISCO II standards to applications seeking to operate with New Skies for services, to, from and within the United States.  T\421.The concerns we raised in the DISCO II Order regarding the legacy of IGO affiliates, and their potential to undermine competition, were wellfounded. A GAO Report has found that approximately 94 percent of INTELSAT's Signatories are partially governmentowned, and 83  T4percent are completely governmentowned and operated.:V xP\'ԍXGeneral Accounting Office, "Competition Issues in International Satellite Communications," GAO/RCED971, October 1996 at 45.(#ƶ Moreover, 71 percent of the Signatories also operate as their country's regulatory authority, responsible for decisions on licensing, spectrum  T4allocation and market access.:;. V zPd'ԍId.: Most of the highgrowth markets for new video services are located in countries in which the Signatory is also the regulatory authority. The GAO Report also notes that independent satellite systems have long complained that the Signatories were using their authority to favor INTELSAT by authorizing earth stations only if they serve INTELSAT's satellites, assessing prohibitively high tariffs on smaller earth stations used by private satellite systems, and denying or restricting access to necessary radio spectrum within the countries for the transmission of satellite  T4signals.:< V zP%'ԍId.: In view of the potential of many Signatories to either control or influence the terms of" R <0*%%88" access to their national markets, the creation of a global satellite provider owned by INTELSAT and its Signatories raised concerns that such provider would enjoy privileged market access in a number  T4of countries or that its competitors would be denied significant market access opportunities.R=V xP'ԍXU.S. Statement at  2.(#R  S`4 ` ` B. INTELSAT Assembly of Parties Decision  T422.In view of these concerns, the Assembly undertook measures to assure the independence of  T4New Skies from INTELSAT and a procompetitive outcome of the creation of New Skies.J>XV xP 'ԍAssembly Decision at 78.J The Assembly decided: (1) that there should be a "natural dilution" of Signatory ownership in New Skies  T4through an initial public stock offering (IPO) and voluntary share trading;":?V zP 'ԍId.: and (2) to adopt various  Tp4competitive safeguards to assure fair competition between New Skies and its competitors.@@pzV zP'ԍId. at 9.@ These  TH 4provisions were central to U.S. support for the Assembly Decision.TAH V zP'ԍSee generally U.S. Statement.T  T 423.The Assembly noted that in order to raise the very sizeable requirement for development capital, that New Skies [INC] will have early in its existence, "an IPO will take place by the end  T 41999 and, subject to market conditions being favorable, as end early as June 1999."NB V xP'ԍAssembly Decision at 6.N The Assembly, however, declined to mandate a specific date for the IPO and did not specify a percentage of Signatory ownership that should be targeted for dilution. Instead, with the objective of ensuring  T04independence from INTELSAT, the Assembly created an ex post review process that focused on the  T 4ownership structure of New Skies. Specifically, the ex post review process provides that "natural dilution" should achieve a "substantial" nonSignatory ownership in New Skies at the end of a fixed  T4period of time.@C. V zP'ԍId. at 8.@ The review process requires that New Skies's "best efforts to achieve an appropriate level of nonSignatory ownership will be considered by competition authorities" and that authorities "will monitor and regulate INC's commercial activities, including its efforts to increase the level of or accelerate the pace of nonSignatory ownership, in accordance with national and multinational  T4competition law and regulatory policy."BD V zP|"'ԍXId.(#B " R D0*%%88"Ԍ T424.The INTELSAT Assembly also concluded that it was necessary to adopt "meaningful and  T4effective safeguards to assure fair competition between INC and its competitors."@EV zP@'ԍId. at 9.@ These competitive safeguards were intended to ensure that New Skies did not derive competitive advantages from its relationship with INTELSAT and the Signatories. The safeguards include: (1) a waiver by INTELSAT and the Signatories of their privileges and immunities with respect to their relationship with New Skies; (2) location of New Skies's headquarters operations in a country that honors international discovery requests; (3) no participation by nor responsibility of INTELSAT for ITU registration or coordination activities on behalf of New Skies after transfer of the satellites; and (4) a  T4clearly defined and visible arm'slength relationship between New Skies and INTELSAT.CFZV zP 'ԍId. at 910.C  Tp425.The language in the Assembly Decision ensuring an arm'slength relationship between New  TH 4Skies and INTELSAT mirrors the DISCO II standard for IGO affiliates. Under the Assembly Decision, a proper arm'slength relationship between New Skies and INTELSAT requires: (1) separate officers, directors, employees, headquarters and accounting systems; (2) fair market value for permissible transactions verifiable by an independent audit process as appropriate and consistent with normal commercial practice; (3) no common marketing or recourse to INTELSAT assets for New Skies credit; (4) transitional contracts valued at a verifiable fair market price for a limited period of time to be negotiated between the Board of Governors and New Skies management after which New Skies would be able to procure such services through open competitive tender; and (4) Party  T 4inspection of all contracts and transaction between INTELSAT and New Skies.;G V zP'ԍId. ; Finally, as to the  T4transitional services,H~V xP'ԍXTransitional services include: information systems support, financial and administrative systems, booking services, and engineering services. (# the INTELSAT Assembly concluded that "it is essential that the duration of the transitional services be limited and that a pure arm'slength relationship between INTELSAT and New  T4Skies is established as soon as possible."WIV xP'ԍXAssembly Decision at 14.(#W  TB426.In addition, the Assembly Decision provides for: (1) a commitment from New Skies not to seek exclusive authorization to provide services in any country or region; and (2) an agreement by Signatories subscribing to New Skies not to foreclose landing rights to New Skies's competitors where  T4the Signatories have such authority under national law.@Jf V zP!'ԍId. at 9.@ Finally, the INTELSAT Assembly recognized that any limits on the scope and duration of landing rights or operating licenses "is the" J0*%%88" sovereign right of each country," and that "actions by governmental authority may be guided by  T4competition principles."AKV zP@'ԍId. at 13.A  S4 :` ` C. Analysis of New Skies Relationship with INTELSAT  T8427.As an IGO affiliate, New Skies's entry into the U.S. market must be analyzed in accordance  T4with the IGO affiliate standard adopted in the DISCO II Order. In applying the DISCO II standard to the earth station applications seeking to operate with: New Skies satellites, and consistent with the INTELSAT Assembly Decision, we consider the potential for any anticompetitive or market distorting consequences of continued relationships or connections between New Skies and INTELSAT. For purposes of this analysis, we address: (1) the ownership structure of New Skies; (2) privileges and  TJ 4immunities; and (3) arm'slength safeguards.XLJ ZV zPD 'ԍDISCO II Order, 12 FCC Rcd 24150.X  S 4 ` `  1. Ownership  T 428.Market Access. PanAmSat argues that because New Skies is 90 percent owned by INTELSAT's Signatories, the vast majority of whom control landing rights in their home countries, New Skies holds an advantage over PanAmSat and other competitors when trying to gain market  T44access.M4V xP'#c PE37 P#э XPanAmSat's Petition to Deny at 911; PanAmSat's Reply Comments at 6; June 10, 1999 PanAmSat Letter at 67.(# According to PanAmSat, New Skies's owners have the ability and the incentive to discriminate against New Skies's competitors in their home markets. PanAmSat contends that even a Signatory with a small stake in New Skies stands to gain by ensuring that New Skies provides satellite  T4services to that Signatory's home market rather than an unaffiliated competitor.TNDV xP'ԍJune 10, 1999 PanAmSat Letter at 7.T  Tl429.Moreover, New Skies's current ownership structure also could create the potential for  TD4collusion among its current investors.O$DV zP'ԍXSee AT&T et. seq., Joint Application for a License to Land and Operate a Submarine Cable Network  zP'between the United States and Japan, FCC 99167 (rel. July 9, 1999) (where the Commission addressed concerns that a consortium structure for owning and operating a proposed submarine cable system would lead to collusion and discrimination against carriers using competing cable systems).(# For example, New Skies's current owners, which include some of the largest telecommunications providers in the world, potentially could use New Skies to coordinate certain business activities to the detriment of consumers. Because many of the Signatories are still the dominant suppliers of telecommunications services in their respective countries and presumably have an incentive to slow the rate of competition into their countries, they might find New Skies a vehicle through which to come together and attempt to restrain or reduce competitive entry and competitive price pressures in their respective countries."T O0*%%88"Ԍ T4ԙ30.New Skies and other commenters in this proceeding dispute these concerns. First, New Skies  T4claims that the DISCO II Order states that when nonU.S. satellite service providers, such as New Skies, are licensed by WTO Members, they are not subject to a market entry analysis. New Skies  T4and USA Teleport argue that the DISCO II Order states that the WTO status of the country authorizing the satellites seeking to serve the United States, and not the ownership structure of the  T<4satellite operator, is dispositive of market entry.wP<V zP'ԍXMay 17, 1999 Letter at 6;  USA Teleport Opposition at 4.(#w We disagree with New Skies and USA Teleport  T4that the DISCO II Order foreclosed an evaluation of the ownership structure of the satellite operator.  T4The IGO affiliate standard adopted in the DISCO II Order specifically provides that in assessing the competitive effect of an IGO affiliate entering the U.S. market, we must consider "the ownership  T4structure of the affiliate and the effect of IGO and other Signatory ownership . . ."XQZV zP 'ԍDISCO II Order, 12 FCC Rcd 24150.X In addition, the  Tx4ex post review process, adopted in the Assembly Decision, compels New Skies to provide to competition authorities in the jurisdictions in which it operates information regarding its ownership  T* 4makeup and other information required of commercial companies.HR* V xP'ԍAssembly Decision at 8.H  T 431.Second, New Skies, BTNA, and Comsat assert that, in any event, Signatories owning New Skies's shares committed, in the Assembly Decision, that they would not foreclose landing rights to  T 4New Skies's competitors.S |V xP'#c PE37 P#э XNew Skies's Opposition at 6; BTNA's Opposition at 5; Comsat's Reply Comments at 22; Assembly Decision at 10.(# Moreover, New Skies and Comsat state that only nine of New Skies's shareholders directly hold more than two percent of New Skies's shares, noting that all are from WTO member countries and must comply with the nondiscrimination obligation under the WTO  T4Agreement.TV xP'ԍXMay 17, 1999 Letter at 10; Comsat's Reply Comments at 24. The MFN obligation under the WTO Basic Telecom Agreement means that a WTO Member that did not make market access commitments for satellite services must not give less favorable treatment to a foreign satellite system than to a system licensed in any other WTO Member country, if that WTO member decides to open its market to a particular service.(# New Skies contends that its remaining shareholders each holds less than two percent of New Skies's shares, with the vast majority of these entities holding interests of less than one  T4percent.QU V xP'ԍMay 17, 1999 Letter at 10.Q According to New Skies, these small ownership interests would not induce shareholders to  T4favor New Skies if another business deal was more attractive.AVV zPN"'ԍId. at 11.A  TJ432.Despite New Skies's assertions to the contrary, we recognize and share PanAmSat's concerns that New Skies's current ownership structure, if left intact, could give New Skies an advantage when""V0*%%88" seeking market access. The WTO protections cited by New Skies as limiting the ability of INTELSAT's Signatories to discriminate, in terms of market access in favor of New Skies, are not  T4available in countries that are not members of the WTO.,WV zP'ԍXSee also Comsat Corporation: Petition Pursuant to Section 10(c) of the Communications Act of 1934, as amended, for Forbearance From Dominant Carrier Regulation and for Reclassification as a Non zP'Dominant Carrier, 13 FCC Rcd 14083 (1998) ("Comsat NonDominance Order") (explaining that "thinroute" markets (routes that are not linked to the United States by cable and generally rely on INTELSAT as the sole provider of service) are generally nonWTO member countries).(#, We note that both nonWTO Signatories and New Skies may benefit by restricting market access to New Skies's competitors. First,  T`4Signatories from nonWTO countries hold ten percent of New Skies's voting shares.KX`|V xP| 'ԍMay 17, 1999 Letter at 11.K These nonWTO investors account for approximately 30 percent of the world's population and 18 percent of  T4world Gross Domestic Product (GDP).dY V xP 'ԍCentral Intelligence Agency, World Fact Book, 1998.d In addition, the nonWTO investors in New Skies are among the 71 percent of INTELSAT Signatories that are wholly or partially owned by the national government or an agency of the government and continue to control or influence access to a  T4significant amount of international telecommunication traffic.WZV zP'ԍXSee supra note 57.(#W Moreover, barriers to entry (i.e., obtaining landing rights) in many of these nonWTO countries make it difficult for satellite service providers, including U.S. satellite providers, to begin providing services in these markets. A nonWTO member country, whose Signatory is also an investor in New Skies, has the financial incentive and the ability to permit New Skies entry into its market while discriminating against other satellite competitors (such as PanAmSat, LoralOrion, Columbia and GE American). The Signatories may either deny access or permit access to New Skies's competitors under less favorable terms and conditions. This type of preferential market access may pose competitive concerns.  T04 33.Second, as we have recognized, many large multinational corporations seek to develop relationships with telecommunications companies that can provide telecommunications services to,  T4from, and within many countries in all parts of the world.[\. V zP'ԍX#XP7  PT6Q|XP##c PE37 P#In the Matter of The Merger of MCI Communications Corporation and British Telecommunications  zPx'PLC,  GN Docket No. 96245, Memorandum Opinion and Order, 12 FCC Rcd 15351, at  5657  xPB'(1997).#Xw PE37|XP#(#Ɯ As we explained above, because of New Skies's ownership structure and its relationship with INTELSAT and its Signatories, New Skies may be able to obtain access to some countries that other competing satellite companies will be unable to obtain. Clearly this would give New Skies a competitive advantage in obtaining multinational corporate clients. If New Skies simply offered lower prices or better services than its competitors because it were more efficient, the fact that it attracted customers away from competitors would not raise competitive issues here. However, to the extent that New Skies may be able to use its relationship with INTELSAT and its Signatories to prevent other companies from providing services to the same number of foreign countries, or could make it more costly for competitors to provide"R [0*%%88" service into some of the countries in which they were able to obtain access, then New Skies would indeed pose a potential for competitive harm.  T4!34.These potential advantages might enable New Skies to outbid or underprice its rivals. In the extreme case, New Skies might even be able to drive some of its weaker competitors out of business, or at least reduce the probability of new entry by additional satellite competitors. If New Skies were successful in such a strategy, it would then have more power in the future to raise prices or dictate other terms and conditions to its customers in a market that had become less competitive. In order to ensure that New Skies becomes independent and does not have the incentive and ability to engage in activities that could potentially harm competition, we grant the earth stations accessing the New Skies  Tp4satellites licenses that are shorter in duration than a full 10year term license.R\pV xP 'ԍX47 C.F.R.  25.121(c).(#R This approach allows us to engage in the ex post review process adopted by the Assembly of Parties, which specifically calls for authorities such as this Commission to consider efforts to increase the level of or accelerate  T 4the pace of nonSignatory ownership.] XV xP'ԍ#XP7  PT6Q|XP##c PE37 P#Assembly of Parties Decision at 78.  T 4"35.We recognize that 90 percent of New Skies voting shares are held by Signatories from WTO countries that must adhere to the general WTO principles of mostfavored nation (MFN) and Transparency, that the individual INTELSAT Signatory investors have a relatively small ownership  T04stake in New Skies,K^0V xP'ԍMay 17, 1999 Letter at 10.K and that fiftysix members of the WTO, also members of INTELSAT and  T4investors in New Skies, agreed to open markets for all or selected services provided by satellites._xV zP 'ԍXLaura B. Sherman, 'Wildly Enthusiastic' About the First Multilateral Agreement on Trade in  zP'Telecommunications Services, 51 Fed. Comm. L.J. 61, 63 (1998).(# The general MFN obligation requires a WTO Member to treat all foreign satellite operators the same  T4once it opens its market to a particular foreign operator.`V zP,'ԍXGeneral Agreement on Trade in Services, WTO Agreement, Annex 1B, supra note 47.(#Ɣ Our concerns regarding the potential for New Skies's current owners to unfairly restrict market access by New Skies's competitors and to coordinate business strategies to the detriment of consumers are lessened, to some extent, by these factors, which may reduce the incentive of the shareholders to restrict market access or use New Skies to coordinate their business activities. The presence of these factors add to our conclusion that the risk of competitive harm is not so high as to warrant denial of the applications and find instead, that a threeyear license term is appropriate given the potential for competitive harm.  Tx4#36.Initial Public Offering. According to PanAmSat and Columbia, in view of New Skies's current relationship with INTELSAT and its Signatories, the Commission should not grant a permanent authorization to New Skies at this time. They argue that if the Commission were to grant New Skies permanent authority to serve the U.S. market prior to the IPO, there would be no realistic"f `0*%%88A"  T4opportunity to assess the effect of the IPO on the ownership structure.paV xPh'ԍJune 10, 1999 PanAmSat Letter at 4; Columbia Letter at 2.p Moreover, PanAmSat argues  T4that New Skies has done no more than make preliminary plans to have an IPO.\bXV xP'ԍXJune 10, 1999 PanAmSat Letter at 3.(#\  T4$37.New Skies asserts that it intends to dilute ownership through an IPO and voluntary share  T`4trading in public markets.Nc`V xP'ԍNew Skies's Opposition at 15.N However, as a new business, New Skies notes that its bankers have advised it that prior to an IPO, New Skies must: (1) complete the task of establishing its corporate infrastructure and largely assume those limited functions now being performed by INTELSAT; (2)  T4establish a credible commercial track record; and (3) clearly articulate a longterm growth strategy.KdxV xP 'ԍJune 16, 1999 Letter at 1.K New Skies also asserts that its management is committed to completing the IPO and plans to commence an offering in the first quarter of 2000 in order to: (1) raise muchneeded capital for fleet expansion and replacement; (2) satisfy the desires of many of its shareholders to create the means for them to monetize their stake in New Skies; and (3) create a "currency" with which management can  T 4pursue strategic acquisitions and other transactions.se V xP'ԍXMay 17, 1999 Letter at 6; June 16, 1999 Letter at 1.(#s  T 4%38.As described above, the Assembly Decision does not legally commit New Skies to hold an IPO; it simply states that reliance on natural dilution through an IPO and voluntary share trading on  T 4public markets are means to achieving "substantial nonSignatory ownership."Hf V xP'ԍAssembly Decision at 8.H Moreover, the Assembly Decision states: XX` ` X Interested national and multinational competition authorities will communicate their views regarding the appropriate levels for nonSignatory ownership in New Skies, and will review the plans of New Skies's board and management  T4to achieve those levels.:g( V zPX'ԍId.:(#  T@4&39.The U.S. Statement to the Assembly Decision, however, emphasized the importance of achieving New Skies's independence from INTELSAT in a timely way. Fundamentally, the U.S. Statement affirmed that New Skies's independence is based on "the speed with which INC [New  T4Skies] proceeds with an IPO and the size of that IPO."Jh V xP"$'ԍU.S. Statement at  2.J Yet, New Skies indicates that an IPO will be held in the first quarter of 2000, and not in 1999 as anticipated by INTELSAT, because of market"J h0*%%88("  T4conditions.QiV xPh'ԍNew Skies's Annual Report at 10.Q Therefore, it is now clear that New Skies will not be able to fulfill the expectations that an IPO would be held in 1999 expectations upon which the United States relied when associating  T4with the Assembly Decision.j$XV zP'ԍXSee generally The Communications Satellite Competition and Privacy Act of 1997: Hearing on H.R.  zPr'1872 Before the Subcomm. on Telecommunications of the House Comm. on Commerce, 105th Cong., 1st Ses. (1998) (statement of Vonya B. McCann, Ambassador and United States Coordinator for, International Communications and Information Policy). (#ƣ  T`4'40.We realize that there was a fivemonth delay in New Skies becoming operational, and that this may have been a cause of the delay in the IPO. We also recognize that the timing and size of the IPO is dependent upon numerous market factors. We therefore will not mandate that New Skies hold an IPO within a specified time. Nevertheless, we agree with Comsat that the Assembly Decision provides for a process by which regulatory authorities can monitor New Skies's efforts to achieve a reasonable level of nonSignatory ownership, and to take appropriate action if New Skies fails to do  Tp4so.nkpDV xPT'ԍComsat's Reply Comments at 11;  Assembly Decision at 8.n We also believe that nonSignatory ownership in New Skies remains essential to achieve an independent New Skies, and is necessary to avoid the potential for New Skies to secure market access  T 4advantages over its competitors.Tl V zP'ԍSee U.S. Statement at  2.T Therefore, consistent with our DISCO II standard and the Assembly Decision, and in recognition of the public interest benefits to be gained from this decision, as described herein, we encourage New Skies to continue its efforts to become independent of INTELSAT as anticipated by the Assembly Decision, including achieving a substantial level of non T 4Signatory ownership.rm  f V xP'ԍXAssembly Decision at 6. Consistent with the Assembly Decision, we decline to define what constitutes "substantial nonSignatory ownership." But, we believe that market forces will ensure that a significant amount of equity will be sold during the IPO to ensure New Skies's ownership is separate from INTELSAT. (#r We also impose quarterly reporting requirements on New Skies as to its progress toward this goal. Such a report shall include information on: (1) selection of an investment bank/underwriter; (2) filing of the registration statement with the Securities and Exchange Commission; (3) completion of relevant financial analysis and due diligence; and, (4) a copy of the Preliminary Prospectus and the Final Prospectus (when made available to the general public).  S4 ` ` 2. Privileges and Immunities  TB4(41.INTELSAT is entitled to immunity from national laws and courts. For example, INTELSAT does not have to pay corporate taxes and is not subject to employment laws, and is completely"N m0*%%88"  T4immune from antitrust suits.nV xPh'ԍXAgreement Relating to the International Telecommunication Satellite Organization,, and Operating Agreement, August 20, 1971, art. XV(c), 23 U.S.T. 3813.(# In contrast, New Skies does not have any privileges and immunities  T4and will be subject to antitrust actions.Po V xP'ԍXAssembly Decision at 9.(#P Moreover, the Assembly agreed to a limited waiver of  T4INTELSAT's immunity from suit involving matters that relate to its relationship with New Skies.SpZV zP'ԍXId. INTELSAT has waived its immunity from lawsuit for government antitrust actions and will be subject to lawsuit by private parties for damages and/or injunctive relief. Also, the terms of this waiver will apply to Comsat as well, in its role as U.S. Signatory to INTELSAT.(#S  Tb4)42.PanAmSat states that the ongoing relationship between New Skies and INTELSAT gives New  T:4Skies an advantage over other competitors.Gq:V xP 'ԍPanAmSat's Reply at 6.G New Skies responds by arguing that the Assembly Decision incorporates a number of safeguards to ensure that the creation of New Skies will enhance competition, including the decision that New Skies has no "privileges and immunities" and will be  T4subject to lawsuits and discovery requests just like any other Netherlands corporation.Mrb V xP'ԍNew Skies's Opposition at 5.M  Tr4*43.The Assembly Decision does not extend INTELSAT's privileges and immunities to New Skies. Therefore, New Skies will operate in the U.S. market subject to the same laws that apply to U.S. satellite service providers. Moreover, the Assembly Decision specifically waives INTELSAT's privileges and immunities with respect to INTELSAT's relationship with New Skies. INTELSAT's waiver provides additional safeguards against INTELSAT and its Signatories when engaging in activities on behalf of New Skies. Given that New Skies is not afforded the competitive benefit of privileges and immunities and INTELSAT has waived its privileges and immunities with respect to its relationship with New Skies (as an additional safeguard against competitive harm), we find that no market distorting consequences exist with regard to INTELSAT's privileges and immunities.  S4 ` ` 3. Arm's Length Relationship between INTELSAT and New Skies   S4 ` `  a. Separate Officers/Directors/Employees  TB4+44.Under New Skies's Articles of Corporate Governance, New Skies is governed by a Supervisory Board which is equivalent to a Board of Directors, and a Management Board that  T4comprises the officers of the company.is V xP"'ԍNew Skies's Articles of Association, Articles 14 and 18.i Members of the Supervisory Board are appointed and  T4dismissed by New Skies's shareholders.Gt V xP$'ԍArticle 18 (11).G However, the New Skies Articles of Association provide"t0*%%88>" that no member of the Supervisory Board may be a concurrent member of INTELSAT's Board of  T4Governors or an employee of INTELSAT.u V xP@'ԍXArticles of Association, Article 18 (1). The Articles of Association state that there will be seven initial members of the Supervisory Board but that the number shall automatically increase to nine at the General Meeting of Shareholders. According to the Articles of Association, these two additional members shall be independent and shall not be employees, officers, representatives of any shareholders.(# The General Meeting of New Skies's shareholders also  T4determines the number of members of New Skies's Management Board.v V xP'ԍXNew Skies's Articles of Association, Article 14 (1)(3). The General Meeting of Shareholders appoints the members of the Board of Management from a list of at least two nominees for each position as well. This list is prepared by the Supervisory Board. New Skies's executive officers are selected from the Management Board.(#ƀ The Management Board is  T4in charge of the daytoday management of New Skies.YwV xP 'ԍArticles of Association, Article 15 (1).Y  T84,45.PanAmSat argues that although INTELSAT's management and employees are barred from participating as members of New Skies's "Supervisory Board," this restriction is virtually meaningless because there are no requirements that the members of New Skies's "Management Board" be  T4independent of INTELSAT.Sx( V xP'ԍPanAmSat's Petition to Deny at 10.S According to PanAmSat, there is nothing to prevent INTELSAT's management from participating in or even controlling the Board of Management or taking executive  Tp4positions in the company.:yp V zP'ԍId.: Moreover, PanAmSat and Columbia argue that New Skies's current  TH 4Supervisory Board members have close connections to INTELSAT's Signatories.kz H J V xP2'ԍXPanAmSat Letter at 4; Columbia Letter at 2 (generally arguing that a majority of New Skies's directors continue to be representatives of INTELSAT Signatories and the directors must answer to the shareholdersINTELSAT and its Signatorieswhich can make a change in management for any reason, at any time).(#k We also note that, if the management were not independent, New Skies's current ownership structure could create the potential for collusion between New Skies and INTELSAT. Instead of deciding when, where, and how to compete in a manner designed to advance its business interests, New Skies's current owners could control the operations of the company in a manner that advances the interests of INTELSAT. Absent separate officers, directors, and employees, New Skies and INTELSAT might have an incentive to share marketing information or implicitly or explicitly make arrangements to divide up markets in terms of either services supplied or particular country routes or regions of the world to be served. If implemented, such a strategy could reduce or prevent competition between the two companies and thus make it easier for them to raise prices with respect to those geographic markets or particular services. In other words, the two entities might find it in their interest to collude in setting prices or determining what services to provide. "h2z0*%%88"Ԍ T4-46. According to New Skies, its current management team and five of the nine current members  T4of the Supervisory Board have no ties to INTELSAT or its Signatories.K{V xP@'ԍJune 22, 1999 Letter at 1.K This action, according to New Skies, underscores its commitment to operate as a standalone commercial satellite operator  T4wholly independent of INTELSAT.P|XV xP'ԍMay 27, 1999 Letter at 1.P Furthermore, New Skies asserts that the Supervisory Board cannot have any INTELSAT officers, employees or Governors as reflected in the New Skies's  T84Articles of Association.}8V zP 'ԍNew Skies's Opposition at 16; see also Articles of Association, Article 15. Comsat, BTNA, and New Skies claim that PanAmSat's contentions that  T4INTELSAT will control the daytoday operations of New Skies are false.~zV xP* 'ԍComsat's Reply Comments at 19; BTNA's Opposition at 7; New Skies's Opposition at 17. Comsat cites the Assembly Decision's language calling for "separate officers, directors, and employees," and also  T4notes that the creation of the dual board system was necessary to comply with Netherlands law.v V zPj'ԍComsat's Reply Comments at 20; see also Assembly Decision at 9.v  Tp4.47.We recognize PanAmSat's concerns that no specific language exists in New Skies's Articles of Association that prohibits INTELSAT employees and or management from exerting control of New Skies's Management Board. However, we note that several members of New Skies's Management  T 4Board were employed by PanAmSat before being employed by New Skies. V xP4'ԍXNew Skies's Annual Report at 7. New Skies's General Counsel and Vice President of Business Development are former PanAmSat employees.(# Moreover, no member  T 4of New Skies's Management Board is currently employed or controlled by INTELSAT.Q V xPd'ԍNew Skies's Annual Report at 11.Q Therefore,  T 4we find that New Skies has separate officers, directors, and employees, consistent with our DISCO II  T 4Order and the Assembly Decision.  S44 `` ` b. Transitional Agreements between New Skies and INTELSAT  T4/48.In the course of creating a separate affiliate, the INTELSAT Assembly approved several draft service agreements to ensure the continuation of service while New Skies builds the necessary`  T4technical infrastructure to support the operation of the transferred satellites on its own.I V xP 'ԍAssembly Decision at 14.I Following the creation and incorporation of New Skies, INTELSAT and New Skies negotiated the final terms of the agreements.  T4049.Transition Services Agreement. The Transition Services Agreement embodies several agreements under which INTELSAT provides New Skies with information services support, financial"0*%%88X" and administrative support, service booking support, KTV ground networking support, KTV construction and launch support services, contract administration, certain customer support services, satellite management services, and various engineering services. The Transitional Services  T4Agreement expires November 30, 1999.\V xP'ԍTransition Services Agreement at  1(a).\  T84150.PanAmSat claims that the Transition Services Agreement enables INTELSAT to manage and operate New Skies's satellite system and provide technical/operational services free without an arm's T4length contract.RXV xP 'ԍPanAmSat's Petition to Deny at 5.R According to PanAmSat, the relevant agreements do not specify a term, the required level of performance, or pricing for the services. According to PanAmSat, a failure to specify terms, performance measures, and pricing robs New Skies of its ability to terminate the  Tp4agreement if INTELSAT fails to perform its obligations.:pV zP 'ԍId.:  T 4251.New Skies responds by stating that the vast majority of the services provided under the Transition Services Agreement have expired and the balance will expire upon the inorbit delivery of  T 4the KTV satellite. zV xP'ԍXMay 27, 1999 Letter at 1. The KTV Ground Network System contract expires upon inorbit delivery (second quarter 1999).(#Ʊ Specifically, New Skies states that the information systems support, financial and administrative systems support, booking services support, and all customer service contracts have  T 4expired.I V zP'ԍId., Attachment B.I Moreover, New Skies argues that those arrangements had not been open ended, as  TX4claimed by PanAmSat, but had been subject to limits on duration and defined cost methodologies.SXd V xP\'ԍNew Skies's Opposition at 8.S  T4352.In addition, New Skies, Comsat and BTNA explain that the INTELSAT Board of Governors approved an INTELSAT management proposal that the price for the services would be negotiated using the methodologies and assumptions (including a cost plus 20 percent mechanism) incorporated  T4in a December 1997 presentation to the INTELSAT working party. V xP$'ԍNew Skies's Opposition at 8, note 12; Comsat's Reply Comments at 16; BTNA's Opposition at 4. According to New Skies, such cost plus pricing is a common commercial practice and ensures there will be no crosssubsidy from  T@4INTELSAT to New Skies.V@ V xPd"'ԍNew Skies's Opposition at 8, note 12.V  T4453.We recognize the need for INTELSAT to perform certain transitional services for New Skies in view of the fact that New Skies inherited five operational satellites with existing customers before it"0*%%88X" could hire employees and obtain workplace arrangements required to commence and develop  T4operations.SV xP@'ԍMay 27, 1999 Letter, Attachment B.S Moreover, in the case of ICO Communications Ltd., we recognized that Inmarsat would provide various development and support services to ICO similar to those provided by  T4INTELSAT to New Skies.{XV zP'ԍXComsat Authority to Participate in ICO, File No. 106SATMiSC 95, FCC 9921 (released Feb. 25, 1999). In the case of ICO, we determined that development and support services from Inmarsat for much longer duration and involving a broader range of functions was acceptable from an arm'slength standpoint because the contract was costbased, reasonable, and provided adequate compensation for Inmarsat's fully distributed costs. Here, PanAmSat poses no credible evidence that INTELSAT's full cost recovery plus a 20% fee would not cover INTELSAT's fully distributed costs.(#{ New Skies also informed the Commission that all but the KTV Ground  T`4Network System contract have expired.a`V xP 'ԍXNew Skies states that the following transitional service agreements have expired: information systems support contract, financial and administrative systems contract, booking services contract, administration support contract, management of satellite operational plans contract, frequency plans and earth station data contracts, satellite and inventory management services contracts. The only remaining transitional services agreement is the KTV ground network system contract, which expires upon inorbit delivery. May 27, 1999 Letter, Attachment B.(#a We, therefore, find that because all of the transitional services agreements have expired, or in the case of the KTV Ground Network System, is expected to expire shortly, these agreements do not create any potential for competitive harm.  T4 554.Space Segment and Satellite Communications Services Agreement. These two agreements were negotiated between INTELSAT and New Skies to provide control services for the operation of  Tr4the satellites.krJ V xP\'ԍSpace Segment and Satellite Communications Services at 1. k The Space Segment Services Agreement involves the operation and control of the satellite bus and payload. This Agreement expires eighteen months from the date of the asset  T" 4transfer, with two options to extend for six month period." V xP'ԍXMay 27, 1999 Letter, Attachment B. New Skies states that it plans to take over these operations in June, 2000.(#ƨ The Satellite Communications Services  T 4Agreement involves the operation, control, and monitoring of traffic on the satellite.: 2V zP'ԍId.: This agreement expires on November 30, 1999.  T 4655. PanAmSat and Columbia claim that INTELSAT will manage and operate the New Skies's  TZ4satellite system under the terms of these agreements.hZV xP"'ԍPanAmSat's Petition to Deny at 5; Columbia Letter at 2.h PanAmSat contends that INTELSAT will perform virtually all technical functions relating to the management and operation of New Skies's"2T0*%%88"  T4satellite system, including carrier management and associated services.:V zPh'ԍId.: According to PanAmSat, such services go beyond tracking, telemetry and control (TT&C). PanAmSat asserts that this will put INTELSAT in the middle of New Skies's daytoday management by having INTELSAT develop link budgets for particular customer applications, assign carriers, and analyze and respond to issues of  T`4carrier performance.\`ZV zPZ'ԍId.; PanAmSat's Reply Comments at 4.\ Moreover, according to PanAmSat, such an agreement cedes to INTELSAT  T84control over New Skies's long range system planning decisions.R8V xP 'ԍPanAmSat's Petition to Deny at 5.R  T4756.New Skies states that under the Space Segment Services Agreement, it will obtain certain technical services from INTELSAT that include TT&C functions (with outsourcing of TT&C being a  T4common practice in the satellite field).M|V xP'ԍNew Skies's Opposition at 8.M According to New Skies, these services will be provided  Tp4pursuant to an arm'slength contract negotiated between New Skies and INTELSAT.Bp V zP'ԍId. at 89.B New Skies also explains that this arrangement is not openended, but is subject to a limit on duration and a  T 4specific pricing term (cost plus 20 percent).; V zP^'ԍId. ; With regard to the Satellite Communications Services  T 4Agreement, New Skies states that it intends to take over operations within the twelve month term.LX 0 V xP'ԍXMay 27 Letter at Attachment B. New Skies explains that its contract permits one option to extend the term of the contract for an additional sixmonth period, but it intends on taking over the Satellite Communications Services by December 1999 and not exercising that option.(#L  T 4857.We do not believe that the Space Segment Services contract poses potential competitive concerns. The Space Segment Service Contract only provides control services for the satellites, i.e. keeps the satellites in their proper place and altitude and changes the configuration of the communications payloads as requested by New Skies. This arrangement is similar to the contract between Columbia Communications Corporation and INTELSAT for the control of Columbia's 515  T4satellite.P V zP'ԍXIn the Matter of Columbia Communications Corp., Memorandum Opinion, Order and Authorization, 13 FCC Rcd 17772 (Sept. 8, 1998).(#ƽ The Satellite Communications Services Contract, however, encompasses both the activation of new carriers and the maintenance of existing carriers, and may give INTELSAT direct  T4contact with New Skies customers.qV xP#'ԍSpace Segment and Satellite Communications Services at  3.3.q We find that this agreement while necessary for transitional purposes, involves the type of contacts with INTELSAT that are not normally appropriate under an"h:0*%%88%" arm'slength relationship and may increase the potential for competitive harm. However, we find that ending the satellite communications services contracts at the early date anticipated by New Skies  T4will eliminate competitive concerns regarding INTELSAT's access to New Skies customers. V xP'ԍXNew Skies also informs the Commission that its Network Operations Center is now under construction in the Hague and New Skies intends to assume responsibility for payload management by December 1999. In addition, the KTV satellite support services will terminate upon the launch of that satellite (expected later this year). June 22, 1999 Letter at 2.(#ƚ We require New Skies, in its quarterly report to the Commission, to include information on its progress towards terminating the remaining agreements with INTELSAT (i.e., Satellite Communications Services Contract and the KTV contracts).  T4958.Ensured Capacity Rights (ECR) Agreement. The ECR Agreement gives INTELSAT the right, over a 25 year period, to obtain under certain circumstances, New Skies capacity for a fixed fee. The ECR Agreement addresses INTELSAT's concern over its ability to provide, on a commercial basis, the space segment required for international telecommunications services on a nondiscriminatory  TJ 4basis to all areas of the world.LJ V xP'ԍECR Agreement at Article 4.L Indeed, the United States participated in the negotiation leading to the ECR Agreement and ultimately agreed to ensure that members of the developing world have access to space segment capacity, if needed. The ECR Agreement mandates that New Skies submit a  T 4bid for the provision of ECR capacity to be carried out by INTELSAT.H @V zP'ԍId. at Article 5.H New Skies is obligated to submit a bid if New Skies possesses spare space segment capacity. New Skies also is required to  T 4market, sell, or lease, as an agent for INTELSAT, excess capacity beyond the ECR capacity.H V zP'ԍId. at Article 6.H  T24:59.PanAmSat argues that the ECR Agreement gives INTELSAT special rights to obtain New  T 4Skies capacity at fixed rates for a 25year term.S d V xP'ԍ PanAmSat's Petition to Deny at 8.S PanAmSat further argues that given the nature of the satellite business, particularly the boom and bust cycles that occur as shortages of capacity turn into gluts and back to shortages, the ability to secure capacity at fixed prices is an extraordinary  T4right.: V zP&'ԍId.: New Skies responds that several Signatories insisted on providing INTELSAT with the ability, in very limited circumstances, to obtain capacity from New Skies to support lifeline services  TB4in INTELSAT's role as "carrier of last resort."IB V xPh"'ԍNew Skies's Reply at 13.I In addition, New Skies adds that the circumstances"B0*%%88"  T4under which these rights might be exercised are limited. V xPh'ԍXFor example, INTELSAT must submit to New Skies an "initiating notice" three years in advance of the date it wants to use the capacity. In addition, the capacity is only available if New Skies possesses the space segment. New Skies is not obligated to take any steps to cancel or fail to renew existing contractual relationships with its customers. ECR Agreement at  5.1. (#ƴ New Skies also asserts that the agreement specifies a "cost plus" basis for determining the charges New Skies will assess for the ECR capacity, ensuring  T4that nocross subsidy from New Skies to INTELSAT occurs.IV xP'ԍNew Skies's Reply at 14.I Conversely, INTELSAT is not obligated to accept the New Skies ECR proposal should alternative capacity be available at a lower cost to INTELSAT, thus ensuring that no crosssubsidy is created by the cost plus formula included in  T84the agreement.:8@V zP 'ԍId.:   T4;60.Comsat further explains that the ensured capacity rights mechanism was an essential element of the transfer of the six INTELSAT satellites. This provision, according to Comsat, is designed to reassure the developing world that the spinoff would not place in jeopardy INTELSAT's obligation  Tp4to provide universal service.OpV xP'ԍComsat's Reply Comments at 19.O Moreover, Comsat points out that the United States actively participated in these discussions and did not object to the inclusion of the ECR Agreement in the  T 4overall restructuring package.: b V zP"'ԍId.: Finally, Comsat argues that the ECR Agreement does not raise any possibility of crosssubsidization from INTELSAT to New Skies. The benefit, if one exists, actually  T 4goes to INTELSAT, according to Comsat.: V zPd'ԍId.:  T 4<61.Overall, we conclude that the ECR Agreement does not create competitive concerns and, moreover, that it may provide an important benefit to some entities in the developing world. The  T04ECR Agreement concerns the equivalent of only one transponder on a satellite that typically carries  T424 to 36 transponders.N V xP.'ԍECR Agreement at Article 2.2.N Thus, the potential competitive harm of any agreement involving such a small fraction of satellite capacity would be insignificant. Moreover, the ECR Agreement would appear to be more of a commercial burden rather than an unfair competitive benefit to New Skies since INTELSAT obtains the use of the transponder capacity at a fixed rate. In addition, we recognize the importance of such an agreement to INTELSAT members from the developing world. Given the importance of this agreement to the developing world and the context in which it was negotiated, we believe that the benefits of this agreement outweigh any potential for competitive harm. "0*%%88K"Ԍ S4 ` ` c. Assignment of Customer Contracts/Leaseback Arrangements  T4=62.The five operational satellites transferred from INTELSAT to New Skies were serving customers under existing contracts when the transfer occurred. In addition, there were commitments to customers in the form of guaranteed reservations and first refusal reservations for capacity on the satellites to be transferred to New Skies. The Assembly Decision endorsed the principle of contract  T4novationV xPx'ԍXNovation is the substitution of a new obligation or contract for an old one by mutual agreement of all parties concerned. (#Ƴ as a basis for transferring customer commitments to New Skies and that principle is  T4reflected in New Skies's Subscription Agreement.{ V xP 'ԍAssembly Decision at 13; New Skies's Subscription Agreement at  14.1. { The Assembly Decision recognized, however, that it may not be possible for national regulatory authorities to complete, prior to the transfer, the process of obtaining landing rights approvals to permit service continuity for services on the satellites  Tp4transferred to New Skies.IpV xP'ԍAssembly Decision at 12.I Therefore, as temporary measures, the Assembly endorsed and the Board of Governors subsequently approved assignment of contracts and leaseback arrangements as a  T 4means to assure service continuity following transfer of the satellites.x @V xP'ԍXThe United States made it clear at the Assembly that it would not employ the "leaseback" approach to assuring continuity of service between New Skies and U.S. companies. The leaseback approach is an artificial arrangement that, as discussed below, inhibits New Skies's independence from INTELSAT. And, it is unnecessary in the United States to assure continuity of service. We assured continuity of service through special temporary authorizations which, unlike countries employing "leaseback," gave New Skies immediate entry into the U.S. market, in its own name, pending review of the earth station applications.(#Ƣ  T 4>63.Leaseback arrangements are governed by the Transponder Leasing Agreement between INTELSAT and New Skies that establishes the terms by which INTELSAT leases capacity from New Skies for use by Signatories. A number of the customer contracts are subject to a leaseback mechanism so that INTELSAT can continue to provide a preexisting service to the customer. New Skies is denied a relationship with the customer in the Leaseback arrangements. Instead, the customer continues a direct relationship with INTELSAT. Novation of the INTELSAT contracts, on the other hand, requires each customer to renegotiate the terms of each contract with New Skies and enter into new contractual commitments with New Skies. This option is ideal because it ensures that New Skies has the direct relationship with its customers as the Assembly intended. New Skies, thus far, has not been able to novate successfully any of the customer contracts associated with the five satellites  T@4transferred from INTELSAT to New Skies.P@ V xP`"'ԍNew Skies's Annual Report at 9.P  T4?64.Assignment of the contracts means that INTELSAT "assigns" its contractual commitments and delegates its contractual duties to New Skies. Assigning the customer contract obligates New Skies to"0*%%881" perform INTELSAT's contractual commitments using portions of the space segment transferred from INTELSAT to New Skies. However, if New Skies is not able to perform its obligations, INTELSAT remains responsible for the performance of the customer contracts. The majority of the customer contracts were assigned to New Skies by INTELSAT, including Comsat's contracts with INTELSAT  T`4to provide service in the U.S. market.:`V zP'ԍId.:  T4@65.PanAmSat claims that the strongest evidence of INTELSAT's role as the de facto operator of New Skies's system is the overall contract approach of "assigning INTELSAT customer contracts to  T4New Skies."RZV xP 'ԍPanAmSat's Petition to Deny at 7.R PanAmSat argues that the assignment of customer contracts has been designed so that, in effect, nothing changes between INTELSAT and its Signatories as to the contracts being  Tr4assigned.@rV zP 'ԍId. at 8.@ PanAmSat also contends that the Signatories will still receive INTELSAT ownership share credit for their use of New Skies's satellite capacity and, absent INTELSAT's consent,  T" 4payments will be made to INTELSAT and then remitted to New Skies.R" |V xP>'ԍPanAmSat's Petition to Deny at 7.R PanAmSat also asserts that New Skies may not shift a Signatory customer to another satellite unless INTELSAT gives its  T 4consent.; V zP~'ԍId. ; Furthermore, PanAmSat notes that assignment of its Signatories customer contracts to  T 4New Skies makes INTELSAT a guarantor of New Skies's capacity.: V zP'ԍId.: PanAmSat claims that backup protection will be provided irrespective of whether the customer's existing agreement calls for any such protection. PanAmSat argues that INTELSAT will provide backup capacity without charge to  T24New Skies.A20 V zP'ԍId. at 6. A  T4A66.New Skies argues that the Assembly Decision provides for both assignment, leaseback and novation of INTELSAT's contractual obligations to its customers in order to ensure continuity of  T4service.v V zP'ԍNew Skies's Opposition at 11; see also Assembly Decision at 13.v Moreover, New Skies contends that it has replaced INTELSAT in its direct operational relationship with the customers and that New Skies will assume full responsibility for billing and  TB4collection for services it provides under the assigned contracts.TBT V xP6#'ԍNew Skies's Opposition at 10.T New Skies also argues that it will have complete authority to shift the Signatory customers to another New Skies satellite without"0*%%88"  T4INTELSAT's consent.wV zPh'ԍId. at 1213; see also Subscription Agreement at  3.1w New Skies asserts that in accordance with normal commercial practice, New Skies has the right to enforce the assigned contracts and the responsibility for asserting any  T4claim against customers under the assigned contracts, and bears related expenses.NZV xP'ԍNew Skies's Opposition at 13.N Finally, New  T4Skies contends that INTELSAT is not acting as a guarantor of New Skies capacity.AV zP'ԍId. at 10.A Instead, according to New Skies, INTELSAT created an exception in one instance, whereby it would retain responsibility (through a leaseback arrangement) for the provision of lifeline public switched network  T4requirements in Portugal.|V xP, 'ԍXAssembly Decision at 10. This is with respect to a single lease for four transponders on one satellite (338.5$ E.L.).(#Ʋ  T4B67.During the negotiations leading to the creation of New Skies, novation of Signatory contracts and termination of leaseback arrangements proved to be major hurdles to the creation of New Skies because INTELSAT's Signatories receive ownership share credit for their use of INTELSAT's  TH 4satellites.UXH V xP'ԍXArticle 6(b) of the INTELSAT Operating Agreement measure utilization percentages for investment share purposes on the basis of "space segment utilization charges payable by the Signatory to INTELSAT." Thus, ownership share credit determines the amount each Signatory owns of INTELSAT(#U The Assembly decided that if the customer contracts were "assigned" to New Skies, usage on the transferred satellites could be recognized for INTELSAT investment share calculations. Thus, if Signatories novate their respective customer contracts, they lose INTELSAT ownership share credit; if INTELSAT assigns the customer contracts to New Skies, the Signatories continue to receive INTELSAT ownership share credit for using the satellites, despite the fact that the satellites are  T 4owned by New Skies.C V zP'ԍId.` ` C  T04C68.We understand New Skies cannot unilaterally novate the existing assigned contracts, nor the  T4existing leaseback contracts. V xP.'ԍXNew Skies states that its representatives consistently raise the issue of novation of existing agreements with current customers. However, New Skies has not been able to novate a single customer contract to date. New Skies explains that in discussions with customers regarding novation, the principal impediment to novation is the fact that existing customers will lose an investment share with INTELSAT once the agreements are novated. May 27 Letter at 2. (# However, nothing more clearly demonstrates that New Skies is not yet fully independent of INTELSAT than its inherited customer base. Moreover, the Signatories' continued reliance on assignment and leaseback arrangements (with the exception of certain leasebacks intended to assure lifeline services) originally established only as interim measures to assure continuity of service, will reduce New Skies's effectiveness as a new competitor. The fact that these artificial"h60*%%88 " arrangements continue apparently for the benefit of the Signatories makes it more difficult for New  T4Skies to operate independently of INTELSAT interests. V xP@'ԍXApproximately 25% of the those customer contracts that expired during the past six months were not renewed by customers, notwithstanding New Skies's best efforts to secure renewals. In a number of instances, customers that declined to renew with New Skies migrated their services to New Skies's competitors, including INTELSAT. June 16, 1999 Letter at 2.(#Ɲ Moreover, unless the apparent impediments to the novation process are removed, we recognize that New Skies's ability to establish a credible, commercial track record necessary for it to undertake an IPO in the near future would be  T`4adversely affected.`V xP 'ԍXINTELSAT's Board of Governors recently considered but declined to take action to remove these impediments.(#ƣ Therefore, we find, consistent with the intent of the Assembly Decision and under the terms of New Skies's Subscription Agreement with INTELSAT, that New Skies must continue to use its best efforts to novate the assigned and leaseback contracts in order to demonstrate its independence from INTELSAT. Because an inherited customer base provides New Skies an advantage over its competitors and clearly demonstrates a lack of an arm'slength relationship between New Skies and INTELSAT, we require New Skies to report, on a quarterly basis, its progress towards novating these contracts.  S 4 ` ` 4. Conclusions Regarding New Skies's Relationship with INTELSAT  T 4D69.We find that New Skies has not yet achieved independence from INTELSAT because: (1) New Skies has yet to conduct an IPO to achieve "substantial" nonSignatory ownership; (2) New Skies's customer contracts have yet to be novated as anticipated by the Assembly Decision; and, (3) New Skies has yet to terminate the remaining service agreements (such as the KTV agreements and the satellite communications services contract). Until New Skies takes these steps to achieve independence from INTELSAT, there remains a potential for harm to competition in the U.S. market and the benefits that would result from a new, independent competitor will not be fully realized.  T4Based on the record overall and the balance of public interest factors under the DISCO II Order, we conclude that a threeyear license term for earth station operators communicating with the New Skies satellites is more appropriate at this time. This approach is necessary because of the serious competition concerns resulting from New Skies's current position as an affiliate of INTELSAT not yet independent of INTELSAT. Specifically, because of its continued ownership by INTELSAT and its Signatories, New Skies's relationship visavis INTELSAT is largely unchanged since it was created by the INTELSAT Assembly in March 1998.  Tz4E70.The threeyear license term will give us a full opportunity to monitor New Skies efforts to become independent of INTELSAT, while creating a suitable incentive for the company to conduct an IPO creating substantial nonSignatory ownership. A limited, threeyear license term is consistent  T4with the Assembly Decision, the IGO affiliate standard adopted in the DISCO II Order, and the" 0*%%88"  T4Commission's rules.=V zPh'ԍXThe Commission has granted licenses for less than full terms on occasion to U.S. licensees. See  zP2'generally In re Application of Volunteers in Technical Assistance, Order, 12 FCC Rcd 3094 (1997); In  zP're Application of Volunteers in Technical Assistance, Order and Authorization, 11 FCC Rcd 1358  zP'(1995); In the Matter of GTE Spacenet Corporation, Memorandum Opinion, Order and Authorization,  zP'2 FCC Rcd 5312 (1987); In re Application of Hye Crest Management, Inc., Memorandum Opinion and  zPZ'Order, 6 FCC Rcd 332 (1991); In re Petition of United States Satellite Broadcasting Company, Inc., Memorandum, Opinion and Order, 1 FCC Rcd 977 (1986).(#= This approach will give New Skies the incentive and provide us a full opportunity to monitor New Skies's efforts to become independent of INTELSAT. The Commission will consider the appropriate action to extend the threeyear earth station licenses granted today to a normal, full "tenyear" license term, if New Skies demonstrates on the record that it has achieved independence from INTELSAT. New Skies may seek to do so at anytime during the term of the licenses.  T4F71.In order for the Commission to evaluate such a request, New Skies should submit information regarding progress toward and results of: (1) a substantial IPO and any additional plans to increase nonSignatory ownership; (2) termination of the remaining service agreements (with the exception of TT&C); and (3) novation of contracts and termination of leaseback arrangements. The Commission will place this information on public notice and seek to act on any such request in a timely manner.  T 4G72.To encourage speedy achievement of independence from INTELSAT and to carry on the ex post review process established by the INTELSAT Assembly, during the term of threeyear license, New Skies must file quarterly (based on a calendar quarter) with the Commission a status report on its plans for its IPO and associated dilution of INTELSAT's Signatories's ownership as well as progress on novation of customer contracts and termination of existing service agreements. Such reports shall include information on: (1) selection of an investment bank/underwriter; (2) filing of the registration statement with the Securities and Exchange Commission; (3) completion of financial analysis and due diligence; (4) a copy of the Preliminary Prospectus and the Final Prospectus (when"!0*%%88M" made available to the general public); (5) information on novation of its customer contracts; and, (6)  T4information on termination of service agreements between New Skies and INTELSAT. B  T4H73.Finally, this Order modifies existing earth station licenses and grants pending applications by earth station entities to provide domestic and international FSS services in the United States via the New Skies satellites. Accordingly, we modify the existing earth station licenses, previously authorized for a full tenyear license term, to reflect the threeyear license term granted today. The threeyear license term pertains to that portion of the earth station authorization applicable to the New Skies satellites. Applications for new earth station facilities are granted for a threeyear license term,  T4unless otherwise extended by the Commission.>ZV xP 'ԍX47 U.S.C.  309. The Commission rules reserve the right to grant licenses for less than tenyears, if,  zP 'in its judgment, the public interest, convenience, and necessity will be served by such action. See also 47 C.F.R.  25.121.(#> All of the earth station licenses granted today will expire on August 6, 2002 and any earth station licenses subsequently granted for communications via New Skies's satellites, prior to August 6, 2002, also will expire on August 6, 2002.  S 4 D. Other Public Interest Considerations  S 4` ` 1. Prohibition Against Exclusive Arrangements  TX4I74.Exclusive arrangements generally take the form of an agreement between a space stationB operator or service provider that offers a particular satellite system as the only permissible facility through which to obtain a particular satellite service between the United States and another country. Prohibiting these types of arrangements is intended to facilitate competition by encouraging the use of multiple satellite systems in other countries and to ensure that all parties have an opportunity to provide truly global service, which also would facilitate competition in the U.S. market. In the  Th4DISCO II Order, the Commission stated it would apply all requirements imposed on U.S. satellite  TB4systems to nonU.S. systems as well, including the prohibition on exclusionary arrangements._BV zP'ԍDISCO II Order, 12 FCC Rcd 24094, 24102._ Thus, if a provider (U.S. or nonU.S.) has an exclusive arrangement, we will not authorize service by the provider between the U.S. and the country with which the provider has such an exclusive  T4arrangement.$|V zP'ԍXAs stated in the DISCO II Order, we recognize that certain countries may not yet have mechanisms in  zP'place by which to authorize competitive systems. In these cases, consistent with the DISCO II Order, we will allow nonU.S. licensed systems to access the U.S. market but will prohibit service between the U.S. and the country with which it has the exclusive arrangement.(# We apply this requirement to New Skies. ""h 0*%%88"Ԍ S4 ` ` 2. Technical Considerations  T4J75.One of the cornerstones of the Commission's satellite licensing policies is twodegree orbital spacing between geostationary satellites. This policy permits the maximum use of the geostationary orbit. Applicants must demonstrate that they comply with the Commission's technical requirements designed to permit twodegree spacing before they are authorized to provide service in the United States. We license noncompliant satellites as well as earth stations only when the applicants can  T4demonstrate that their operations cause no harmful interference to existing satellite operations.V zPP'ԍXSee, e.g., Section 25.209(f) of the Commission's rules, 47 C.F.R.  25.209(f).(#Ɛ Further, we condition any nonconforming operations upon a licensee accommodating future satellite  T4networks serving the United States that are twodegree compliant.ZV zP 'ԍXSee Licensing of Space Station in Domestic FixedSatellite Service, 48 Fed. Reg. 40233 (Sept. 6, 1983) at  101.(#Ʋ The New Skies satellites do not meet the Commission's twodegreespacing requirements. Consistent with our treatment of U.S. licensed systems, we permit New Skies to provide service in the United States, on a noninterference basis to twodegree compliant operations.  T 4K76.Specifically, none of New Skies's satellites meets the polarization requirements of the  T 4Commission's rules for the 4/6 GHz frequency band. V yP'#X\  P6G; ɒP#эX# c PE37 P#Section 25.210(a)(1) and (3) of the Commission's rules, 47 C.F.R.  25.210(a)(1) and (3), requires satellites in the FSS used to provide domestic service to use linear orthogonal polarization with the capability of switching sense of polarization by ground command. The Domestic/International Satellite Consolidation Order removed the distinction between domestic and international service when applying the requirements of Part 25 of the Commission's rules. All the New Skies satellites use circular  xP'polarization in the 4/6 GHz frequency band with no switching capability. #X\  P6G; ɒP#(# In addition, the New Skies's satellites  T 4typically do not meet the FM/TV frequency plan requirement of the Commission's rules.Y - V yPM'#X\  P6G; ɒP#эX# c PE37 P#Section 25.211(a) of the Commission's rules, 47 C.F.R.  25.211(a), requires analog video transmissions in the band 3,7004,200 MHz to transmit on center frequencies of 3,700+20N where N  xP'is an integer from 1 to 24. #X\  P6G; ɒP#(#Ɲ Also, except for INTELSATK, none of the New Skies satellites will operate on permitted tracking,  T04telemetry and telecommand frequencies.!0N V yP'#X\  P6G; ɒP#эX# c PE37 P#Section 25.202(g) of the Commission's rules, 47 C.F.R.  25.202(g), requires the tracking , telemetry and telecommand functions to operate at the edges of the allocated bands. The INTELSAT satellites which New Skies acquired typically perform these functions at the center of the 4/6 GHz frequency  xPw 'band.#X\  P6G; ɒP#(# Further, the INTELSAT513 at 183o E.L. does not meet"0#70*%%88"  T4the requirements concerning saturation flux density,YV yPh'#X\  P6G; ɒP#эX# c PE37 P#Section 25.210(c) of the Commission's rules, 47 C.F.R.  25.210(c), requires that the saturation flux density to be switchable in steps no greater than 4 dB over a range of at least 12 dB. The INTELSAT xP'513 has a minimum step of 5 dB in the 11/12/14 GHz bands and 7.5 dB in the 4/6 GHz band.#X\  P6G; ɒP#(# stationkeeping@!V yP'#X\  P6G; ɒP#эX# c PE37 P#Section 25.210(j)(1) of the Commission's rules, 47 C.F.R.  25.210(j)(1), requires that space stations  xPR'operating in the GSO be designed with the capability to maintain their orbital longitude within 0.05o of  xP'their assigned location. The INTELSAT513 was designed to maintain its longitude within 0.1o of its  xP'assigned location.#X\  P6G; ɒP#(#@ and polarization isolation in  T4the 4/6 GHz frequency band.!V yPJ '#X\  P6G; ɒP#эX# c PE37 P#Section 25.210(i) of the Commission's rules, 47 C.F.R.  25.210 (i), requires that space stations antennas be designed to provide a crosspolarization isolation such that the ratio of onaxis copolar gain to crosspolar gain is 30 dB. The 4/6 GHz antennas on the INTELSAT513 were designed to  xP 'provide 27 dB of isolation.#X\  P6G; ɒP#(#  T4L77.These technical requirements facilitate coordination of satellite networks and if they are not met, it will be difficult to coordinate the New Skies satellites with satellites serving the U.S. that are twodegree compliant. However, there are, at present, no U.S. or foreign licensed satellites serving the United States in the vicinity of the New Skies satellites that have not been already coordinated with the New Skies satellites prior to their transfer. As a result, the New Skies satellites are not expected to cause harmful interference to any U.S. or foreign licensed satellite serving the United States at this time. For these reasons, we waive, on our own motion, the technical requirements described above in order to permit New Skies to continue service to its U.S. customers and we condition the earth station authorizations to this end.  T 4M78.In the future, should the Commission authorize access to the U.S. market by a satellite that is twodegreespacing compliant, and is located as close as twodegrees from a New Skies satellite, New Skies would be expected to coordinate, in good faith, with the licensee of this satellite. If a coordination agreement is not reached, New Skies's operation must be on a noninterference basis relative to U.S. services being provided by the compliant satellite.  T4N79.We will not permit New Skies's satellite network operations to interfere with U.S. services being provided by any authorized system that is twodegree spacing compliant, nor can New Skies claim protection against interference to its operations caused by U.S. services being provided by the twodegree compliant satellites.  S@4c `IV. CONCLUSION א T4c  T4O80.We conclude based on the record before us that New Skies entry into the U.S. market would not pose a high risk to competition that could not be cured with conditions, and that, therefore, New`  T4Skies, pursuant to DISCO II, should be permitted entry into the U.S. market. We find, however, that New Skies has not achieved independence from INTELSAT, as anticipated by the Assembly Decision. New Skies's lack of independence from INTELSAT could give New Skies a market access advantage"R$ 0*%%88z" over its competitors as a result of its continuing relationship with an IGO and its members. For this reason and the reasons discussed above, we grant threeyear licenses to U.S. earth stations operating with New Skies.  T`4P81.We conclude that this approach is in the public interest because it allows the benefits of New Skies's entry into the U.S. market while at the same time addresses the competitive concerns at hand. Our action today is consistent with and implements U.S. obligations contained in the schedule of  T4commitments under the WTO Basic Telecom Agreement which is part of the GATS, and the DISCO  T4II Order implementing those commitments domestically. We believe that authorizing entry will provide sufficient flexibility and certainty, for New Skies to move forward with an IPO at a time conducive to market conditions. Finally, entry into the U.S. market will enable New Skies to ensure continuity of services and develop new service options and customer relations different from the Signatory customers assigned to it upon transfer of the satellites from INTELSAT.  T 4 Ã  S 4` `  ,hh]V. ORDERING CLAUSES  T 4Q82.Accordingly, IT IS ORDERED, that, pursuant to Sections 303(r), 308, 309, and 310, of the Communications Act of 1934, as amended, 47 U.S.C.  303(r), 308, 309, and 310 pursuant to Sections 25.121(a), 25.137(c) of the Commission's Rules, 47 C.F.R.  25.121(a), 25.137(c), the earth station applications listed in Attachment A, ARE GRANTED for a limited threeyear term, until August 6, 2002, to provide Fixed Satellite Services (FSS), excluding FSS DirectToHome services, to, from or within the United States by accessing the New Skies 513, New Skies 703, New Skies 803, New Skies 806, and New Skies K satellites;  TD4R83.IT IS FURTHER ORDERED that the Petition to Dismiss, Deny, or Defer filed by PanAmSat Corporation IS DENIED;  T4S84.IT IS FURTHER ORDERED that all of the earth station licenses granted in this Order will expire on August 6, 2002 and any earth station licenses subsequently granted for communications via New Skies's satellites, prior to August 6, 2002, also will expire on August 6, 2002, unless otherwise extended by the Commission;  T4T85.IT IS FURTHER ORDERED that this authorization does not authorize New Skies to provide any Directto Home (DTH) service, Direct Broadcasting Satellite (DBS) service, or Digital Audio Radio Service (DARS) to, from, or within the United States;  Td4U86.IT IS FURTHER ORDERED that at anytime during the threeyear license term, New Skies may make a showing, on the record, that it has achieved independence from INTELSAT and, upon a sufficient showing, the Commission will consider the appropriate action to extend the earth station licenses to a full tenyear term;  T"4V87.IT IS FURTHER ORDERED that New Skies file quarterly reports with the Commission regarding the status of: (1) its IPO and associated dilution of INTELSAT's Signatories ownership; (2) information on New Skies's progress towards novating customer contracts; and, (3) information on"L$%0*%%88"" New Skies's progress towards terminating remaining service agreements between INTELSAT and New Skies. These reports shall include specific information on the IPO such as: (1) selection of an investment bank/underwriter; (2) filing of the registration statement with the Securities and Exchange Commission; (3) completion of financial analysis and due diligence; (4) a copy of the Preliminary Prospectus and the Final Prospectus (when made available to the general public); and (5) information on novation of its customer contracts;  T4W88.IT IS FURTHER ORDERED that the Commission waives Sections 25.210(a)(1) and (3), 25.211(a), 25.202(g), 25.210(c), 25.210(j)(1), 25.210(i) of the Commission's rules, 47 C.F.R.  25.210(a)(1), 25.211(a), 25.202(g), 25.210(c), 25.210(j)(1), 25.210(i), to ensure that the space stations may provide service to the U.S. market;  T 4X89.IT IS FURTHER ORDERED that access to New Skies satellite networks shall be in compliance with the satellite coordination agreements reached between the United States and INTELSAT regarding the operations of New Skies 513, New Skies 703, New Skies 803, New Skies 806 and New Skies K;  TX4Y90.IT IS FURTHER ORDERED that consistent with the satellite coordination agreements reached between the United States and INTELSAT regarding the operations of New Skies 806, the Kuband frequencies on New Skies 806 have not been coordinated for operation over North America. Kuband operations over the New Skies 806 satellite in the United States may not cause interference to, and may not claim protection from, (1) any U.S.licensed geostationary satellite network and (2) nonU.S.licensed geostationary satellite networks operating in conformance with international coordination agreements;  T4Z91.IT IS FURTHER ORDERED that operations over the New Skies 513, New Skies 703, New Skies 803, New Skies 806 and New Skies K satellite networks shall not cause harmful interference to, nor shall operators accessing these satellite networks claim protection from, U.S. services provided by U.S. authorized satellite networks that are compliant with the Commission's twodegree spacing rules;  TP4[92.IT IS FURTHER ORDERED that operations over the New Skies 513, New Skies 703, New Skies 803, New Skies 806, and New Skies K satellite networks shall not cause harmful interference to, nor shall operators accessing these satellite networks claim protection from, United Satesauthorized services that are compliant with the Commission's twodegree spacing rules and provided over nonUnited States authorized satellite networks;  T`4\93.IT IS FURTHER ORDERED that operations over and access to the New Skies 513, New Skies 703, New Skies 803, New Skies 806, and New Skies K satellite networks shall cease immediately upon notification of harmful interference. Complaints of all radio interference shall be forwarded immediately to the Commission in writing;  T"4]94.IT IS FURTHER ORDERED that this authorization is effective upon adoption. Petitions for Reconsideration, pursuant to Section 1.106 of the Commission's Rules, may be filed within 30 days"p#&0*%%88 "" of the public notice of this Order. 47 C.F.R.  1.106. This grant is also subject to Section 1.110 of the Commission's Rules. 47 C.F.R.  1.110. ` `  ,hh] ` `  ,hh]Federal Communications Commission ` `  ,hh] ` `  ,hh]Magalie Roman Salas  Tp4` ` ,hh]Secretary