10 FCC Red No. 20 Federal Communications Commission Record DA 95-1733
Before the
Federal Communications Commission 
Washington, D.C. 20554
In re Application of 
Continental Satellite Corporation
For Assignment of Direct Broadcast File Nos. 
Satellite Orbital Positions and Channels DBS 87-01
For Consent to Transfer of Control to 
Loral Aerospace Holdings, Inc.
49-SAT-TC-95
MEMORANDUM OPINION AND ORDER
Adopted: August 4, 1995; Released: August 7, 1995
By the Chief, International Bureau:
1. Under consideration are the following: (1) a request 
by Continental Satellite Corporation ("CSC") for assign 
ment of orbital positions and channels for its proposed 
Direct Broadcast Satellite ("DBS") system; (2) an applica 
tion for consent to a proposed transfer of control of CSC to 
Loral Aerospace Holdings, Inc. ("LAHI"): (3) a motion for 
dismissal of the transfer application, filed by Nevada Direct 
Broadcasting System, Inc. ("Nevada DBS"): and (4) a peti 
tion for investigation of LAHI's character qualifications, 
also filed by Nevada DBS.
2. CSC has waited five years for evaluation of its due 
diligence showing and the award of appropriate orbit 
al/channel assignments. During that time. CSC has contin 
ually maintained a contract for the construction of DBS 
satellites, in compliance with the first element of our due 
diligence rules. We rightly require that our permittees pro 
ceed with due diligence. Our permittees are entitled to 
expect that we will do the same. In this instance, we have 
not. Indeed, we may have delayed through inaction CSC's 
progress towards the construction of its system. Because 
CSC has satisfied its first obligation under our due dili 
gence rules, its unopposed request for assigned channels 
and orbital positions will be granted subject to certain 
conditions. Further, because we find that LAHI is qualified 
to control a DBS permittee, its application for consent to 
transfer of control is granted. We find no merit to the 
motions filed by Nevada DBS. and accordingly they are 
denied.
I. DUE DILIGENCE
The due diligence requirement has two distinct compo 
nents. First, the DBS permittee must begin construction or 
complete contracting for construction of its satellite(s) 
within one year of the grant of its construction permit. See 
47 C.F.R. § 100.19(b). Specific orbital positions and chan 
nels are not assigned to a DBS permittee until it dem 
onstrates compliance with this requirement. 1 Due diligence 
showings are evaluated in the order received, and channels 
are assigned in the order that successful showings are 
made.
4. Second, the permittee must have its DBS system in 
operation within six years of the grant of its construction 
permit, "unless otherwise determined by the Commission 
upon proper showing in any particular case." 47 C.F.R. § 
100.19(b).
5. Through various adjudicatory actions, the Commission 
has established and clarified the specific factors to be con 
sidered in determining whether a permittee has completed 
contracting for the construction of satellites in compliance 
with the first component of the due diligence requirement:
There is a contract, signed by both parties, which 
contains no unresolved contingencies which could 
preclude substantial construction of the satellites. The 
essential terms of the contract are verified by the 
submission of relevant portions of the document or 
by the principal's sworn statement as to the contents, 
verified by ... (the satellite construction contractor]. 
Specific satellites and their design characteristics are 
identified, and dates for the start and completion of 
construction are specified. The payment terms and 
schedule are described sufficiently to demonstrate the 
parties' investment/commitment to completion of the 
system.2
The Commission has further described the factors it will 
consider in assessing due diligence by requiring that the 
contracts or contract descriptions submitted must include 
"regular specific construction progress milestones in the 
construction timetable," and "payment schedules with suf 
ficient specificity for the Commission to determine that the 
permittee is making a financial commitment to the con 
struction of the satellite and to indicate that the milestones 
listed for the early stages of construction constitute mean 
ingful levels of advancement in the satellite construction 
process." j
6. On August 15. 1989, the Commission granted CSC a 
provisional permit for construction of a DBS system, con 
ditioned on its compliance with these due diligence re 
quirements.4 CSC filed its pending request for assigned 
channels and orbital positions on August 13, 1990, sup 
ported by a copy of portions of a satellite construction 
contract with Ford Aerospace Corporation, Space Systems
A. Background
3. Under the Commission's DBS rules, a construction 
permit is granted on the condition that the permittee pro 
ceed with "due diligence" in the construction of its system.
' Processing Procedures Regarding the Direct Broadcast Service, 
95 F.C.C.'d 250,253(1983).
2 Tempo Enterprises, Inc., 1 F.C.C.R. 20, 21 (1986)( "Tempo").
3 United States Satellite Broadcasting Co., 3 F.C.C.R. 6858, 6861,
6862 n.20 (1Q88) ("USSB").
4 See Continental Satellite Corp., 4 F.C.C.R. 6292, 6300
(l9W)("Continental").
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DA 95-1733 Federal Communications Commission Record 10 FCC Red No. 20
Division ("Ford Aerospace"), signed on July 20, 1990.5 The 
Ford Aerospace contract provided for its own expiration in 
24 months if certain contingencies -- including receipt of 
orbital/channel assignments   had not been met.6 In July 
1992, with the contract's expiration date imminent, CSC 
negotiated a one-year extension of the contract.
7. In July 1993, after another year had passed without 
action on the pending request for orbital/channel assign 
ments, CSC filed an amended due diligence showing in 
which it reported that it had entered into a new contract 
with a different supplier. 7 CSC explained that the change 
had become necessary due to intervening developments in 
the three years that had elapsed since the filing of its 
original request for orbital/channel assignments. It had de 
cided against renewing the original contract for a second 
time, it said, because Ford Aerospace had demanded a 
forty-two-month lead time following commencement of 
construction in which to build and deliver the spacecraft to 
orbit. CSC said that such a protracted construction period 
would have exacerbated its competitive disadvantage vis 
a-vis other DBS licensees that had received full operational 
authority during the three years that CSC's request had 
been pending before the Commission. CSC therefore solic 
ited proposals for delivery of spacecraft within thirty 
months of the start of construction. CSC reported that it 
had entered into a replacement contract with 
INTRASPACE Corporation, the only supplier that had 
offered to comply with CSC's proposed delivery schedule. 
CSC submitted as attached exhibits a copy of various sec 
tions of the new contract, supported by a confirming letter 
from INTRASPACE's president.8
8. The INTRASPACE contract provides for the construc 
tion and launch of four satellites and includes a detailed 
description of their design characteristics and specifications, 
a payment schedule, a construction schedule, and a signa 
ture page bearing the endorsements of the chief executive 
officers of INTRASPACE and 'CSC. The contract provides 
for a down payment from CSC on the date of the contract's 
execution. It also states that other payments from CSC to 
INTRASPACE are to be made in accordance with an at 
tached schedule, which indicates that thirty more payments 
in amounts specified in terms of percentages of the total 
sum of money to be paid in addition to the down-payment. 
Under this payment schedule, more than half of the origi 
nal after-down-payment balance would be paid off upon 
delivery of the eleventh installment. Aside from indicating 
their chronological order, however, the attachment does 
not indicate when each installment would be due, either by 
specifying fixed dates or by prescribing deadlines in terms 
of time intervals from a designated contingency.
9. On July 26, 1993, in response to a request from the 
Commission's staff for clarification of its construction 
schedule, CSC filed a supplement to its amended due 
diligence showing. This supplement was a statement signed 
by its president, William P. Welty, and an attached "Con 
struction Milestone" timetable.9 Welty asserted that the 
attachment set forth the anticipated delivery dates for hard 
ware, software, and documents called for in the contract. 
The "Construction Milestone" schedule lists performance 
obligations and corresponding deadlines specified in terms 
of numbers of months after the "Effective Date for Com 
mencement of Construction Phase" ("EDCP") - which, 
according to Welty, would occur within ninety days after 
the Commission assigns channels and orbital locations to 
CSC. The contract, however, does not require construction 
to commence within ninety days of an assignment of chan 
nels and orbital locations. Rather, it provides that the 
Construction Phase will commence once the requested as 
signments have been issued and CSC has tendered a further 
payment of a specified amount. 10 Consistent with the 
INTRASPACE contract terms previously filed, the "Con 
struction Milestone" schedule indicates that a first satellite 
pair is to be delivered on-orbit within 30 months of the 
EDCP and a second pair is to be placed in orbit within 36 
months.
10. In a December 1993 report, CSC informed the Com 
mission that a preliminary design review had been con 
ducted, that CSC and INTRASPACE were consequently 
prepared to commence "actual construction and design 
activities" after the anticipated assignment of channels and 
orbital positions, and that CSC intended to begin construc 
tion within ninety days after such assignments." In its next 
report, CSC stated that it had made no further progress, 
due to the Commission's "continuing failure" to assign 
orbital positions and channel frequencies. 12
11. On July 14, 1994, in response to an inquiry from a 
member of the Commission's staff. CSC filed supplemental 
information about payment deadlines under the 
INTRASPACE contract. According to that filing, the thirty 
scheduled installment payments called for under the con 
tract were to be made at monthly intervals, with the first 
due at the EDCP. 13
12. In June 1995, CSC informed the Commission that 
INTRASPACE had completed a number of additional ele 
ments of design work for the project, including preparation 
of satellite performance specifications, the first item men 
tioned in the "Construction Milestones" list. 14 According to 
the report, this work had a billable value of $2,290,000. 
The report asserted that the ahead-of-schedule performance 
would shorten post-assignment construction time to twenty- 
four months, enabling CSC to begin operating by the end 
of 1997 if its assignment request were granted promptly. 15
5 See Application for Construction Permit and Launch Au 
thority. Demonstration of Due Diligence, and Petition for 
Amended Orbital Allocation and Channel Assignment (filed 
Aug. 13, 1990).
6 Id. at Attachment 1, Article 34 ("Ford Aerospace Contract").
7 See Amended Due Diligence Showing and Progress Report 
for Continental Satellite Corporation (filed July 21, 1993).
8 Id. at Exhibits 1 and 2 (collectively, "INTRASPACE Con 
tract"). CSC thus notified the Commission of its new contract, 
and submitted relevant portions thereof, four days after the 
contract was executed on July 19, 1993.
9 See Supplement to Amended Due Diligence Showing (filed 
July 26, 1993); Letter from William Welty to Mark Solberg, 
dated July 22, 1993.
10 INTRASPACE Contract at Article 39.
11 See CSC Semi-Annual Report at 1, 3 (filed December 30, 
1993).
12 See CSC Semi-Annual Report at 1 (dated June 28, 1994).
13 See Supplement to Semi-Annual Report at 2 (filed July 14, 
1994).
14 See CSC Semi-Annual Report at 1-2 (filed June 19, 1995).
15 Mr. Welty stated in a subsequent, letter that INTRASPACE 
had voluntarily performed these tasks, which would not have 
become obligatory under the terms of the construction contract
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10 FCC Red No. 20 Federal Communications Commission Record DA 95-1733
B. Discussion
13. CSC's request for orbital/channel assignments has not 
been opposed. We must nonetheless address a number of 
issues in order to determine CSC's compliance with the 
first aspect of its due diligence obligations. Having done so, 
we conclude that the conditional grant of CSC's pending 
request for assignments is justified.
14. Where, as here, a DBS permittee has switched con 
struction contractors, we assess its compliance with the first 
due diligence requirement using a three-part analysis in 
which we consider: (1) whether the original contract satis 
fied the due diligence standard; (2) whether the new con 
tract satisfies the due diligence standard; and (3) whether 
despite the substitution, the permittee has demonstrated a 
reasonable degree of continuity in its efforts to establish its 
DBS system. 1*
15. An important factor in the "continuity" analysis is 
the promptness with which the permittee substitutes a new, 
executed contract for the previous contract.17 As discussed 
above, CSC entered into its second construction contract 
concurrent with the expiration of the first, and it supplied 
the Commission with documentation of the new contract 
within four days of its execution. Moreover, the change 
actually accelerated CSC's construction schedule, rather 
than delaying it. Accordingly, if CSC's original submission 
based on its contract with Ford Aerospace and its subse 
quent submission based on its contract with INTRASPACE 
both satisfy the first component of the due diligence re 
quirement, then CSC has been in continual compliance 
with that requirement despite the change in satellite con 
struction contractors.18 We must therefore evaluate both 
contracts for compliance with our rules.
16. CSC has demonstrated substantial compliance with 
the first due diligence obligation in connection with both 
of its satellite construction contracts. In accordance with 
the essential requirements set out in Tempo and USSB, for 
each of those contracts CSC filed with the Commission a 
facsimile of the essential terms, signed by both parties and 
verified by a letter from an officer of the contractor, which 
specified the design requirements of the satellites and terms 
of payment and included a construction schedule.
17. There are. however, two problematic aspects to each 
of CSC's construction contracts. First, the principal perfor 
mance and payment obligations are contingent upon an 
initial payment that CSC is not obligated to make.' 1* By
withholding the payment, CSC could postpone, and ulti 
mately nullify, its ostensible commitments under the con 
tract without incurring any contractual penalty aside from 
loss of its downpayment(s).
18. In CBS, Inc., the Commission found that a construc 
tion contract with a similar payment contingency did not 
satisfy the first due diligence requirement.20 CSC thus 
should have known that this type of contingency would be 
a material deficiency in its compliance with the initial due 
diligence requirement. CSC's president has, however, 
pledged to the Commission in a signed statement that the 
initial payment will be made and the Construction Phase 
of the contract will commence within ninety days of assign 
ment of channels and orbital positions.21 In combination 
with the financial obligations CSC has already incurred,22 
we believe that this pledge adequately evidences CSC's 
commitment to construction of its DBS system. We will 
memorialize this pledge as a condition of the orbit 
al/channel assignments as a further assurance that construc 
tion will commence promptly after issuance of this order. 
This result is consistent with the Commission's actions in 
CBS, Inc., in which the Commission gave the permittee a 
six-month grace period in which to eliminate the 
unacceptable contingency while reserving the channels and 
orbital positions that the permittee had requested.23
19. A second problematic feature of both construction 
contracts is that most of the contractor's performance 
obligations and most of CSC's reciprocal payment 
obligations are explicitly contingent upon grant by the 
Commission of CSC's request for an assignment of chan 
nels and orbital positions. Consequently, most of the work 
involved in the actual construction of its proposed DBS 
system still remains to be done, although the six-year term 
of its permit is now nearly expired.24
20. In order to satisfy the first requirement of our due 
diligence rules, a permittee must either begin satellite con 
struction or complete contracting for such construction. 
The Commission has never held that a contract under 
which the commencement of construction is contingent 
upon the assignment of orbital positions and channels runs 
afoul of a permittee's due diligence obligations.25 Moreover, 
although the contingency that we are now identifying as 
problematic has been evident from the outset, the Commis 
sion has not previously given CSC any indication that this 
contingency might be unacceptable in the five years that 
have elapsed since CSC filed its request for assigned chan-
until after CSC had received orbital/channel assignments, with 
out demanding a corresponding acceleration of the payment 
schedule. He explained that INTRASPACE had waived contem 
poraneous payment for the partial performance because CSC's 
financial backers were reluctant to release funds for that pur 
pose before the Commission rules on CSC's requests. See Letter 
from William Welty to William Bell at 2 (dated July 21, 1995). 
16 See Dominion Video Satellite, Inc., 8 F.C.C.R. 6680, 6688 
(J993).
18 Id.
19 See INTRASPACE at Article 39; Ford Aeorspace Contract at 
Article 5 and Attachment A.
-  CBS. Inc., 99 F.C.C.2d 565, 569 (I984)(construction contract 
insufficient to meet first due diligence test where contractor's 
commitment to meet a performance schedule and the pur 
chaser's reciprocal commitment to meet a payment schedule 
were contingent upon payment by the latter of a certain sum of 
money and presentation of letters of credit within a specified
period of time).
- 1 Letter from William Welty to Mark Solberg, dated July 22.
1993; CSC Semi-Annual Report at 3 (filed June 19. 1W5).
12 INTRASPACE has already performed almost $2.3 million
worth of work under CSC's satellite contract. Although
INTRASPACE has not yet required payment for this work,
there is no indication that CSC will be relieved of its obligation
to pay. See footnote 15, supra.
23 CBS, Inc.. 99 F.C.C.2d at 569.8
24 CSC's construction permit expires on August 15, 1995. It has 
requested an extension of unspecified duration for that permit. 
See Public Notice (Rep. No. SPB-21, Mimeo No. 55074), July 31, 
1995.
25 The closest the Commission has come to addressing this 
issue was its EchoStar decision, in which it held that EchoStar's 
decision (after beginning performance under its contract) to 
delay its construction milestones pending orbital/channel assign 
ments was "justified." EchoStar, 7 F.C.C.R. at 1769.
10475
DA 95-1733 Federal Communications Commission Record 10 FCC Red No. 20
nels and orbital positions. During that time, CSC has dem 
onstrated its willingness to respond to Commission 
inquiries and address Commission concerns in a timely 
manner.
21. We recognize that the construction of DBS satellites 
in the best of circumstances is a very costly undertaking 
and not without commercial risk. Proceeding with con 
struction prior to the assignment of channels and orbital 
positions magnifies that risk, especially given the slow pace 
at which such assignments have been made.26 For example, 
had CSC proceeded to construct its two proposed satellites 
according to the timetable specified in its original contract 
with Ford Aerospace without waiting for its orbital/channel 
assignments, they would have been ready for launch in 
November 1993 -- but for want of regulatory approval, 
those satellites would have remained on the ground for 
another two years pending today's action. It is not surpris 
ing that CSC's investors have been unwilling to release 
funds for construction while CSC's requests for channel 
and orbital assignments remain in limbo.
22. Finally, there are several objective indications that 
tend to confirm that CSC remains intent on implementing 
its DBS system: it has responded promptly and appro 
priately to requests by Commission staff for further in 
formation: it took timely steps to preserve the viability of 
its original construction contract and subsequently negoti 
ated a new contract in order to secure a more expeditious 
construction commitment; and, despite its inability to ob 
tain funds prior to grant of its request for assigned channels 
and positions, it prevailed upon the current contractor to 
perform much of the preliminary design work ahead of 
schedule.
23. In sum, we believe that CSC has done what a reason 
able and prudent permittee facing the same uncertainties 
in the administrative process would have done. Thus, we 
find that CSC has satisfied the first prong of our due 
diligence requirement by maintaining an adequate contract 
for construction of its DBS satellites.
24. Those shortcomings that we have identified in CSC's 
contract should be cured by the assignment of orbital 
positions and channels, which was a major contingency in 
the construction contract. Now that we have removed that 
contingency, we must require CSC to move forward ex- 
peditiously with the actual construction, launch, and op 
eration of its system. As an additional condition of the 
assignment of channels and orbital locations, therefore, we 
will require CSC to submit, within sixty (60) days of the 
release of this Order, an updated construction milestone 
schedule specifying the particular dates upon which its
previously reported construction milestones are to be ac 
complished; and an updated payment schedule specifying 
the particular dates upon which payments are due. This 
information, combined with CSC's semi-annual reports, 
will enable us to better monitor CSC's progress toward 
launch and operation of its DBS system.
II. APPLICATION FOR CONSENT TO 
TRANSFER OF CONTROL
A. Background
25. LAHI and CSC have filed an application to transfer 
control of CSC (in the form of 51 percent of its stock) to 
LAHI. According to the transfer application, LAHI is a 
wholly-owned subsidiary of the Loral Corporation 
("Loral"), and in turn owns a 51 percent interest in Space 
Systems/Loral, Inc. ("SS/L"), a satellite manufacturer. LAHI 
asserts in its application that it is especially well suited to 
bring DBS service to market due to its affiliation with SS/L 
and because of its substantial financial resources.
26. The proposed transfer of control of CSC to LAHI 
would consummate stock options that LAHI acquired as 
the successor in interest to the terms of the construction 
contract between CSC and Ford Aerospace.28 LAHI sued to 
enforce its rights to under these options, and an arbitrator 
confirmed LAHI's right to exercise them in a decision that 
has since been affirmed by a judicial order that is no 
longer appealable.2' As part of the arbitrator's decision, 
CSC was ordered to cooperate in executing an application 
for consent to transfer of control to LAHI and. subject to 
Commission approval, to assign 51 percent of its stock to LAHI.JO
27. While LAHI's state court action was pending, CSC 
sought and received authorization from the Commission to 
assign its DBS construction permit to Nevada DBS. a new 
ly-formed corporation largely owned and controlled by 
principals of CSC. That authorization was explicitly "con 
ditioned upon whatever action the Commission may deem 
necessary and appropriate as a result of the final deter 
mination in [the] arbitration proceeding (between CSC and 
LAHI|."31 CSC and Nevada DBS consummated the assign 
ment on April 7, 1994.
28. Based upon the arbitrator's decision, in November 
1994. LAHI moved to rescind the conditional assignment 
of the permit to Nevada DBS.32 and the International
2b In the six years since CSC received its DBS permit, the 
Commission has assigned channels and orbital positions to six 
other permittees. See, e.g.. United States Satellite Broadcasting 
Co., 5 F.C.C.R. 7576 (1990); Advanced Communications Corp.. 6 
F.C.C.R. 2269 (1991). re-con, denied, 6 F.C.C.R. 6977 (1991); 
Tempo Satellite. Inc.. 1 F.C.C.R. 6597 (1992): Direct Broadcast 
Satellite Corp., 8 F.C.C.R. 7959 (1993); and Directsat Corp., 8 
F.C.C.R. 7962 (1993). No orbital/channel assignments have been 
made since November 10, 1993.
27 The circumstances of this case are readily distinguishable 
from the facts considered in Advanced Communications Corp. 
(DA 95-944. released April 27,1995), where a DBS permit was 
cancelled after the permittee had failed to build and launch its 
proposed satellites, or even to make substantial progress toward 
those objectives, for several years after having received assigned 
channels and orbital positions.
28 The history of the LAHI/CSC litigation is discussed in 
greater detail in our prior order in this proceeding. See Con 
tinental Satellite Corp., DA 95-1015 (lnt'1 Bur. May 2, 1995).
29 See Award of Arbitration (Case No. 727539, Santa Clara 
County Sup. Ct., May 11, 1994); Order on Petition to Confirm 
Arbitration Award and for Entry of Judgment (Case No. 727539, 
Santa Clara County Sup. Ct., July 2!. 1994): Loral Aerospace 
Holdings, Inc. v. Continental Satellite Corp. (Case No. H013145, 
Cal. Ct. App., Sixth Dist., Nov. 3, 1994).
30 Award of Arbitration in Case No. 727539, Santa Clara Coun 
ty Sup. Ct.. at 2.
31 File No. DBS 87-01/93-06ACP.
32 See Letter from Philip L. Verveer to William F. Caton at 2 
(dated November 15, 1994).
10476
10 FCC Red No. 20 Federal Communications Commission Record DA 95-1733
Bureau granted that motion in May 1995.33 In January 
1995, while the rescission motion was still pending, LAHI 
filed the transfer application at issue, which CSC had 
signed in obedience to the court order.34 In response, 
Nevada DBS filed: (1) a motion to dismiss, as unacceptable 
for filing, the LAHI/CSC transfer application;35 and (2) a 
motion requesting that the Commission conduct an inves 
tigation to determine whether LAHI lacks the requisite 
character qualifications to have a controlling interest in a 
DBS permittee.36
B. Motion to Dismiss
29. Nevada DBS has raised a number of grounds that, in 
its view, mandate the dismissal of the application for trans 
fer of control. We find these arguments to be without 
merit, and therefore deny the motion.37
30. Nevada DBS first contends that the transfer applica 
tion cannot be granted because the proposed transferor, 
CSC, does not have the permit. Since, as a result of our 
rescission order, CSC now holds the permit, the factual 
predicate for that objection is no longer valid.
31. Nevada DBS next contends that the application is 
unacceptably incomplete, inasmuch as it fails to provide 
various kinds of information called for by FCC Form 315. 
That form is for use by applicants seeking to transfer 
control over broadcast construction permits. The Com 
mission has held, however, that DBS service that is acces 
sible only to subscribers is not broadcast service,39 and the 
rules pertaining to DBS applications do not require the use 
of any particular FCC form, including Form 315.4U More 
over, the transfer application does not omit anything 
explicitly called for by the rules applicable to DBS service. 
Thus, it is not subject to dismissal for failure to include 
information expressly required by regulation.
32. Nevada DBS further argues that the application 
should be dismissed because it contains inaccurate informa 
tion about the proposed transferor, CSC.41 Nevada DBS has 
not, however, supported its assertions of error with specific 
contradictory allegations. Nor does it contend that LAHI is
trying to deceive the Commission as to any of the alleged 
inaccuracies or that any such inaccuracy has a material 
bearing on disposition of the application in the public 
interest.42 Such unsupported and immaterial assertions can 
not justify the dismissal Nevada DBS seeks.
33. Finally, Nevada DBS argues that dismissal is in order 
because LAHI has deceitfully withheld material informa 
tion. More specifically, the petitioner contends that LAHI 
has attempted to deceive the Commission by reporting only 
one misconduct determination against a corporate affiliate 
without disclosing others that have a materially adverse 
bearing on its character qualifications. The application dis 
closes that LAHI's parent corporation, Loral, pled guilty in 
1989 to three felony counts of a federal criminal informa 
tion in connection with its activities as a supplier to the 
Department of Defense. Nevada DBS cites to newspaper 
articles as evidence that (1) Loral was again convicted of a 
felony in 1994; (2) Loral agreed in 1995 to pay $1.55 
million to the federal government to settle a false claim 
lawsuit; and (3) a LAHI subsidiary and a sub-contractor 
agreed in 1994 to pay $22,500 to settle a state law claim for 
an allegedly illegal discharge of wastewater.
34. The cited articles are all immaterial. Contrary to the 
petitioner's assertions, none of them says or implies that 
LAHI or any of its corporate affiliates was convicted of 
anything in 1994, nor do they otherwise indicate that any 
conviction aside from the one that the application discloses 
was ever entered against any LAHI-affiliated company. As 
for the reported settlement payments, we believe that here 
as in the broadcast context, "non-FCC" misconduct (unless 
"so egregious as to shock the conscience" and evoke uni 
versal condemnation) should not be deemed material to an 
applicant's qualifications absent an adjudicative finding of 
guilt by a court or by another governmental agency.43 
Hence, mere settlements will ordinarily be disregarded.44 
We see no reason for applying a more exacting standard of 
materiality in this case.
33 See footnote 28, supra.
34 See Application for Consent to Transfer of Control (filed 
January 26, 1995).
35 Motion to Dismiss Transfer Application as Unacceptable for 
Filing (filed February 9, 1995).
36 Petition for Section 403 Investigation of Loralspace Holdings, 
Inc. (filed March 15, 1995).
37 We do not consider this transaction to be a for-profit 
transfer of control: therefore, we need not at this time deter 
mine CSC's ongoing compliance with its obligations under the 
second aspect of our due diligence requirement. See Directsat 
Corp.. 10 F.C.C.R. 88 (1995)(for-profit transfer of control al 
lowed where permittee proceeding with due diligence). 
 '8 See 47 C.F.R. § 73.3540. As indicated by its caption - 
"Application for Consent to Transfer of Control of Corporation 
Holding Broadcast Station Construction Permit or License"   
Form 315 is to be used in a different context. 
3I) Subscription Video. 2 F.C.C.R. 1001, 1006 (1987), aff'd sub 
nom. National Ass'n for Better Broadcasting v. FCC, 849 F.2d 
665 (D.C. Cir. 1988).
40 See 47 C.F.R. § 100.13 (setting out general application re 
quirements).
According to the petitioner, the statements in the applica 
tion concerning CSC's address, the number of shares of issued 
and authorized CSC stock, the stockholding percentages of par 
ticular CSC shareholders, and the shareholders' addresses and 
telephone numbers are erroneous. It further alleges that the
application errs in stating that James H. Schollard and William 
P. Welty currently maintain working control of CSC, that 
Welty is CSC's President and Chairman of the Board, and that 
Lillian E. Schollard is its Chief Financial Officer. See Motion to 
Dismiss at 11.
42 As it appears that CSC and Nevada DBS have common 
principals, those individuals should bear in mind that they 
share responsibility for correcting factual errors in the applica 
tion and that it does not comport with that responsibility to 
withhold specific corrective information to cure inaccuracies of 
which they are aware. See 47 C.F.R. §1.65(a).
43 See Policy Regarding Character Qualifications in Broadcast 
Licensing. 102 F.C.C.2d 1179, 1204-05 and n.64 (1986), recon. 
denied. 1 F.C.C.R. 421 (1986), modified, 5 F.C.C.R. 3252 (1990), 
recon. granted in part, 6 F.C.C.R. 3448 (1991).
44 Moreover, the report about the settlement payment in 1995 
states that the defendant company did not admit liability, and 
does not say that there was any adjudicative finding on point.
45 This is not necessarily to say that the standard for judging 
the materiality of misconduct allegations against DBS applicants 
should be as strict as that specified in Character Policy with 
regard to broadcast applicants. Cf. Character Policy, 1 F.C.C.R. 
at 424 ("common carriers are distinguished from broadcasters 
for purposes of character qualifications because no content regu 
lation is involved"). We need not address that issue here, as 
even applying the broadcast standard in this instance leads to 
the conclusion that no material character issue is presented.
10477
DA 95-1733 Federal Communications Commission Record 10 FCC Red No. 20
C. Petition for Investigation
35. In its "Petition for Section 403 Investigation of Loral 
Aerospace Holdings, Inc.", Nevada DBS requests that the 
Commission institute "formal proceedings" to investigate 
LAHI's qualifications to become the controlling owner of a 
DBS permittee.46 As discussed below, we find nothing that 
warrants investigation, and therefore will deny the 
petition.47
36. Relying upon the showing in its Motion to Dismiss, 
Nevada DBS reiterates the contention that it has presented 
prima facie evidence that LAHI has deceitfully withheld 
information concerning litigation against affiliates that has 
a substantially adverse bearing on its character qualifica 
tions. This accusation is rejected for the reasons stated in 
paragraph 34 above.
37. Nevada DBS next contends that there is reason to 
suspect LAHI of trying to conceal .material information 
about alien ownership. Nevada DBS notes that the applica 
tion declares that the proposed transaction "will be" in 
compliance with the limits on foreign ownership specified 
in Section 100.11 of the Commission's Rules but does not 
say when such compliance would occur or whether foreign 
equity holdings in LAHI and its parent corporation are 
currently within those limits.48 The petitioner also notes 
that according to the application a class of non-voting stock 
in LAHI, comprising some undisclosed percentage of its 
total equity, is held by merchant banking partnerships 
affiliated with Shearson Lehman and asserts that "it would 
appear" that most or all of those partnerships are foreign. 
The. petitioner stresses, moreover, that the application does 
not include a disclosure required by FCC Form 315 as to 
whether funds for construction and operation will be pro 
vided by aliens or alien-controlled companies.49
38. We see no reason to suspect LAHI of concealing 
materialp 1 information about alien ownership, nor do we 
agree that the application provides insufficient information 
in this regard. As discussed above, the application does not 
omit any disclosure required by the applicable regulations. 
It declares, moreover, that all of the officers and directors 
of LAHI and its parent company are United States citizens 
and that its proposed acquisition of a controlling interest in 
CSC "will be in compliance with the provisions of ... 
Section 100.11 . . . relating to interests of aliens and foreign 
governments."50 The latter assertion alone is sufficient on 
its face, and Nevada DBS has not pointed to anything that 
controverts it. The contention that it "appear|s|" that most
or all of the partnerships with non-voting stock are foreign 
is evidently without foundation, as the petitioner cites no 
evidence to support it.51
39. The petitioner alleges that the real transferee-party- 
in-interest is not LAHI, but rather its SS/L subsidiary, and 
that the designation of LAHI as the transferee is a sham 
designed to evade the foreign ownership rule.52 The peti 
tioner asserts that SS/L is 49 percent foreign-owned and 
therefore ineligible to receive a DBS authorization; that 
SS/L is in the business of designing, building, and launch 
ing satellites, whereas LAHI is merely a holding company 
whose principals lack the expertise to supervise its oper 
ations; and that the principals of Loral planned from the 
first to have SS/L gain a controlling interest in CSC's 
construction permit and decided to substitute LAHI as the 
nominal transferee only after discovering that SS/L was 
legally ineligible. To substantiate these assertions, petitioner 
refers to a copy of an August 1992 memorandum from an 
SS/L employee to two vice presidents of Loral, discussing 
the advisability of exercising the option that SS/L then held 
for acquisition of a controlling interest in CSC. In particu 
lar, the petitioner calls attention to a statement in the 
memorandum that "(o]ur option (in SS/L's name) would 
need to be transferred to another Loral activity (e.g., LAC) 
before exercise to avoid any foreign influence concerns."53
40. We reject the petitioner's argument. Nevada DBS has 
presented no material evidence to suggest that LAHI would 
abdicate its responsibility for the proposed DBS operations 
of CSC. The allegation that its principals lack the requisite 
expertise is unsupported. The cited memorandum, more 
over, evidences not an attempt to flout limitations on for 
eign ownership, but rather a recognition of those 
limitations and an effort to comply with them. To char 
acterize measures taken for the sake of compliance with 
regulatory restrictions as culpable "evasion," in the absence 
of probative evidence of bad faith, is to stand the truth on 
its head.
41. Nor does LAHI's "nondisclosure" of: (1) the extent of 
holdings by insurance companies or bank trust depart 
ments; (2) whether such entities exercise influence or con 
trol over the company; and (3) whether financial assistance 
will be provided by aliens or companies controlled by 
aliens, indicate that material information has been con 
cealed.54 There is no rule requiring the submission of such 
information in a DBS transfer application, nor is there any 
need for supplemental information in light of LAHI's state-
46 Petition for Section 403 Investigation of Loral Aerospace 
Holdings, Inc. at I (filed March 10, 1995).
47 Although Nevada DBS contends that its petition "supports 
an investigation by the full Commission," disposition of that 
petition is within the scope of the International Bureau's man 
date under 47 C.F.R. § 0.5 l(c) to "administer policies, rules, 
standards, and procedures for the authorization ... of ... 
domestic and international satellite systems."
48 The foreign ownership limitations in Section 100.11 are 
virtually identical to those in Subsection 310(b) of the Commu 
nications Act. Section 100.11 states that DBS authorizations 
shall not be granted to or held by any corporation with an alien 
officer or director, any corporation of which more than one- 
fifth of the capital stock is owned or voted by aliens or their 
representatives, or any corporation directly or indirectly con 
trolled by another corporation of which more than one-fourth
of the stock is owned or voted by aliens.
4() Petition for Section 403 Investigation at 18-19.
50 Application for Consent to Transfer of Control at 5.
51 We note that an officer and director of LAHI recently 
certified in an unrelated proceeding that aliens or their repre 
sentatives, foreign corporations, arid/or foreign governments or 
their representatives do not own or vote more than one fifth of 
LAHI's capital stock and that LAHI is not directly or indirectly 
controlled by any corporation of which any officer or more 
than one fourth of the directors are aliens or by any corpora 
tion of which more than one fourth of the stock is owned or 
voted by aliens. See Licensee Qualification Report (File Nos. 
109-SAT-P/LA-95 and 110-SAT-L-95, filed May 2, 1995).
52 Petition for Section 403 Investigation at 21-23.
53 Id. at 19-21 and Attachment 4. LAHI does not dispute the 
authenticity of this memorandum.
54 Id. at 18-19.
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10 FCC Red No. 20 Federal Communications Commission Record DA 95-1733
ments that it will be in compliance with the provisions of 
Section 100.11. and that aliens will not have a de facto 
controlling interest by virtue of financial leverage.55
42. Nevada DBS also accuses LAHI of deliberately with 
holding material information about future ownership 
rights. This contention is without support in the record.
43. It appears that LAHI is fully qualified to hold a 
controlling interest in the corporate permittee. It also ap 
pears that the proposed transaction would promote equity 
by affording long-overdue resolution of an unsatisfied pay 
ment obligation without prejudice to CSC's readiness to 
implement its plans for construction and operation of a 
DBS system. We therefore conclude that it would serve the 
public interest to grant permission for the proposed trans 
fer of control.
III. CONCLUSION
44. Accordingly, IT IS ORDERED that Continental Sat 
ellite Corporation is authorized to provide eleven channels 
of eastern half-CONUS service, or eleven channels of full- 
CONUS service, on odd-numbered channels 1-21 at orbital 
position 61.5 degrees West longitude and eleven channels 
of western half-CONUS service on odd-numbered channels 
1-21 at orbital position 166 degrees West longitude.
45. IT IS FURTHER ORDERED that authority for use 
of these channels and orbital locations is conditioned on 
compliance with Appendix 30 of the ITU Radio Regula 
tions, particularly Annex 1, and other international treaties 
and agreements. This assignment is also subject to the 
following conditions:
(a) Continental Satellite Corporation shall submit 
within thirty (30) days of the release of this Order 
updated technical information for its proposed sat 
ellites, including the "Basic Characteristics to be Fur 
nished in Notices Relating to Space Stations in the 
Broadcasting-Satellite Service" mentioned in Annex 2 
of Appendix 30 (Orb 85) of the ITU Radio Regula 
tions. Detailed calculations should be supplied to 
demonstrate compliance with paragraphs 1 through 8 
of Annex 1 of Appendix 30 (Orb 85), as applicable, 
along with any additional analysis necessary to show 
that the proposed satellites would not require more 
protection than provided for in the Region 2 Plan. 
Particular attention should be paid to shaped beam 
contours to ensure that they are sufficiently detailed 
to permit verification of all necessary calculations. As 
a guideline, see paragraph 12(h) of Annex 2. Finally. 
CSC should provide a detailed description of any 
technical characteristics to be utilized that differ from 
those specified in the Region 2 Plan, e.g., use of FM 
signal transmissions.
(b) The authorization may be modified or rescinded 
if analysis of updated technical information indicates 
that such service would not comply with Appendix 
30 of the ITU Radio Regulations or other interna 
tional treaties or agreements.
(c) Continental Satellite Corporation shall submit, 
within sixty (60) days of the release of this Order, an 
updated construction milestone schedule specifying 
the particular dates upon which its previously re 
ported construction milestones are to be accom 
plished: and an updated payment schedule specifying 
the particular dates upon which payments are due.
(d) Continental Satellite Corporation shall submit, 
within ninety (90) days of the release of this Order, 
proof that it has satisfied the payment condition men 
tioned in Article 39 of its contract with 
INTRASPACE Corporation.
This assignment of channels and orbital positions does not 
include launch or operational authority. An instrument of 
authorization, including launch authority, will be issued 
upon submission of updated technical information and a 
finding that the information assures compliance with inter 
national treaties and agreements.
46. IT IS FURTHER ORDERED that the Application 
for Consent to Transfer of Control filed by Continental 
Satellite Corporation and Loral Aerospace Holdings. Inc. 
on January 26, 1995. IS GRANTED.
47. IT IS FURTHER ORDERED that the Motion to 
Dismiss Transfer Application filed by Nevada Direct 
Broadcasting System. Inc. on February 9, 1995, and the 
Petition for Section 403 Investigation of Loral Aerospace 
Holdings, Inc., filed by Nevada Direct Broadcasting System, 
Inc. on March 10. 1995, ARE DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Scott Blake Harris
Chief, International Bureau
55 See 11 38 and footnote 51, supra.
56 Petition for Section 403 Investigation at 19-21.
10479