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Transferor) ) and) ) DIRECTV Enterprises, Inc.) Transferee) )  T4 4X` hp x (#%'0*,.8135@8:' " and 119o W.L. In the Revision of Rules and Policies for the Direct Broadcast Satellite Service, Report and  zP' " Order, 11 FCC Rcd 9712 (1995) ("DBS Auction Order"), the Commission prohibited any entity that, at  xP' " that time, had a license at a fullCONUS location from bidding on the 110o W.L. slot in the 1996 auction.  " That rule, designed for that particular auction, was meant to prevent any one entity from having attributable  zPb'interests in more than one of the three DBS fullCONUS locations. Id. at  5. (#Y  T 416. ` ` Because this transaction only involves a total of eight DBS channels at two different  Ti 4orbital locations, five at 101o W.L. and three at 110o W.L., we do not believe that grant of the Joint Transfer Application would be likely to preclude entry into the relevant product markets by another MVPD entrant. Further, existing competitors in local MVPD markets are investing heavily in additional capacity. Cable operators, for instance, have invested large amounts to increase their  T 4capacity to deliver more programming and other services to consumers.+ R  zP' " ԍX1998 Cable Competition Report at Section II.A.5, supra n. 33 (discussion of cable operators investments in capacity to provide broadband services).(# This has meant that for DBS operators to compete with cable operators, they also must acquire additional capacity to provide  T74similar services.,"7 zP ' "' ԍ XDOJ made the same point in its complaint against Primestar. United States of America v. PrimeStar, Inc.,  " No. 1: 98CV01193, 1998 U.S. Dist. (filed D.C. May 12, 1998). If Congress passes a bill to reform the  "[ Satellite Home Viewer Act that imposes mustcarry obligations on DBS operators, then DBS operators would need more capacity. (#  T417. ` ` Thus, we find that the grant of this application would allow DIRECTV to become a stronger competitor in the MVPD market, which we believe would further the overall public interest in increasing the strength of competitive alternatives to cable within the MVPD market. "8,+''<<"Ԍ S4  B.` ` USSB Request for Additional Time  T418. ` ` As part of the proposed transaction, DIRECTV would acquire the three channels that  Tg4USSB is assigned to at the 110o W.L. orbital location.q-g zP'ԍXJoint Transfer Application at 2, supra n. 1.(#q USSB has not yet implemented service at  T44these channels. USSB received its initial assignment for these channels in 1984.b.4Z zP.'ԍXCBS I at  22, supra n. 5.(#b In 1988, the Commission granted USSB an extension of time within which to commence service at this location,  T4from December 3, 1988 to December 4, 1992./ zPZ ' " ԍXUSSB I, supra n. 11. The extension grant also applied to USSB's permit for five DBS channels at the 101o W.L. orbit location.(# In 1992, USSB received a second extension of five  T4years, extending USSB's operation deadline from December 4, 1992 to December 4, 1997.H0F zP ' " ԍXUSSB III, supra n. 12. Concurrently, USSB contracted with Hughes Communications Galaxy, Inc.  xPK' " ("Hughes") for the use of five transponders on Hughes' DBS satellite at 101o W.L. The Mass Media  " Bureau noted that in order for USSB to use the five transponders, its launch date must be adjusted to  "h coincide with that of the Hughes launch. Hughes' DBS system was not required to be operational until December 7, 1994.(#H The Mass Media Bureau noted that this second extension was justified due to the considerable effort and  T54money expended a financial commitment of over twentythree million dollars , the progress attained, USSB's overall contribution to the development of DBS, and the compelling interest of  T4service to the public.*1$  zPg' "  ԍXId. at  16. The Mass Media Bureau also noted that operation on Hughes' transponders would enable  " USSB to provide video compression and HDTV. These services would increase the number of channels  " available to DBS viewers and improve the quality of the picture received. The Mass Media Bureau stated  zP'that these advancements and improvements would serve the "ultimate goal of service to the public." Id.(#* On February 26, 1997, USSB filed a request for additional time, from December 12, 1997 to December 12, 1999, to implement its authorization to construct and launch a  Ti 4satellite using three DBS channels at the 110o W.L. orbit location. j2i  xP'ԍXPublic Notice, Report No. SPB77 (March 5, 1997).(#j No party filed comments or opposed this request. We address this request here in order to determine whether USSB can transfer its assignment of these DBS channels to DIRECTV.  T 419.` ` Section 100.19 of the Commission's rules,U3 t xP'ԍX47 C.F.R.  100.19.(#U requires that an entity receiving a DBS authorization proceed with "due diligence" in implementing its authorization, unless the Commission  T74determines otherwise after a "proper showing."R47 xP"'ԍX47 C.F.R.  100.19(c).(#R An application for transfer of control, however,  T4cannot justify an extension of the due diligence deadlines.B5 zP8%'ԍXId.(#B The due diligence requirement has two prongs. The first prong requires a permittee to either begin construction or complete a contract for" &5+''<<"  T4construction within one year of receiving a construction permit.\6 zPh'ԍXSee 47 C.F.R.  100.19(a).(#\ USSB has complied with this requirement. The second prong requires the permittee to begin operation within six years of  T4receiving that permit.H7Z zP'ԍXId.(#H Although we find that USSB has not met the second prong of the due diligence rule within the requisite time, on our own motion, we find that it is in the public interest to  T44waive Section 100.19(a) of the rule.R84 xP'ԍX47 C.F.R.  1.3.(#R  T420. ` ` Commission rules allow for waiver where good cause is shown.H9| zP 'ԍXId.(#H In regard to the Commission's waiver standard, the United States Court of Appeals has stated that granting a waiver of a particular rule may be appropriate if unique circumstances support a finding that strict adherence would not be in the public interest and where a grant would not undermine the underlying policy  T4objectives of the rule in question.: zP'ԍXWait Radio v. FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969) ("Wait Radio").(#ƒ As the court stated, though "an agency may discharge its responsibilities by promulgating rules of general application which, in the overall perspective, establish the 'public interest' for a broad range of situations, [this] does not relieve it of an obligation  Ti 4to seek out the 'public interest' in particular, individualized cases."H;i  zP'ԍXId.(#H We believe that the public interest is served by granting a waiver of the Commission's DBS due diligence requirement under these unique circumstances. We also conclude that the underlying policy objectives of the due diligence rule are not compromised by this waiver. However, we condition grant of the Joint  T 4Transfer Application on DIRECTV's commencing service from 110o W.L. orbit location, using the  Tj4three DBS channels, by December 31, 1999.w<j2  zP<'ԍ XSee Joint Transfer Application at 6, supra n. 1. (#w If DIRECTV fails to commence service by this time, the Commission will reclaim these channels by cancelling DIRECTV's authorization.  T4  T421. ` ` First, we find that this situation presents unique and unusual circumstances that justify a waiver. As an experienced DBS operator and pioneer, USSB has demonstrated a genuine commitment and progress in the implementation of its DBS service. The efforts of USSB in bringing  T84its DBS authorization at 101o W.L. into productive use almost five years ago is well established and commendable. Those efforts, which included making financial arrangements, contracting with DBS home receiving equipment suppliers, and making significant monetary investments, have helped it develop a valuable history and expertise in the DBS industry. USSB has continued to apply the same  Tl4type of effort to bring its three channels at 110o W.L. into productive use. Prior to the announcement of the proposed transfer of control to DIRECTV, its efforts included its continued compliance with the construction contract with Lockheed Martin Corporation ("Lockheed Martin") which was placed" <+''<<"  T4on an accelerated schedule at the time of its application for additional time.0=  xPh' " ԍXUnited States Satellite Broadcasting Company SemiAnnual Report (March 27, 1998) ("USSB March 1998  " SemiAnnual Report") at 1; USSB SemiAnnual Report (August 26, 1997) at 1; and USSB SemiAnnual  xP' " Report (filed February 3, 1997). USSB states that it has entered into a contract agreement with Lockheed  xP' "h Martin for an highlyaccelerated construction schedule for its three channel satellite at 1100 W.L, and that  " pursuant to that agreement, USSB made a two million dollar payment to Lockheed Martin. USSB states  xPP' "u that it has been actively negotiating with Arianespace for the launch of the 1100 W.L. satellite. Although  " these contractual arrangements suggest that USSB has complied with the first part of the due diligence  zP' "R requirement, the Commission held in Advanced I that "[t]he fact that Advanced continues to have a binding  " construction contract, or that it has made all payments required by this contract does not excuse its failure  xPr ' " to meet the second part of its due diligence requirement operation of its direct broadcast satellite system."   zP: ' " Advanced Communications Corp., 10 FCC Rcd 13337 (Int'l Bur. 1995 ("Advanced I"), aff'd Advanced  zP ' " Communications Corp., 11 FCC Rcd 3399 (1995) ("Advanced II"), aff'd Advanced Communications Corp.  zP ' "m v. FCC, 84 F.3d 1452 (D.C. Cir. 1996) cert. denied, Advanced Communications Corp. v. FCC, 117 S.Ct. 718 (1997).(#0 USSB continued to  T4make monthly payments on the construction contract; payments to date total $7.6 million.u>  zP'ԍXUSSB March 1998 SemiAnnual Report at 1, supra n. 61. (#u It also has expended efforts to negotiate launch vehicle services with Arianespace. Moreover, USSB continues to oversee its previously established broadcast centers, handles program distribution agreements with programmers, administers its subscriber services center, markets its DBS service to the public, and generally promotes its DBS service, as it has done over the past decade.  T4  T4 22. ` ` Nevertheless, as described in the record, USSB has encountered significant difficulties  Th4in implementing its DBS service at the 110o W.L. orbit location, which have made it difficult for USSB to strictly comply with our due diligence rule. We believe, however, that USSB has made reasonable attempts to overcome these difficulties. The primary difficulty is the fact that for nine  T4years, USSB has had only three DBS channels at the 110o W.L. orbit location. It is commercially difficult to finance and construct a satellite designed with so few authorized channels. We note, that the issue of a minimal channel assignment at any particular DBS orbit location was not addressed when the due diligence rule was originally formulated. The Commission, however, now recognizes  T 4that an assignment of a small number of channels can be a serious difficulty.?  zP' " ԍXRevision of Rules and Policies for Direct Broadcast Satellite Service, Report and Order, 11 FCC Rcd 9712  xP' "+ (1995) (Commission acknowledges that for a DBS system to be competitive and viable it must offer many  zPO' "~ channels of service). See also USSB I at  12, supra n. 11, (where the Commission noted that "[w]hile  " these potential difficulties may have been perceived, they were obviously not fully accounted for when the due diligence rule was set for DBS.").(#Ƈ In particular, the Commission has stated that "[f]our channels may not provide sufficient capacity to operate a viable system, [and] such piecemeal assignment of channels could render the potentially fullCONUS orbital  Tj4location at 110o W.L. unusable by any single permittee."@j zP"' " ԍXAdvanced II at  70, supra n. 62 (addressing whether or not reclaimed channels should be allocated pro rata or aggregated for reassignment).(# USSB resolved a similar problem at the  T74101o W.L. orbit location by purchasing an equity interest in DIRECTV's satellite there and by implementing a complementary service.  T423. ` ` As the record demonstrates, USSB has made consistent attempts over the past several" (@+''<<;"  T4years to achieve a similar contractual sharingtype arrangement for its authorization at 110o W.L., but has been unsuccessful. USSB asserts that its attempts to negotiate a sharing agreement have been made uniquely difficult by several factors. First, it contends that the failure of Advanced Communications Corp. ("ACC") to proceed with due diligence in the construction and launch of its DBS system and the Commission's subsequent denial of ACC's proposal to sell its DBS authorization to Tempo Satellite, Inc., led to what was, in effect, a lost opportunity for USSB to negotiate a sharing  T4agreement. Adding to the delay, ACC's reclaimed channels were subsequently auctioned to MCI.A xP6' " ԍXAfter the auction, the channel assignments at 110o W.L. included: 28 DBS channels for MCI, three DBS channels for USSB, and one DBS channel for EchoStar Satellite Corporation.(# USSB asserts that, although MCI was originally receptive to a sharing proposal, it ultimately chose not to negotiate. USSB, therefore, states that it then proceeded to expeditiously complete construction and launch of its own DBS satellite.  T424. ` ` We acknowledge the unique difficulties that USSB has encountered in attempting to  T 4negotiate a sharing arrangement at 110o W.L. The minimal channels it has been assigned at this  Ti 4location has hampered its implementation of a DBS service at 110o W.L.uBi  zP)'ԍXSee, e.g., Advanced II at  70, supra n. 62. (#u In addition, we find that a waiver will not undermine the policies underlying Section 100.19. The primary purpose of our DBS due diligence requirement is to prevent warehousing of "substantial blocks of spectrum and valuable  T 4orbital positions."cC  zP"'ԍXCBS I at  119, supra n. 5.(#c In this case, USSB has neither a substantial block of spectrum nor control of a  T 4valuable orbital location. Given that USSB's current assignment at the 110o W.L. orbit location contains only three DBS channels, a waiver would not undermine our warehousing policy, which is the basis of the due diligence rule. We further note that no party, including any satellite company  T4that conceivably could provide DBS service at 110o W.L., opposed the extension request or commented on it.  Tk425. ` ` Further, the Commission has asserted that a primary goal in initiating DBS service is to provide competition to distributors like cable operators, improve service to remote areas, encourage  T4innovative new programming, and expedite the delivery of DBS service to the public.rDD zP'ԍXAdvanced II at  3 and 5, supra n. 62.(#r Here,  T4DIRECTV asserts that it will expeditiously initiate DBS service from the 110o W.L. orbit location within a few months from grant of the Joint Transfer Application. Specifically, the parties assert that  Tl4DBS service from the 110o W.L. orbit location is imminent by the fall of this year.kEl zP'ԍXJoint Transfer Application at 6, supra n. 1.(#k A grant of additional time here satisfies our policy objectives of expeditious delivery of service to U.S. consumers. It is doubtful that the Commission could adopt any alternative plan, for example, reclaiming these channels and auctioning them, that would result in service to consumers any sooner,  T4utilizing the three DBS frequency channels at 110o W.L. In order to assure that consumer service is in fact implemented expeditiously, we condition the Joint Transfer Application, with respect to the  T:4three channels at 110o W.L., on the requirement that DIRECTV commence service from the 110o": h E+''<</"  T4W.L. orbit location by December 31, 1999.CF zPh'ԍ XId.(#C If DIRECTV fails to commence service by this time, the Commission will reclaim these channels and cancel DIRECTV's authorization for these three  T4channels at 110o W.L.  Tg4  T4426. ` ` The facts before us show that, overall, USSB has made a real and measurable  T4commitment to providing a DBS service, and in particular from the 110o W.L. orbital location. Its proposed transaction with DIRECTV is not simply the transfer of bare DBS authorizations but,  T4instead, the transfer of an entire, ongoing business, which includes five operating channels at 101o  Th4W.L., an authorization for three channels at 110o W.L., and three earth stations. This situation is  T54clearly different from that of ACC, which was attempting to transfer bare licenses, and nothing else.GZ5Z zP/ ' " ԍXAdvanced II at  36, supra n. 62 (Advanced had "extended inaction and apparent lack of commitment."  "u It was "not 'much closer to the threshold of providing service than any nonpermittee,' and thus has no  xP 'claim to comparative advantage that justify an extension.").(#Ƌ USSB has made steady progress in implementing its complete DBS service, including operating DBS channels. In contrast, ACC's situation was characterized as "extended inaction and apparent lack of  T 4commitment."hH | zP'ԍXSee USSB I at  16, supra n. 11.(#h USSB, as noted above, continued its efforts, including making significant  Ti 4investments in its system.pIi  zP'ԍXAdvanced II at  4753, supra n. 62.(#p Even with the advantage of a prime orbital location with enough channels to implement a viable and productive DBS service, ACC failed to demonstrate "concrete progress"  T 4toward launch and operation.NJ  zPC'ԍXId. at  44.(#N Instead, ACC chose to concentrate its efforts on negotiating a merger  T 4or a transfer in lieu of building a DBS business.TK 2  zP'ԍXId. at  50.(#T Its primary goal, unlike USSB's, was to secure a windfall from the authorization of valuable spectrum awarded to it, at virtually no cost.  T7427.` ` The unique circumstances here justify our decision to grant USSB a waiver of our due diligence rules. The facts before us show that USSB has continued to make significant efforts toward  T4the implementation of DBS service at 110o W.L. in the face of significant difficulties. Further, we find that the policy objectives of the due diligence rule are not undermined by the grant of a waiver. In particular, with the accompanying grant of the application to transfer the licenses to DIRECTV, the  T84public interest will be served by the swift initiation of DBS service from the 110o W.L. orbit location.  X4J #Xw PE37=XP#IV. Conclusion #&m PE37E &P#ѐ\  TI428. ` ` Accordingly, for the reasons stated above, we find that it is in the public interest to grant the Joint Transfer Application of DIRECTV and USSB for consent to transfer control of USSB's DBS authorizations to DIRECTV, subject to the condition that, with respect to the three  T4channels at 110o W.L., DIRECTV commence service from that orbit location by December 31, 1999. We also find that it is in the public interest to waive the due diligence requirement of Section"} K+''<<" 100.19(a) with regard to USSB's pending application for additional time to construct and launch a  T4Direct Broadcast Satellite at 110o W.L. and dismiss it.  X447   #Xw PE37=XP#V. Ordering Clauses #&m PE37E &P#ѐ\  T4 29. ` ` Accordingly, IT IS ORDERED, pursuant to Section 0.261 of the Commission's rules on delegated authority, 47 C.F.R.  0.261, that the application for consent to transfer of control, Files Nos. DBS8107 and DBS8107(II), IBFS File Nos. SATT/C1998121700098 and SEST/C1998121701876, filed by United States Satellite Broadcasting Company, Inc., and DIRECTV Enterprises, Inc. IS GRANTED, SUBJECT TO THE CONDITION that, with respect to the three  T4channels at 110o W.L., DIRECTV Enterprises, Inc., initiate service using these three channels by December 31, 1999.  TF 430. ` ` IT IS FURTHER ORDERED, pursuant to Section 1.3 of the Commission's rules, 47 C.F.R.  1.3, that the due diligence requirement of Section 100.19(a) of the Commission's rules, 47 C.F.R.  100.19(a), with respect to the United States Satellite Broadcasting Company, Inc.'s application for additional time, File No. 45SATEXT97, IBFS File No. SATMOD1997022600020, IS WAIVED.  T431. ` ` IT IS FURTHER ORDERED that the United States Satellite Broadcasting Company, Inc.'s application for additional time, File No. 45SATEXT97, IBFS File No. SATMOD1997022600020, IS DISMISSED.  TH432. ` ` IT FURTHER ORDERED THAT this Order is effective upon release. ` `  ` ` hhCqFEDERAL COMMUNICATIONS COMMISSION ` `  hhCqRoderick K. Porter  T4` `  hhCqActing Chief, International Bureau