Efficient use of orbit/spectrum by satellite systems - the impact of fees

Transcription

1 Efficient use of orbit/spectrum by satellite systems - the impact of fees BR Workshop on the efficient use of the spectrum/orbit resource Gerry Oberst 6 May 2009 Hogan & Hartson LLP. All rights reserved.

2 Critical inputs and considerations for satellite networks Spectrum Orbital slots Construction contracts Launch contracts Consistent regulatory structures Including fees limited to administrative cost recovery Hogan & Hartson LLP. All rights reserved. 2

3 Efficient use of orbit / spectrum requires consistent and reasonable regulatory structures Satellite investments are long term Satellite networks are the ultimate definition of fixed assets, whether FSS, MSS, BSS or other Satellite coverage patterns normally are uniquely international All of which adds up to a heightened need for business certainty and attention to the business plan for satellite assets Hogan & Hartson LLP. All rights reserved. 3

4 National rules typically limit fees to cost recovery EU standards generally for fees: Administrative charges can cover only administrative costs (Auth. Dir. Art. 12) Fees for use of radio frequencies can reflect the need to ensure optimal use (Auth. Dir. Art. 13) The number of fees has decreased as the number of required licenses has also decreased, by the move towards general authorizations U.S. regulatory fees The FCC shall assess and collect fees to recover costs of regulatory activities (47 U.S.C. 159) Application fees set legislatively (47 U.S.C. 158) Hogan & Hartson LLP. All rights reserved. 4

5 Countries do not always get the message European experiences Inconsistent charges for VSAT somewhat cured by legislative moves towards license exemption Early experience with DTH terminals European Commission had to take court action to thwart excessive and discriminatory fees Upfront administrative fees what might be reasonable administrative fees become difficult if charged all in one upfront payment Zigzagging fees case study of precipitous fee adjustments causing a 900% increase in one year, falling back to 300% Hogan & Hartson LLP. All rights reserved. 5

6 The international nature of satellite service multiplies potential problems Due to satellite footprints, often business plans must be based on regulatory structure and fees crossing many national boundaries Implications of planning a new service can be daunting with multiple inconsistent fee structures affects new entrants in particular If the economic feasibility of a project depends on service revenues in multiple countries, then operators must defer market entry until all (or most) relevant countries have completed their licensing + regulatory processing Hogan & Hartson LLP. All rights reserved. 6

7 Auctions are also problematic Auctions are anathema to satellite operators and are likely to have damaging results on the ability of satellite operators to serve the market, especially for international systems (SIA comments to the Australian Communications Authority, May 2003) The FCC shall not have the authority to assign by competitive bidding orbital locations or spectrum used for the provision of international or global satellite communications services. The President shall oppose in the [ITU] and in other fora any assignment by competitive bidding of orbital locations or spectrum used for the provision of such services. (Communications Act Sec. 648, 47 U.S.C. 765g) Hogan & Hartson LLP. All rights reserved. 7

8 Satellite service remains international even with an integrated ground component ATC / CGC approaches add terrestrial component to satellite network increasing efficiency and offering new service concepts, based on aggregated demand across the entire footprint The integrated approach adds substantial cost elements, which can be hugely magnified by separate national determinations of fee structures One administration in Europe has publicly explored CGC fees by comparison to domestic terrestrial systems if the same approach were applied across Europe, an operator would have to pay between $261M and $320M Hogan & Hartson LLP. All rights reserved. 8

9 Economic options fees for spectrum use or MIFR Financial due diligence not a new concept Historically the ITU has examined this option in depth Res. 18 (Kyoto, 1994) gave rise to substantial discussion e.g., SCRPM Report SC-4, November 1996 Res. 85 (Minneapolis, 1998) evaluated early results of the due diligence concept WRC-1997 adopted administrative due diligence and cost recovery (Res. 49) WRC-2000 declined to adopt financial due diligence (Res. 81) WRC-2007 revised Res. 49 on administrative due diligence, no sign of financial due diligence Hogan & Hartson LLP. All rights reserved. 9

10 Economic options advantages and disadvantages Could limit coordination filings to serious efforts Filing deposit could better balance early filing with later start Increase resources to BR Administrations would more carefully tailor filing to national needs Possibility of forfeiture would require degree of certainty of actual system Straight filing fee is simple to administer Hogan & Hartson LLP. All rights reserved. 10

11 Economic options advantages and disadvantages Impracticality of agreeing to fee levels Disadvantage to entities in developing countries Possible need for extension of ITU regulatory competence and consequential reduction in national sovereignty Dilution of responsibilities of administrations Complexities for extending to all other filings and ITU activities (fairness / nondiscrimination) Consideration of failure to coordinate despite genuine intentions Fees may not be a deterrent to major players and could decrease competition Hogan & Hartson LLP. All rights reserved. 11

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