*Pages 1--10 from Microsoft Word - 6471.doc* Federal Communications Commission DA 00- 2852 Before the Federal Communications Commission Washington, D. C. 20554 In re Petition of ) ) ) R/ L DBS Company, L. L. C. ) File Nos. DBS 87- 01, For Extension of its Direct ) 94- SAT- AL- 96, 94- SAT- TC- 96, Broadcast Satellite Construction Permit ) 49- SAT- TC- 95, 130- SAT- EXT- 95, ) SAT- MOD- 19990813- 00083 ) ) MEMORANDUM OPINION AND ORDER Adopted: December 28, 2000 Released: December 29, 2000 By the Chief, International Bureau: I. Introduction 1. By this Order, we grant R/ L DBS Company, L. L. C. (R/ L DBS) a 36- month extension of time in which to bring its Direct Broadcast Satellite (DBS) system into operation. Under the terms of its construction permit, R/ L DBS’s satellite system was required to be in operation by August 15, 1999. 1 The additional time will allow R/ L DBS an opportunity to implement its innovative, regionally targeted DBS service. II. Background 2. In 1989, the Commission issued Continental Satellite Corporation (Continental), R/ L DBS’s predecessor in interest, a construction permit for a two- satellite DBS system. 2 Pursuant to that authorization, in August 1995, the International Bureau assigned eleven DBS channels to Continental at both the 166º W. L. and 61.5º W. L. orbit locations. 3 In November 1995, the International Bureau granted Continental a four- year extension of the date on which it was required to commence service, acknowledging that the government’s delay in assigning channels to Continental had made it difficult for the company to proceed with the construction of its satellite. 4 Subsequently, R/ L DBS voluntarily surrendered the eleven 1 Continental Satellite Corp. et al., 4 FCC Rcd 6292 (rel. August 15, 1989) (Continental CP Order); see also 47 C. F. R. §100.19( a) (six years from grant to be in operation); Application of Continental Satellite Corporation for Extension of Construction Permit, 11 FCC Rcd 1157 (Int’l Bur. 1995) (Continental Extension Order) at ¶ 17 (milestone deadline extended to August 15, 1999). 2 Continental CP Order, 4 FCC Rcd at 6300. 3 Application of Continental Satellite Corp. For Assignment of Direct Broadcast Satellite Orbital Positions and Channels and For Consent To Transfer Of Control To Loral Aerospace Holdings, Inc., 10 FCC Rcd 10473 (Int’l Bur. 1995) (Continental Channel Assignment Order and Loral Transfer Order). 4 Continental Extension Order, 11 FCC Rcd at 1158. 1 Federal Communications Commission DA 00- 2852 2 assigned western channels at the 166º W. L. orbit location. 5 R/ L DBS now asks for a further extension of its service commencement date for the channels at 61. 5º W. L. or, in the alternative, a six- month extension to pursue a transponder lease arrangement. 6 3. Ownership of the DBS permits issued to Continental has followed a long and tortuous history that stems from Continental’s contractual efforts to obtain equipment and programming for its DBS system, and from the reaction of some Continental owners to those efforts. In July 1990, Continental contracted with Ford Aerospace Corporation (Ford) for the construction of a DBS satellite. 7 To finance that purchase, Continental executed a Memorandum of Understanding with Ford, granting the latter a right to waive Continental’s payments under the contract in exchange for unilateral options by which Ford could acquire 51 percent of Continental’s stock. 8 When payments were waived, Ford and its successor in interest, Loral Aerospace Holdings, Inc., thereby gained paid options to acquire a controlling interest in Continental. 9 In April 1992 Continental reached alternative contracts with Rainbow Programming Holdings, Inc. (Rainbow) to obtain video programming content for its service. Under these contracts, Continental would either lease its DBS system to Rainbow or would assign its DBS permit to Rainbow. 10 4. Soon after the Rainbow agreements were executed, Continental’s shareholders removed the chief executive officer who had negotiated those agreements, James Dixon. Continental’s replacement 5 Public Notice, International Bureau Satellite Policy Branch Information: Report No. SPB- 138a, DA 98- 1869, 13 FCC Rcd. 17892 (Sept. 15, 1998). 6 Petition for Extension of the R/ L DBS Direct Broadcast Satellite Construction Permit, File. No. SAT-MOD- 19990813- 00083 (filed Aug. 13, 1999) (R/ L DBS Petition). 7 See Continental Satellite Corp. Application for Consent to Assignment of Construction Permit for a New Direct Broadcast Satellite System, 10 FCC Rcd. 9537 (Int’l Bur. 1995) (Continental/ Nevada DBS Rescission Order). 8 Id. 9 This controlling interest itself followed a circuitous trail before joining in the filing of this petition for extension. Ford Aerospace Corporation apparently conveyed its interests in Continental to Loral Aerospace Holdings, Inc. before Ford exercised those contractual rights itself. Loral Aerospace Holdings, Inc. was then part of a 1996 merger of Loral Corporation with Lockheed Martin. Loral Corp. Request For a Declaratory Ruling Concerning Section 310( b)( 4) of the Communications Act of 1934 and Application of R/ L DBS Company For Assignment of Continental Satellite Corporation’s Direct Broadcast Satellite Construction Permit , 12 FCC Rcd. 21164, 21165 (Int’l Bur. 1997) (Loral Declaratory Ruling Order and R/ L DBS Assignment Order) (identical text also published at 12 FCC Rcd. 24325). After completing that merger and subsequently reorganizing its subsidiaries, Loral Corporation requested Commission approval to transfer its majority ownership interest in Continental to Loral SpaceCom DBS Inc., a Delaware corporation, which is wholly owned by Loral SpaceCom DBS Holdings Inc., also a Delaware corporation, which in turn is wholly owned by Loral Space and Communications Ltd., a Bermuda corporation. Id. at 21165- 66. The Commission granted the requested transfer of control, and found that the Bermuda corporation’s indirect ownership of the DBS permit did not contravene foreign ownership restrictions. Id. at 21168. For simplicity, “Loral” loosely describes all Loral entities in this Order. More precisely, Loral SpaceCom DBS Holdings Inc., which owns fifty percent of R/ L DBS, is a petitioner for this extension. 10 Continental/ Nevada DBS Rescission Order, 10 FCC Rcd. at 9538. 2 Federal Communications Commission DA 00- 2852 3 management then took a number of actions in an apparent effort to reverse the Ford/ Loral and Rainbow contracts. In July 1993, Continental filed a request for a declaratory ruling from the Commission as to whether exercise of the lease option under the Rainbow agreements would result in an unauthorized transfer of control. 5. Meanwhile, in October 1992, Loral notified Continental that it was exercising its options to take control of Continental, subject to Commission approval. 11 When Continental’s replacement management refused to consent, Loral brought suit in California state court, where the matter was referred to arbitration. 12 Replacement management then formed a new Nevada corporation with an identical name – Continental Satellite Corporation – and applied to the Commission to assign its DBS permit from the California to the Nevada corporation. 13 The Mass Media Bureau granted the assignment, conditioned on the outcome of Loral’s California arbitration, but rescinded the grant when Loral obtained a favorable result in its arbitration. 14 Loral then filed an application for transfer of control so that it could exercise its contractual options. The International Bureau granted the transfer in the same Order in which it assigned DBS channels and orbital locations to Continental. 15 6. In November 1995, the International Bureau granted Continental a four year extension, until August 1999, of the date upon which Continental was required to bring its system into operation. The Commission did so because it did not issue Continental its channel and orbit assignment until the initial construction period was nearly over. 16 In February 1996 the International Bureau issued a declaratory ruling without opinion that the Rainbow lease arrangement, if implemented, would constitute an unauthorized transfer of control of Continental’s DBS permit. 17 Rainbow and Loral then agreed to form a joint venture to develop the Continental system. 7. On March 6, 1996, Loral SpaceCom DBS Holdings Inc. and Rainbow DBS Holdings, Inc. formed R/ L DBS, a Delaware limited liability company owned equally by the forming companies. The combined venture inherited Rainbow’s right, under its agreements with Continental, to purchase Continental’s DBS permit outright. In March 1996, R/ L DBS filed an application to assign Continental’s DBS permit to R/ L DBS. The International Bureau granted the assignment in May 1997. 18 11 Continental/ Nevada DBS Rescission Order, 10 FCC Rcd. at 9537. 12 Id. 13 Id. 14 Id 15 Loral Transfer Order, 10 FCC Rcd. at 10476- 79. 16 Continental Extension Order, 11 FCC Rcd 1157. 17 Continental Satellite Corp. Request for Declaratory Ruling, 11 FCC Rcd. 5395 (Int’l Bur. 1996). 18 R/ L DBS Assignment Order, 12 FCC Rcd. at 21173. 3 Federal Communications Commission DA 00- 2852 4 8. The issue before us now is whether we should grant R/ L DBS an extension of its service commencement milestone for its satellite at the 61. 5º W. L. orbit location. 19 R/ L DBS represents that an extension is needed to allow it to implement its service. Kelly Broadcasting Systems, Inc. and EchoStar Satellite Corporation filed petitions to deny the extension request. 20 James B. Dixon, an executive and shareholder of R/ L DBS’s predecessor in interest, also filed comments. 21 Mr. Dixon supports a two- year extension of the construction permit, but opposes the alternative lease arrangement. He also continues to object to the assignment of these DBS assets to R/ L DBS. III. Discussion 9. The Commission’s DBS due diligence rules, and the deadlines they contain, are designed to ensure that valuable spectrum is not warehoused, and that service is timely deployed for the benefit of the public. To facilitate service to the public, the Commission has chosen not to conduct exhaustive and protracted proceedings, such as comparative hearings, to determine in advance that licensees are financially and technically capable of building and operating DBS satellites. 22 Rather, as it has done with other satellite services, the Commission has required, through conditions, DBS permittees to construct and commence satellite operations within a specified period of time. These conditions, which are referred to as the DBS “due diligence” milestones, contain two deadlines. The first due diligence milestone requires that a DBS permittee complete a contract for construction of the satellites in its system within one year of the grant of its construction permit. 23 Orbital positions and channels are not assigned to a DBS permittee until it meets the first milestone. 24 The second due diligence milestone requires permittees to have their DBS systems in operation within six years of the grant of their construction permits. 25 19 This proceeding is a non- restricted, permit- but- disclose proceeding subject to the disclosure requirements set forth in 47 C. F. R. § 1.1206. Public Notice, International Bureau Satellite Policy Branch Information: Report No. SPB- 153, DA 99- 2450 (Nov. 4, 1999). Pursuant to this Section, R/ L DBS disclosed ex parte contacts with various Commissioners and staff on the following dates: March 22, 2000, March 23, 2000, March 30, 2000, April 19, 2000, April 25, 2000, May 24, 2000, June 1, 2000, June 6, 2000, June 7, 2000, June 15, 2000, June 23, 2000, June 28, 2000, August 2, 2000, October 27, 2000 and November 1, 2000. EchoStar made an ex parte contact by letter on December 4, 2000. 20 Petition to Deny of Kelly Broadcasting Systems, Inc. (filed Sep. 24, 1999) and Petition of EchoStar Satellite Corporation to Deny Request for Extension of Construction Permit (filed Sep. 24, 1999). EchoStar subsequently announced that it acquired 100 percent ownership of Kelly Broadcasting Systems, Inc., EchoStar press release dated March 16, 2000. Finally, R/ L DBS filed an Opposition to Petitions to Deny Extension of the R/ L DBS Direct Broadcast Satellite Construction Permit (Oct. 7, 1999) (R/ L DBS Opposition). 21 Comments of James B. Dixon (filed September 17, 1999). 22 Direct Broadcast Satellite Service, Report and Order, 90 FCC 2d 676 at ˆ114 (1982). 23 47 C. F. R. § 100.19( a) (second sentence). 24 Processing Procedures Regarding the Direct Broadcast Service, 95 F. C. C. 2d 250, 253 (1983). 25 47 C. F. R. § 100.19( a) (third sentence). 4 Federal Communications Commission DA 00- 2852 5 10. In granting Continental a four- year extension of its operating deadline in 1995, the International Bureau found that Continental had met its first due diligence milestone by timely completing a construction contract for the system. 26 The fundamental issue in this proceeding is whether R/ L DBS should be granted a further extension of the operating milestone. 27 11. When deciding whether to grant an extension of DBS due diligence milestones, the Commission considers the “totality of circumstances.” This includes the following four factors: those efforts made and not made, the difficulties encountered and those overcome, the rights of all parties, and the ultimate goal of service to the public. 28 Because strict enforcement of our DBS milestones furthers the very important spectrum management goal of ensuring that valuable spectrum resources are efficiently put to use, we have been reluctant to grant extension requests except in extraordinary circumstances. 29 Our desire to ensure that DBS orbital locations and spectrum will be put to efficient use requires a rigorous evaluation of whether the “totality of the circumstances” standard has been satisfied. 12. R/ L DBS asserts that the Commission should grant it an additional extension of its operating milestone for the following reasons. First, R/ L DBS asserts that its failure to launch and operate a satellite was justified because the market consolidated and changed during the period when Continental’s construction permit was the subject of litigation. R/ L DBS argues that, with eleven channels at an orbit location capable of reaching only half of the continental United States (CONUS), it was difficult to develop a viable DBS service that could compete with the two dominant players in the DBS market DirecTV and EchoStar. According to R/ L DBS, these two service providers each have “substantially greater channel capacity” than does R/ L DBS and the majority of their capacity is at full- CONUS orbit locations. In order to compete, R/ L DBS states that it must serve a niche market not being served by the current DBS providers. 30 Consequently, R/ L DBS decided to offer a package of locally oriented programming to major metropolitan markets in the eastern United States. This service requires the system to incorporate over seventeen different spot beams. R/ L DBS asserts that this system design required improvements in multiple spot beam and digital compression technologies before it could be implemented. R/ L DBS asserts that these technical challenges caused additional delay in system implementation and justifies an extension of the operating milestone. 31 R/ L DBS also notes that EchoStar already has a satellite in orbit at the 61. 5º W. L. orbit location with capacity sufficient to accommodate R/ L DBS’s eleven assigned channels. R/ L DBS contends that if the Commission refuses to extend R/ L DBS’s construction permit, EchoStar could 26 Continental Channel Assignment Order, 10 FCC Rcd at 10476. 27 47 C. F. R. § 100.19( c). Subsection (c) permits the Commission to grant extensions of the due diligence requirements “upon a proper showing in any particular case.” 28 United States Satellite Broadcasting Co., 3 FCC Rcd. 6858, 6860 (1988). See also Advanced Communications Corp., 10 FCC Rcd. 13337, 13340 (Int’l Bur. 1995), 11 FCC Rcd. 3399, 3411 (FCC 1995), aff’d by Advanced Communications Corp. v. Federal Communications Commission, 84 F. 3d 1452 (D. C. Cir. 1996), cert. denied, 519 U. S. 1071 (1977). 29 Advanced Communications Corp., 11 FCC Rcd. at 3411; Tempo Satellite, Inc., 13 FCC Rcd. 11068, 11074 (Int’l Bur. 1998). 30 R/ L DBS Petition at 4. 31 Id. 5 Federal Communications Commission DA 00- 2852 6 obtain the channels, thereby increasing concentration within the industry. 13. R/ L DBS also contends that it has expended substantial sums of money, put forward great effort and shown significant progress toward providing service from the 61. 5º W. L. orbit location. Specifically, it claims to have spent more than $30 million to develop a DBS business, including more than $14 million in payments made in connection with the design and construction of a DBS satellite. 32 R/ L DBS states that these payments have included money for “extensive design work on an innovative satellite using spot beam technology, as well as orders for long lead- time parts.” Additionally, R/ L DBS contends an extension should be granted because the constant disputes over the authorization at the Commission and in California and Oregon state courts have “created a cloud of uncertainty” that made moving forward with the financing and construction of a satellite extremely difficult. 33 14. In its petition to deny the extension, EchoStar questions whether the $14 million in satellite construction costs claimed by R/ L DBS was actually used for the R/ L DBS system. Because Loral, one of the partners in R/ L DBS, is a satellite manufacturer, EchoStar contends that the expenditures claimed for construction costs might not have been R/ L DBS specific. According to EchoStar, these expenditures may represent only internal transfers, generic design work or parts purchases that Loral could use in its normal satellite construction activities. 34 EchoStar contends that R/ L DBS has not provided evidence of actual construction activity. Further, EchoStar asserts that R/ L DBS’s $14 million payment for parts and design work does not constitute a significant effort toward building a $250 million satellite. 35 EchoStar also points out that $15 million of R/ L DBS’s total $30 million expenditure covered Loral’s acquisition of Continental’s capital stock. 36 While EchoStar agrees that expenditure of these funds may have been necessary and prudent business expenditures, it asserts that they have not been applied to either the construction of R/ L DBS’s satellite and have not furthered its progress toward the commencement of service. 37 EchoStar also argues that R/ L DBS has not made additional progress toward arranging the remaining financing for the completion of construction and launch of its satellite. 15. We find that based upon the totality of the circumstances, and, specifically, the record that has been developed in this proceeding, that an extension of R/ L DBS’s operating milestone is warranted. Under the first factor of the “totality of the circumstances” standard, we conclude that R/ L DBS has made a significant effort to implement its DBS system. It, or its members (Rainbow and Loral), has expended more than $14 million in connection with satellite design and construction. We are not persuaded by EchoStar’s speculation that R/ L DBS’s corporate affiliation with its satellite manufacturer means that these monies were not actually applied towards the development of the R/ L DBS system. We also recognize that R/ L DBS has devised a comprehensive business plan that incorporates the latest 32 Id. 33 Id. at 2. 34 EchoStar Petition at ii and 5. 35 Id. 36 Id. at 4. 37 See EchoStar Petition at 6- 7. 6 Federal Communications Commission DA 00- 2852 7 technological advances in digital compression and multiplexing. Further, while we do not accept the struggle for corporate control of Continental as a justification for extension of the operating milestone, we recognize that R/ L DBS’s expenditure of $15 million to assure its control of the permit is evidence of effort made to develop the system. 16. These efforts become more notable when we consider the second factor of the totality of the circumstances standard – the difficulties encountered and those overcome. R/ L DBS holds a construction permit for a satellite that can serve only half of the contiguous United States (CONUS). Moreover, the permit authorizes R/ L DBS to operate on only eleven of the 32 available channels at that orbit location. As R/ L DBS notes, the Commission has recognized the difficulties associated with the assignment of a small number of channels to DBS permittees. 38 These limitations are more pronounced in the current DBS market, which is dominated by two companies offering up to 350 channels of video programming and serving more than ten million subscribers. 39 17. To overcome these difficulties, R/ L DBS has incorporated recent technological advances into its system design. Its plan will allow R/ L DBS to improve the quality of its video offerings and the number of channels it can offer to consumers. 40 Further, the plan allows R/ L DBS to use, to its best advantage, the geographic limitation of its satellite. Under the plan, R/ L DBS will market regional programming to television markets in the eastern United States. 41 This is an unprecedented DBS service offering, which could enhance the commercial viability of R/ L DBS’s half- CONUS, limited- channel DBS system. 18. In addition to the limitations inherent in its permit, R/ L DBS and its predecessors have also encountered – and at long last, appear to have overcome – a prodigious number of legal struggles in connection with the permit. While these struggles do not, in and of themselves, justify an extension of a due diligence milestone, they have created a cloud of uncertainty that has, until recently, prevented the development of a definitive business plan. 42 19. The third factor in a totality of the circumstances finding is the ultimate goal of service to the public. We have recognized the trend toward consolidation of DBS channel and orbit assignments. 43 As R/ L DBS points out, DirecTV and Echostar are authorized to operate 157 of the 172 DBS channels 38 Revision of Rules and Policies for the Direct Broadcast Satellite Service, 11 FCC Rcd. 9712 (1995). USSB Extension Order, 14 FCC Rcd. at 4595. 39 In the Matter of Annual Assessment Of The Status Of Competition In Markets For The Delivery Of Video Programming, 15 FCC Rcd. 978 at ¶¶ 69- 70 (2000)( 1999 MVPD Report) (as of June 1999, DirecTV had 72% share of the domestic DBS market and EchoStar had 28% DBS market share). 40 R/ L DBS Petition at 9. 41 R/ L DBS Petition at 10. 42 We reject the suggestion by R/ L DBS that internal corporate litigation justifies extension of a construction permit. Letter from James A. Kirkland to Anna Gomez, Linda Haller, International Bureau, June 28, 2000, at p. 8. While we cannot interpret the Mass Media Bureau’s rules, we find nothing in the broadcast rules cited by R/ L DBS to suggest that a construction permit deadline may be tolled because a permittee cannot find agreement within itself. 43 Revision of Rules and Policies for the Direct Broadcast Satellite Service, 11 FCC Rcd. at 9736. 7 Federal Communications Commission DA 00- 2852 8 currently assigned. R/ L DBS’s planned service is perhaps the last opportunity in the near- term for entry by a competitive provider within the DBS service itself. 44 Moreover, R/ L DBS plans to provide a service not now available in the DBS service -- original local or regional programming to each area served by a spot beam. An extension may therefore facilitate the introduction of a new and important DBS service to the public. Indeed, R/ L DBS represents that it would “accept an explicit condition in connection with grant of R/ L DBS’s extension request requiring the fulfillment of its programming commitments.” 45 We condition this extension accordingly. Consequently, allowing R/ L DBS additional time in which to implement its system has the potential to enhance both competition in the industry and the variety of service offerings available to the public. 20. Moreover, granting an extension here will not result in these channels lying idle. EchoStar is currently providing service over these channels pursuant to a grant of special temporary authority, and will continue to do so until R/ L DBS is ready to launch its satellite. 46 21. Last, in considering the totality of the circumstances, we evaluate the rights of the parties. Both Echostar and Kelly Broadcasting Systems, Inc. filed petitions to deny the extension. EchoStar is currently providing service from its satellite at the 61. 5 W. L. orbit location and argues that, if revoked, R/ L DBS’s channels could be used to extend its existing services. Kelly seeks to contract with EchoStar for expanded carriage capacity. We do not believe that the rights of Echostar and Kelly outweigh the efforts R/ L DBS has made in implementing its DBS system, the difficulties it has encountered and overcome, and the ultimate goal of service to the public. We also recognize that James Dixon, the third commenter in this proceeding, supports an extension of R/ L DBS’s operating milestone. 22. In its Petition For Extension, R/ L DBS requested a 24- month extension. In ex parte letters to Commission staff, R/ L DBS later requested a 27- month extension. We remind R/ L DBS that it must obtain authority to modify its satellite design within the extension period. Because we must process that modification application, and because we require that R/ L DBS provide service to customers within the extension time period rather than only launching the satellite, we grant a slightly more generous extension of 36 months on our own motion. This is designed to prevent any further requests for extension. 23. Moreover, in an ex parte letter to the International Bureau in support of its Petition for Extension, R/ L DBS commits to completing an extensive list of construction tasks at specified intervals during the extension period. 47 To ensure that these valuable DBS spectrum resources are put to use as soon as possible, we adopt that proposed schedule, and condition grant of this extension upon R/ L DBS meeting all the interim milestones it proposes, and providing verification that the interim milestones are met. By the sixth month of the extension, R/ L DBS commits to reaching the effective date of its satellite 44 The Commission has recognized that the DBS service competes with video programming provided by broadcast and cable providers. 1999 MVPD Report, 15 FCC Rcd. 978. 45 See letter from Charles D. Ferris to Adam Krinsky (Sept. 26, 2000). 46 Direct Broadcasting Satellite Corporation Application for Special Temporary Authority to Operate a Direct Broadcast Satellite Over Channels 1- 21 (odd) and 23- 32 (odd and even) at 61.5º W. L., 13 FCC Rcd. 6392 (Int’l Bur. 1998). 47 Letter from Howard J. Symons to Linda L. Haller, International Bureau, June 7, 2000. 8 Federal Communications Commission DA 00- 2852 9 contract, placing subcontracts for its propulsion tank, battery cell and CIC laydown, conducting the preliminary design review of its system, and delivering an interface control document to its communications panel subcontractor. By the twelfth month of its extension, R/ L DBS commits to starting construction of its propulsion and structure modules, delivering its design review data package, conducting its system design review, and completing construction of its central cylinder, travelling wave tube, and propulsion tank. By the eighteenth month of its extension, R/ L DBS commits to completing its structure fabrication and its propulsion module, and mating the main body of its satellite. By the end of the second year of its extension, R/ L DBS commits to completing its reflector fabrication and payload integration, and completing reference performance. Finally, at the end of 27 months, R/ L DBS commits to completing thermal vacuum tests, dynamics, CATR testing, final testing, shipping the satellite to the launch site, and launching it. We recognize, however, that because we must process R/ L DBS’s modification application during the interim milestone period, launches can be delayed for reasons that are beyond a licensee’s control and R/ L DBS will have to test its satellite in orbit for several months before becoming fully operational, an additional post- construction extension is also warranted. In order to provide for a definitive operational milestone, we grant R/ L DBS an additional nine months to begin providing full service to the public. 48 Therefore, we grant R/ L DBS a total of 36 months to become fully operational. 24. In that same June 7, 2000 ex parte letter, R/ L DBS also committed to a number of concrete oversight actions, through which it proposes to allow the Commission to monitor its progress closely, reviewing appropriate documentation evidencing that progress, and taking appropriate action if the milestones are not met. First, R/ L DBS has committed to completing its satellite design process within the first six months of its extension period, and to make its preliminary design review data package available for review by Commission staff. 49 Second, R/ L DBS has committed to enter into subcontracts, also within the first six months of its extension period, for production of its satellite propulsion tank, its battery cell, and its solar power cells. 50 R/ L DBS will be required to make those contracts available for inspection so that Commission staff can verify that those promised milestones are met. Third, R/ L DBS has committed to finalizing the design of its communications panel with its subcontractor within the first six months of its extension period, and to make that document available for Commission staff review. 51 Fourth, R/ L DBS has committed to allow onsite inspection of the construction of its satellite subsystems within the second six months of its extension period. R/ L DBS will be required to permit such onsite inspection as is requested, both in that six month period and through the completion of its satellite construction and launch. Failure to meet any of these interim milestones will automatically render its DBS permit null and void without further Commission action. No further extensions will be granted. IV. Conclusion 25. Based on the record before us, we conclude that the totality of circumstances justifies an 48 The DBS milestone rules require that satellite stations must be in operation within the construction permit time period. 47 C. F. R §100.19( a). We have previously decided that this milestone means not merely having launched a satellite, but also providing service to the public. Tempo Satellite, 13 FCC Rcd. at 11071- 72. 49 Symons letter to Haller, June 7, 2000, at p. 2. 50 Id. at p. 3 51 Id. 9 Federal Communications Commission DA 00- 2852 10 extension of the R/ L DBS construction permit. V. Ordering Clauses 26. Accordingly, IT IS ORDERED that the Petition For Extension filed by R/ L DBS Company, L. L. C., File No. SAT- MOD- 19990813- 00083, IS GRANTED, subject to the conditions stated below. 27. IT IS FURTHER ORDERED that the term of the construction permit held by R/ L DBS Company, L. L. C. IS EXTENDED to December 29, 2003, subject to the conditions that R/ L DBS Company, L. L. C. (1) must launch the satellite and begin providing service to customers by that date and (2) must provide original or regional programming to each area served by an R/ L DBS spot beam. 28. IT IS FURTHER ORDERED that the interim milestones proposed by R/ L DBS are HEREBY ADOPTED as a condition of this grant. R/ L DBS shall meet all the interim milestones detailed in Paragraph 23 of this Order, and shall provide to Commission staff the promised documentation detailed in Paragraph 24 of this Order. 29. This Order is issued under delegated authority, pursuant to Section 0.261 of the Commission’s rules, 47 C. F. R. §0.261, and is effective upon release. FEDERAL COMMUNICATIONS COMMISSION Donald Abelson Chief, International Bureau 10