FCC Seeks Comment on Status of Competition in Satellite Services Industry

July 23, 2010

Yesterday, the FCC’s International Bureau (“Bureau”) released a Public Notice (“PN”) seeking comment on the status of competition in the domestic and international satellite services industry. Although input concerning satellite industry competition is solicited annually by the Bureau, the scope and level of detail sought this year has expanded dramatically, with a particular emphasis on gathering information to evaluate the impact of consolidation on the fixed and mobile satellite industries, including barriers to entry and anticompetitive behavior by existing satellite operators that may have achieved market power. Similar issues were raised earlier in 2010 in comments submitted to the FCC for its annual ORBIT Act Report, which evaluates U.S. objectives related to the privatization of intergovernmental Intelsat and Inmarsat satellite fleets, and the Bureau had already indicated it would seek more comprehensive feedback on these issues when it sought comment on the status of competition in the broader satellite industry.

Industry comments responding to the PN will be used to develop the Commission’s annual Satellite Competition Report, but may also be reflected in FCC action on other satellite competition-related matters.

Comments are due on August 23, and reply comments are due September 7.

While commenters are invited to address other issues affecting competition in the satellite industry in their filings, the FCC has identified a number of areas of concern this year, including the following:


The Commission seeks input on the impact of “industry consolidation and corporate reorganization on the satellite communications services industry,” including the extent to which consolidation has affected competition, innovation and consumer choices in products in the fixed and mobile satellite industries. The Commission also seeks comment on the effects of “using private equity funding to finance mergers and acquisitions of satellite system operators,” as well as input on current and historical (i.e., pre-consolidation) availability of fixed satellite transponder capacity and the overall availability of satellite system capacity, fixed and mobile.


The Commission seeks comment on barriers to market entry, including “first-mover” advantages, orbital allocation limits, spectrum allocation limits and anti-competitive government regulations/policies. The Commission also seeks input on the “nature and intensity” of rivalries among existing competitors, and whether the threat of new entrants “constrain[s] the pricing behavior of incumbent satellite operators.”


The Commission discusses the significant structural change that has affected the satellite services industry in recent years, in particular, how “mergers and acquisitions in each sector have tended to increase industry concentration and increase the size and scale of incumbent firms.” The Commission seeks comment concerning how increased industry concentration and “the possible exercise of market power” are impacting competitors and satellite space segment users.

With regard to market power, the Commission specifically asks if “any satellite operator in any satellite industry sector acquired sufficient market power to impair competition in any sector.” Comment is also sought on the extent to which any satellite operator has the ability to “deny access to transponder capacity” or to “otherwise restrict the contracting opportunities of non-facilities-based system integrators and resellers of transponder capacity.”


In what may be a response to growing concern that consolidation has reduced R&D spending, the Commission asks for feedback concerning the extent to which satellite operators are investing in research and development to “gain competitive advantage or compete by improving service quality.” In addition, the Commission seeks input on whether “service innovations” and “capital expenditures” by satellite operators have increased or decreased over the last five (5) years.


The Commission seeks input on the balance of bargaining power between satellite manufacturers and operators, including whether the “satellite construction industry is able to bargain so effectively with satellite operators that expected profits from the sale of communications services over the life of spacecraft are severely constrained.” The Commission also seeks comment on whether launch costs and launch insurance are adversely affecting the “timing of capacity expansion or the nature and type of satellite” that operators are electing to construct and launch. Although the Commission does not discuss specific concerns regarding the manufacturing and launch industries, commenters in other proceedings have remarked on the trend toward smaller fixed satellites with reduced transponder payloads.


The Commission seeks input on satellite capacity pricing trends, including:

  • Transponder lease rates
  • Pricing per megabit if transmission capacity is based on throughput
  • Pricing based on service quality and different types of satellite systems
  • Pricing based on short-term and long-term pricing plans
  • The extent to which pricing is still negotiated on a bilateral basis between customer and satellite operator
  • The extent to which terrestrial services are affecting satellite service pricing
  • Comments Due: Aug. 23, 2010.

    Reply Comments Due: Sept. 7, 2010

    If you have questions regarding this matter or would like to further discuss these issues, or require assistance preparing written comments on the status of competition in the fixed and/or mobile satellite industries, please contact the following lawyers in our Telecommunications, Media & Technology Group:

    Andrew D. Lipman 

    Catherine Wang 

    Timothy L. Bransford 

    This article was originally published by Bingham McCutchen LLP.