**Before the**

Federal Communications Commission

Washington, D.C. 20554

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FIRST REPORT

**Adopted: March 22, 2007 Released: March 26, 2007**

By the Commission: Commissioners Copps and Adelstein concurring and
issuing separate statements; Commissioner Tate issuing a separate
statement.

Table of Contents

Heading Paragraph \#

I. EXECUTIVE SUMMARY 1

II\. introduction 5

A. Sources of Information 8

B. Structure and Analytical Approach of the Report 10

III\. MARKET STRUCTURE 11

A. Summary 11

B. Organizational Structure of the Satellite Communications Industry 13

1\. Historical Review of Industry Structure Before 2000 13

2\. Organizational Changes Since 2000 20

3\. Current Industry Revenues 23

C. Market Description and Identification of Market Participants 24

1\. Summary 24

2\. The Relevant Market and Market Participant Concepts 28

3\. Introduction to Relevant Markets 33

4\. Domestic Relevant Markets and Market Participants 36

5\. International Relevant Markets 58

D. Market Concentration 64

1\. Mergers and Other Transactions in Commercial Satellite Markets Since
2000 65

2\. Measures of Market Concentration 68

E. Market Entry Conditions 81

1\. Introduction 81

2\. Industry Cost Structure 85

3\. Industry Dynamics 93

4\. Spectrum Allocation and Orbital Locations 106

5\. United States Market Entry Standard 113

6\. Public Policies of Foreign Administrations 118

F. Effect of Technology Change on Market Structure 138

1\. Spectrum-Efficient Technology 139

2\. On-Board Processing 142

IV\. Market conduct 144

A. Wholesale Markets 146

B. Retail Markets 156

V. MARKET PERFORMANCE 159

A. Analytical Framework 160

B. Data and Application of Analytical Framework 168

1\. Domestic Wholesale Markets 168

2\. Domestic Retail Markets 179

VI\. COMPETITION ASSESSMENT AND CONCLUSIONS 188

VII\. ADMINISTRATIVE MATTERS 192

APPENDICES

A-List of Parties Filing Comments and Other Papers

B-List of Foreign Nations Raising Barriers to Market Entry by United
States Satellite Providers

# EXECUTIVE SUMMARY

1.  This is the first annual report by the Federal Communications
    Commission to the United States Congress on the status of
    competition in the market for domestic and international satellite
    communications services. In this Report, we conclude that there is
    effective competition in both wholesale and retail satellite
    services markets. The Report is retrospective, focusing on
    conditions prevailing in the satellite services marketplace from the
    beginning of the 2000 calendar year through the 2006 calendar year.

2.  In this Report, the Commission concludes that the market for
    commercial communications satellite services is effectively
    competitive. We discuss the structure of the satellite
    communications services industry and describe six wholesale markets
    or groups of markets (three domestic and three international) and
    two retail markets or groups of markets (both domestic). Within
    these markets, we calculate a range of standard economic indicators
    commonly used to assess market conduct, concentration, and
    performance. We also discuss the Commission's policies regarding
    foreign participants' entry into the U.S. market, as well as U.S.
    companies' access to foreign markets.

3.  For wholesale markets, we find that four competitors held 80 percent
    of the domestic transponders activated (Intelsat, SES Americom,
    PanAmSat and New Skies) during the relevant period. Subsequent to
    the collection of these data, Intelsat and PanAmSat merged, and SES
    and New Skies merged. We find relatively high profitability ratios
    for the major wholesale market participants coupled with limited and
    declining market power based on Lerner Index proxy measurements. We
    also note that participants in the network services markets continue
    to post significant revenues, even as they are experiencing
    increased competition from terrestrial providers.

4.  For retail markets, we assess performance for the Satellite Digital
    Audio Radio Service market ("SDARS"), but have insufficient data to
    assess performance for satellite providers in the Fixed Wireless
    Broadband market. As expected for a relatively new service, neither
    provider is currently profitable, but growth rates for both
    subscribers and revenues are high and revenues per user have begun
    to rise. Two-way satellite-based fixed wireless broadband service
    was first offered only in 2005, and satellite-based broadband of all
    types represents less that 1 percent of the U.S. broadband
    subscriber base. The sector does show growing subscriber up-take and
    increasing competition among three emerging providers. Because
    satellite-based multichannel video programming distributors ("MVPD")
    and mobile satellite services ("MSS") are discussed in other annual
    competition reports issued by the Commission, we do not address them
    here.

# introduction

5.  This is the first annual report (the \"Report\") by the Federal
    Communications Commission ("the Commission") to the U.S. Congress on
    the status of competition in the markets for domestic and
    international satellite communications services, as required by
    section 4 of an Act of July 12, 2005, Pub. L. No. 109-34, 119 Stat.
    377 (2005), which amended the Communications Satellite Act of
    1962[^1] and is codified at 47 U.S.C. § 703 (\"section 703\").

6.  In section 703(b), Congress directed that the Commission include in
    this Report,

    "(1) an identification of the number and market share of competitors
    in domestic and international satellite markets; (2) an analysis of
    whether there is effective competition in the market for domestic
    and international satellite services; and (3) a list of any foreign
    nations in which legal or regulatory practices restrict access to
    the market for satellite services in such nation in a manner that
    undermines competition or favors a particular competitor or set of
    competitors."[^2]

7.  Although section 703(b)(2) directs this Report to analyze "whether
    there is effective competition in the market for domestic and
    international satellite services,"[^3] the term "effective
    competition" is not defined in section 703 or in the context of
    satellite services more generally.[^4] Accordingly, to analyze
    effective competition, we rely on a range of standard indicators
    commonly used for the assessment of effective competition.

## Sources of Information

8.  The information and analysis provided in this Report are based on a
    wide variety of publicly available sources. In March 2006, the
    International Bureau (the "Bureau") released a Public Notice (the
    "Notice") seeking data and information in order to evaluate
    satellite competition.[^5] Seven parties submitted comments or reply
    comments in response to the Notice.[^6]

9.  In addition to information submitted in response to the Notice in
    this docket, we relied upon a wide variety of publicly available
    sources of industry data. These sources included: company filings
    with the Securities and Exchange Commission, data compiled and
    released by trade associations and by other government agencies,
    reports by securities analysts and other research companies and
    consultants, company news releases and websites, newspaper and
    periodical articles, and various public Commission filings,
    decisions, and databases. We also conducted numerous discussions
    with members of the industry, industry associations, industry
    observers, and financial analysts.

## Structure and Analytical Approach of the Report

10. After a brief history of the satellite communications industry, the
    Report describes the relevant markets for commercial satellite
    communications services, in the U.S. and internationally, and
    evaluates market performance in this sector. [^7] In the Market
    Structure discussion, we identify and describe the markets relevant
    to this competition analysis, including the leading market
    participants. We also measure market concentration, provide
    information on recent relevant mergers and other transactions, and
    review various conditions affecting the ability of additional
    providers or classes of providers to enter the market. In the Market
    Conduct Section, we explore the conduct of buyers and sellers in the
    market and, in the Market Performance Section, we assess the
    performance of market participants using a variety of economic
    indicators, including market shares, market concentration,
    profitability, revenues and subscriber levels. Finally, the
    Competition Assessment and Conclusion provides a summary of both the
    structural and the behavioral characteristics of the satellite
    industry found in the Report.

#  MARKET STRUCTURE

## Summary

11. In this inaugural Report, we begin with a history that explains how
    the satellite communications industry attained its present broad
    outlines. Then we describe relevant markets in current satellite
    communications services that we use in our later economic analysis
    of the industry.

12. In this Report, we do not discuss satellite-based MVPD services
    because the Commission analyzes the overall video market in a
    separate annual report to Congress.[^8] Similarly, we do not discuss
    mobile satellite services, as they are encompassed in the
    Commission's annual report to Congress on Commercial Mobile Radio
    Service ("CMRS").[^9]

## Organizational Structure of the Satellite Communications Industry

### Historical Review of Industry Structure Before 2000

13. Early legislative and regulatory decisions fostered the beginnings
    of international and domestic Fixed Satellite Services ("FSS")
    sector. In 1964, the United States and other nations formed what
    would become the intergovernmental organization, INTELSAT.[^10] The
    *INTELSAT Agreement* entered into force on February 12, 1973. In
    1965, Comsat placed the first U.S. commercial geostationary
    satellite into service to supplement communications facilities
    between the United States and Europe.[^11] In 1966, the Commission
    opened a docket to explore questions associated with possible
    authorization of domestic communications satellite facilities to
    nongovernmental entities and, in 1970, the Commission adopted a
    policy of affording reasonable opportunity for entry into the
    domestic communications satellite field by qualified
    applicants.[^12]

14. The Commission granted its first group of domestic FSS C-band
    authorizations in 1973.[^13] By 1980, there were nine U.S. domestic
    satellites in orbit, all in the C-band.[^14] Although the domestic
    satellite carriers initially provided service between a few
    general-purpose earth stations located near major metropolitan
    areas, they subsequently offered new and specialized communications
    services as carriers and users added additional earth stations to
    the networks.[^15] During the 1970s, these U.S. domestic satellites
    ("domsats") provided FSS solely within the United States.
    International services were provided using INTELSAT space segment
    exclusively through COMSAT, a U.S. licensee, which served as the
    U.S. signatory to INTELSAT.

15. During the 1980s, the Commission granted an additional four groups
    of domestic FSS authorizations -- in 1980, 1983, 1985, and
    1988.[^16] Beginning in 1981, the Commission had begun to authorize
    domestic satellites to operate in the additional Ku-band
    frequencies.[^17] By late 1988, there were 42 existing and recently
    authorized domestic FSS satellites in the C- and Ku-bands, including
    eleven hybrids in those bands, an almost five-fold increase over the
    nine satellites that had been in orbit just eight years
    earlier.[^18] Additionally, beginning in 1981, the Commission
    approved applications to use U.S. domsats to provide certain
    international services, conditioned on successful coordination with
    INTELSAT and the concurrence of other involved countries.[^19] In
    keeping with U.S. obligations under the INTELSAT Treaty, most
    applications involved instances where use of the INTELSAT system
    clearly would be uneconomical or impractical.[^20] Thus, there was
    little overlap between the services provided by INTELSAT and the
    U.S. domsats.

16. In the international arena, the Commission authorized the entry of
    new FSS "separate satellite" systems that began to compete with
    INTELSAT for international FSS services, including services to and
    from the United States.[^21] Due to U.S. obligations under the
    INTELSAT Treaty, the authorized separate satellite systems were not
    permitted to utilize their capacity for domestic U.S.
    communications.[^22] Therefore, the Commission made a clear
    distinction between those U.S.-licensed FSS satellite operators
    providing domestic satellite capacity and those providing
    international satellite capacity.

17. In the 1990s, the Commission allocated spectrum and issued service
    rules for multiple additional satellite services. Spectrum was
    allocated to create two new non-geostationary satellite services
    provided by constellations of low-Earth orbit ("LEO") satellites,
    the Little LEO[^23] and Big LEO[^24] services. Additional FSS
    spectrum was allocated for other geostationary satellites in the
    Ka-band,[^25] and spectrum was allocated for non-geostationary
    satellite orbit systems in both the Ka-band and Ku-band satellite
    spectrum.[^26]

18. In 1996, the Commission eliminated the regulatory dichotomy between
    the provision of international and domestic services.[^27] As a
    result, U.S. international and domestic satellite providers began to
    provide both global and domestic U.S. satellite services. With the
    signing of the World Trade Organization ("WTO") Basic Telecom
    Agreement in 1997, the Commission adopted new rules and procedures
    for U.S. market entry by foreign satellite providers from WTO Member
    countries.[^28]

19. In 1997, the Commission adopted rules for SDARS,[^29] building on
    decisions to open spectrum for such services in the 1980s. [^30]
    Market entry followed, with XM initiating service in 2002 and Sirius
    initiating service in 2003.[^31] In addition, the Commission
    authorized two Worldspace spacecraft in non-SDARS bands, which
    provide digital audio radio services outside of the U.S. to
    subscribers in Asia, the Middle East, Africa, and Europe.[^32]

### Organizational Changes Since 2000

20. Today's FSS markets reflect several organizational changes occurring
    in the period from 2000 to the present, including the privatization
    of INTELSAT, various mergers and acquisitions, and new entry. In
    2000, the intergovernmental organization INTELSAT competed in
    providing FSS satellite capacity for services to and from the United
    States with companies that, for the most part, also provided U.S.
    domestic FSS services: PanAmSat; GE Americom and its subsidiary
    Columbia Communications Corporation; Loral Skynet; and New Skies.
    Today, the commercial FSS sector in the United States is composed of
    two major participants and a number of smaller providers, including
    Loral Skynet; a number of foreign-licensed providers such as New
    Skies, Telesat Canada, and Satmex; and Direct Broadcast Satellite
    ("DBS") providers EchoStar, DirecTV, and Dominion Video Satellite,
    which hold FSS licenses. The two major providers of FSS transponder
    capacity are SES Global, through its subsidiaries SES Americom and
    New Skies, and Intelsat, the successor to the intergovernmental
    organization INTELSAT, which recently acquired FSS provider
    PanAmSat. Both entities compete internationally and in U.S. domestic
    FSS markets. Additionally, Loral Space and Communications and its
    partner, Canada's Public Sector Pension Investment Board, recently
    announced plans to acquire Telesat Canada.[^33]

21. A major change in the FSS sector involved the privatization of
    INTELSAT. In 2000, Congress enacted the ORBIT Act to promote a more
    competitive global satellite communications services market for the
    benefit of consumers and providers of satellite service and
    equipment.[^34] The ORBIT Act mandated the full privatization of the
    former intergovernmental satellite organization INTELSAT. In 2000,
    the Commission granted conditional licensing authority to Intelsat
    LLC, a separate, privately held U.S. corporation created by Intelsat
    to hold U.S. satellite authorizations and associated space segment
    assets.[^35] In 2001, the Commission determined that, once INTELSAT
    privatized, the use of space segment operated by Intelsat LLC for
    services to, from and within the United States would not harm
    competition in the telecommunications market of the United
    States.[^36] INTELSAT privatized later in 2001.[^37] Its successor,
    the privately held company Intelsat, became a U.S. licensee. In
    2004, Intelsat acquired certain satellite assets from Loral that
    permitted Intelsat to enter the U.S. domestic video distribution
    market.[^38] In 2005, the Commission determined that Intelsat was in
    compliance with the final privatization requirement of the ORBIT
    Act.[^39]

22. The privatization of Intelsat appears to have had a positive effect
    on the domestic U.S. market. Privatization has given Intelsat the
    opportunity to develop new services for the U.S. market that
    potentially will result in the expansion of service options and
    providers for U.S. customers.[^40] The privatized companies compete
    more effectively in providing service to U.S. commercial and
    governmental customers, and compete freely for U.S. satellite
    business opportunities, which have increased competition in the U.S.
    market.[^41] Privatization also appears to have had a positive
    impact on the global marketplace for satellite communications
    services.[^42]

### Current Industry Revenues

23. The Satellite Industry Association ("SIA") estimates, based on a
    mid-year 2006 study prepared by Futron Corporation (the "SIA/Futron
    Study"),  that the world commercial satellite communications
    industry generated \$88.8 billion in 2005, up 7.4% from \$82.7
    billion in 2004, and posted an annual growth of 6.7% for the period
    2000-2005. [^43] The SIA/Futron Study estimates that revenues from
    commercial satellite communications services amounted to \$52.8
    billion in 2005, or 60% of overall satellite sector revenues in
    2005, up from only 45% in 2000. [^44] The SIA/Futron Study estimates
    that global revenues from retail services represented \$45.5 billion
    or 86% of 2005 services revenues, with wholesale services
    representing the remainder.[^45] For the United States only, The
    SIA/Futron Study estimates service revenues at \$24 billion in 2005,
    up from \$19.5 billion in 2004, with retail satellite services
    revenues representing 88.7% and wholesale satellite service revenues
    contributing 11.2%.[^46]

## Market Description and Identification of Market Participants

### Summary

24. Consistent with accepted methods of analyzing competition in a
    business, this Report next describes relevant markets. Specifically,
    we describe three national wholesale product markets, each
    consisting of communications capacity that is provided to business
    and government customers within the United States.[^47] We also
    describe two national retail product markets, each consisting of
    communications services provided to retail consumers within the
    United States. Several of these product markets may be groupings of
    smaller identifiable product markets that we have grouped to
    facilitate analysis.[^48] Finally, we describe three international
    product markets each of which consists of communications service,
    wholesale or retail, between points in the United States and points
    in foreign countries. To simplify analysis, we do not consider each
    international route separately as we might in other contexts.

25. The markets and groups of markets we describe in this Report are:

> ● Domestic

-   Wholesale Services

    -   Capacity for Video Contribution

    -   Capacity for Video Distribution

    -   Network Services

-   Retail Services

    -   Fixed Satellite Broadband Services

    -   SDARS

> ● International

-   Wholesale Services

    -   Capacity for Video Contribution

    -   Capacity for Video Distribution

    -   Network Services

26. In this Report, we do not include two retail markets with
    satellite-based participants because they are analyzed elsewhere in
    annual competition reports provided by the Commission to Congress.
    [^49] Satellite-based MVPD providers are part of the broader MVPD
    market that is analyzed in the Commission's annual video competition
    report. Similarly, mobile satellite services providers are
    participants in the broader CMRS market that is discussed in
    Commission's annual CMRS competition report.

27. We emphasize that the market descriptions included in this Report
    are intended to facilitate discussion of satellite markets and
    services as required by section 703, and may not reflect the
    appropriate markets to be considered in other Commission
    proceedings, including merger reviews, rulemakings involving the
    Commission's ownership rules, or other reports to Congress.

### The Relevant Market and Market Participant Concepts

28. [Relevant Market.]{.underline} Describing the \"relevant market,\" a
    concept drawn from antitrust law, is the first step in assessing
    whether "effective competition"[^50] or market power exists in a
    market.[^51] A relevant market has both product and geographic
    dimensions. When a relevant market has been described in both
    dimensions, market participants can be identified. Then, the
    participants' economic significance in the market can be measured
    and the presence of competition determined.

29. In this Report, we draw on the relevant market concept to identify
    the product and geographic markets in which providers of satellite
    communications services compete with each other and with service
    providers that use non-satellite technologies. In describing
    relevant markets, we rely on antitrust law, economic theory, and the
    U.S. Department of Justice and Federal Trade Commission *Horizontal
    Merger Guidelines* ("*Merger Guidelines*").[^52] Although this
    Report is not an analysis of a proposed merger, the *Merger
    Guidelines* provide useful principles for the analysis of
    competition in satellite communications markets.

30. Antitrust case law and economic theory describe the relevant product
    market by examining whether most consumers of a given product or
    service consider that there are close substitutes for the product or
    service, and whether there are other services that are reasonably
    interchangeable, even if not identical, for the same purposes.[^53]
    The *Merger Guidelines* describe a product market as the smallest
    group of competing services for which a hypothetical monopoly
    provider would profitably impose at least a small but significant
    and non‑transitory price increase, presuming no change in the terms
    of sale of other services.[^54] Both descriptions consider the
    availability of substitutes that would enable a customer to defeat
    an attempted increase in price or lowering in quality by a firm in
    the market.

31. The *Merger Guidelines* describe a geographic market as the area
    within which a hypothetical monopolist would profitably impose at
    least a small but significant and non-transitory increase in price,
    holding constant the terms of sale for all services produced
    elsewhere.[^55] Antitrust precedent describes a geographic market
    similarly, as the area of effective competition, the area within
    which buyers can practically turn for alternative sources of supply,
    or the area in which there are sellers who could act to restrain the
    prices charged to those buyers.[^56] The geographic market for a
    satellite communications service -- the geographic area within which
    buyers can turn for alternative sources of supply -- may be greater
    than nationwide because buyers may consider purchasing services on
    any satellite that can reach their particular geographic market
    within the United States, regardless of its ownership or physical
    location in space.

32. [Market Participants.]{.underline} Once a relevant market is
    described, the next step is to identify the firms that participate
    in the market. According to the *Merger Guidelines*, market
    participants "include firms currently producing or selling the
    market\'s products in the market\'s geographic area."[^57] Market
    participants can be large or small. A firm that has not yet entered
    the market and does not exercise a constraining influence on firms
    that are in the market is not a market participant. A firm that has
    not yet entered may be considered a market participant, however, if
    its entry is shown to be certain and significant or to influence the
    behavior of the firms that are currently producing or selling.[^58]

### Introduction to Relevant Markets

33. In this Report, we examine competition in domestic and international
    relevant markets for satellite communications services. Each
    relevant market described in this Report is a service that uses a
    communications satellite as a platform. We examine several relevant
    markets, including "wholesale" (in which the product is capacity, an
    input to a service provided to business or retail consumers) and
    "retail" (in which the product is a service provided to
    consumers).[^59] In some cases, we address a grouping of similar,
    smaller relevant markets together for analytical simplicity.

34. After we describe each relevant market, we identify or describe the
    "market participants," the firms that currently sell (or, in the
    case of most satellite communications services, provide service) in
    it.[^60] In some cases, several firms own different components of a
    service -- a communications satellite spacecraft, transmitting
    and/or receiving earth station(s), the other components of a
    communications service (*e.g.*, software, program content) and radio
    frequency licenses. In each such case, we list as the market
    participant the firm that controls the asset(s) that are most
    significant in providing the service. In many cases, this will be
    the owner of the communications satellite spacecraft. In some cases,
    however, the market participant we list may lease significant
    long-term capacity from the satellite owner in order to provide a
    value added or satellite networking service to customers. In those
    cases, we consider the latter company to be more significant and we
    list it as the market participant.

35. The relevant markets described in this Report may include market
    participants that use technology platforms other than communications
    satellites to provide services that compete with satellite
    providers. Recognizing intermodal competition is consistent with
    customary descriptions of relevant markets. Satellite technology is
    one technology platform, an input that can be used to provide a
    communications service. It is not uncommon for the same service --
    the same communications capability that a consumer uses -- to be
    provided by differing platforms such as satellite, radio
    transmitters on the earth's surface ("terrestrial wireless"), and/or
    wires (copper, coaxial, or fiber optic). These different
    technologies afford consumers substantially the same capability. A
    provider of each of those services may have a constraining effect on
    the pricing and output of a provider of any of the others. The
    extent to which a terrestrial provider may compete with
    satellite-based providers, however, may be constrained by the
    geographic extent of its network, especially compared to the
    relatively large geographic coverage of satellites.

### Domestic Relevant Markets and Market Participants

36. We describe three wholesale product markets, each consisting of
    communications capacity that is provided to business and government
    users within the United States for their further provision to end
    users, and two retail product markets, each consisting of
    communications services provided directly to retail consumers
    (mostly individuals and households) within the United States.[^61]
    These product markets are listed in Table 1. For each product market
    we discuss its market description and the market participants. We
    then discuss the geographic aspects of these three wholesale product
    markets.

    **TABLE 1**

    **DOMESTIC PRODUCT MARKETS**

    INVOLVING SATELLITE COMMUNICATIONS SERVICES

+-----------------+----------------------------------------------------+
| Wholesale       | Capacity for Video Contribution                    |
| Services        |                                                    |
|                 | Capacity for Video Distribution                    |
|                 |                                                    |
|                 | Network Services                                   |
+-----------------+----------------------------------------------------+
| Retail Services | Fixed Satellite Broadband Services                 |
|                 |                                                    |
|                 | Satellite Digital Audio Radio Services (SDARS)     |
+-----------------+----------------------------------------------------+

#### Domestic Wholesale Markets

##### Capacity for Video Contribution

37. [Product Market.]{.underline} We describe this product market
    grouping as consisting of services offering point-to-point capacity
    for full-time contribution to, or occasional use by, providers of
    media services within the United States.[^62] Services in this
    market transmit entertainment and news content from the location
    where they occur to the media company production facilities where
    they are edited and packaged for later broadcast and transmission to
    consumers.

38. These "video contribution" markets consist of a number of smaller
    markets that we discuss together in this Report. The smaller markets
    may show differing characteristics that affect the buyer-seller
    relationship, including variations in the recurrence of the service
    (full-time or occasional use), its predictability (pre-negotiated
    purchases versus spot purchases), and the terms of contracted
    service. These smaller product markets include full-time
    transmission of program content from the point of its origination,
    such as a content production studio, to the operational headquarters
    of cable TV companies, providers of DBS service, over-the-air
    broadcast networks[^63] and stations, and syndicators, for further
    distribution.[^64] These markets also include short-term,
    occasional, or "ad hoc" transmission of video content to the same
    media companies from locations of short-term interest, such as
    venues of breaking news or on-site interviews, political campaigns,
    or sporting events. Customers in these markets are broadcast TV
    networks and stations; syndicators; MVPDs, including wireline local
    exchange carriers ("LECs")[^65] in a growing number of areas; major
    independent networks; movie distributors; the National Rural
    Telecommunications Cooperative ("NRTC"); and some major sporting
    stadiums.

39. [Market Participants.]{.underline} Satellite-based participants in
    these video contribution markets are FSS satellite operators,
    including Intelsat, Ltd. ("Intelsat," which recently merged with
    PanAmSat), Loral Space & Communications, Ltd. ("Loral"), and SES
    Americom, Inc. ("SES Americom"), teleports,[^66] resellers and other
    specialized program providers engaged in occasional use for
    satellite news gathering.[^67] EchoStar recently announced its entry
    into this market, providing news organizations ABC and CBS with
    capacity for election coverage.[^68] Additional participants are
    large media entities, such as CBS, which self-supply some capacity.
    Also, on certain specific routes, terrestrial providers of
    communications transmission services are participants in this
    market.[^69] The most prominent such providers are Level 3
    Communications, Inc., AT&T Corp., and Verizon Communications Inc.
    Terrestrial distribution is available only from sites where
    terrestrial facilities (*e.g.,* wire, coaxial, fiber) are installed.
    Satellite distribution, in contrast, is potentially available to and
    from any point within the coverage area of a satellite.

40. Finally, all foreign-licensed FSS operators listed on the
    Commission's Permitted Space Station or "ALSAT" list[^70] are market
    participants in this and other wholesale relevant markets described
    in this Report. As with all satellite technology, however, their
    ability to participate fully in this or other domestic markets may
    be limited by their spacecraft's geographic coverage.

##### Capacity for Video Distribution

41. [Product Market.]{.underline} We describe this group of product
    markets to consist of capacity for the wholesale distribution of
    media content between points within in the United States. These
    "video distribution" markets consist of point-to-multipoint
    transmission of entertainment and news content, for example, from
    broadcast networks and syndicators to individual broadcast stations;
    from the hub locations of MVPDs and MVPD networks[^71] to individual
    MVPD headends;[^72] and from over-the-air broadcast stations over
    long distances to MVPD headends,[^73] all for subsequent
    distribution to consumers (*i.e.,* viewers and listeners).[^74]
    Customers in this grouping of markets are the same as in the
    above-described markets for Video Contribution.

42. [Market Participants.]{.underline} Satellite-based participants in
    this group of product markets are FSS satellite operators, including
    Intelsat, Loral, and SES Americom,[^75] as well as EchoStar
    Satellite, L.L.C. ("EchoStar").[^76] Market participants also
    include some local and regional teleports such as Crawford
    Communications, Inc., and Ascent Media Group. Also participating in
    this market are the large media entities mentioned in paragraph 39
    above, and, on a few routes, the terrestrial communications
    companies referred to in paragraph 39 above. Other potential
    participants are all foreign-licensed satellite operators listed on
    the Commission's ALSAT list.[^77]

##### Network Services

43. [Product Market.]{.underline} We describe this group of product
    markets as consisting of the provision of point-to-point
    telecommunications transmission paths to telecommunications
    operators and corporate users. This group has two major components.

44. The first component consists of "backbone" satellite capacity used
    for point-to-point trunking for voice, data, or Internet traffic,
    for backhaul[^78] of communications services, and for redundancy and
    restoration of communications services when the primary cable and
    terrestrial wireless technologies fail.[^79] This service includes
    backbone capacity to Alaska, Hawaii, and tribal territories. Users
    of this capacity include facilities-based communications carriers
    (both wireline and wireless), paging service providers, business
    corporations, and parts of the United States government (both
    military and nonmilitary).

45. The participants in this component of the network services product
    market include FSS satellite operators such as Intelsat, Loral, and
    SES Americom; some teleport operators;[^80] all foreign-licensed
    satellite operators listed on the ALSAT list;[^81] and resellers of
    satellite capacity. Terrestrial wireline and wireless carriers also
    offer capacity for telecommunications backbone where they have
    network facilities. In addition, some carriers and government users
    may supply themselves with capacity for telecommunications backbone.

46. Other participants in this component of the network services market
    are "network integrators," which are companies that supply their
    retail customers with network services. Network integrators make use
    of a variety of communications platforms (or combination thereof),
    including both satellites and terrestrial wireline and wireless.
    These satellite applications may use existing teleports or build
    dedicated on-site earth stations called Very Small Aperture
    Terminals ("VSATs") and arrange with licensees and satellite owners
    for the remaining service inputs.[^82]

47. The second component of the network services market consists of
    other fixed communications services between points within the United
    States. These services include the provision of both point-to-point
    and point-to-multipoint networks, and many kinds of specialized
    voice and data services for communicating within the United States
    between business enterprise hub locations and their many remote
    locations.[^83] Subscribers to these services, unlike subscribers to
    the backbone services just described, often require the service
    provider to furnish receiving stations, ground integration, network
    integration, and other management services.

48. Corporate communications networks often use such fixed
    satellite-based services to reach widely dispersed locations or
    remote locations that do not have access to wireline facilities.
    Examples would include retail chains communicating with stores
    dispersed throughout the US; gas stations needing point-of-sale
    credit verification at rural crossroads; and communications networks
    established for remote work sites or places preparing for or struck
    by natural disasters.[^84] Some of these fixed communications
    services have sporadic or uneven traffic patterns, such as those
    used for periodic inventory management and other tracking; digital
    signage; operation of automatic teller machines; other banking and
    financial services; credit card verification, and other short
    exchanges of data. Other fixed communications services provided by
    satellite have relatively steady traffic patterns, such as corporate
    communications networks for telephony, data, and Internet
    connectivity, or corporate television and radio services. Services
    in this product market can be IP-based or not, and symmetrical or
    asymmetrical. Most are narrowband, but some, such as corporate
    television, may be broadband. Customers in these markets are a wide
    range of business enterprises in many industries, parts of the
    United States government, and network integrators.

49. The satellite-based participants in this component of the network
    services market group include the FSS satellite operators Intelsat,
    Loral and SES Americom, which offer to enterprise and government
    customers both turn-key network services, and alternatively,
    wholesale satellite capacity that customers can use to meet their
    needs themselves. Other potential participants include all
    foreign-licensed FSS satellite operators listed on the ALSAT
    list.[^85]

50. In addition, several VSAT companies, including Hughes Network
    Systems, LLC ("Hughes"); iDirect, Inc.; Gilat Satellite Networks
    Ltd. (including its U.S. subsidiary, Spacenet, Inc., hereinafter
    "Gilat"); and ViaSat, Inc., are participants in these markets. [^86]
    Additional satellite-based participants include teleport operators
    which may offer connectivity for specialized enterprise or
    government networks. Terrestrial participants include providers of
    transmission via wire named in paragraph 39 above. Some military
    users and large enterprises (for example, the oilfield services
    provider, Schlumberger Limited, and Dow Jones & Company) self-supply
    some of their own fixed communications needs by satellite.

##### Geographic Markets for Wholesale Domestic Services

51. The *Merger Guidelines* describe the geographic market for a service
    as the area within which a hypothetical monopolist would profitably
    impose at least a small but significant and non-transitory price
    increase, or the area within which buyers can practically turn for
    alternative sources of supply.[^87] The wholesale media markets
    described above include news sources, broadcast stations, and cable
    headends located throughout the United States. In addition, many
    major customers of wholesale telecommunications have business
    locations across the United States and require access to other
    points in the country, such as credit card data banks and suppliers.
    Accordingly, the geographic extent of the contribution and
    distribution product market groups described above is national.[^88]
    The geographic extent of the network services market group is
    regional.

#### Domestic Retail Markets

##### Fixed Satellite Broadband Service

52. [Product Market.]{.underline} For the purpose of this report, we
    describe this product market to consist of point-to-point high-speed
    or broadband fixed satellite Internet access service provided
    directly to retail customers within the United States for a
    fee.[^89] Customers in these markets include the tens of millions of
    American residential and small office/home office ("SOHO") customers
    in rural and remote locations where terrestrial-based broadband has
    not been deployed.[^90]

53. [Geographic Markets.]{.underline} We describe the geographic
    dimension of these markets to be local to the extent that most
    consumers of this product are individual households or small
    businesses seeking broadband connectivity by whatever technological
    means available. Although satellite-based broadband providers tend
    to provide these services nationwide, terrestrial broadband
    providers such as cable TV companies and LECs remain the largest
    class of providers of this service in the United States. While many
    larger fixed broadband providers operate in many or all areas of the
    nation and offer similar data rates and terms to consumers
    nationwide, the mix of broadband providers available to any given
    consumer differs by locality.[^91] According to the Commission's
    July 2006 report titled "High Speed Services for Internet Access:
    Status as of December 31, 2005," satellite technologies served at
    least one customer in 88% of U.S. zip codes, making it the most
    widely available technology for broadband in the U.S.[^92]

54. [Market Participants.]{.underline} The participants in these markets
    are several providers of broadband service utilizing FSS satellites:
    WildBlue Communications, Inc.,[^93] Hughes, and Gilat (which offers
    Starband Service).[^94] Additionally, one mobile satellite services
    operator, Inmarsat, Inc. ("Inmarsat"), through its resellers, offers
    fixed broadband service throughout the United States, including
    Alaska and Hawaii.[^95] Another company, atContact Communications,
    LLC, intends to offer broadband services globally using both FSS and
    satellites in Highly Elliptical Orbit after launch of its
    spacecraft.[^96]

##### Satellite Digital Audio Radio Services (SDARS) 

55. [Product Market.]{.underline} For the purpose of this Report, we
    describe this product market to consist of satellite audio
    programming provided to persons within the United States for a fee.
    The most prominent of these services is SDARS.

56. [Geographic Markets.]{.underline} We find the geographic aspects of
    this market to be national. Individual customers face the same
    nationwide-licensed choices throughout the 48 contiguous states.
    Although each user is in one locality, the major participants in the
    market serve the entire country with mostly the same content.

57. [Market Participants.]{.underline} The participants in this market
    are the two SDARS providers, XM and Sirius. XM is also expanding its
    focus through trial arrangements with several airlines.

### International Relevant Markets 

58. This Report examines those international markets that provide
    communications or other satellite-delivered services between a point
    in the United States and a point outside the United States.[^97]
    Although an examination of competition in markets for
    satellite-delivered services entirely removed from the United States
    is beyond the scope of this Report, we will, as directed by
    Congress, examine barriers to U.S. satellite providers in such
    markets.[^98]

59. [Product Markets.]{.underline} We describe three groups of
    international product markets, each consisting of a wholesale
    communications service between one point in the United States and
    one point in a foreign country. There are many such product markets,
    one for each foreign country. For example, there is a product market
    for video contribution between the United States and Spain, and
    another for the same capacity between the United States and Japan.
    These product market groups are listed in Table 2.

    **TABLE 2**

    **INTERNATIONAL PRODUCT MARKETS**

    INVOLVING SATELLITE COMMUNICATIONS SERVICES

+-----------------+----------------------------------------------------+
| Wholesale       | Capacity for Video Contribution                    |
| Services        |                                                    |
|                 | Capacity for Video Distribution                    |
|                 |                                                    |
|                 | Network Services                                   |
+-----------------+----------------------------------------------------+

60. Usually, product markets for international communications services
    are described on a route-by-route basis (*e.g.*, U.S.-to-Germany,
    U.S.-to-Poland).[^99] This approach applies equally to the
    transmission of telecommunications and media content. For example,
    one international "capacity for video contribution" market would
    include FSS transmission of video content from the a news event in
    South Africa to the network hub of a television news organization
    located in the United States, or the transmission of video from a
    sporting event in the United States to the headquarters of a
    broadcaster in Japan. In the network services markets, international
    telecommunications carriers procure backbone capacity to meet the
    same point-to-point and point-to-multipoint needs as domestic
    carriers. Finally, many subscribers need fixed and mobile
    communications network services between the United States and
    foreign countries of the same kinds that domestic subscribers need.
    In some cases, satellite technologies may provide the only
    connectivity available for certain services or on certain routes.

61. Route-by-route analysis may seem to disregard satellite technology's
    ability to cover broad areas. Often, however, the decisive fact in
    describing international product markets is the legal and regulatory
    policies of each foreign government, not only the coverage area of
    its satellite or network. Nations differ significantly in their
    policies for "landing" international communications services,
    whether via terrestrial wireline connections or satellite receiving
    stations.[^100] It is not unusual for a satellite-based service of
    one or more providers to be technically available in many countries,
    but for commercial availability of the service to differ among
    adjacent countries based on legal or regulatory policies.

62. Notwithstanding these potential differences, we will limit our
    discussion of these international markets in this part of this
    Report to the above descriptions. We provide only general analysis
    of competition in these international satellite markets. We believe
    that this analysis, in conjunction with our list of countries
    potentially raising barriers to entry by U.S. satellite providers,
    provides information indicative of the level of competition in the
    provision of international satellite services.[^101]

63. [Geographic Markets.]{.underline} Most of the customers in the U.S.
    for international telecommunications or media services, like those
    of the wholesale services described above, are businesses and
    institutions that require communications connectivity among multiple
    locations around the globe or must link remote locations in the U.S.
    and a specific country or countries. The major participants in these
    markets are the service providers that market within all 50 U.S.
    states, but whose satellites may have regional or global coverage
    capability. The geographic aspects of those service offerings are
    therefore national.

## Market Concentration

64. One measure of competition in a market is the actual number and size
    of firms participating in that market. Market concentration
    fluctuates with financial transactions such as mergers,
    acquisitions, bankruptcies, and restructurings. This Section reviews
    such transactions in the satellite communications sector since 2000.
    We then analyze data about market shares for some relevant markets
    and other market concentration measures, in order to contribute to
    our overall conclusion about competition in satellite communications
    markets.

### Mergers and Other Transactions in Commercial Satellite Markets Since 2000

65. This Section describes recent organizational changes that have
    occurred in the U.S. commercial satellite services industry. These
    changes include company mergers and acquisitions, privatizations and
    public offerings, joint ventures, divestitures and other split-offs,
    bankruptcy reorganizations, and new entry. Mergers and acquisitions
    can eliminate a market participant and, at the same time, create a
    more competitive post-merger firm if the depth and breadth of its
    services are greater than before the merger. Other transactions,
    such as divestitures, split-offs, and new entry can create new
    market participants and add to the competitiveness of markets. The
    descriptions of organizational structure in this Section focus on
    the entities that own and operate satellite platforms, along with
    other facilities, and not on resellers or other service providers
    that might also be participants in a relevant market analysis.

66. The FSS sector is in the above-named wholesale markets, including
    Capacity for Video Contribution, Capacity for Video Distribution,
    and Network Services, as well in the retail market of Fixed Wireless
    Broadband Service. The sector's first three decades were shaped by
    mergers, acquisitions, and other transactions. For example, when the
    Commission removed barriers to providing both international and
    domestic services in 1996, it observed that the number of commercial
    entities providing domestic satellite services had declined from six
    in 1985 to three in 1996.[^102] In 1997 and 1998, respectively,
    Loral Space and Communications, a new company formed in 1996,
    acquired AT&T Skynet and Orion Network Services.[^103] In 1997,
    PanAmSat acquired the Galaxy fleet of satellites from Hughes.[^104]
    During the period of 2000-2006, the sector experienced a series of
    mergers and acquisitions, including: (1) GE Americom's acquisition
    of Columbia Communications Corporation, which combined a
    predominantly domestic FSS provider with a predominantly
    international FSS provider (2000); (2) SES Global's acquisition of
    GE Americom and Columbia Communications Corporation, giving SES
    Global entry into U.S. markets (2001); (3) Intelsat's acquisition of
    Loral's North American satellites, providing Intelsat entry into the
    U.S. video distribution market (2004); (4) the split-off and
    divestiture of Hughes and its subsidiaries by General Motors,
    followed by the merger and acquisition of a controlling interest in
    Hughes by The News Corporation Limited (2004); (5) the private
    equity fund acquisitions of PanAmSat (2004) and Intelsat (2005);
    and (6) the recent acquisitions of New Skies by SES Global (2006),
    and of PanAmSat by Intelsat and the announced purchase of Telesat
    Canada by Loral Skynet (2006).

67. With regard to SDARS, in 2003, the Commission approved the
    restructuring of SDARS provider Sirius by granting authority to
    Sirius Satellite Radio Inc. to transfer control of its SDARS space
    station license to Sirius' creditors, none of which individually
    would have a controlling interest.[^105]

### Measures of Market Concentration 

68. In this Section, we analyze data indicating market structure and
    ownership in wholesale and retail markets that include satellite
    services. We first discuss relevant measures of market concentration
    and then use these measures to examine the extent of market
    concentration in retail and wholesale markets for satellite
    services.

69. [Measures of Market Concentration.]{.underline} There are various
    ways of measuring market concentration and the appropriate measure
    is generally dictated by the economic theory that best fits the
    behavior of the firms in the relevant market. The
    Herfindahl-Hirschman Index ("HHI") is a measure of concentration
    that takes into consideration the distribution of the size of firms
    in the market. HHI can measure to some extent whether one firm in a
    market has market power or whether conditions are conducive to
    collusion.[^106] The HHI is used by courts, the Commission, and is
    included in the *Merger Guidelines* as a preliminary screening test
    to detect market power in relevant markets.[^107]

70. The HHI measures concentration in a market by calculating the market
    share of each market participant, squaring each market share, and
    adding the resulting sums. A market's HHI varies with the number of
    firms and the degree of inequality among firm size. Generally, the
    HHI increases as there are fewer and larger firms in the market. A
    market's HHI can range from nearly zero in the case of an atomistic
    market to 10,000 (100 squared) in the case of a monopoly.

71. Generally, horizontal concentration in differentiated product
    markets (*i.e.*, markets with products that are differentiated in
    terms of location, brand, and quality) may lead to situations where
    a specific market outcome is not due to coordinated interactions
    among firms, but due to the action of a single firm.[^108] When
    analyzing differentiated product markets, the HHI may not be useful
    in analyzing market performance.[^109] Instead, unilateral actions
    may be analyzed using demand characteristics of the merging firms
    and the "diversion ratio" -- a measure of the fraction of sales
    going to firms offering substitute products.[^110] Since
    firm-specific demand characteristics such as own- and cross-demand
    elasticities[^111] and diversion ratios are theoretical concepts and
    are seldom calculated by individual firms, market shares are
    frequently used as a proxy for the diversion ratio.[^112] To
    evaluate concentration in the wholesale satellite markets, we
    primarily rely upon market shares rather than HHIs, which may be
    misleading in markets with few players and those that establish
    price by negotiation.[^113] For the retail satellite markets, we
    calculate both market shares and HHIs.

72. [Concentration in Wholesale Markets]{.underline}. Using the market
    descriptions described in Section III.C above, we differentiate the
    relevant product markets between wholesale and retail markets. We
    then apply the appropriate measures of market concentration to
    determine the extent of concentration in domestic wholesale and
    retail product markets related to satellite services.

73. Given the highly differentiated nature of wholesale services --
    including the unique attributes of satellite transponder capacity in
    terms of frequency, power, bandwidth and geographic coverage, as
    well as the extensive use of long term, individually negotiated
    contracts -- it is likely that the relative bargaining power of the
    buyer and seller will determine the price paid by the buyer in this
    type of market. In the *Intelsat-PanAmSat* *Order,* the Commission
    observed that prices in the markets for wholesale satellite
    communications services are determined somewhat differently than in
    the markets for retail services. First, the services in wholesale
    satellite markets are substantially differentiated from one another
    by frequency band, transponder power, and geographic coverage.
    Second, a buyer's utilization of a particular satellite
    communications service in the wholesale market usually involves a
    long-term, ongoing business relationship with the communications
    satellite carrier, not a "one-shot" impersonal purchase of a
    standardized "commodity" type of service. In fact, the purchase of
    wholesale services usually involves extensive negotiations between
    the communications satellite carrier and the buyer.[^114]

74. We lack the requisite data to determine specific market shares for
    the retail relevant markets described in paragraphs 52-57 above. We
    do consider market share in analyzing the competitive relationship
    between firms in the wholesale satellite services market. Market
    shares may be measured in several different ways using different
    criteria, including, for example, revenues, value of the product, or
    capacity utilization.

75. Capacity utilization by fixed satellite operators is dynamic,
    shifting with customers\' actual usage of contracted capacity,
    conclusion of new contracts, and the launch or decommission of
    spacecraft.  Table 3 provides a snapshot of fixed satellite
    transponder capacity as utilized by market participants in two
    domestic wholesale markets: (1) capacity used for video contribution
    and distribution; and (2) capacity used for network services. We
    note that Table 3 does not include data on capacity for video
    distribution and network services provided by other market
    participants, such as terrestrial providers or mobile satellite
    providers active in the network services markets. As a result, Table
    3 does not constitute a complete analysis of market share. Because
    it does not include data on the capacity provided by other market
    participants, Table 3 most likely overstates each satellite
    operator's share of capacity. We also note that, because Futron's
    2006 data were collected for the second quarter, it does not yet
    combine data for the subsequently merged entities of Intelsat and
    PanAmSat or of SES Americom and New Skies.

    **TABLE 3**

    **SHARES OF UTILIZED TRANSPONDER CAPACITY**

    **BY TYPES OF DOMESTIC WHOLESALE SERVICES**[^115]

  ---------------- -------------------- -------------- ---------------- --------------
  Operators        Video Contribution                  Network          
                   and                                 Services[^117]   
                   Distribution[^116]                                   

                   2001                 2006           2001             2006

  Intelsat         5%                   15%            9%               42%

  PanAmSat         33%                  29%            10%              13%

  Loral Skynet     23%                  3%             25%              3%

  SES Americom     33%                  34%            37%              25%

  New Skies        n/a                  3%             n/a              9%

  Other            7%                   15%            20%              9%
  ---------------- -------------------- -------------- ---------------- --------------

Source: Futron Corporation.

76. Table 3 shows that in 2006 three fixed satellite operators
    (Intelsat, PanAmSat, and SES Americom) provided a majority of
    satellite transponder capacity in the wholesale video contribution
    and distribution services markets and the wholesale network services
    markets. In the *Intelsat-PanAmSat Order,* the Commission determined
    that SES Americom, PanAmSat, and Intelsat have respectively 31%,
    34%, and 15% of transponder capacity sales for domestic network
    services.[^118]

77. Globally, industry consulting firm Euroconsult reports that
    Intelsat/PanAmSat and SES Global/New Skies Satellite account for 50%
    of the revenues from wholesale satellite services in 2005. Moreover,
    according to Euroconsult, the top 10 operators in the wholesale
    market for satellite services accounted for 87% of total wholesale
    market revenues in 2005.[^119]

78. [Concentration in Retail Markets]{.underline}. Unlike the wholesale
    market where satellite operators, resellers, LECs, and VSAT and
    teleport operators, face a relatively small number of buyers,
    sellers in the retail market face thousands and even millions of
    individual consumers, households, and businesses as potential
    buyers. Customers in the retail market do not have an individualized
    relationship with sellers except for critical services such as
    billing. Moreover, in some retail markets, all customers pay the
    same price for the same service, except for specific differentiation
    due to subscribers' choice of service tiers, promotional offers, or
    certain specific customer groupings.[^120]

79. In retail markets, where sellers actively compete in terms of price
    and conditions of service, market concentration is expected to have
    a more pronounced effect on market behavior and price-cost margins.
    Ideally, the HHI measures market concentration in retail markets.
    Despite its relatively short history, we have sufficient data to
    calculate HHIs for the leading SDARS providers, as well as market
    shares based on revenues and subscribers. The following Table
    presents market shares and HHIs for this emerging market.

    **TABLE 4**

    **MARKET CONCENTRATION IN SDARS**

  ---------------- ------------ ------------- ------------- -------------
                   **2002**     **2003**      **2004**      **2005**

  XM Market Share  96.1%        87.7%         78.5%         69.7%
  (Revenue)                                                 

  Sirius Market    3.8%         12.3%         21.5%         30.3%
  Share (Revenue)                                           

  HHI (Revenue)    9,262        7,843         6,627         5,779

  XM (Subscribers) 92.1%        83.9%         73.6%         64.1%

  Sirius           7.9%         16.1%         26.1%         35.9%
  (Subscribers)                                             

  HHI              8,538        7,298         6,138         5,400
  (Subscribers)                                             
  ---------------- ------------ ------------- ------------- -------------

Source: Company Annual Reports.[^121]

80. The above Table shows that the two SDARS providers both have made
    significant progress in gaining new subscribers. The continuous
    decline in the HHI measure over the last four years is due to Sirius
    steadily increasing its share of revenues and subscribers over this
    period.

## Market Entry Conditions

### Introduction 

81. In this Section we discuss significant factors that affect the ease
    with which potential participants may enter into satellite
    communications markets. This discussion includes an assessment of
    the industry's cost structure. We then evaluate the impact of
    spectrum allocations and orbital locations on entry and we explain
    U.S. government policies for market entry by foreign entities. We
    also review the public policies of foreign administrations about
    entry into their markets.

82. Entry is the construction of new facilities and/or the offering of
    service by a participant who was not in the market before. An
    entrant is a new market participant that can add capacity and
    competition to the relevant market in which it participates.[^122]
    Generally, entry is considered significant if a participant can
    enter the market within two years from initial planning to
    significant market impact.[^123]

83. From the beginning of the planning for a new communications
    satellite to its commencement of service to customers requires more
    than two years.[^124] Entry relevant to this Report can occur,
    however, in new satellites that have moved far enough through the
    entry process that they will begin providing service within two
    years; by terrestrial wireless and wire-based entrants; and by
    existing satellites moving their capacity from one product market to
    another. Examples of the latter are a fixed satellite that began
    providing capacity for telecommunications backbone, exited that
    market, and entered the market for network services; and a satellite
    that began providing service to foreign markets, exited that market,
    and began providing service to a U.S. market.

84. Barriers to entry into all markets exist, and can range from
    insignificant to virtually prohibitive. Sources of barriers to entry
    can be regulatory restraints, strategic behavior by incumbent market
    participants, and the scarcity of necessary inputs such as natural
    resources, uncommon human skills, and large amounts of capital. The
    following Section discusses the cost structure of the commercial
    satellite industry and its impact on the industry's structure,
    conduct, and the degree of competition in the industry.

### Industry Cost Structure

85. The cost structure that typifies an industry influences both the
    extent of competitive entry and the nature of industry conduct. The
    cost of production as the output of a firm expands or contracts may
    significantly affect the extent to which competitors enter a given
    industry. Additionally, once a firm has committed to enter an
    industry, certain attributes of the cost of production, especially
    investment in durable assets used to produce output, will predispose
    the firm and its competitors toward certain behaviors that will
    affect the nature of competition observed in the industry.

86. The investment required to enter and operate in virtually any
    satellite communications markets is substantial, fixed, and largely
    sunk. The cost of production for any enterprise, including fixed and
    mobile communications satellite operators, may be classified as
    either variable or fixed*.* Variable costs vary directly, either
    increase or decrease, but not necessarily proportionately, with the
    quantity of output produced. Examples of such variable costs include
    hourly labor that varies with the level of production; materials and
    supplies used in production; electricity consumption; and other
    variable expenses. Fixed costs do not vary with the quantity of
    output produced and represent expenditures on inputs of production,
    including plant and equipment that imply a recurring monthly or
    annual economic rental rate, *i.e*., charges for economic
    depreciation and interest, whether or not anything is produced using
    such fixed cost assets. In the satellite industry, fixed costs would
    include the manufacture of a communications satellite or
    constellation of satellites or the lease of satellite capacity,

87. Often, substantial investment in fixed cost assets is required to
    enter a market before any output is produced or sold to customers.
    Moreover, much if not all the substantial investment in fixed cost
    assets required to enter a new market may be sunk as well as fixed,
    *i.e*., the fixed cost asset has no alternative use or economic
    value beyond the specific investment application required to produce
    output in a specific market. In other words, a sunk cost asset is a
    dedicated, irretrievable investment in capacity for producing a
    specific type of output that cannot be redeployed to produce output
    in a different market. For example, a communications satellite is a
    sunk cost investment in producing satellite communications services
    because it cannot be redeployed to produce terrestrial
    communications services. The requirement for an entrant in a market
    to make large investments in sunk cost assets tends to deter entry
    at the margin and consequently diminishes potential competitive
    rivalry relative to markets where substantial investment in sunk
    cost assets is not required.

88. Table 5 provides estimated proxy measures of annual economic
    variable and fixed costs of several communications satellite
    carriers that show the predominance of fixed costs in the production
    of communications satellite services generally.[^125] We note that
    data used in this table pre-dated the mergers between Intelsat and
    PanAmSat and SES and New Skies.

    **TABLE 5**

    **ESTIMATED VARIABLE AND FIXED COSTS**

    FOR SELECTED SATELLITE CARRIERS

+----------+------------+---------------+------------+---------------+
|          | Proxy      | Replacement   | Proxy      | Ratio of      |
|          | Variable   | Value of      | Fixed      | Fixed to      |
|          | Cost       | Satellites    | Cost[^127] | Total         |
|          |            |               |            | Economic Cost |
|          | (\$        | (\$ millions) | (\$        |               |
|          | millions)  | (2)           | millions)  | \[            |
|          | [^126]     |               | (3)        | (3)/(1)+(3)\] |
|          |            |               |            |               |
|          | \(1\)      |               |            |               |
+----------+------------+---------------+------------+---------------+
| Intelsat | 438.1      | 8,400.0       | 1,554.0    | 0.78          |
+----------+------------+---------------+------------+---------------+
| PanAmSat | 223.1      | 3,300.0       | 610.5      | 0.73          |
+----------+------------+---------------+------------+---------------+
| SES      | 483.8      | 8,472.0       | 1,567.3    | 0.79          |
+----------+------------+---------------+------------+---------------+

Source: Company Annual Reports.[^128]

89. Additions to investment in satellite capacity also tend to be lumpy
    or not easily divisible. In other words, satellite capacity cannot
    be augmented one transponder at a time in response to growth in
    demand for satellite communications services. Rather, given the
    large sunk cost of launching a communications satellite, it is much
    more economical to launch a satellite with transponder capacity
    sufficient to meet some level of forecast future demand even though
    such capacity will substantially exceed current demand levels.

90. In addition to requiring large fixed and sunk expenditures,
    therefore, entry into communications satellite services requires
    those investments in large increments or "lumps." A new satellite
    typically introduces much new capacity into the market and thus
    often creates excess capacity that lasts for a significant time.
    Charts 1-3, from Euroconsult, track the global "reference
    supply"[^129] of transponders and global demand, illustrating the
    persistence of excess capacity through time in the satellite
    communications industry.

91. Regional data on excess transponder supply provides some insight on
    the distribution of excess capacity around the globe. Charts 1-3
    present a time series of the discrete changes in the excess of
    transponder supply over demand by world region from 2000 through
    2005.[^130] While the aggregation of data within regions may create
    some distortions, there is a clear consistency across regions of an
    on-going excess supply, which is consistent with a lumpy capacity
    expansion process and uncertainty and variability of market demand.

    **CHARTS 1-2**

    **EXCESS TRANSPONDER SUPPLY BY REGION**

    ![](media/image1.wmf)

    ![](media/image2.wmf)

    **CHART 3**

    **WORLDWIDE TRANSPONDER SUPPLY AND DEMAND**

    ![](media/image3.wmf)

    Source for Charts 1-3: *Euroconsult 2006 Report*.

92. The lumpy nature of investment and the consequent recurring excess
    capacity in the satellite communications industry predisposes
    satellite communications markets to a certain amount of inherent but
    predictable economic instability to which satellite operators must
    and do react. In other words, market equilibrium in the industry
    will appear to fluctuate as market demand and the extent of excess
    capacity vary over time. This economic instability is long-standing
    and well understood within the satellite industry. Satellite
    communications carriers have to varying degrees successfully managed
    these market dynamics to ameliorate fluctuations in profitability as
    a result of capacity and price adjustments and shifts in market
    demand. To some extent, virtually all competitive markets exhibit
    fluctuations in profit, including losses, and unanticipated shifts
    in demand and prices. These instances of instability do not
    ordinarily cause otherwise efficient firms to exit the market or
    seriously impair the long term viability of such business
    enterprises.

###  Industry Dynamics 

93. The discussion in this Section briefly reviews the factors that may
    contribute to fluctuations in demand that affect most portions of
    the satellite communications market. Satellite companies are
    institutionally aware of such shifts in demand and adapt to them by
    implementing discriminatory or non-linear pricing[^131] policies,
    among other reactive or defensive behaviors.

94. One factor that shifts demand for transponder services is the
    substitution of fiber optic transmission facilities, both
    terrestrial and undersea cables, for many satellite transponder
    services. Demand reduction may be especially sharp when a new fiber
    optic cable is brought into service, given the huge transmission
    capacity of modern fiber optic cables. In some cases, however,
    satellite transponder services complement the transmission services
    provided by fiber optic transmission facilities by providing path
    redundancy or backup capacity. This increase in demand may offset to
    some extent the decline in demand attributable to the substitution
    of fiber optic facilities for satellite transmission services.

95. Another factor that can shift demand for satellite carriers is the
    purchasing policy decisions of major customers of satellite
    transponder services. Such customers include international providers
    of direct-to-home television services, sizable distributors of video
    content and U.S. government agencies. Decisions by these significant
    buyers whether to purchase or renew leases for multiple transponders
    can result in sharp fluctuations in the overall demand for
    transponder services.

96. New applications that employ transponder capacity can increase
    demand for satellite carriers. Growth in consumer demand for
    multichannel video services, satellite radio, and mobile telephony
    increases the demand for transponder capacity provided by satellite
    carriers that offer these retail services and for other satellite
    carriers that lease capacity to other operators for these services.
    General macroeconomic conditions, such as the business cycle, will
    also induce fluctuations in the demand facing satellite carriers.

97. On the supply side, the capacity expansion process can induce
    economic instability if the demand forecasts supporting the capacity
    expansion decision turn out to be excessively optimistic. A
    satellite carrier risks financial losses if its cost structure
    shifts as a result of expansion of capacity and outpaces the growth
    in demand. In other words, financial losses can result from both (1)
    sharp reductions in demand and (2) capacity expansion and shifts in
    the satellite carrier's cost structure that are predicated on
    forecast levels of demand that fail to develop or are delayed.

98. Finally, the entry of new satellite carriers can induce some element
    of instability into the overall market, at least in the short term.
    The entry of a new, facilities-based satellite operator increases
    industry supply, which may affect both equilibrium prices and the
    level of demand facing competitors. The entry of competitors
    offering innovative services may even, in the long term, enlarge the
    size of the relevant market or even create new markets.

99. [Behavioral Implications.]{.underline} The foregoing discussion
    describes the market uncertainties faced by satellite carriers,
    which cause certain observed behaviors to offset these
    instabilities. These behaviors are interpreted here as defensive
    reactions to the persistent tendency toward economic instability in
    various segments of the satellite communications market. This
    chronic instability appears to be rooted in both the nature of the
    cost structure of satellite carriers and the fluctuating, uncertain
    demand for various types of transponder services. Most of the
    following behaviors help stabilize the satellite carrier's business
    environment and increase the likelihood of financial survival over
    the longer term. It appears that these behaviors are well
    established in the industry and seemingly effective in maintaining a
    measure of predictability and profitability.

100. [Non-Linear Pricing.]{.underline} Satellite carriers create
     specific transponder "services" that effectively segment customers
     into self-selecting categories with transponder lease rates that
     reflect willingness to pay. Satellite carriers offer a diverse
     array of pricing criteria that may take into account quality of
     service, type and quantity of capacity leased, geographic coverage,
     and the length of lease period. As a result, price-cost margins
     will vary markedly between and among different transponder services
     notwithstanding the marginal cost similarity for most services.

101. [Risk-Shifting and Revenue Stabilization.]{.underline} Given the
     dominance of fixed and sunk costs in the cost structure, satellite
     carriers offer strong financial incentives for customers to absorb
     some of the satellite carrier's risk of long term capital cost
     recovery. Satellite carriers offer transponder leases that extend
     for the operational life of a satellite, such as 15 years, which
     shifts some of the risk of capital recovery to the customer and
     stabilizes the cash flow of the satellite carrier. By leasing
     entire transponders or substantial fractions of a transponder for
     long periods, the satellite carrier protects against the revenue
     fluctuations resulting from unpredictable shifts in demand.

102. [Mergers.]{.underline} The acquisition of competing satellite
     carriers not only reduces the number of rivals that the acquiring
     satellite carrier must face in various market segments and the
     potential competitive pressure on price-cost margins, but also
     reduces the risk of sudden revenue reduction should a customer not
     renew a transponder lease and lease instead from a competitor.
     Beyond realizing potential economies of scale and administrative
     efficiencies, the post-merger satellite carrier has additional
     satellite capacity for meeting more diverse customer requirements
     over a broader geographic area and additional capacity for
     increasing the level of protection for its transponder services.

103. [Vertical Integration.]{.underline} Another strategy for
     stabilizing revenue for some satellite carriers, especially over
     the longer term, is vertically integrating into the production of a
     critical input of production. This strategy helps reduce the risk
     that the satellite carrier might lose customers should the supply
     of the critical input be interrupted or unavailable in either
     sufficient quantity or quality. Thus, a SDARS operator in retail
     markets may invest in the production of certain programming or
     commit to long-term contracts for the purchase of programming that
     it considers to be essential to the building of a profitable
     subscriber base. In wholesale markets, a satellite carrier may
     vertically integrate into the production of spacecraft to minimize
     the hazards of market contracting with spacecraft manufacturers and
     to insure the timely availability of replacement satellites as a
     satellite fleet ages or encounters unexpected failures or service
     interruptions

104. [Service Proliferation.]{.underline} An additional way that a
     satellite carrier may attempt to stabilize revenue is to broaden
     the scope of services offered to customers. So long as the
     additional services tend to complement rather than substitute for
     existing services, service proliferation can help exploit economies
     of scope that may be embedded in satellite technology viewed as a
     multi-purpose platform. Thus, a satellite carrier serving wholesale
     markets may combine its basic transmission services with network
     design and management services to offer customers a turnkey,
     multi-platform network solution that minimizes the technical
     competence required of the customer. Service proliferation provides
     a mechanism for the satellite carrier to forge long-term, durable,
     and flexible relationships with customers that reduces the risk of
     contract cancellation when the customer's requirements change.

105. [Switching Costs.]{.underline} Although long term transponder
     leases contribute to revenue stability for a satellite carrier
     dealing with uncertain, fluctuating demand, such leases impose
     significant switching costs on customers that may want to terminate
     their transponder service contracts. Customers may also incur costs
     if they must re-point earth stations when changing satellite
     carriers. Taken together, these costs constrain the customer's
     flexibility to choose a different satellite carrier in response to
     a change in price or quality of service.[^132]

### Spectrum Allocation and Orbital Locations

106. In addition to requiring large financial investments, entry into
     satellite communications requires radio spectrum licenses and
     orbital slots. The lack of availability of commercial spectrum has
     the potential to create a significant barrier to entry into markets
     for commercial satellite communications services.[^133] While
     technological advances have steadily increased the ability to fit
     more users into any given band, radio spectrum remains a finite
     resource.

107. The Commission has made policy choices that have reduced the
     potential entry-limiting effects associated with spectrum
     allocation and assignment. First, in spectrum allocation decisions,
     the Commission has increased the amount of spectrum available for
     the provision of satellite communications services over the past 10
     years. The Commission has opened Ku-band and Ka-band spectrum for
     the provision of additional satellite services by non-geostationary
     satellite orbit service providers, sharing that spectrum with
     incumbent geostationary satellite services.[^134]

108. Second, the Commission has progressively implemented a more
     flexible, market-oriented model of spectrum assignment for spectrum
     used to provide commercial satellite services. In the *First Space
     Station Reform Report and Order*, the Commission substantially
     revised the procedures for considering license applications, which
     had been in place since 1983.[^135] The Commission adopted
     different processing procedures for each of the two kinds of orbits
     characterizing satellite systems: geostationary satellite orbit
     ("GSO")-like satellite systems; and non-geostationary satellite
     orbit ("NGSO")-like systems.

109. For NGSO-like satellites, which include NGSO satellite systems and
     GSO satellite systems using omni-directional user terminals (such
     as GSO mobile satellite systems), the Commission uses a modified
     processing round approach.[^136] When an entity files an NGSO-like
     application that is not technically incompatible with any licensed
     system or previously filed NGSO-like application, the Commission
     issues a public notice inviting interested parties to file
     competing applications to be considered together with the first
     application. The Commission then divides the available spectrum
     equally among the qualified applicants.

110. For most GSO-like satellites, which comprise satellite systems
     using directional customer terminals, the Commission uses a
     first-come, first-served approach.[^137] When an entity files a
     GSO-like application that is not technically incompatible with any
     licensed system or previously filed GSO-like application, the
     Commission will grant the application if the applicant is qualified
     without opening a processing round. With this first-come,
     first-served procedure, the Commission has reduced average
     processing time for new space station applications from several
     years to less than four months.[^138]

111. The *First Space Station Reform Report and Order* also adopted
     other measures, including eliminating the satellite
     \"anti-trafficking rule,\" which had prohibited satellite licensees
     from selling their licenses at a profit.[^139] License purchasers
     are usually more willing and able than the sellers to complete
     construction of the satellite system. Making it easier for
     licensees to sell their licenses accelerates provision of service
     to the public. Moreover, eliminating the anti-trafficking rule can
     lead to a secondary market for satellites. By facilitating
     satellite licensees to sell unused spectrum to other parties
     willing to put the spectrum into use, the Commission allows parties
     flexibility to transfer satellite bandwidth to more efficient uses
     in response to changing market conditions and consumer demands,
     thus allowing marketplace forces to determine which companies
     succeed.

112. The net effect of these new, flexible, and market-oriented spectrum
     assignment procedures has been to help reduce entry barriers that
     may arise from government regulation of spectrum.

### United States Market Entry Standard

#### U.S. Regulatory Policies for Market Entry

113. The United States market for satellite services is open to market
     entry by foreign satellite operators. The Commission has approved
     many foreign-licensed satellites for domestic communications,[^140]
     and as discussed above in the Relevant Markets Section, such
     foreign satellite service providers are active market participants
     in the U.S.[^141] In this Section, we review our policies regarding
     the provision of satellite services to the U.S. as a measure of an
     open regulatory regime.

114. [World Trade Organization.]{.underline} Most satellite services are
     covered by WTO commitments, namely by the Agreement on Basic
     Telecommunications ("BTA") that is part of the General Agreement on
     Trade in Services ("GATS").[^142] As part of its commitments under
     the GATS, the United States made market access commitments for all
     satellite services, except for Direct to Home ("DTH"), DBS and
     SDARS.[^143] The Commission's *DISCO II Order*[^144] implemented
     the satellite market-opening commitments made by the United States
     in the WTO BTA.[^145]

115. The *DISCO II* *Order* sets forth a presumption that entry by WTO
     Members to provide WTO-covered services would further competition
     in the United States.[^146] As part of the competition analysis,
     the Commission adopted a presumption that entry by WTO Members to
     provide WTO-covered services would further competition in the
     United States.[^147] Under this approach, companies from WTO Member
     countries seeking FCC authorizations to provide WTO-covered
     services in the U.S. are accorded national treatment (*i.e.*,
     considered the same as a domestic applicant). In evaluating
     requests from U.S. earth station operators to access a
     non-U.S.-licensed space station or in-orbit non-U.S.-licensed
     satellites to provide space segment capacity service to licensed
     earth stations in the United States, we apply a public interest
     framework that considers the effect on competition in the United
     States, spectrum availability, eligibility and operating
     requirements, national security, law enforcement, foreign policy
     and trade concerns.[^148]

116. [ECO-SAT.]{.underline} For services from non-WTO Members, or those
     services for which the United States did not make market access
     commitments (*i.e.,* DTH, DBS and SDARS), [^149] the Commission
     applies the "effective competitive opportunities for satellites"
     ("ECO-SAT") analysis.[^150] In a merger or other transaction where
     such services are at issue, the ECO-SAT analysis requires parties
     to demonstrate that U.S.-licensed satellite systems have effective
     competitive opportunities to provide analogous services in the
     non-U.S.-licensed space station's "home market\'" and, in certain
     cases, the non-U.S.-licensed space station's "route markets."[^151]
     When the ECO-SAT test is not satisfied, the Commission will
     prohibit a satellite system from serving the U.S. market, unless
     there is a compelling public interest reason to do otherwise.[^152]
     Specifically, the Commission considers "whether any additional
     countervailing public interest factors weigh in favor of a result
     different from the one we would reach under the ECO-SAT analysis
     alone."[^153] In applying the ECO-SAT analysis to a small number of
     recent applications relating to services for which the U.S. did not
     make market access commitments, the Commission has determined that
     there were compelling public interest reasons to permit access to a
     non-U.S.-licensed space station despite the presence of a *de jure*
     barrier to entry in the non-U.S.-licensed space station's home
     market.[^154]

#### New International Entrants to U.S. Markets

117. [FSS.]{.underline} Following U.S. adoption of the WTO Basic Telecom
     Agreement in 1997, the Commission, in its *DISCO II* decision,
     established a Permitted Space Station List procedure by which
     non-U.S. licensed satellite operators providing FSS in the C- and
     Ku-bands might acquire authority to provide space segment capacity
     in the United States.[^155] Permitted Space Station List operators
     include Telesat Canada,[^156] Satelites Mexicanos, S.A. de
     C.V.,[^157] New Skies Satellites N.V.,[^158] Spacecom Satellite
     Communications Services (Israel),[^159] Embratel (Brazil),[^160]
     Loral Skynet do Brasil,[^161] Eutelsat,[^162] Hispasat S.A.
     (Spain),[^163] Horizons Satellite LLC (Japan),[^164] Mabuhay
     Philippines Satellite Corp.,[^165] Binariang Satellite Systems SDN
     BHD (Malaysia),[^166] and Intelsat.[^167]

### Public Policies of Foreign Administrations

118. Satellites, more than any other technology platform, are
     technically well suited to provide communications services to a
     wide geographic area. "\[D\]ue to the flexible nature of satellite
     coverage, each satellite can cover various countries and can be
     available to all those countries within its footprint."[^168]
     Moreover, some satellite capacity can be relocated from one
     geographic region to another to respond to service demand.[^169]
     While a particular satellite-delivered service may be technically
     available in any particular nation, the laws and regulations of
     individual nations will determine whether the service may be
     commercially offered.[^170] These policies may be specific to the
     satellite communications services sector or more generally applied
     to the entire communications sector, or even represent conditions
     applied to a broad scope of commercial activities. Such policies
     may, by their nature, affect the ability of individual firms to
     enter the market.[^171]

119. In directing the Commission to prepare this Report, Congress
     requested that the Commission compile "a list of any foreign
     nations in which legal or regulatory practices restrict access to
     the market for satellite services in such nation in a manner that
     undermines competition or favors a particular competitor or set of
     competitors."[^172] As directed to by Congress, we have requested
     comment on "the legal or regulatory practices of foreign nations
     which have the effect of restricting access to that nation's market
     for satellite services." We also asked commenters to tell us "what
     types of legal or regulatory practices hinder U.S. firms from fully
     participating in a given foreign market" and if there are "legal or
     regulatory practices that favor a particular competitor or set of
     competitors."[^173]

#### Executive Branch

120. The Commission is an independent regulatory agency tasked primarily
     with implementation of the Communications Act. As such its
     expertise is related primarily to regulation of domestic
     communications services or international communications that
     originate or terminate in the United States. Moreover, the
     Commission does not represent the United States government in its
     formal relations with other sovereign nations, although it does
     provide assistance in areas of its expertise.

121. Any review of the legal or regulatory practices of a foreign nation
     raises issues intimately related to the trade relationships of the
     United States with other sovereign nations. Foreign relations,
     including communications-related agreements, are the province of
     Executive Branch agencies. It is beyond the role of the Commission
     to determine whether foreign nations' laws and regulations are or
     are not in compliance with any obligations under trade agreements
     with the United States or other international law. The discussion
     in this Section (and Appendix B), therefore, does not represent the
     views of the Executive Branch.

#### Market Access Standard

122. In carrying out Congress' direction to identify those nations with
     legal or regulatory practices that restrict access to their markets
     for satellite services, we first must determine what standard we
     will apply to describe which practices do in fact restrict access
     for satellite services "in a manner that undermines competition or
     favors a particular competitor or set of competitors."[^174]

123. In the Notice, we invited comment on this issue. Three parties
     filed comments that addressed this Section of the report. In
     implementing Congress' direction, we also look to the United
     States' rules for reviewing entry to the U.S. market to evaluate
     whether or not legal or regulatory practices in other nations
     restrict access to foreign markets in a manner that undermines
     competition or favors a particular competitor or set of
     competitors.[^175]

##### Comments

124. SIA filed comments describing the practices that they assert
     non-WTO Member nations should adhere to in order to gain accession
     to the WTO or that current WTO Member nations should adopt if they
     have not yet done so. SIA recommends that the Commission consider
     whether a nation (1) provides for transparent, non-discriminatory
     and timely licensing procedures; (2) provides for national
     treatment (*i.e*., most favored nation status); and (3) permits the
     transport of broadcast video signals and associated audio signals.
     SIA also recommends that the Commission ensure that a nation does
     not require as a prerequisite to entry (4) local presence; (5)
     completion of the International Telecommunications Union ("ITU")
     frequency coordination process; or (6) the deployment of any
     particular technology. In addition, SIA also states that (7) no
     special monopoly status should be afforded to incumbent
     telecommunications operators or satellite systems.[^176]

125. In its comments, Stratos Global Corporation ("Stratos") asserts
     that while seeking regulatory approval to provide Inmarsat's mobile
     satellite services it has encountered barriers "in many, if not a
     majority of the world's countries."[^177] Stratos states that many
     countries continue to protect the monopoly operations of incumbent
     providers and prevent competitive entry either through legal and
     regulatory practices that have that effect or through the lack of
     an applicable regulatory scheme.[^178] Stratos asserts that many
     countries do not permit competitors to sell MSS services or impose
     local ownership requirements and/or exorbitant licensing
     fees.[^179]

126. Finally, EchoStar commented that Canada has imposed legal and
     regulatory barriers to entry into the Canadian satellite television
     market that include foreign ownership restrictions, rules
     controlling the amount of U.S. and Canadian content carried on
     Canadian satellites and restrictions on the distribution of U.S.
     content to Canadian consumers.[^180]

127. We also reviewed USTR's National Trade Estimate Report on Foreign
     Trade Barriers ("NTE Report"), which documents foreign trade and
     investment barriers and U.S. efforts to reduce and eliminate those
     barriers.[^181]

128. The NTE Report covers significant trade barriers whether they are
     consistent or inconsistent with international trading rules.[^182]
     The NTE considers trade barriers to include "government laws,
     regulations, policies, or practices that either protect domestic
     products from foreign competition or artificially stimulate exports
     of particular domestic products."[^183] In the 2006 NTE Report, a
     number of foreign nations are cited for several types of market
     barriers to satellite, including (1) a lack of commitments in trade
     agreements for market access or national treatment for satellite
     services; (2) requirements for foreign operators to partner with
     local entities or otherwise establish a local presence; (3)
     restrictions on DTH or other satellite-delivered content business;
     and (4) restrictions on foreign ownership in satellite operators or
     related businesses.

##### Discussion

129. We find that the Commission's rules for foreign-licensed satellite
     providers to operate in the United States provide a reasonable
     benchmark for evaluating whether foreign nations' requirements for
     entry into their satellite markets have the effect of restricting
     access to that nation's market for satellite services. The
     Commission's rules incorporate both the commitments made by the
     United States as a part of its WTO membership and a process for
     evaluating entry by non-WTO Member nations. Although the United
     States does evaluate non-WTO Member nations (and all foreign
     nations with regards to non-WTO-covered services) for equivalent
     competitive opportunities for entry for U.S. operators, the United
     States' baseline requirements for foreign entry to the United
     States' satellite markets do not restrict or preclude meaningful
     participation by foreign operators nor do our rules favor a
     particular competitor or set of competitors.[^184]

#### Market Access Findings 

130. In this proceeding, we did not receive extensive comment regarding
     foreign market barriers to U.S. licensed satellite operators. We
     did receive illustrative information regarding the types of
     barriers satellite companies assert exist in various foreign
     nations from SIA (a U.S.-based trade association representing
     satellite operators, service providers, manufacturers, launch
     services providers, remote sensing operators and ground equipment
     suppliers). SIA asserts that its Comments provide an "industry-wide
     consensus perspective on certain selected issues raised by the
     Public Notice."[^185] In addition, Stratos described legal and
     regulatory obstacles encountered by mobile satellite service
     providers when seeking to enter foreign markets, and EchoStar
     described specific restrictions on the provisions of DBS services
     to Canada. We find these comments expressed several common
     categories of legal or regulatory policies that restrict access to
     foreign markets. We received no comments in opposition to these
     comments. Moreover, we find that the comments are not in conflict
     with stated approaches to market access issues for satellite
     services by USTR or the Commission. We find, therefore, that these
     general observations regarding foreign nations' market barriers are
     consistent with the standard for review of foreign satellite
     markets we have chosen to use in this Report.

131. Based on our standard and the record in this proceeding, we
     identify six broad types of market barriers established by foreign
     nations that preclude entry by U.S. satellite operators or
     satellite service providers.[^186] Some barriers relate generally
     to the commercial or procedural conduct of countries' regulatory
     regimes, such as: a lack of transparent, non-discriminatory and
     timely licensing procedures; and no national treatment *(i.e*.,
     Most Favored Nation status) provided for U.S. satellite operators.
     Other barriers relate to legal or regulatory practices that are
     specific to satellite services, such as: prohibitions on U.S.
     satellite operators transporting broadcast video signals and
     associated audio signals; requirements that U.S. satellite
     operators establish a local presence or obtain a local partner;
     requirements for completion of the ITU frequency coordination
     process prior to granting market access for U.S. satellite
     operators; and explicit monopolies for a country's domestic
     satellite operator over a U.S. operator. Appendix B to this Report
     includes a list of the nations commenters identified in the record
     as engaging in one or more of the following market barriers to
     entry by U.S. satellite providers.

132. [Lack of Transparent, Non-Discriminatory and Timely Licensing
     Procedures]{.underline} *.* SIA asserts that licensing procedures
     should be streamlined, transparent, and timely, and recommends that
     licensing procedures should be the same for satellite earth
     stations, mobile satellite handsets and all terminal equipment
     accessing domestic or foreign satellite systems.[^187] Stratos
     states that even where application by competing providers is
     permitted, some countries impose exorbitant licensing fees.[^188]

133. [No National Treatment (*i.e.,* Most Favored Nation Status) for
     United States Satellite Operators]{.underline}*.* SIA asserts that
     foreign nations should not make exemptions to or otherwise place
     limitations on Most Favored Nation treatment that would put U.S.
     satellite operators at a disadvantage.[^189] In the 2006 NTE, USTR
     noted those foreign nations that took exemptions for market access
     or national treatment for satellite services under the WTO or
     another trade agreement.[^190]

134. [Prohibitions on U.S. Satellite Operators Transporting Broadcast
     Video Signals and Associated Audio Signals.]{.underline} SIA
     asserts that foreign nations should permit U.S. satellite operators
     to transmit video programming and any associated audio
     signals.[^191] EchoStar notes that Canada has imposed several
     barriers to entry into its satellite television market that include
     restrictions on foreign ownership and content as well as rules
     limiting the use of Canadian satellites.[^192] In the 2006 NTE,
     USTR noted those foreign nations that impose restrictions on
     satellite-delivered content businesses.[^193]

135. [Requirements for Local Presence or a Local Partner.]{.underline}
     SIA notes that a foreign satellite operator is not required to
     establish a local company or presence in the United States in order
     to be added to the Permitted Space Station List. SIA and Stratos
     assert that foreign nations similarly should not impose local
     requirements on U.S. satellite operators.[^194] In the 2006 NTE,
     USTR noted those foreign nations that require U.S. satellite
     operators to partner with local entities or otherwise establish a
     local presence.[^195]

136. [Requirements for Completion of the ITU Frequency Coordination
     Process Prior to Granting Market Access.]{.underline} SIA notes
     that the United States does not require an applicant to complete
     international coordination before granting that applicant's
     satellite system authorization. Rather, the authorization is
     conditioned with a requirement to undertake ITU coordination.[^196]
     If a satellite operator has received a license for its space
     segment from its home country and has coordinated through the ITU,
     a foreign nation should not impose a duplicate licensing
     requirement to provide services in that country.[^197]

137. [Monopolies for Domestic Satellite Operators or Service
     Providers.]{.underline} SIA asserts that foreign nations must not
     afford any special monopoly status to incumbent telecommunications
     operators or satellite systems. Foreign nations must permit U.S.
     satellite operators to sell space segment capacity directly to any
     licensed earth station operator.[^198]

## Effect of Technology Change on Market Structure

138. Technology innovation plays a critical role in the state of
     competition within specialized telecommunications industries such
     as the commercial satellite communications sector. Advances in
     spacecraft technology, associated ground equipment, or in satellite
     services applications can dramatically affect the competitiveness
     of satellite as a delivery platform versus other wired or wireless
     platforms, and the strategic competitiveness of one firm versus
     another within the satellite industry. Additionally, technological
     changes can permit the market entry of new service providers
     utilizing different technology platforms, such as satellite.

### Spectrum-Efficient Technology

139. Recent technology advances -- in particular spot beam technology
     and powerful data compression algorithms -- have enabled more
     efficient use of spectrum, thereby increasing the number of
     satellite providers that may effectively participate in a given
     market. Spot beams are small-footprint satellite beams that are
     focused on relatively limited portions of the Earth, thereby
     allowing multiple frequency reuse through spatial isolation
     (multiple beams).[^199] Initially, spot beams were used to conserve
     on-board power while serving areas outside the main-beam (*e.g*.,
     the waters around Hawaii). More recently, spot beam technology in
     combination with advanced on-board, or ground-based, processing has
     permitted satellites to migrate to all-spot beam architectures.
     This design permits efficient reuse of spectrum and allows for the
     delivery of regional services.

140. Data compression is the process of encoding data to reduce
     redundancy, thus increasing effective data density and reducing
     required transmission bandwidth. Data compression is accomplished
     by providing a coding scheme at each end of a communications link
     that allows characters to be removed at the transmitting end of the
     link, and replaced at the receiving end. Data compression
     techniques continue to yield higher data rate services within a
     given bandwidth.[^200]

141. Some other significant examples of increased technical efficiency
     in satellite communications include: error detection/correction
     coding[^201] and higher-order modulation techniques (*e.g*.,
     8PSK,[^202] 16-QAM[^203]) permitting significant increases in data
     rates within a given spectrum bandwidth (higher bit/s/Hz); and
     demand assignment[^204] techniques that maximize the number of
     satellite users that can access a given resource.

### On-Board Processing

142. On-board processing is a general term that refers to signal
     processing functions implemented on-board the satellite that go
     beyond the amplification and frequency conversion performed in
     conventional, bent-pipe satellite systems, to include any number of
     additional functions like demodulation, multiplexing, switching or
     routing. On-board processing payloads can function as intelligent
     signal routers and switches, directing traffic between spot beams
     in a satellite or to another satellite within the operating
     constellation. This capability enables wide regional or even global
     single-hop connectivity between earth stations. Moreover, they are
     able to adapt quickly to changing data throughput and system
     loading demands. On-board processing systems can achieve the higher
     service speed, throughput capacity and full-mesh connectivity
     necessary for peer-to-peer communications. In addition, low-Earth
     orbit ("LEO") systems require sophisticated position and pointing
     capabilities, satellite-to-satellite handover control, and
     beam-to-beam handover control functions which may also be performed
     on-board.

143. Despite its many advantages, on-board processing is not achieved
     without significant increases in satellite payload cost and
     complexity. Moreover, because on-board processed systems are
     generally tailored to a specific application, they are less able to
     adapt to changes in the operator's business model.

# Market conduct

144. In this Section, we explore a variety of factors that may influence
     firm conduct and decision-making in satellite communications
     markets. Because fixed and sunk costs are a prominent attribute
     throughout the satellite industry, we explore the types of economic
     costs evident in both wholesale and retail markets. We also
     contrast the means by which prices are set in both the wholesale
     and retail markets, and the extent to which firms compete in price
     alone or on both price and product quality.[^205]

145. In general, we find differing conduct in the wholesale and retail
     satellite markets. For wholesale markets, firms tend to invest
     heavily in the network costs of acquiring the satellite-based
     infrastructure required to enter the communications satellite
     market. As a result, carriers competing in wholesale markets
     generally compete on the basis of price. For retail markets, firms
     tend to invest more in marketing, additional programming, and other
     operational costs to increase the consumer's willingness to pay for
     the firm's output compared to what is offered by competitors.

## Wholesale Markets

146. In wholesale satellite communications markets, the conduct of
     market participants is significantly influenced by
     non-discretionary investments required to build a satellite-based
     infrastructure or procure satellite transponder capacity. These
     economic costs, which may be broadly categorized using the
     accounting terms as "network costs," include the investment in
     engineering, design and manufacture of spacecraft, launch vehicle
     services, transponder lease contracts, network control and ground
     support services.[^206] These costs tend to be determined by
     technology and are essential to market entry; in economic terms,
     they are considered "sunk" costs that are not easily be
     transferred.[^207]

147. For wholesale markets, these non-discretionary "network" costs tend
     to exceed other discretionary investments, such as the "operating
     costs" of advertising or marketing expenditures that are more
     prevalent in retail markets.[^208] Unlike satellite carriers
     delivering retail services directly to customers, wholesale
     satellite carriers face a relatively small number of specialized
     buyers whose needs and demands remain relatively consistent.
     Further, the negotiated, long-term contract nature of exchange
     transactions in this market tends not to require investment in a
     substantial base of customer support functions, product
     advertising, and mass marketing.

148. Table 6 sheds some light on the relative ratio of network costs
     versus operating costs, using publicly available company financial
     data for 2001-2005. Not all data are available for all satellite
     operators, but sufficient data do exist to allow computation of
     rough proxies for economic costs using network and operating sunk
     costs. We note that the data utilized in this Table pre-dated the
     subsequent mergers of Intelsat with PanAmSat and SES with New
     Skies.

**TABLE 6**

**RATIO OF OPERATING TO NETWORK SUNK COSTS**

**FOR WHOLESALE SATELLITE OPERATORS**[^209]

+---------+-----------+----------+------------+----------+----------+
| Sa      | Estimated | Weighted | Dep        | E        | Ratio of |
| tellite | Re        | Average  | reciation@ | stimated | O        |
| Carrier | placement | Cost of  | 8.3% Per   | Network  | perating |
|         | Cost of   | Capital  | Annum      | Co       | to       |
|         | S         | \@8.5%   |            | st[^210] | Network  |
|         | atellites |          | (\$        |          | Cos      |
|         |           | Per      | millions)  | (\$      | ts[^211] |
|         | (\$       | Annum    |            | m        |          |
|         | millions) |          |            | illions) |          |
|         |           | (\$      |            |          |          |
|         |           | m        |            |          |          |
|         |           | illions) |            |          |          |
+---------+-----------+----------+------------+----------+----------+
| I       | 8,400.0   | 714.0    | 840.0      | 1,554.0  | 0.098    |
| ntelsat |           |          |            |          |          |
+---------+-----------+----------+------------+----------+----------+
| P       | 3,300.0   | 280.5    | 330.0      | 610.5    | 0.184    |
| anAmSat |           |          |            |          |          |
+---------+-----------+----------+------------+----------+----------+
| SES     | 8,472.0   | 720.1    | 847.2      | 1,567.3  | N/A      |
+---------+-----------+----------+------------+----------+----------+
| New     | N/A       | N/A      | N/A        | N/A      | N/A      |
| Skies   |           |          |            |          |          |
+---------+-----------+----------+------------+----------+----------+

Source: Company Annual Reports.[^212]

149. For wholesale markets, the Table shows that network costs dominate
     the cost structure.

150. [Price Competition.]{.underline} Wholesale satellite markets reveal
     a pricing behavior that primarily reflects bilateral negotiations
     or bargaining between the customers and satellite carriers. Given
     the highly specific circumstances surrounding any particular
     negotiation between a satellite carrier and a wholesale customer,
     it is difficult to model general bargaining behavior in a way that
     is representative of behavior for all satellite carriers and all
     wholesale customers.[^213] It is possible, however, to identify
     certain attributes of the bargaining environment that are
     predictive of the conduct of both satellite carriers and wholesale
     customers.[^214]

151. Negotiations between a satellite carrier and a wholesale customer
     are multidimensional and often include much more than just the
     pricing of transponder lease services. As we have discussed,
     specific technical aspects of coverage, power, and bandwidth likely
     come into play. Negotiations may also involve the terms and
     conditions of the transponder lease contract, including payment
     schedules, cancellation penalties, and legal issues, and other
     aspects of service delivery, including the nature and extent of
     customer support following contract execution. Both parties benefit
     from building and sustaining a workable, ongoing, and long-term
     commercial relationship, given the typical length of contract term
     for most transponder leases and the technical nature of the
     service, which may require adjustments and modifications as
     technology and the commercial requirement evolve.[^215]

152. The negotiated pricing of a transponder generally reflects relative
     bargaining power which is affected the customers' ability to select
     outside options, *i.e*., other offers of service or economic
     benefit outside the current bargaining context that party may
     accept if negotiations in the present bargaining context breakdown.
     The price may also reflect the certain economic attributes of
     transponder transactions including asset specificity, *i.e*., the
     degree that an asset can redeployed to alternative uses and by
     alternative users without substantial loss in productive service.

153. The bargaining power of the customer with credible outside options
     may constrain the satellite carrier from realizing much or any
     economic profit. Customers without credible outside options may
     still retain substantial bargaining power relative to the satellite
     carrier. To the extent that a satellite carrier has substantial
     excess transponder capacity or faces a highly uncertain demand for
     its services, then the satellite carrier may be willing to accept
     an offer that fails to cover its long run incremental cost.

154. The limited transponder lease rate data that exist for wholesale
     markets support our previous discussion of the prominence of
     investments in network versus operating costs.[^216] As indicated
     above, the wholesale market for transponder capacity is
     characterized by bilateral negotiations between suppliers and
     customers. Asset specificity, combined with the bargaining power of
     purchasers (which reflects outside options), should be reflected in
     price differentials.

155. Table 7 presents the average lease rate per 36 MHz transponder, by
     region, for the years 2003 and 2004, in a way that permits
     examination of site specificity. The Table also reflects the
     regional excess supply of transponders for 2005, as those lease
     rates would reflect supply and demand considerations for the near
     future. With the exception of the Middle East and North Africa and
     somewhat with Latin America,[^217] there is a high degree of
     correlation between excess supply and lease rates, indicating that
     the volume of outside options has a strong influence on market
     prices.

     **TABLE 7**

     **TRANSPONDER LEASE RATES AND EXCESS SUPPLY OF TRANSPONDERS**

+-----------------------+-----------------------+-----------------------+
| Region                | 2003/2004 Average     | Excess Supply/Total   |
|                       | Revenue/Transponder   | Supply                |
|                       | in Millions of \$     |                       |
|                       |                       | \(2005\)              |
+-----------------------+-----------------------+-----------------------+
| Western Europe        | 3.02                  | 30.7 %                |
+-----------------------+-----------------------+-----------------------+
| Asia Pacific          | 1.51                  | 46.4 %                |
+-----------------------+-----------------------+-----------------------+
| North America         | 1.49                  | 47.1 %                |
+-----------------------+-----------------------+-----------------------+
| Sub Saharan Africa    | 1.37                  | 53.5 %                |
+-----------------------+-----------------------+-----------------------+
| Middle East and North | 1.41                  | 28.3 %                |
| Africa                |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Latin America         | 1.36                  | 38.8 %                |
+-----------------------+-----------------------+-----------------------+
| Central Europe        | 1.40                  | 52.0 %                |
+-----------------------+-----------------------+-----------------------+
| Russia and Central    | 1.31                  | 52.6 %                |
| Asia                  |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Southern Asia         | 0.87                  | 55.7 %                |
+-----------------------+-----------------------+-----------------------+

Source: *Euroconsult 2006 Report*.

## Retail Markets

156. For retail markets with many customers, short term financial
     arrangements, and high customer mobility, substantial investments
     in advertising and programming are required to create and support a
     brand image and to enhance the customer's perception of value and
     willingness to pay for the product. Extensive customer support
     capability to retain and attract customers is also needed in such
     markets. These expenditures are both discretionary and significant
     in the retail markets.

157. Table 8 shows the proportion of network to operating investments
     for satellite carriers supplying the retail SDARS market, applying
     the same assumptions for estimating economic costs described above
     for wholesale markets. This Table relies on publicly filed company
     data for 2001-2005. The high level of operating to network costs is
     consistent with substantial investments spent on product
     development and customer acquisition.

**TABLE 8**

**RATIO OF OPERATING TO NETWORK SUNK COSTS**

**FOR SDARS OPERATORS**

+--------+-----------+----------+------------+-------------+--------+
| Sat    | Estimated | WACC     | Dep        | Estimated   | Ratio  |
| ellite | Re        | \@8.5%   | reciation@ | Network     | of     |
| C      | placement |          | 8.3% Per   | Cost[^218]  | Ope    |
| arrier | Cost of   | Per      | Annum      |             | rating |
|        | S         | Annum    |            | (\$         | to     |
|        | atellites |          | (\$        | millions)   | N      |
|        |           | (\$      | millions)  |             | etwork |
|        | (\$       | m        |            |             | Costs  |
|        | millions) | illions) |            |             | [^219] |
+--------+-----------+----------+------------+-------------+--------+
| XM     | 1,040.0   | 88.4     | 104.0      | 192.4       | 3.1    |
+--------+-----------+----------+------------+-------------+--------+
| Sirius | 780.0     | 66.3     | 78.0       | 144.3       | 2.9    |
+--------+-----------+----------+------------+-------------+--------+

Source: Company Annual Reports.[^220]

158. [Price Competition]{.underline}. Table 9 indicates an increasing
     trend in average revenue per user or unit ("ARPU") for SDARS
     providers. This trend occurred simultaneously with the dramatic
     growth in subscribers as presented in paragraph 182 below.

     **TABLE 9**

     **ARPU TREND FOR SDARS** OPERATORS

  ----------- ----------- ----------- ----------- ----------- -----------
  ARPU        2001        2002        2003        2004        2005

  XM          n/a         n/a         8.97        8.68        9.51

  Sirius      n/a         n/a         9.48        10.16       10.34
  ----------- ----------- ----------- ----------- ----------- -----------

Source: Company Annual Reports.[^221]

# MARKET PERFORMANCE

159. In the foregoing Sections, we have studied the structure of, and
     conduct in, the relevant markets for satellite communications
     services. In this Section, we apply those studies using publicly
     available industry data to evaluate how well these markets are
     performing for consumers. We discuss various tests that are
     commonly applied to evaluate market performance including the
     degree of competition and the presence of market power. The tests
     that we are able to apply, based on the available data, provide us
     with enough information to conclude generally that the markets
     analyzed are performing well, and that both wholesale and retail
     markets show evidence of price and quality rivalry.

## Analytical Framework

160. [Introduction.]{.underline} Good performance in a market is best
     described as an optimal mixture of efficiency in the use of
     resources, responsiveness to consumer demands, and innovation to
     produce improved services at lower prices.[^222] One way to detect
     the presence or absence of these forms of 'good performance' in a
     market is to measure the presence of competition or, at the
     opposite extreme, market power. In a perfectly competitive market,
     no firm has the ability to charge prices above cost on a sustained
     basis and to earn ongoing 'economic' profits (revenues in excess of
     what is required to compensate all inputs of production for their
     opportunity costs). Such a market is likely to perform well for
     consumers. If, however, a firm can set its prices above its costs
     and earn economic profits for a sustained period of time, then the
     firm possesses market power.[^223] Such a market is likely to
     perform poorly for consumers. Between these two extremes lie many
     possible levels of competition. For example, market power can exist
     in a relevant market and that market's performance may be
     sub-optimal relative to a theoretical benchmark of perfection, but
     'effective competition' can be developing.[^224]

161. [Description of Economic Tests.]{.underline} In the following
     paragraphs, we discuss commonly used tests to measure both the
     degree of competition and the presence of market power. Some of
     these tests measure static conditions, such as the relationship
     between current prices and marginal costs. Other tests measure
     dynamic conditions, such as changes in market share, improvement in
     quality, and other indicators of innovation. Ultimately, we do not
     apply all of the tests to all the relevant markets, due in part to
     the unavailability of requisite data or the inappropriateness of
     some tests for certain types of markets.

162. [Market Concentration.]{.underline} As described in Section
     III.D.2, a market's concentration can be measured by calculating
     market shares or by calculating the HHI.[^225] As discussed in that
     Section, however, we do not find HHIs to be a meaningful indicator
     of competition in wholesale markets, but do apply it to retail
     markets. We assess concentration in wholesale markets by reviewing
     the percent of domestic transponder capacity in Table 10. We also
     calculate market shares and HHIs for SDARS in Table 13.

163. [Profit-to-Sales Ratio.]{.underline} Another test of competition or
     market power in a relevant market is the ratio of profit over
     sales, either in one firm in the market or in all firms in the
     market. This test assumes that higher profits might indicate a
     level of market power in the relevant market. Some critics of this
     approach counter, however, that high profits may also result from
     remarkable innovation, superior service, governmental decisions, or
     historical accident. We use profit to sales ratios to measure
     competition in the wholesale market in Table 11.

164. [The Lerner Index.]{.underline} Yet another test calculates the
     percentage difference between price and the marginal cost of
     production of a product or service at the profit‑maximizing level
     of production.[^226] The Lerner Index assumes that the prevalence
     over time of prices in excess of marginal costs often indicates the
     existence of market power.[^227] If the Lerner Index of a market is
     declining, we may infer that the market is moving towards a
     competitive condition. In this Report, we use Lerner Indices to
     measure competition in the markets for wholesale services in Table
     12.

165. The Lerner Index establishes a direct relationship between market
     power and the own‑price elasticity of demand, or the degree to
     which the demand for a product itself changes as its price changes.
     If the elasticity of demand for a firm\'s product is infinite, as
     it is in a perfectly competitive market, then the deviation of
     price from marginal cost is zero. As illustrated by the Lerner
     Index, the larger in absolute value the own‑price elasticity of
     demand is, the smaller the divergence is between monopoly and
     competitive price (where competitive price is just equal to
     marginal cost in the absence of economies of scale).[^228] As the
     number of substitutes for a service increases, the elasticity of
     demand for its services will increase. Thus, even if competition in
     a market is between a few firms selling somewhat differentiated
     products, such rivalry may significantly increase the elasticity of
     demand for each of the rivals\' services and eliminate significant
     deviations of price from marginal cost.

166. [Consumer-Oriented Metrics.]{.underline} Competition and market
     power can also be detected indirectly in retail markets by
     calculating various metrics relating to consumer behavior, such as
     churn and ARPU. Churn is defined as the percentage of customers of
     a firm, or of all firms in a market, that change their service
     supplier in a given period of time. A low rate of churn in a market
     may indicate trapped customers and the presence of market power in
     one or more market participants. At the opposite extreme, a high
     rate of churn may indicate a competitive market in which consumers
     freely shift from one supplier to another in response to lower
     prices, higher quantities, or other attractive attributes of
     service offerings.[^229]

167. ARPU is another metric widely used in retail communications
     businesses. Falling ARPU can indicate decreases in price or
     increases in the quantity of service offered at a given price,
     either of which may indicate increasing competition or, at least,
     improved market performance for consumers. In this Report, we
     discuss ARPU, churn and other consumer-oriented metrics to measure
     competition in those retail markets where sufficient data exist.

## Data and Application of Analytical Framework

### Domestic Wholesale Markets 

168. Publicly available data concerning the satellite industry necessary
     to conduct the analysis by the various metrics described in
     paragraphs 161-167 above, exist only in part. For wholesale
     satellite services markets, the available public data are quite
     limited, in part because some market participants report their
     financial data as part of a larger corporate parent's filings and
     do not provide sufficiently disaggregated data. Other wholesale
     market participants are not publicly traded, and no data are
     publicly reported. As noted in the description of the markets for
     the various wholesale services, these markets typically involve
     relatively few large purchasers of capacity. Because they can
     effectively bargain with satellite operators (unlike the large
     number of individual consumers in retail markets), measures of
     market concentration such as HHIs lose the meaning they might lend
     to retail markets. Additionally, the data available do not reflect
     the recent mergers of Intelsat with PanAmSat and New Skies with
     SES.

169. Many satellite operators are not, and have not been in recent
     years, publicly traded companies. Others do not disaggregate their
     financial data from that of their corporate parent company. This
     makes computation of comparable performance indices impossible.
     Several firms that operate global systems, essentially operators of
     fixed satellites, provide detailed financial data, but only on a
     consolidated, global basis, and not separately for the U.S.
     domestic market. As the domestic market, however, generally
     accounts for some 70% of global wholesale satellite revenues,[^230]
     we have computed the various financial measures, understanding that
     these measures based on globally consolidated data can only serve
     as proxies for domestic data. In addition, a number of operators
     entered bankruptcy during the study period (with some exiting),
     particularly those in the mobile satellite services market,
     creating a high degree of fluctuation for some metrics.

170. For this Report therefore, we utilize data developed by the Futron
     Corporation for the capacity-related wholesale markets examined in
     this study. These data portray the use of transponders in the
     domestic market by the major operators prior to recent
     transactions, as well as some globally consolidated financial data
     that can serve as proxy indicators of competition in the domestic
     market. For the network services market, we provide industry
     revenue information to illustrate the dynamics of the VSAT and
     teleport sectors.

171. [Wholesale Market Shares.]{.underline} Given the cost
     characteristics and the dynamics of market demand, all wholesale
     market segments appear to be performing well. Our review of
     available data on shares of satellite capacity shows that four
     firms held 80 percent of the domestic transponders activated
     (Intelsat, SES Americom, PanAmSat and New Skies), with the
     remainder provided by Loral Skynet and other foreign-licensed
     operators. Subsequent to the collection of these data, Intelsat and
     PanAmSat merged, and SES and New Skies merged. We find relatively
     high profitability ratios for the major wholesale market
     participants but limited and declining market power based on Lerner
     Index proxy measurements. This may be due to the wholesale
     customer's strong bargaining power in establishing price and
     ongoing price rivalry among the remaining firms in the wholesale
     market, as well as terrestrial competition in certain wholesale
     markets. We also note that participants in the Network Services
     markets continue to post significant revenues, even as they are
     experiencing increased competition from terrestrial providers where
     wireline solutions are geographically available.

172. As noted in paragraph 71 above, the use of an HHI in markets in
     which there are few, large purchasers is of limited value due to
     the countervailing power between supplier and purchaser. Table 10
     displays the major participants' shares of transponders activated
     in domestic markets.

     **TABLE 10**

     **PERCENT OF DOMESTIC TRANSPONDERS**

     **ACTIVATED BY FIXED SATELLITE OPERATORS**[^231]

+--------------------+------+------+-------+------+------+-----------+
|                    | TV   |      | MVPD  |      | Net  |           |
|                    | R    |      |       |      | work |           |
|                    | elay |      |       |      | Serv |           |
|                    | (V   |      |       |      | ices |           |
|                    | ideo |      |       |      |      |           |
|                    | Cont |      |       |      | (VS  |           |
|                    | ribu |      |       |      | ATs) |           |
|                    | tion |      |       |      |      |           |
|                    | and  |      |       |      |      |           |
|                    | D    |      |       |      |      |           |
|                    | istr |      |       |      |      |           |
|                    | ibut |      |       |      |      |           |
|                    | ion) |      |       |      |      |           |
+--------------------+------+------+-------+------+------+-----------+
|                    | 2001 | 2006 | 2001  | 2006 | 2001 | 2006      |
+--------------------+------+------+-------+------+------+-----------+
| Intelsat           | 5%   | 15%  | 0%    | 0%   | 9%   | 42%       |
+--------------------+------+------+-------+------+------+-----------+
| PanAmSat           | 33%  | 29%  | 0%    | 0%   | 10%  | 13%       |
+--------------------+------+------+-------+------+------+-----------+
| Loral              | 23%  | 3%   | 0%    | 0%   | 25%  | 3%        |
+--------------------+------+------+-------+------+------+-----------+
| SES Americom (GE   | 33%  | 34%  | 0%    | 14%  | 37%  | 25%       |
| Americom)          |      |      |       |      |      |           |
+--------------------+------+------+-------+------+------+-----------+
| New Skies          | N/A  | 3%   | N/A   | 0%   | N/A  | 9%        |
+--------------------+------+------+-------+------+------+-----------+
| Other              | 7%   | 15%  | 0%    | 0%   | 20%  | 9%        |
+--------------------+------+------+-------+------+------+-----------+
| DirecTV            |      |      | 67%   | 5    |      |           |
| (self-supplied)    |      |      |       | 2.5% |      |           |
+--------------------+------+------+-------+------+------+-----------+
| EchoStar           |      |      | 33%   | 3    |      |           |
| (self-supplied)    |      |      |       | 3.5% |      |           |
+--------------------+------+------+-------+------+------+-----------+
| Note: Percentages  |      |      |       |      |      |           |
| reflect the        |      |      |       |      |      |           |
| operators\'        |      |      |       |      |      |           |
| proportion of      |      |      |       |      |      |           |
| utilized capacity  |      |      |       |      |      |           |
| for each           |      |      |       |      |      |           |
| application.       |      |      |       |      |      |           |
+--------------------+------+------+-------+------+------+-----------+

Source: Futron Corporation

173. [Profitability Ratios and Lerner Indices for Wholesale
     Markets.]{.underline} Using information derived from the operators'
     globally consolidated financial statements, we can examine time
     series financial statistics for the four major operators that did
     not enter bankruptcy proceedings during the study period. Tables 11
     and 12 below provide profitability ratios and Lerner Indices for
     these major wholesale service providers.[^232]

     **TABLE 11**

     **PROFITABILITY RATIOS**

     **FOR MAJOR WHOLESALE FIXED SATELITE OPERATORS**[^233]

+----------+-----+-----+-----+-----+-----+------+--------+-------+
| Prof     |     |     |     |     |     |      |        |       |
| it/Sales |     |     |     |     |     |      |        |       |
+----------+-----+-----+-----+-----+-----+------+--------+-------+
|          | 2   | 2   | 2   | 2   | 2   | Ave  | St     | St.   |
|          | 001 | 002 | 003 | 004 | 005 | rage | andard | Dev./ |
|          |     |     |     |     |     |      | Dev    |       |
|          |     |     |     |     |     |      | iation | Av    |
|          |     |     |     |     |     |      |        | erage |
+----------+-----+-----+-----+-----+-----+------+--------+-------+
| PanAmS   | 0.0 | 0.1 | 0.1 | -   | 0.0 | 0.   | 0.1005 | 0     |
| at[^234] | 352 | 047 | 198 | 0.0 | 845 | 1131 |        | .8885 |
|          |     |     |     | 955 |     |      |        |       |
+----------+-----+-----+-----+-----+-----+------+--------+-------+
| S        | 0.5 | 0.3 | 0.3 | 0.3 | 0.3 | 0.   | 0.0746 | 0     |
| ES[^235] | 360 | 921 | 078 | 646 | 782 | 3957 |        | .1885 |
+----------+-----+-----+-----+-----+-----+------+--------+-------+
| New      | 0.1 | -   | 0.0 | -   | N/A | 0.   | 0.0669 | 1     |
| Ski      | 584 | 0.0 | 549 | 0.0 |     | 0414 |        | .6159 |
| es[^236] |     | 234 |     | 243 |     |      |        |       |
+----------+-----+-----+-----+-----+-----+------+--------+-------+
| Intels   | 0.4 | 0.2 | 0.1 | -   | -   | 0.1  | 0.1959 | 1     |
| at[^237] | 603 | 764 | 914 | 0.0 | 0.2 | 2266 |        | .5971 |
|          |     |     |     | 371 | 777 |      |        |       |
+----------+-----+-----+-----+-----+-----+------+--------+-------+

Source: Company Annual Reports.[^238]

**TABLE 12**

**PROXY LERNER INDICES**

**FOR MAJOR WHOLESALE FIXED SATELITE OPERATORS**[^239]

+-------------+--------+--------+--------+--------+--------+--------+
| Lerner      |        |        |        |        |        |        |
| Index       |        |        |        |        |        |        |
+-------------+--------+--------+--------+--------+--------+--------+
|             | 2001   | 2002   | 2003   | 2004   | 2005   | A      |
|             |        |        |        |        |        | verage |
+-------------+--------+--------+--------+--------+--------+--------+
| PanAmSat    | 0.1629 | 0.2801 | 0.2926 | 0.1366 | 0.4203 | 0.2585 |
+-------------+--------+--------+--------+--------+--------+--------+
| SES         | 0.6976 | 0.7795 | 0.7236 | 0.7658 | 0.5719 | 0      |
|             |        |        |        |        |        | .70768 |
+-------------+--------+--------+--------+--------+--------+--------+
| Intelsat    | 0.4610 | 0.3218 | 0.2766 | 0.1403 | 0.0369 | 0      |
|             |        |        |        |        |        | .24732 |
+-------------+--------+--------+--------+--------+--------+--------+
| > New Skies | N/A    | N/A    | N/A    | N/A    | N/A    |        |
+-------------+--------+--------+--------+--------+--------+--------+

Source: Company Annual Reports.[^240]

174. As can be seen, earnings as measured by profitability ratios and
     Lerner indices in the wholesale markets are relatively high as
     compared to retail markets, but also highly variable. The level of
     earnings is consistent with customers' lack of significant 'outside
     options.' Further, the general trend in these measures for the U.S.
     market is downward. Both the variability and downward trend in
     earnings are consistent with the earlier discussion of the
     bilateral negotiation nature of competition in the wholesale
     market. The downward trend in these metrics suggests an increase in
     rivalry for most wholesale services.

175. The degree of terrestrial competition faced by satellite providers
     varies significantly among wholesale markets. For Video
     Contribution and Distribution services, terrestrial alternatives
     have a limited competitive impact, because the economics of
     multi-point content distribution favor satellite technology, as
     does the inherently mobile nature of some Video Contribution
     activities. This may account for the relatively high values in the
     Tables above.

176. We note that the Lerner Index on its own may not be a reliable test
     of competition in markets with substantial capital or fixed costs
     and economies of scale such as satellite communications services
     markets.[^241] Prices above marginal costs in such a market do not
     conclusively indicate market power because such prices may simply
     be necessary for a firm to cover its substantial capital or fixed
     costs.

#### Network Services 

177. Little company-specific data are available for market participants
     in these wholesale markets, which includes the provision of
     satellite capacity for telecommunications backbone services, as
     well as satellite-based communications services using VSAT and
     teleport services. The allocation of satellite capacity for these
     services is indicated above in Table 10, revealing disparate
     emphasis among the major operators on this sector. The World
     Teleport Association estimates that the global teleport industry
     generated \$12.8 billion at year-end 2004. Of this, the U.S. market
     generated \$3.1 billion, representing a quarter of the world
     market.[^242] The SIA/Futron Study estimates the U.S. VSAT industry
     generated \$1.4 billion in revenues in 2005, double the sector's
     2000 revenues.[^243]

178. It is, however, clear that terrestrial competition is making
     inroads into what has been historically a market dominated by
     satellite. Increasingly, VSAT satellite operators are providing
     'hybrid' networks to corporate customers that combine satellite and
     terrestrial components. This is particularly true for the corporate
     VSAT network sector, where both major market participants, Hughes
     and Gilat, offer such service.[^244] Gilat includes a specific
     hybrid service, Connexstar DSL, in its service portfolio.[^245]

### Domestic Retail Markets 

179. For the SDARS market, we compute HHIs, both on the basis of
     revenues and subscribers, as well as the various financial
     measures. Because the fixed satellite broadband businesses are
     still developing, we lack adequate data to perform the metrics
     applied to the SDARS markets. For the nascent fixed satellite
     broadband market, we provide various consumer-oriented indices to
     illustrate their respective market dynamics.

#### SDARS 

180. Although the SDARS market appears to be in the early stages of
     development, sufficient data exists to analyze the performance of
     the market. XM[^246] had its first full commercial year in 2002,
     followed by Sirius[^247] in 2003. As expected in a relatively new
     market, neither provider is currently profitable,[^248] but growth
     rates for both subscribers and revenues are high and revenues per
     user have begun to rise.

181. [HHI.]{.underline} For SDARS service providers, the HHI trend shows
     a decrease, reflecting intensifying rivalry among the providers in
     this market. Table 13 below indicates that the HHI as of 2005
     reflected a 70/30 market share favoring XM, but it should be noted
     that in 2006, Sirius has exceeded XM in terms of new subscriber
     acquisition.

     **TABLE 13**

     **MARKET SHARES AND HHIs FOR SDARS**

  ---------------- ------------ ----------- ----------- ---------- ----------
                   2001         2002        2003        2004       2005

  Market Shares                                                    
  (revenue)                                                        

  XM               100.0000%    96.1641%    87.7003%    78.5240%   69.7387%

  Sirius           0.0000%      3.8359%     12.2997%    21.4760%   30.2613%

  HHI              10,000.00    9,262.25    7,842.63    6,627.24   5,779.23

  XM                            92.0587%    83.8979%    73.8527%   64.1434%

  Sirius                        7.9413%     16.1021%    26.1473%   35.8566%

  HHI                           8537.8684   7,298.14    6,137.91   5,400.07
  ---------------- ------------ ----------- ----------- ---------- ----------

Source: Company Annual Reports.[^249]

182. [Consumer-Oriented Measures.]{.underline} Revenue statistics for
     SDARS operators show a very high growth rate. Revenue for SDARS in
     2002 was approximately \$21 million, but the industry generated
     revenues of over \$800 million in 2005. During this time period,
     ARPU has increased slowly. For example, Sirius' monthly charge rose
     from \$9.48 in 2003 to \$10.34 in 2005 while industry subscribers
     rose from 1.3 million in 2003 to 9.2 million in 2005.

#### Fixed Satellite Broadband Services 

183. Two-way satellite-based fixed broadband service was first offered
     only in 2005, and satellite-based broadband of all types represents
     less that 1 percent of the U.S. broadband subscriber base. The
     sector does show growing subscriber up-take and increasing
     competition among three emerging providers.

184. WildBlue began to offer service in June 2005 on a Canadian-licensed
     Anik Ka-band satellite. The company's own satellite, WildBlue-1,
     was successfully launched in December 2006.[^250] In addition,
     Hughes will provide limited HughesNet Ku-band service until the
     launch of the Ka-band satellite Spaceway 3, scheduled for 2007.
     These additional satellites will greatly expand satellite broadband
     capacity dedicated to the residential/SOHO market because all of
     WildBlue-1 and some portion of Spaceway will be dedicated to that
     market.

185. Table 14 provides a comparison of the current satellite-based
     market participants' offerings, indicating the similarity of each
     company's service offerings and prices charged, particularly for
     services targeted at residential/home office customers.

     **TABLE 14**

     **SERVICE OFFERINGS AND PRICES CHARGED**

     **BY SATELLITE-BASED BROADBAND PROVIDE**RS

  ---------------- -------------- -------------- -------------- -----------------
  WildBlue[^251]                                                

                   Downstream     0.5 Mbps       1.0 Mbps       1.5 Mbps
                   speed                                        

                   Upstream speed 128 Kbps       200 Kbps       256 Kbps

                   Upfront cost   \$ 299         \$ 299         \$ 299

                   Monthly price  \$ 49.95       \$ 69.95       \$ 79.95

  Hughes[^252]                                                  

                   Downstream     0.5-0.7 Mbps   0.8 -1.0 Mbps  1.5 Mbps
                   speed                                        

                   Upstream speed N/A            N/A            N/A

                   Upfront cost   \$ 299.98      \$ 299.98      \$ 699.98

                   Monthly price  \$ 59.00       \$ 69.00       \$ 199.00

  Starband[^253]                                                

                   Downstream     Up to 10x      0.75 Mbps      Up to 20X faster
                   speed          faster than                   than dialup
                                  dialup                        

                   Upstream speed 100 Kbps       128 Kbps       256 Kbps

                   Upfront cost   \$499.99       \$ 599.99      \$899.99

                   Monthly price  \$69.99        \$109 .99      \$149.99
  ---------------- -------------- -------------- -------------- -----------------

186. [Subscriber Levels.]{.underline} At the end of 2005, Hughes
     reported 275,000 total subscribers for North America, [^254] which
     reflects its early entry into the market. Space News reports,
     however, that for the last six months of 2005 (the time in which
     WildBlue began commercial operation) Hughes and WildBlue each added
     approximately 25,000 customers.[^255] By the end of the third
     quarter of 2006, Hughes reported that it had 313,000
     subscribers,[^256] up from 300,000 subscribers at the end of the
     second quarter (of which 250,000 were residential and 50,000 were
     business[^257]) and WildBlue reported 85,000 customers.[^258]
     Additionally Space News reports that Gilat Starband had 30,000
     broadband subscribers in August 2006.[^259] This indicates that
     satellite competition for broadband services has developed.

187. Due to the fledgling state of the satellite-based broadband market
     during the specified study period, no further detailed analysis is
     possible.

# COMPETITION ASSESSMENT AND CONCLUSIONS

188. In this Report, we find that markets for commercial communications
     satellite services are subject to effective competition and that
     consumers realize significant net benefits in terms of service
     choice, innovation, and improvements in service quality. Market
     performance measures indicate good market performance and support
     an expectation that such performance will be sustained in the
     coming year.

189. For wholesale markets, we observe that the lumpy nature of
     satellite infrastructure investment leads to recurring excesses of
     capacity, creating a certain degree of inherent but predictable,
     economic instability. Costs for wholesale markets are predominantly
     fixed and centered around network-related costs, and there are
     relatively few buyers and sellers in the market. Pricing behavior
     in wholesale markets reflects in substantial part the relative
     bargaining power of the satellite carrier and the wholesale
     customer. In two wholesale markets, Video Contribution and Video
     Distribution, trends in major market performance indicators show
     that any ability by satellite providers to influence the markets is
     gradually eroding, despite the recent mergers of Intelsat and
     PanAmSat, and of SES and New Skies. We also note that the VSAT and
     teleport operators competing in the wholesale market for Network
     Services continue to post significant revenues, even as they face
     increasing competition from terrestrial alternatives.

190. In general, we observe that retail market participants invest
     relatively more in advertising and other quality-related
     expenditures directed toward product improvements than in network
     costs. Retail markets generally feature a relatively large number
     of buyers. Competition in the retail markets for SDARS is still
     emerging. Similarly, the fixed Wireless Broadband Service markets
     are in early stages, characterized by high subscriber growth rates
     and product innovation.

191. We observe significant improvements in market entry conditions in
     recent years. As a result of the *DISCO II Order* to implement the
     satellite market-opening commitments made by the United States in
     the WTO, the Commission has approved many foreign-licensed
     satellites to provide services within the United States. We also
     identify six broad legal and regulatory barriers established by
     foreign nations that affect foreign market entry by U.S. operators,
     and list those countries identified as exhibiting these barriers.

# PROCEDURAL MATTERS

192. This First Report is issued pursuant to authority contained in
     section 703, 47 U.S.C. § 703.

# ORDERING CLAUSES 

193. It is **ORDERED** that the Secretary shall send copies of this
     Report to the appropriate committees and subcommittees of the
     United States House of Representatives and the United States
     Senate.

194. It is **FURTHER ORDERED** that the proceeding in the IB Docket No.
     06‑67 IS **TERMINATED**.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX A**

**List of Parties Filing Comments and Other Papers**

[Comments]{.underline}

DIRECTV, Inc.

EchoStar Satellite, L.L.C.

Inmarsat plc

Mobile Satellite Ventures Subsidiary LLC

Stratos Global Corporation

The Satellite Industry Association

[Reply Comments]{.underline}

EchoStar Satellite, L.L.C.

Inmarsat plc

Iridium Satellite, LLC

**APPENDIX B**

**List of Foreign Nations Raising Barriers to Market Entry by United
States Satellite Providers**

This Appendix is a compilation of foreign nations identified in the
record in this proceeding as having legal or regulatory practices that
constitute market barriers for U.S. satellite companies.

[Countries Identified as Lacking Transparent, Non-Discriminatory and
Timely Licensing Procedures for U.S. Satellite Operators]{.underline}.

-   Brazil

-   China

-   Egypt

-   India

-   Indonesia

-   Russia

[Countries Identified as Not Providing National Treatment (*i.e*., Most
Favored Nation status) for U.S. Satellite Operators.]{.underline}

-   Brazil

-   China

-   India

-   Indonesia

-   Israel

-   Kazakhstan

-   Korea

-   Malaysia

-   Philippines

-   Russia

-   Saudi Arabia

-   Vietnam

-   Venezuela

[Countries Identified as Not Permitting U.S. Satellite Operators to
Transport Broadcast Video Signals and Associated Audio
Signals.]{.underline}

-   Canada

-   India

-   Kazakhstan

-   Russia

[Countries Identified as Requiring a Local Presence or Local Partner for
U.S. Satellite Operators]{.underline}.

-   Bangladesh

-   Brazil

-   Indonesia

-   Israel

-   Kazakhstan

-   Mexico

-   Philippines

-   Russia

-   Saudi Arabia

-   Venezuela

[Countries Identified as Requiring Completion of the ITU Frequency
Coordination Process Prior to Market Access for U.S. Satellite
Operators.]{.underline}

-   Brazil

-   Russia

[Countries Identified as Having a Monopoly for the Domestic Satellite
Operator.]{.underline}

-   Egypt (duopoly)

-   Indonesia

-   Kazakhstan

-   Russia

-   South Africa

-   Thailand

-   Vietnam

#  {#section .unnumbered}

[^1]: 47 U.S.C. §§ 701 *et seq*.

[^2]: 47 U.S.C. § 703(b)(1)-(3).

[^3]: 47 U.S.C. § 703(b)(2).

[^4]: Although "effective competition" is defined in section 623 of the
    Communications Act of 1934, as amended (the "Act"), 47 U.S.C. §
    543(l)(1), we find that the definition in section 623 is
    inapplicable to satellite communications services.

[^5]: *IB Invites Comment for Annual Report to Congress on Status of
    Competition in the Satellite Services Market*, Public Notice, 21 FCC
    Rcd. 2967 (2006) (the "*Notice*"). Although the *Notice* asked
    commenters to provide certain kinds of data and other information,
    we did not require commenters to provide such information, nor did
    we audit the data provided.

[^6]: Appendix A lists the commenters in this proceeding.

[^7]: The commercial satellite sector includes many diverse industries,
    including the manufacture of spacecraft and satellite ground
    equipment, and the manufacture of launch vehicles and provision of
    launch services. The sector also includes numerous service
    applications that utilize satellite technology platforms, including
    both communications services and non-communications services, such
    as earth remote sensing services, weather observation services,
    military applications, scientific research, and global positioning
    services. In this Report, we focus on the commercial satellite-based
    services sector and those applications that are within the
    definition of communications services under the Act. We do not
    evaluate the satellite manufacturing or launch sectors, nor do we
    assess non-communications satellite applications, as we view these
    as outside the scope of Congress' request.

[^8]: EchoStar asserts that we should not include this market in our
    report because it is covered in the Commission's annual *Video
    Competition Report*. EchoStar Comments at 1-5. We agree with
    EchoStar. *See Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, Twelfth Annual
    Report, 21 FCC Rcd 2503 (2006) ("*Twelfth MVPD Competition
    Report*").

[^9]: *See, e.g.,* *Annual Report and Analysis of Competitive Market
    Conditions with Respect to Commercial Mobile Services*, Tenth
    Report, 20 FCC Rcd 15908 (2005).

[^10]: Agreement Establishing Interim Arrangements for a Global
    Commercial Communications Satellite System, Aug. 20, 1964, 15 U.S.T.
    1705; Agreement Relating to the International Telecommunications
    Satellite Organization, Aug. 20, 1971, 23 U.S.T. 3813.

[^11]: *See Communications Satellite Corporation*, 38 FCC 1298 (1965);
    *see also Assignment of Orbital Locations to Space Stations in the
    Domestic Fixed-Satellite Service*, Memorandum Opinion and Order, 84
    FCC 2d 584, 585, ¶ 5 (1981) ("*1980 Orbit Assignment Order*").

[^12]: *Establishment of Domestic Communications-Satellite Facilities by
    Non-Governmental Entities*, First Report and Order, 22 FCC 2d 86
    (1970), Second Report and Order, 35 FCC 2d 844 (1972), *recon*.,
    Memorandum Opinion and Order, 38 FCC 2d 665 (1972).

[^13]: *See Western Union Telegraph Company*, Orders and Authorizations,
    38 FCC 2d 1197, 40 FCC 2d 1123, and 41 FCC 2d 379 (1973); *American
    Telephone and Telegraph Co*., Order and Authorization, 42 FCC 2d 654
    (1973); *Comsat General Corp*., Orders and Authorizations, 42 FCC 2d
    677 (1973) and 45 FCC 2d 444 (1974); *American Satellite
    Corporation*, Order and Authorization, 43 FCC 2d 348 (1973); *GTE
    Satellite Corp*., Order and Authorization, 43 FCC 2d 1141 (1973).
    *See also RCA Global Communications*, Order and Authorization, 42
    FCC 2d 774 (1973) (authorizing interim commercial satellite system
    using Telesat Canada's satellites and U.S. earth stations).

[^14]: Western Union Telegraph Company, RCA Global Communications, and
    COMSAT General Corporation launched these satellites and put them
    into service in the mid- to late-1970s. *See 1980 Orbit Assignment
    Order*, 84 FCC 2d at 587, ¶ 7 & nn.9-12 (by December, 1980, Western
    Union Telegraph Company operated three satellites, RCA American
    Communications, Inc. operated two, COMSAT General Corporation
    operated three for use by AT&T and GTE Satellite Corporation, and
    the ninth satellite recently had been launched by Satellite Business
    Systems). *Id*.

[^15]: *Id.* at 587-88, ¶ 8 & nn.14-19. In the 1970s, the Commission
    approved customer-owned earth stations, distribution of diversified
    program material to cable television systems, the use of small,
    lower-cost antennas for transmission and reception, interconnection
    of non-commercial broadcast stations, carrier-provided earth
    stations directly on customer premises, and deregulation of
    receive-only earth stations. *Id*.

[^16]: *See 1980 Orbit Assignment Order*, 84 FCC 2d at 584; *Assignment
    of Orbital Locations to Space Stations in the Domestic
    Fixed-Satellite Service*, Memorandum Opinion and Order, 94 FCC 2d
    129 (1983), *recon*. FCC 84-32 (Feb. 2, 1984), *further recon.* (May
    15, 1984); *Assignment of Orbital Locations to Space Stations in the
    Domestic Fixed-Satellite Service*, Memorandum Opinion and Order, 50
    Fed. Reg. 35228 (1985) ("*1985 Orbit Assignment Order*"), *recon.
    denied*, FCC 86-376 (rel. Aug. 26, 1986); *Assignment of Orbital
    Locations to Space Stations in the Domestic Fixed-Satellite
    Service*, Memorandum Opinion and Order, 3 FCC Rcd 6972 (1988)
    ("*1988 Orbit Assignment Order*"). There was little overlap between
    the services provided by INTELSAT and domestic FSS operators. *See*
    *Transborder Satellite Video Services*, Memorandum Opinion, Order
    and Authorization, 88 FCC 2d 258 (1981) ("*Transborder Satellite
    Decision*") (permitting domestic satellite operators to provide
    international public telecommunications services within the coverage
    areas of their satellites, where INTELSAT did not provide the
    service or it was clearly uneconomical or impractical to use
    INTELSAT facilities for the service).

[^17]: *1980 Orbit Assignment Order*, 84 FCC 2d at 599, ¶ 56 & n.77
    (authorizing two Ku-band systems and two hybrid C-/Ku-band systems).

[^18]: *1988 Orbit Assignment Order*, 3 FCC Rcd at 6973, ¶ 8 & n.30 (42
    in-orbit satellites, including 11 hybrid satellites, in 51 C- and
    Ku-band orbital slots, authorized to eleven satellite companies). To
    maximize the number of satellites that could be accommodated in
    orbit in order to meet increasing demand for satellite service, in
    1983 the Commission adopted a 2º spacing policy for both the C- and
    Ku-bands, which it adopted immediately for the Ku-band and
    implemented in 1985 for the C-band. *See Licensing of Space Stations
    in the Domestic Fixed-Satellite Service*, Report and Order, 54 Rad.
    Reg. 2d (P&F) 577, 589 (1983), *recon*., Memorandum Opinion and
    Order, 99 FCC 2d 737 (1985); *see also 1985 Orbit Assignment Order*,
    50 Fed. Reg. at 35229, ¶ 2.

[^19]: *See* *Transborder Satellite Decision*, 88 FCC 2d 258 (permitting
    domestic satellite operators to provide international public
    telecommunications services within the coverage areas of their
    satellites, where INTELSAT did not provide the service or it was
    clearly uneconomical or impractical to use INTELSAT facilities for
    the service); *see also Amendment to the Commission's Regulatory
    Policies Government Domestic Fixed Satellites and Separate
    International Satellite Systems*, Notice of Proposed Rulemaking, 10
    FCC Rcd 7789, 7790, ¶ 5 & n. 6 (1995) ("*DISCO I NPRM*") (describing
    implementation of Transborder Policy).

[^20]: *DISCO I NPRM*, 10 FCC Rcd at 7790, ¶ 5 (*e.g.,* the Commission
    allowed domsats to provide video programming to neighboring
    countries within their coverage areas, where use of INTELSAT would
    have required multiple satellite hops, terrestrial facilities, and
    collocated domestic and international earth stations).

[^21]: *Establishment of Satellite Systems Providing International
    Communications*, 101 FCC 2d 1046 (1985) ("*Separate Systems
    Decision*"), *recon*., 61 Rad. Reg. 2d (P&F) 649 (1986), *further
    recon*., 1 FCC Rcd 439 (1986) (permitting establishment of U.S.
    international satellite systems separate from Intelsat, but
    initially restricting separate systems to providing services through
    sale or long-term lease of capacity for communications not
    interconnected with public switched networks); *Permissible Services
    of U.S. Licensed International Communications Satellite Systems
    Separate from the International Telecommunications Satellite
    Organization (Intelsat)*, Order, 7 FCC Rcd 2313 (1992) (eliminating
    limitation on separate satellite systems interconnected with public
    switched network effective January 1, 1997), *recon. denied*, 8 FCC
    Rcd 5122 (1993).

[^22]: *See Separate Systems Decision*, 101 FCC 2d at 1172 & n.162.

[^23]: *Amendment of Section 2.106 of the Commission's Rules to Allocate
    Spectrum to the Fixed-Satellite Service and the Mobile-Satellite
    Service for Low-Earth Orbit Satellites*, Report and Order, 8 FCC Rcd
    1812 (1993); *Amendment of the Commission\'s Rules to Establish
    Rules and Policies Pertaining to a Non-Voice, Non-Geostationary
    Mobile-Satellite Service*, Report and Order, 8 FCC Rcd 8450 (1993).

[^24]: *Amendment of Section 2.106 of the Commission\'s Rules to
    Allocate the 1610-1626.5 MHz and the 2483.5-2500 MHz Bands for Use
    by the Mobile-Satellite Service, Including Non-geostationary
    Satellites*, Report and Order, 9 FCC Rcd 536 (1994); *Amendment of
    the Commission's Rules to Establish Rules and Policies Pertaining to
    a Mobile Satellite Service in the 1610-1626.5/2483.5-2500 MHz
    Frequency Bands*, Report and Order, 9 FCC Rcd 5936 (1994), *on
    recon*., 11 FCC Rcd 12861 (1996).

[^25]: *Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission\'s
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate
    the 29.5-30.0 GHz Frequency Band, to Establish Rules and Policies
    for Local Multipoint Distribution Service and for Fixed Satellite
    Services*, First Report and Order, 12 FCC Rcd 12545, Second Report
    and Order, 12 FCC Rcd 15082, Third Report and Order, 12 FCC Rcd
    22310 (1997).

[^26]: *The Establishment of Policies and Service Rules for the
    Non-Geostationary Satellite Orbit, Fixed Satellite Service in the
    Ku-Band*, Report and Order and Further Notice of Proposed
    Rulemaking, 17 FCC Rcd 7841 (2002); *The Establishment of Policies
    and Service Rules for the Non-Geostationary Satellite Orbit, Fixed
    Satellite Service in the Ka-Band*, Report and Order, 18 FCC Rcd
    14708 (2003).

[^27]: *Amendment to the Commission's Regulatory Policies Governing
    Domestic Fixed Satellites and Separate International Satellite
    Systems, and Petition for Declaratory Ruling Regarding the Use of
    Transponders to Provide International DBS Service*, Report and
    Order, 11 FCC Rcd 2429 (1996) ("*DISCO I Order*") (adopting policy
    permitting all U.S.-licensed FSS, MSS, and DBS systems to offer both
    domestic and international services, removing "outdated" regulatory
    barriers to greater competition in satellite communications services
    by eliminating distinction between U.S. domestic and separate
    satellite systems and allowing both space- and earth-segment
    operators to provide both domestic and international services).

[^28]: *Amendment to the Commission's Regulatory Policies Governing
    Domestic Fixed Satellites and Separate International Satellite
    Systems, and Petition for Declaratory Ruling Regarding the Use of
    Transponders to Provide International DBS Service*, Report and
    Order, 12 FCC Rcd 24094 (1997) ("*DISCO II Order*"), First Order on
    Reconsideration, 15 FCC Rcd 7207 (1999) (adopting declaratory ruling
    procedure by which non-U.S. licensed satellite operators might
    request authority to provide space segment capacity service to
    licensed earth stations in the United States, where previously only
    U.S. earth station operator could request service from non-U.S.
    licensed satellite operator (Permitted Space Station List); also
    adopting procedure to permit U.S. earth station licensee to access
    particular non-U.S. licensed satellite without further approval
    (ALSAT designation)).

[^29]: SDARS is a radiocommunication service in which audio programming
    is digitally transmitted by one or more space stations directly to
    fixed, mobile, and/or portable stations, and which may involve
    complementary repeating terrestrial transmitters, telemetry,
    tracking and control facilities. 47 C.F.R. § 25.201; see also ¶¶
    55-57 *infra*.

[^30]: *Digital Audio Radio Satellite Service in the 2310-2360 MHz
    Frequency Band*, Report and Order, Memorandum Opinion and Order and
    Further Notice of Proposed Rulemaking, 12 FCC Rcd 5754 (1997)
    (adopting rules to auction two 12.5 MHz SDARS authorizations in the
    2320-2332.5 and 2332.5-2345 MHz frequency bands).

[^31]: *See* *Sirius Satellite Radio Inc., Application for Transfer of
    Control of Station Authorization*, Order, 18 FCC Rcd 215 (2003), and
    *XM Radio Inc*., Order and Authorization, 20 FCC Rcd 1620, 1621, ¶ 3
    (2005).

[^32]: *Application of Afrispace, Inc. for Authority to Construct,
    Launch, and Operate a Subregional Africa and Middle Eastern
    Satellite Sound Broadcasting Transmission System*, Order and
    Authorization, 15 FCC Rcd 1632 (1999); *Afrispace, Inc. Application
    for Authority to Launch and Operate a Replacement Satellite,
    AfriStar-2, at 21º E.L. and to Co-locate it with AfriStar-1*, Order
    and Authorization, 21 FCC Rcd 17 (2006).

[^33]: Loral Skynet, *Loral and PSP Investments Agree to Acquire Telesat
    Canada,* http://www.loralskynet.com/news_121806.asp (visited Dec.
    29, 2006)

[^34]: Open-Market Reorganization for the Betterment of International
    Telecommunications Act, Pub. L. No. 106-180, 114 Stat. 48 (2000),
    *as amended*, Pub. L. No. 107-233, 116 Stat. 1480 (2002), *as
    amended*, Pub. L. No. 108-228, 118 Stat. 644 (2004), *as amended*,
    Pub. L. No. 108-371, 118 Stat. 1752 (2004), *as amended*, Pub. L.
    No. 109-34, 119 Stat. 377 (2005); *codified* at 47 U.S.C. § 761, *et
    seq*.

[^35]: *See Application of Intelsat LLC for Authority to Operate, and to
    Further Construct, Launch, and Operate C-band and Ku-band Satellites
    that Form a Global Communications System in Geostationary Orbit*,
    Memorandum Opinion, Order and Authorization, 15 FCC Rcd 15460
    (2000), *recon. denied*, 15 FCC Rcd 25234 (2000), *further
    proceedings*, 16 FCC Rcd 12280 (2001). Under this licensing
    authority, the Commission permitted Intelsat LLC's licenses to
    become effective upon privatization (*i.e*., the transfer of
    Intelsat's satellites and associated assets to Intelsat and the
    transfer of its International Telecommunications Union ("ITU")
    network filings to the U.S. registry). *See id.*, 15 FCC Rcd at
    15461, ¶3.

[^36]: *See Application of Intelsat LLC for Authority to Operate, and to
    Further Construct, Launch, and Operate C-band and Ku-band Satellites
    that Form a Global Communications System in Geostationary Orbit*,
    Memorandum Opinion, Order and Authorization, 16 FCC Rcd 12280,
    12303, ¶¶ 71, 73 (2001) ("*Intelsat LLC ORBIT Act Compliance
    Order*") (finding that, although the Initial Public Offering ("IPO")
    required under the privatization requirements of the ORBIT Act had
    not yet been completed, INTELSAT would privatize in a manner
    consistent with the non-IPO privatization provisions of the ORBIT
    Act).

[^37]: Intelsat privatized and became a Commission license for its C-
    and Ku-band satellites and earth stations in July, 2001,
    transferring its assets to a commercial corporation, Intelsat.
    Intelsat is a U.K. licensee for its Ka-band facilities. *See
    Intelsat LLC ORBIT Act Compliance Order*.

[^38]: *Loral Satellite, Inc. (Debtor-in-Possession) and Loral Spacecom
    Corporation (Debtor-in-Possession), Assignors, and Intelsat North
    America, LLC, Assignee, Applications for Consent to Assignments of
    Space Station Authorizations and Petition for Declaratory Ruling
    under Section 310(b)(4) of the Communications Act of 1934, as
    Amended*, Order and Authorization, 19 FCC Rcd 2404 (2004). Prior to
    the Loral acquisition in 2004, Intelsat offered virtually no U.S.
    domestic services. *Id*. at 2418, ¶ 32.

[^39]: In 2001, the Commission found that, although the Initial Public
    Offering ("IPO") required under the privatization requirements of
    the ORBIT Act had not yet been completed, Intelsat would privatize
    in a manner consistent with the non-IPO privatization provisions of
    the ORBIT Act, upon completion of its plans to distribute Intelsat
    LLC shares to its Signatories. Intelsat later distributed shares to
    its Signatories as it had planned. *Intelsat LLC ORBIT Act
    Compliance Order*, 16 FCC Rcd at 12290, ¶ 71. In October 2004,
    Congress amended the ORBIT Act, adding sections 621(5)(F) and (G),
    to provide a certification process as an alternative to the IPO
    requirements under sections 621(5)(A) and (B). 47 U.S.C. §
    763(A)-(B), (F)-(G). In December 2004, the Commission, on delegated
    authority, authorized the transfer of control of Intelsat's licenses
    and authorizations to Zeus Holdings Limited (now Intelsat Holdings),
    a private equity group organized under the laws of Bermuda. *See
    Intelsat, Ltd., Transferor, and Zeus Holdings Limited, Transferee,
    Consolidated Application for Consent to Transfer of Control of
    Holders of Title II and Title III Authorizations and Petition for
    Declaratory Ruling Under Section 310 of the Communications Act, as
    Amended*, Order and Authorization, 19 FCC Rcd 24820 (2004). In
    April, 2005, the Commission determined that Intelsat's certification
    was in compliance with sections 621(5)(F) and 621(5)(G) of the ORBIT
    Act. *See Intelsat, Ltd., Petition for Declaratory Ruling that
    Intelsat, Ltd. Complies with Section 621(5)(F) of the ORBIT Act*,
    Memorandum Opinion and Order, 20 FCC Rcd 8604 (2005).

[^40]: *FCC Report to Congress as Required by the ORBIT Act*, Seventh
    Report, 21 FCC Rcd 6740, 6757 (2006) ("*Seventh ORBIT Report*").

[^41]: *Id.*, 21 FCC Rcd at 6756.

[^42]: *Id*.

[^43]: Satellite Industry Association and Futron Corporation, "Satellite
    Industry Indicators Fact Sheet," June 2006, at 3. The SIA/Futron
    Study does not include non-communications satellite services.

[^44]: *Id.* at 7.

[^45]: *Id.* at 8-10.

[^46]: *Id.*

[^47]: *See* *Constellation, LLC and Intelsat Holdings, Ltd.,
    Application for Transfer of Control of PanAmSat Licensee Corp.,*
    Memorandum Opinion and Order, 21 FCC Rcd 7368, 7375 ¶¶ 31-32 (2006)
    ("*Intelsat-PanAmSat Order*").

[^48]: Any individual proceeding in which the Commission defines
    relevant product and geographic markets, such as an application for
    approval of a license transfer or a rulemaking with respect to the
    Commission's ownership rules, may present facts pointing to narrower
    or broader markets than any used, suggested, or implied in this
    Report. We note that markets can evolve and change over time.

[^49]: *See supra* notes 8, 9.

[^50]: 47 U.S.C. § 703(b)(2).

[^51]: Market or monopoly power has been defined as the power to force a
    purchaser to do something that he would not do in a competitive
    market, *Eastman Kodak Co. v. Image Technical Services, Inc.,* 504
    U.S. 451, 464 (1992), the ability to raise prices above those that
    would be charged in a competitive market, *Jefferson Parish Hospital
    Dist. No. 2 v. Hyde*, 466 U.S. 2, 27 n.46 (1984), the ability of a
    single seller to raise price and restrict output*, Fortner
    Enterprises, Inc. v. U.S. Steel Corp*., 394 U.S. 495, 503 (1969),
    and the power to control market prices or exclude competition,
    *United States v. E.I. du Pont de Nemours & Co*., 351 U.S. 377, 391
    (1956).

[^52]: U.S. Department of Justice and Federal Trade Commission,
    Horizontal Merger Guidelines, [57 Fed. Reg. 41552 (dated Apr. 2,
    1992, revised, Apr. 8,
    1997)](http://web2.westlaw.com/find/default.wl?rp=%2Ffind%2Fdefault.wl&vc=0&DocName=57FR41552&FindType=Y&ReferencePositionType=S&ReferencePosition=41552&AP=&fn=_top&rs=WLW6.09&mt=Communications&vr=2.0&sv=Split)
    ("Merger Guidelines").

[^53]: *International Boxing Club of New York, Inc. v. United States,*
    358 U.S. 242, 249 (1959), *citing United States v. E. I. Du pont De
    Nemours & Co*., 351 U.S. 371, 395 (1956) (in describing the relevant
    product market in Sherman Act cases, "no more definite rule can be
    declared than that commodities reasonably interchangeable by
    consumers for the same purposes make up that \'part of the trade or
    commerce,\' monopolization of which may be illegal."). *See also
    Eastman Kodak Co. v. Image Technical Services, Inc*., 504 U.S. 451,
    481-82 (1992) ("The relevant market for antitrust purposes is
    determined by the choices available to \[consumers\]."); *National
    Collegiate Athletic Ass\'n v. Board of Regents of the University of
    Oklahoma*, 468 U.S. 85, 95 (1984) ("The District Court defined the
    relevant market as 'live college football television' because it
    found that alternative programming has a significantly different and
    lesser audience appeal."); *United States v. Microsoft*, 253 F.3d
    34, 52 (D.C. Cir. 2001), *cert. denied*, 534 U.S. 952 (2001) (in
    determining reasonable substitutes, the court excluded
    \"middleware\" software from the description of the relevant product
    market because of its present non‑interchangeability with Windows
    notwithstanding its long‑term future potential).

[^54]: Merger Guidelines §§ 1.11, 1.12.

[^55]: *Id.* § 1.21.

[^56]: *United States v. Philadelphia Nat\'l Bank*, 374 U.S. 321, 359
    (1963); *Tampa Elec. Co. v. Nashville Coal Co*., 365 U.S. 320, 327
    (1961); *Spirit Airlines, Inc. v. Northwest Airlines, Inc*., 431
    F.3d 917, 932-33 (6^th^ Cir. 2005).

[^57]: *Id.* §§ 1.0, 1.31.

[^58]: In our reviews of several previous mergers of major incumbent
    LECs, our competitive analysis focused on the likelihood that one
    would enter the other's territory and add to competition there, and
    on the reduction of competition that the proposed merger would
    cause. *See, e.g.,* *NYNEX Corp. & Bell Atlantic Corp*., Memorandum
    Opinion and Order, 12 FCC Rcd 19985, 19990-91 ¶ 8, 20025-28 ¶¶ 73-78
    (1997). Our analysis of another major merger considered the
    certainty of entry by broadband PCS carriers affecting the behavior
    of existing cellular carriers. *Craig O McCaw & AT&T*, Memorandum
    Opinion and Order, 9 FCC Rcd 5836, 5863, ¶ 40 (1994), *aff'd*, *SBC
    Communications, Inc. v. FCC*, 56 F.3d 1484, 1492 (D.C. Cir. 1995).

[^59]: For a similar differentiation of wholesale and retail satellite
    communications markets, see *Intelsat-PanAmSat Order*, 21 FCC Rcd at
    7375, ¶ 31 ("it is useful to contrast the nature of competitive
    rivalry in *retail* satellite service markets, where customers are
    ordinary consumers buying, for example, multi-channel video
    programming services, and *wholesale* satellite service markets,
    where customers are business entities buying video transmission
    services by satellite for either contribution or distribution
    purposes.") (emphasis in original).

[^60]: Merger Guidelines § 1.31. Sellers in a market may also include
    "uncommitted entrants" -- firms not currently producing or selling
    the relevant product in the relevant area who would likely enter the
    market within one year and without the expenditure of significant
    sunk costs of entry and exit, in response to a small but significant
    and nontransitory price increase. *Id.* at § 1.32. Neither the
    comments herein nor our own analyses have identified any uncommitted
    entrants. In general, entry into the markets discussed herein, even
    if it required only new earth stations or other terminal equipment,
    would entail significant sunk costs. *See* MSV Comments at 6. Entry
    entailing new radio licenses and satellites would entail such costs
    and also take more than one year.

[^61]: Unless otherwise specifically noted, the "United States" in this
    Report includes Alaska and Hawaii.

[^62]: This relevant market is comparable to what, in the
    *Intelsat-PanAmSat Order*, we described as "video contribution
    (transmission of news, sports, and other video programming from
    various locations to central video production studios), and
    occasional use video (short‑term satellite services provided to
    broadcasters and others for coverage of sporting events, special
    events and breaking news)." *Intelsat-PanAmSat Order*, 21 FCC Rcd at
    7376, ¶ 35.

[^63]: We define "broadcast" for this Report as referring to
    "over-the-air" television stations using VHF and UHF radio spectrum,
    or, over-the-air radio stations using AM and FM spectrum. We define
    "broadcast network," for this Report, as an organization that offers
    programs for transmission to affiliated broadcast stations for a
    substantial number of hours per week. *See* 47 U.S.C. §§
    73.3613(a)(1), 74.2, 76.55(f).

[^64]: We define "syndicator" for this Report as a person, other than a
    network, who obtains rights to a program or group of programs and
    makes them available to MVPDs or broadcast stations for transmission
    to the latters' consumers.

[^65]: We define "local exchange carrier" or "LEC" for purposes of this
    Report as any person that is engaged in the provision of
    telecommunications service for a fee within a telephone exchange or
    its equivalent, or in the offering of access to an exchange for the
    purpose of the origination or termination of telephone toll services
    between stations in different exchange areas for which there is made
    a separate charge. See 47 U.S.C. §§ 153(16), (26), (47)-(48).

[^66]: A teleport is a large accumulation of connections to terrestrial
    facilities, earth stations and related equipment, and access to
    satellites that meet the high-volume needs of one or more consumers
    of satellite communications services. Some large enterprises operate
    their own teleports; some satellite owners operate teleports; and
    there are stand-alone teleport operators. The latter two kinds of
    operation serve groups of satellite consumers, no one of which needs
    enough capacity to create its own teleport. *See* Newton Telecom
    Dictionary 851 (16^th^ ed. 2000).

[^67]: For simplicity, we usually name as market participants the parent
    companies in corporate structures, although a subsidiary may provide
    the service discussed.

[^68]: *Satellite*, Communications Daily at 12 (Nov. 24, 2006).

[^69]: SIA Comments at 9 n.23 (paraphrasing CNN executive that about one
    half of CNN's domestic news feeds arrive at its Atlanta headquarters
    over fiber optic terrestrial video paths).

[^70]: *Permitted Space Station List*, available at
    http://www.fcc.gov/ib/sd/se/permitted.html (visited July 12, 2006).

[^71]: We define an "MVPD network," for purposes of this Report, as a
    stream of video content provided by its owner to an MVPD for
    transmission to the MVPD's retail consumers. Examples of MVPD
    networks would include CNN and ESPN.

[^72]: A headend is the central location of a cable TV system from which
    channels of video programming are sent via cable to the system's
    consumers. *See* Newton Telecom Dictionary 400 (16^th^ ed. 2000).

[^73]: When a broadcast station's transmitter is close enough to an MVPD
    headend for the latter to receive the former's signal by radio and a
    simple antenna, in the same way viewers at home receive it, that
    medium may be used.

[^74]: This relevant market is comparable to what, in the
    *Intelsat-PanAmSat Order*, we described as "video distribution
    (transmission of programming to broadcasters, cable systems and
    other redistribution systems)." *Intelsat-PanAmSat Order*, 21 FCC
    Rcd at 7376, ¶ 35.

[^75]: DirecTV Comments at 21 (*citing* *NRTC to Market SES Americom's
    IP-PRIME*, Press Release, available at
    http://www.nrtc.coop/export/main/news_policy/pdfreleases/2005_Press_Releases/NRTC_SES_final_final_release.pdf
    (visited Sept. 11, 2006)).

[^76]: EchoStar Comments at 6.

[^77]: *See* *supra* note 70.

[^78]: For purposes of this Report, we define "backhaul" as transmitting
    from a remote site or network to a central or main site, usually
    over a high capacity line and for purposes of efficient management.
    See, *e.g.*, PC Magazine, *Encyclopedia*,
    http://www.pcmag.com/encyclopedia_term/0,2542,t=
    backhaul&i=38356,00.asp (visited Oct. 23, 2006).

[^79]: This relevant market is comparable to what, in the
    *Intelsat-PanAmSat Order*, we described as "voice and data
    applications provided to telecommunications carriers (mostly
    point-to-point transmission between telecommunications hubs), . . .
    and Internet applications (including satellite capacity for Internet
    Protocol trunking and direct Internet access broadband
    connectivity)." *Intelsat-PanAmSat Order*, 21 FCC Rcd at 7378, ¶ 41.

[^80]: Major teleport operators include Intelsat, SES Americom, Stratos,
    Loral, Globecomm, CapRock, and Ascent. World Teleport Ass'n, *Global
    Top Twenty of 2006,*
    http://www.worldteleport.org/displaycommon.cfm?an=1& subarticlenbr
    =301 (visited Oct. 3, 2006).

[^81]: See *supra* note 70.

[^82]: Some VSAT companies also own one or more central or hub earth
    stations that manage communications between a satellite and a VSAT.

[^83]: This relevant market is comparable to what, in the
    *Intelsat-PanAmSat Order*, we described as "corporate network
    applications (including point-to-point and point-to-multipoint
    traffic for one- and two-way communications among multiple business
    sites)." *Intelsat-PanAmSat Order*, 21 FCC Rcd at 7378, ¶ 41.

[^84]: Adrianne Kroepsch, *FSS Operators Preparing for Hurricane
    Season*, Communications Daily at 12 (June 2, 2006).

[^85]: *See* *supra* note 70.

[^86]: *See generally* *Global VSAT Forum*, available at
    http://www.gvf.org/ (visited Oct. 4, 2006). Some of these VSAT
    companies are network integrators and others also manufacture some
    or all of the requisite network equipment. *Id.*

[^87]: *See supra* ¶ 30.

[^88]: Satellite technology allows for provision of services throughout
    wide geographic areas, although the amount and power of wholesale
    satellite capacity may vary from location to location. For example,
    due to their geographic separation from the 48 contiguous United
    States, satellite providers may need to add capacity in order to
    provide comparable services to Alaska and Hawaii.

[^89]: In this Report, we define "high-speed" or "broadband" as
    affording a bit rate of 200 kbps or more in at least one direction.
    *See* FCC, High-Speed Services for Internet Access: Status as of
    December 31, 2005, n.1 (rel. July 26, 2006) (\"*High-Speed Services
    for Internet Access: 2005 Status Report*\"), available at
    http://hraunfoss.fcc.gov/edocs \_public/attachmatch/DOC-266596A1.pdf
    (visited Oct. 30, 2006). This report and previous releases of the
    High-Speed Services for Internet Access report are available at
    http://www.fcc.gov/wcb/iatd/comp.html.

[^90]: Terrestrial-based broadband service, where it is available,
    offers higher bit-rates at lower prices than satellite-based
    broadband service. *See H**igh-Speed Services* *for Internet
    Access:* *2005 Status Report* at 11. Therefore, for the purposes of
    this Report, we do not generally consider satellite-delivered
    broadband to be competitive with terrestrial-based broadband where
    the latter is available.

[^91]: Satellite-based broadband providers may also offer varying speeds
    or require different consumer ground equipment for certain
    locations, depending on coverage and power levels available. *See,
    e.g.,* *Starband: Frequently Asked Questions*, available at
    http://www.starband.com/faqs/index.asp (visited Oct. 27, 2006).

[^92]: *High-Speed Services for Internet Access: 2005 Status Report,*at
    4.

[^93]: DBS providers DirecTV and EchoStar have agreed to distribute
    WildBlue's broadband service to their customers. *Satellite,*
    Communications Daily at 15 (Oct. 23, 2006); *DirecTV, EchoStar to
    offer WildBlue high-speed Internet*, Los Angeles Business, available
    at
    http://www.bizjournals.com/losangeles/stories/2006/06/05/daily57.html
    (visited June 14, 2006). In some rural areas where AT&T is the
    incumbent LEC, it is marketing WildBlue's service. News Release,
    *AT&T Initiatives Expand Availability of Advanced Communications
    Technologies*, at 2 (May 8, 2006).

[^94]: *Who Is Starband?*, available at
    http://www.starband.com/whatis/index.asp (visited June 15, 2006);
    *Gilat Boundless Communications*, available at
    http://www.gilat.com/Solutions_BroadBandIP.asp (visited June 15,
    2006).

[^95]: *Seventh ORBIT Report*, 21 FCC Rcd at 6749 (2006).

    ^?^ *Broadband for a Mobile Planet,* http://broadband.inmarsat.com/
    (visited Dec. 28, 2006).

[^96]: *ContactMEO Communications, LLC*, Order and Authorization, 21 FCC
    Rcd 4035 (2006).

[^97]: In determining the scope of this Report, we look to the Act,
    which on its terms applies to "all interstate and foreign
    communication by wire or radio and all interstate and foreign
    transmission of energy by radio, which originates and/or is received
    within the United States." 47 USC § 152(a). The Act further defines
    \"foreign communication\" to mean \"communication . . . from or to
    any place in the United States to or from a foreign country, or
    between a station in the United States and a mobile station located
    outside the United States.\" 47 USC § 153(17). *See In the Matter of
    International Settlement Rates*, Report and Order, 12 FCC Rcd 19806,
    19934, ¶ 278 (1997).

[^98]: *See infra* § III.E.5.

[^99]: *See, e.g.,* *International Bureau Revises and Reissues the
    Commission's List of Foreign Telecommunications Carriers That Are
    Presumed to Possess Market Power in Foreign Telecommunications
    Markets*, Press Release, 19 FCC Rcd 20385, 20386 (2004) ("The
    Commission\'s rules include a presumption that a foreign carrier
    does not possess market power on the foreign end of a U.S.
    international route if it possesses less than 50 percent market
    share in each of three relevant foreign product markets");
    *L**ockheed Martin Corp. and Intelsat, Ltd.,* Order and
    Authorization, 17 FC Rcd 27732, 27741-43, ¶¶ 15-17 (2002).

[^100]: *See* *infra* § III.E.5 and Appendix B to this Report.

[^101]: The resources necessary to describe geographic markets for
    several services and perhaps two hundred countries would, in our
    opinion, go beyond the scope of what Congress intended for this
    Report. See *infra* § III.E.5 and Appendix B for several
    illustrative examples of varying legal and regulatory policies that
    might obstruct commercial availability of satellite services.

[^102]: *DISCO I Order*, 11 FCC Rcd at 2431, ¶ 11. *See also 1988 Orbit
    Assignment Order*, 3 FCC Rcd at 6973, ¶ 8 & n.30 (eleven companies
    assigned C- and Ku-band FSS orbital locations for 42 satellites);
    *Assignment of Orbital Locations to Space Stations in the Domestic
    Fixed-Satellite Service*, Order and Authorization, 11 FCC Rcd 13788,
    13793, ¶ 9 & n.12 (1996) (eight companies assigned orbital locations
    for 44 satellites).

[^103]: *AT&T Corp., Assignor, and Loral SpaceCom Corporation, Assignee,
    For Authority to Assign the Licenses for Telstars 302, 303, 401,
    402R, 5, and 6, and Associated Earth Station and Common Carrier
    Authorizations*, Order and Authorization, 12 FCC Rcd 925 (1997);
    *Loral Space and Communications Ltd. and Orion Network Systems, Inc.
    International Private Satellite Partners, L.P. d/b/a Orion Atlantic,
    L.P., Application for the Transfer of Control of Various Space
    Station, Earth Station, and Section 214 Authorizations*, Order and
    Authorization, 12 FCC Rcd 4592 (1998).

[^104]: *Hughes Communications, Inc. and Affiliated Companies and
    Anselmo Group Voting Trust/PanAmSat Licensee Corp. and Affiliated
    Companies, Application for Transfer of Control and/or Assignment of
    Various Space Station, Earth Station, and Section 214
    Authorizations*, Order and Authorization, 12 FCC Rcd 7534 (1997)
    (transferring control of PanAmSat to Hughes, assigning certain
    Hughes licenses to PanAmSat, and transferring control of certain
    Hughes subsidiaries to the new PanAmSat).

[^105]: *Sirius Satellite Radio Inc., Application for Transfer of
    Control of Station Authorization*, Order, 18 FCC Rcd 215 (2003).

[^106]: Cournot-Nash behavior occurs where firms maximize their profit
    by setting output, taking their rival's output as a given. Keith
    Cowling & Michael Waterson, "Price-Cost Margins and Market
    Structure," *Economica*, 43 (Aug. 1976), 264-274. The HHI can be
    used to detect cheating on collusive agreements. George J. Stigler,
    "A Theory of Oligopoly," *J. Pol. Econ.* 72 (1964) 44-61.

[^107]: *See, e.g., Synthroid Marketing Litigation,* 325 F.3d 974 (7^th^
    Cir. 2003); *FTC v. H.J. Heinz Co.*, 246 F.3d 708, 716 (D.C. Cir.
    2001); *Twelfth MVPD Competition Report,* 21 FCC Rcd at 2573-74, ¶
    153. The Merger Guidelines advocate the use of post-merger HHI and
    change in HHI due to merger as factors to consider when challenging
    a merger as being anticompetitive. Merger Guidelines § 1.5.

[^108]: More precisely, unilateral effects may arise in situations where
    firms sell products that substitute for each other, in varying
    degrees, so that any attempt by a single firm to raise price would
    fail because consumers would be able to switch to close substitutes.
    "A merger between two of these firms, however, may be profitable to
    the extent that the merger includes the firm to which enough of the
    customers switch. Since the price rise is initiated by a single
    firm, the competitive problem with such a merger is not coordinated
    behavior but rather is characterized as a 'unilateral effect.'"
    *See* John E. Kwoka & Lawrence J. White, *The Antitrust Revolution,*
    Third Edition, (Oxford University Press, 1999), p. 17.

[^109]: *See* Lawrence J. White, "Horizontal Merger Antitrust
    Enforcement: Some Historical Perspectives, Some Current
    Observations," prepared for the Antitrust Modernization Commission's
    "Economist's Roundtable on Merger Enforcement," Jan. 2006; John E.
    Kwoka, "Some Thoughts on Concentration, Market Shares, and Merger
    Enforcement Policy," paper presented at the FTC/DOJ Workshop on
    Merger Enforcement, Feb. 2004; Gregory J. Werden & George A.
    Rozanski, "The Application of Section 7 to Differentiated Products
    Industries: The Market Definition Dilemma," Antitrust, 8 (Summer
    1994), 40-43; *but see* Daniel L. Rubinfeld, "Testimony before the
    Antitrust Modernization Commission," Jan. 19, 2006, available at
    <http://www.amc.gov/commission_hearings/pdf/>
    rubinfeld_statement_final.pdf (visited Nov. 16, 2006).

[^110]: *See* Federal Trade Commission & U.S. Department of Justice,
    *Commentary on the Horizontal Merger Guidelines*, March, 2006 at 27.

[^111]: Demand elasticity measures the degree to which the quantity
    demanded for a product or service changes as some attribute of the
    product, such as price, changes.  Own-price elasticity of demand
    measures the degree to which the quantity demanded of a product or
    service itself changes as its price changes -- for example, the
    percentage reduction in the quantity of apples demanded in response
    to a percentage increase in the price of apples.  Cross-price
    elasticity of demand measures the degree to which the demand for
    *another* product changes if the price of a product changes -- for
    example, the percentage increase in the quantity of oranges demanded
    in response to a percentage increase in the price of apples.

[^112]: Kwoka notes,

    > "To the extent that the market shares of the merging parties are
    > related to the degree of competitive concern (as indicia of the
    > diversion ratio, for example), that will also be reflected in
    > higher measured concentration, other things equal. But the
    > relationship between two firms' shares and overall concentration
    > is loose, and in principle concentration itself -- which reflects
    > all firms' shares -- is simply not the issue."

    *See* Kwoka, *supra* note 108 at 4; Robert D. Willig, "Merger
    Analysis, Industrial Organization Theory, and Merger Guidelines,"
    Brookings Papers on Economic Activity, Microeconomics, (1991)
    281-332.

[^113]: We note, for example, that in the recent merger between Intelsat
    and PanAmSat, the Commission considered the bargaining relationships
    between suppliers and sellers rather than calculating HHIs in
    analyzing the competitive issues associated with the wholesale
    satellite markets identified in that proceeding. *Intelsat-PanAmSat
    Order*, 21 FCC Rcd at 7382-401, ¶¶ 25-64.

[^114]: *Id.* at 7374, ¶ 29.

[^115]: Percentages reflect the operators\' proportion of capacity
    actually utilized for each service for the United States for the
    second quarter of each year noted.

[^116]: The numbers include domestic wholesale markets for capacity for
    video contribution and capacity for video distribution.

[^117]: The numbers include domestic wholesale markets for network
    services.

[^118]: *Intelsat-PanAmSat Order*, 21 FCC Rcd at 7389, ¶ 42.

[^119]: Euroconsult, *Facts and Figures on the Performance of the
    Satellite Business Globally* (June 2006).

[^120]: *Intelsat-PanAmSat Order*, 21 FCC Rcd at 7385, ¶ 31. Also,
    retail markets differ from wholesale markets in one additional
    aspect, the former is generally more vertically integrated than the
    later. For example, retail markets for MVPD services and SDARS and
    other mobile media services are generally vertically integrated
    markets where satellite operators also have ownership interests in
    video and audio content distributed to retail customers.

[^121]: XM Satellite Radio Holdings, Annual Report on Form 10-K Pursuant
    to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
    the Fiscal Years ended December 31, 2001-2005 ("XM 10-Ks"); Sirius
    Satellite Radio, Inc., Annual Report on Form 10-K Pursuant to
    Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
    Fiscal Years ended December 31, 2001-2005 (Sirius 10-Ks"), both
    available at http://www.sec.gov/edgar.shtml (visited July 12, 2006).

[^122]: As the Court of Appeals said in *Federal Trade Commission v.
    H.J. Heinz Co*., 246 F.3d 708, 717 n.13 (D.C. Cir. 2001):

    > "Barriers to entry are important in evaluating whether market
    > concentration statistics accurately reflect the . . . competitive
    > picture. *Cf. Baker Hughes,* 908 F.2d at 987. If entry barriers
    > are low, the threat of outside entry can significantly alter the
    > anticompetitive effects of the merger by deterring the remaining
    > entities from colluding or exercising market power. *See United
    > States v. Falstaff Brewing Corp.,* 410 U.S. 526, 532‑33, 93 S. Ct.
    > 1096, 35 L. Ed. 2d 475 (1973); *Baker Hughes,* 908 F.2d at 987
    > ('In the absence of significant barriers, a company probably
    > cannot maintain supracompetitive pricing for any length of
    > time.')."

[^123]: Merger Guidelines § 3.2.

[^124]: *S**ee* *Amendment of the Commission's Space Station Licensing
    Rules and Policies*, Notice of Proposed Rulemaking and First Report
    and Order, 17 FCC Rcd 3847, 3853 n.13 (2002) (*quoting* *Application
    of Comsat Corp.*, Order, 12 FCC Rcd 12059, 12075 n.68 (1997).

[^125]: Metrics used are 'operating cost' as a proxy for variable cost
    and forward-looking 'platform' or network cost as a proxy for fixed
    cost. Operating expenses are taken from income statements and a
    weighted average cost of capital ("WACC") and an annual depreciation
    rate are applied to the estimated replacement value of an operator's
    satellite fleet to estimate platform cost. Not all data are
    available for all wholesale operators (for whom satellite capacity
    is much more 'commoditized' than for retail services) but sufficient
    data do exist to allow computation of these cost elements. The
    negotiated, long term contract nature of exchange transactions in
    this market do not necessitate a substantial base of customer
    support functions, product advertising and mass marketing so that
    the ratio of variable costs to the cost of the satellite network
    itself (including engineering and design cost) is relatively low.

[^126]: Operating costs from 2005 Income Statements (in Millions) are
    taken as a proxy for variable costs.

[^127]: Economic rental cost of satellite capacity was estimated based
    upon the replacement value of the satellite fleet as of 12/31/2005
    multiplied by a weighted average cost of capital of 8.5% (the
    average for the Direct to Home firms as estimated by Bernstein) and
    an average depreciation rate based on a 12 year design life.

[^128]: Intelsat, Ltd., Annual Report on Form 10-K Pursuant to Section
    13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal
    Years ended December 31, 2001-2005 ("Intelsat 10-Ks"), available at
    http://www.sec. gov/edgar.shtml (visited July 12, 2006); PanAmSat
    Holding Corp., Annual Report on Form 10-K Pursuant to Section 13 or
    15(d) of the Securities Exchange Act of 1934 for the Fiscal Years
    ended December 31, 2001-2005 ("PanAmSat 10-Ks"), available at
    http://www.sec.gov/edgar.shtml (visited July 12, 2006); SES, Annual
    Report on Form 10-K Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934 for the Fiscal Years ended December
    31, 2001-2005 ("SES 10-Ks"), available at
    http://www.sec.gov/edgar.shtml (visited July 12, 2006).

[^129]: Euroconsult defines \"reference supply\" as those transponders
    \"that are effectively available for service, taking into account
    the date of launch, potential movement of satellites between
    different orbital positions, technical failures, and transponders
    reserved for failure.\" Euroconsult*,* *World Satellite
    Communication & Broadcasting Markets Survey, Ten Year Outlook*, 12th
    ed., (Paris, France, Aug. 2005), p. 1.

[^130]: In its report, Euroconsult assumes a 36 MHz transponder. The
    vertical axis of Charts 1-3 represents the number of 36 MHz
    transponders. *Id.*

[^131]: Non-linear pricing refers to the pricing of output that varies
    with the quantity purchased. Typically, as the quantity purchased of
    a good or service increases, the unit price of successive units
    purchased *declines*. *See* Robert B. Wilson, *Nonlinear Pricing*
    (New York: Oxford University Press, 1993).

[^132]: For a useful overview of the general competitive implications of
    switching costs and "lock-in" effects, see Massimo Motta,
    *Competition Policy: Theory and Practice* (Cambridge, UK: Cambridge
    Univ. Press, 2004), pp. 79-81.

[^133]: One party commenting on the record in this proceeding suggests
    that satellite spectrum scarcity is the primary barrier to entry by
    satellite providers. *See* EchoStar Comments at 6.

[^134]: *The Establishment of Policies and Service Rules for the
    Non-Geostationary Satellite Orbit, Fixed Satellite Service in the
    Ku-Band*, Report and Order and Further Notice of Proposed
    Rulemaking, 17 FCC Rcd 7841 (2002); *The Establishment of Policies
    and Service Rules for the Non-Geostationary Satellite Orbit, Fixed
    Satellite Service in the Ka-Band*, Report and Order, 18 FCC Rcd
    14708 (2003).

[^135]: *Amendment Of The Commission\'s Space Station Licensing Rules
    And Policies*, First Report and Order and Further Notice of Proposed
    Rulemaking, 18 FCC Rcd 10760 (2003) ("*First Space Station Reform
    Order"*).

[^136]: *First Space Station Reform Order*, 18 FCC Rcd at 10774, ¶ 23.

[^137]: *Id.* at 10792, ¶ 73.

[^138]: The Commission is currently seeking comment on the appropriate
    processing framework to apply to DBS applications.  *See Amendment
    of the Commission\'s Policies and Rules for Processing Applications
    in the Direct Broadcast Satellite Service, Feasibility of Reduced
    Orbital Spacing for Provision of Direct Broadcast Satellite Service
    in the United States,* Notice of Proposed Rulemaking, 21 FCC Rcd
    9443 (2006).

[^139]: *First Space Station Reform Order*, 18 FCC Rcd at 10841, ¶ 215.

[^140]: Foreign operated satellites listed on the Permitted Space
    Station List may be accessed by any U.S.-licensed earth station with
    an ALSAT license. *See* *Amendment of the Commission's Regulatory
    Policies to Allow Non-U.S. Licensed Space Stations to Provide
    Domestic and International Satellite Service in the United States*,
    First Order on Reconsideration ("*DISCO II First Reconsideration
    Order*"), 15 FCC Rcd 7207, 7213-16, ¶¶13-20 (1999). An unofficial
    list of satellites on the Permitted Space Station List is available
    at http://www.fcc.gov/ib/sd/se/permitted. html.

[^141]: *See, e.g.,* *supra* ¶¶ 40, 49.

[^142]: The GATS is composed of three major components. The first
    consists of the general obligations and disciplines that apply to
    all WTO Members. The second includes the specific commitments
    relating to market access, national treatment, and other commitments
    that are identified in individual WTO Member Schedules of Specific
    Commitments. The third contains any exemptions taken by WTO Members
    from the general obligations that are contained in Article II of the
    GATS. In addition, all WTO Members must comply with the transparency
    obligations of Article III of the GATS, which requires prompt
    publication of all laws and regulations applicable to the provision
    of services.

[^143]: *See, e.g., EchoStar Satellite, LLC For Blanket Authorization to
    operate 1,000,000 Receive--Only Earth Stations to provide
    Direct-to-Home Fixed Satellite Service in the United States using
    the Canadian-authorized ANIK F3 Satellite at the 118.7 W.L. Orbital
    Location*, Order and Authorization ("*EchoStar Blanket
    Authorization*"), 20 FCC Rcd. 20083, 20084, ¶ 2 (2005).

[^144]: The U.S. also took an exemption from most-favored nation
    treatment for these services as well. *See* *Amendment of the
    Commission's Regulatory Policies to Allow Non-U.S. Licensed
    Satellites Providing Domestic and International Service in the
    U.S*., Report and Order, 12 FCC Rcd 24094 (1997).

[^145]: The WTO was established pursuant to the *Marrakesh Agreement
    Establishing the World Trade Organization* ("*Marrakesh
    Agreement*"), 33 I.L.M. 1125 (1994). The GATS is Annex iB of the
    *Marrakesh Agreement,* 33 I.L.M. 1167 (1994). The WTO Telecom
    Agreement was incorporated in the GATS by the Fourth Protocol to the
    GATS. 36 I.L.M. 354 (1997).

[^146]: *DISCO II Order*, 12 FCC Rcd at 24112, ¶ 39.

[^147]: *Id.*

[^148]: *Id.* at 24107-72, ¶¶ 30-182. In the same Order, the Commission
    adopted rules for licensed earth station operators to request access
    to non-U.S. licensed space stations. In the *DISCO II First
    Reconsideration Order*, 15 FCC Rcd 7207 (1999), the Commission
    adopted similar rules for in-orbit non-U.S. licensed space stations
    to provide service to licensed earth station operators in the United
    States. In-orbit non-U.S. licensed space stations approved by the
    Commission are placed on the Permitted Space Station list which all
    routine licensed earth stations may communicate with. *DISCO II
    First Reconsideration Order* 15 FCC Rcd at 7214, ¶ 16. *See also*
    *International Bureau -- Permitted Space Station List*, available at
    http://www.fcc.gov/ib/sd/se/permitted.html (visited Aug. 1, 2006).

[^149]: The United States did not make commitments for market access or
    most-favored nation treatment for DBS and SDARS. *See* *Fourth
    Protocol to the GATS*, 36 I.L.M. at 359. Member nations are
    permitted to take exemptions under certain circumstances specified
    in an annex to the GATS. *See GATS Annex on Article II Exemptions.*

[^150]: *DISCO II Order*, 12 FCC Rcd at 24127-37, ¶¶ 72-101; 47 C.F.R. §
    25.137(a).

[^151]: *Id.* (both).

[^152]: *Amendment of the Commission's Regulatory Practices to Allow
    Non-U.S. Licensed Space Stations to Provide Domestic and
    International Satellite Service in the U.S.*, Notice of Proposed
    Rulemaking ("*DISCO II NPRM*"), 11 FCC Rcd 18178, 18192, ¶ 38
    (1996).

[^153]: *See, e.g.,* *EchoStar Blanket Authorization,* 20 FCC Rcd at
    20087-88, ¶ 11(*citing* *DISCO II NPRM*).

[^154]: *See EchoStar Blanket Authorization*, 20 FCC Rcd at 20087-88, ¶¶
    10-11, and 20089, ¶ 14 (notwithstanding Canadian regulations
    prohibiting use of U.S.-licensed space stations to offer one-way
    subscription video programming service to Canadian public, use of
    Telesat Canada's ANIK F3, a Canadian-licensed satellite, to receive
    DTH FSS provided public interest benefits by facilitating EchoStar's
    ability to provide coverage to Alaska and Hawaii and might promote
    competition for enhanced programming in those states).

[^155]: *DISCO II Order*, 12 FCC Rcd at 24094; *DISCO II First
    Reconsideration Order*, 15 FCC Rcd at 7207. Also, as discussed in
    Section III E 4 of this report, the *DISCO II* proceeding adopted
    the ALSAT procedure permitting U.S. earth station licensees to
    access particular non-U.S. licensed satellites without further
    approval, provided that the earth station complies with the
    Commission's technical requirements and operates under the
    conditions of its license.

[^156]: *See Telesat Canada, Petition for Declaratory Ruling for
    Inclusion of ANIK F1 on the Permitted Space Station List*, File No.
    SAT-PDR-20000420-00083, Order, 15 FCC Rcd 24828 (2000); *See Telesat
    Canada, Petition for Declaratory Ruling for Inclusion of ANIK F2 on
    the Permitted Space Station List and Petition to Serve the U.S.
    Market Using Ka-band Capacity on Anik F2*, 17 FCC Rcd 25287 (2002).

[^157]: *See Satelites Mexicanos, S.A. de C.V., Petition for Declaratory
    Ruling*, Order, 15 FCC Rcd 19311 (2000), *erratum*, 19 FCC Rcd 20427
    (2004).

[^158]: *See New Skies Satellites N.V., Petition for Declaratory
    Ruling*, Order, 16 FCC Rcd 6740 (2001); *New Skies Satellites N.V.,
    Petition for Declaratory Ruling*, Order, 17 FCC Rcd 10369 (2002). In
    2006, SES Global acquired New Skies. *New Skies-SES GLOBAL*, 21 FCC
    Rcd 3194 (2006).

[^159]: *See Spacecom Satellite Communications Services S.C.C. Ltd,
    Petition for Declaratory Ruling for Inclusion of AMOS-2 on the
    Permitted Space Station List*, File No. SAT-PDR-20020823-00161,
    Order, 18 FCC Rcd 14433 (2003).

[^160]: *See Empresa Brasileira de Telecomicaçöes S.A., Petition for
    Declaratory Ruling on Access to Brasilsat A2 Satellite via U.S.
    Earth Stations*, File No. SAT-PDR-20000111-00047, Order, 16 FCC Rcd
    655 (2001).

[^161]: *See Loral Skynet do Brasil, Petition for Declaratory Ruling to
    Add Estrela do Sul 1, a Ku-band Satellite, to the Permitted Space
    Station List*, File Nos. SAT-PDR-20021010-00196,
    SAT-WAV-20031202-00352, and S2474, Order, DA 03-4095 (rel. Dec. 23,
    2003).

[^162]: *See European Telecommunications Satellite Organization
    (EUTELSAT), Petitions for Declaratory Ruling to Add EUTELSAT
    Satellites ATLANTIC BIRD™ 1 at 125º W.L. and ATLANTIC BIRD™ 2 at 8º
    W.L. to the Commission's Permitted Space Station List*, File Nos.
    SAT-PDR-10010118-00011 and SAT-PDR-20010207-00012, Order, 16 FCC Rcd
    15961 (2001).

[^163]: *See Hispasat S.A., Petition for Declaratory Ruling for
    Inclusion of Hispasat-1B on the Permitted Space Station List*, File
    No. SAT-PDR-20020208-00016, Order, 18 FCC Rcd 3277 (2003); *Hispasat
    S.A., Petition for Declaratory Ruling to Add HISPASAT-1D Satellite
    at 30º W.L. to the Permitted Space Station List*, File NO.
    SAT-PDR-20030430-00090, Order, 18 FCC Rcd 21142 (2003).

[^164]: *See Horizons Satellite LLC, Petition for Declaratory Ruling to
    Add Horizons I to the Permitted Space Station List*, File No.
    SAT-PDR-20030210-00015, Order, 18 FCC Rcd 24745 (2003); *Horizons
    Satellite LLC, Application for Modification of Permitted List
    Authorization*, File No. SAT-PPL-20040112-00004, Order and
    Authorization, 19 FCC Rcd 20349 (2004) (permitting one-way DTH
    service).

[^165]: *See Mabuhay Philippines Satellite Corp. Petition for
    Declaratory Ruling, et al*., Order and Authorization, 15 FCC Rcd
    23671 (2000).

[^166]: *See Binariang Satellite Systems SDN BHD, Petition for
    Declaratory Ruling to Add MEASAT-2 to the Permitted Space Station
    List*, File No. SAT-PDR-20030501-00091, Order, 18 FCC Rcd 16623
    (2003).

[^167]: *See Loral SpaceCom Corporation, Petition for Declaratory Ruling
    to Add Telstar 13 to the Permitted Space Station List*, File No.
    SAT-PDR-20020315-00025, Order, 18 FCC Rcd 16374 (2003). Intelsat
    acquired Telstar 13 from Loral Spacecom Corporation in 2004, and
    operates it as IA-13. *Loral Satellite, Inc, and Loral Spacecom
    Corp., Assignors and Intelsat North America, LLC, Assignee,* Order
    and Authorization, 19 FCC Rcd 2404 (2004).

[^168]: SIA Comments at 6-7 (*quoting* FCC, 2004 Section 43.82 Circuit
    Status Data, at 4 n.12 (Dec. 2005)).

[^169]: *Id.* at 7.

[^170]: *See, e.g.,* International Telecommunication Union, ITU-D Study
    Group 1, Rapporteur For Question 17/1, Satellite Regulation In
    Developing Countries, *Report on Satellite Regulation In Developing
    Countries* (2004) ("*ITU-D Satellite Regulation Report*") at 7-8.

[^171]: The United States Trade Representative (USTR) explains that
    "\[t\]rade barriers or other trade distorting practices affect U.S.
    exports to another country because these measures effectively impose
    costs on such exports that are not imposed on goods produced
    domestically in the importing country." 2006 NTE Report, Foreword.

[^172]: 47 U.S.C. § 47 U.S.C. § 703(b)(3).

[^173]: *Notice* at 5.

[^174]: 47 U.S.C. § 703(b)(3).

[^175]: *See supra* § III.E.5.

[^176]: SIA Comments, Att. 1 at 3-4.

[^177]: Stratos Comments at 1.

[^178]: *Id.* at 2.

[^179]: *Id*. at 2-3.

[^180]: EchoStar Comments at 6.

[^181]: USTR is required to submit an annual report on significant
    foreign trade barriers to the President, the Senate Finance
    Committee, and appropriate committees in the House of
    Representatives in accordance with section 181 of the Trade Act of
    1974, as amended by section 303 of the Trade and Tariff Act of 1984,
    section 1304 of the Omnibus Trade and Competitiveness Act of 1988,
    section 311 of the Uruguay Round Trade Agreements Act, and section
    1202 of the Internet Tax Freedom Act. The NTE Report is based upon
    information compiled within USTR, the U.S. Departments of Commerce
    and Agriculture, and other U.S. Government agencies, and
    supplemented with information provided in response to a notice in
    the Federal Register, and by members of the private sector trade
    advisory committees and U.S. Embassies abroad. 2006 National Trade
    Estimate Report on Foreign Trade Barriers ("*2006 NTE Report*"),
    Foreword.

[^182]: Many barriers to U.S. exports are consistent with existing
    international trade agreements. On the other hand, where measures
    are not consistent with international rules, they are actionable
    under U.S. trade law and through the World Trade Organization. *2006
    NTE Report*, Foreword.

[^183]: *Id*.

[^184]: With regards to non-WTO Members and non-WTO-covered services,
    only if the United States finds that a foreign nation's requirements
    do not provide to U.S. operators equivalent competitive
    opportunities to the baseline U.S. market requirements, does the
    United States restrict entry by foreign satellite operators.

[^185]: SIA Comments at 1. SIA lists as executive members: Artel, Inc.,
    The Boeing Company, The DirecTV Group, Globalstar LLC, Hughes
    Network Systems LLC, ICO Global Communications, Integral Systems,
    Inc., Intelsat, Ltd., Iridium Satellite LLC, Lockheed Martin Corp.
    Loral Space and Communications Inc., Mobile Satellite Ventures LP,
    Northrop Grumman Corp., PanAmSat Corp., SES Americom, Inc., and
    TerreStar Networks, Inc., and as associate members: ATK, Inc, EMC
    Inc, Eutelsat, Inc, Inmarsat plc., IOT Systems, Marshall
    Communications Corp., New Skies Satellites Inc., Spacecom Corp., and
    Stratos Global Corp. *Id.* at n.2.

[^186]: NTE groups trade barriers into ten different categories: (1)
    Import policies; (2) Standards, testing, labeling and certification;
    (3) Government procurement; (4) Export subsidies; (5) Lack of
    intellectual property protection; (6) Services barriers; (7)
    Investment barriers; (8) Anticompetitive practices; (9) Trade
    restrictions affecting electronic commerce; and (10) Other barriers.
    *2006 NTE Report*, Foreword.

[^187]: SIA Comments, App. A at 3.

[^188]: Stratos Comments at 3.

[^189]: SIA Comments, App. A at 3.

[^190]: USTR noted that both the Philippines and Columbia had not made
    commitments for various satellite services under the WTO. *2006 NTE
    Report* at 173, 531.

[^191]: SIA Comments, App. A at 4.

[^192]: EchoStar Comments at 5-6.

[^193]: USTR cited Brazil for subjecting foreign satellite television
    programmers to an 11 percent remittance tax unless the programmer
    invests 3 percent of its remittances into co-production of Brazilian
    audio-visual services. *2006 NTE Report* at 45. USTR cited Singapore
    for restricting the use of satellite receiving dishes and has not
    authorized direct to user satellite television services*. Id*. at
    602. USTR cited Canada and Korea for restricting the retransmission
    of foreign programming. *Id*. at 76, 408.

[^194]: SIA Comments at 3 and Stratos Comments at 3-4, Appendix A. *See
    also ITU-D Satellite Regulation Report* at 20, 67.

[^195]: USTR noted that India requires foreign satellite operators to
    have an Indian partner and that Russia requires foreign satellite
    operators to have a local presence. *2006 NTE Report* at 325, 559.
    In addition, the Russian Federation maintains a preference for the
    use of Russian satellite communications systems. *Id*. at 557.

[^196]: SIA Comments, Appendix A at 3.

[^197]: *See ITU-D Satellite Regulation Report* at 20, 67.

[^198]: SIA Comments, Appendix A at 4. *See also* Stratos Comments at 3.

[^199]: Typically, 20-30 Ku-band spot beams are used to provide coverage
    of the entire USA. At Ka-band, spot beam diameters may be small and
    capable of tighter targeting of designated metropolitan areas. *See,
    e.g.,* Fred Dawson, "Next Generation FSS May Prove Formidable," CED
    (May 1, 1997), available at http://www.cedmagazine.com
    /article/ca6261705.html (visited Nov. 1, 2006); Jeffrey Krauss,
    "Sorting Out The Satellite Confusion," CED (July 1, 1997), available
    at http://www.cedmagazine.com/article/ca6261652.html (visited Nov.
    7, 2006).

[^200]: *See* Owen D. Kurtin, "Dollars & Sense: A Closer Look: DVB And
    IPTV," Satellite Today (July 1, 2006), available at
    http://www.satellitetoday.com/cgi/pub/via/via07010607.html (visited
    Nov. 7, 2006).

[^201]: In error detection and correction coding, each data signal
    conforms to specific rules of construction (code) so that departures
    from this construction in the received signal can generally be
    automatically detected and/or corrected.

[^202]: Phase-shift keying ("PSK") is a digital modulation scheme that
    conveys information by changing, or modulating, the phase of the
    reference carrier wave. In 8-PSK, eight distinct phases are used,
    each corresponding to a unique pattern of binary data bits.

[^203]: Quadrature amplitude modulation ("QAM") is a modulation scheme
    which conveys information by changing the amplitude of two carrier
    waves that are out of phase with each other by
    90[°](http://en.wikipedia.org/wiki/Degree_(angle)). In 16-QAM,
    sixteen discrete modulation symbols are represented by various
    combinations of the relative amplitudes of each of the two
    quadrature waves.

[^204]: Demand assignment refers to the assignment of varying amounts of
    capacity to particular users depending upon their fluctuating
    traffic requirements. When multiple users share a communication
    channel on a real-time basis, demand assignment optimizes channel
    capacity utilization at the expense of system complexity.

[^205]: For further discussion, *see* John Sutton, *Sunk Costs and
    Market Structure: Price Competition, Advertising, and the Evolution
    of Concentration* (Cambridge, MA; MIT Press, 1991).

[^206]: We note that accounting costs are not strictly equivalent to
    economic costs. Accounting costs are historical, where economic
    costs are future-oriented, reflecting the opportunity cost of using
    an input of production, such as labor, materials, or durable assets
    in a particular application.

[^207]: These 'sunk' costs are predominately 'fixed' costs. Network
    costs tend to be totally fixed in that they do not vary with output,
    while the operating costs are largely fixed in nature, but may vary
    to some extent with the level of production, *i.e.*, programming
    expenditure.

[^208]: Operating costs or expenses are accounting costs related to the
    production of goods or services sold, such as R&D and sales and
    marketing; see G. Porter and C. Norton, *Financial Accounting*,
    Second Edition (Dryden Press, 1995), 560-61.

[^209]: Operating expenses are taken from income statements of satellite
    operators, and a weighted average cost of capital and an annual
    depreciation rate are applied to the estimated replacement value of
    an operator's satellite fleet to estimate annual platform cost. This
    estimated cost is a proxy for the single-period, implicit annual
    economic rental cost of such assets.

[^210]: Estimated Network Costs were based upon the replacement value of
    the satellite fleet as of 12/31/2005 multiplied by a weighted
    average cost of capital of 8.5%, the average for the DTH firms as
    estimated by Bernstein, and an average depreciation rate based on a
    12 year design life.

[^211]: Discretionary costs in the numerator were calculated using
    sales, marketing, R&D, and programming costs contained in
    publicly-filed reports for relevant companies.

[^212]: Intelsat, Ltd., Annual Report on Form 10-K Pursuant to Section
    13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal
    Years ended December 31, 2001-2005 available at
    http://www.sec.gov/edgar.shtml (visited July 12, 2006); PanAmSat
    Holding Corp., Annual Report on Form 10-K Pursuant to Section 13 or
    15(d) of the Securities Exchange Act of 1934 for the Fiscal Years
    ended December 31, 2001-2005 available at
    http://www.sec.gov/edgar.shtml (visited July 12, 2006); SES, Annual
    Report on Form 10-K Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934 for the Fiscal Years ended December
    31, 2001-2005 available at http://www.sec.gov/edgar.shtml (visited
    July 12, 2006); New Skies Satellites B.V., Annual Report on Form
    10-K Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the Fiscal Years ended December 31, 2001-2005 available
    at http://www.sec.gov/edgar.shtml (visited July 12, 2006).

[^213]: Possibly the most useful general bargaining models for
    understanding in broad terms satellite carrier and wholesale
    customer behavior are found in the literature on alternating offers
    over finite and infinite time. *See*, Areal Rubinstein, "Perfect
    Equilibrium in a Bargaining Model," *Econometrica* 50 (1982):
    97-110. A useful treatise covering numerous aspects of modern
    bargaining theory is Abhinay Muthoo, *Bargaining Theory With
    Applications* (Cambridge, UK: Cambridge University Press, 1999).

[^214]: This discussion addresses the major long-term contractual issues
    that are most directly related to investment decisions. We note that
    there may be other markets in which the dynamics of negotiation may
    differ somewhat, such as the spot market for transponder capacity
    for satellite news gathering, which relates to short-run needs of
    customers.

[^215]: As emphasized in transaction cost economics, such contracts are
    necessarily *incomplete,* and an adaptable mechanism is required to
    allow the resolution of new problems or disputes which may arise
    during execution of the contract*. See* Oliver E. Williamson, *The
    Economic Institutions of Capitalism* (New York: The Free Press,
    1985), Chapter 2.

[^216]: *See supra* at ¶ 146-147.

[^217]: It should be recalled that there are a number of other factors
    besides outside options that will affect price.

[^218]: Based upon the replacement value of the satellite fleet as of
    December 31, 2005, multiplied by a weighted average cost of capital
    of 8.5%, the average for the DTH firms, as estimated by Bernstein,
    and an average depreciation rate based on a 12 year design life, as
    estimated by Futron Corp.

[^219]: Operating costs in the numerator were created using sales,
    marketing, R&D, and programming costs contained in publicly filed
    company reports.

[^220]: XM and Sirius 10-Ks.

[^221]: *Id*.

[^222]: See F.M. Scherer and David Ross, *Industrial Market Structure
    and Economic Performance* (Third Edition, Houghton Mifflin Co.,
    Boston MA, 1990) 4-5.

[^223]: Market power sustained over a substantial period of time often
    signals the existence of some impediment to market entry, although
    the impediment need not constitute a policy‑relevant barrier to
    entry. A policy‑relevant barrier to entry (1) is any cost that a
    potential entrant must incur in the course of market entry that an
    incumbent firm need not incur, and (2) implies a net loss in
    consumer welfare if the barrier persists. *See* *Annual Assessment
    of the Status of Competition in the Market for the Delivery of Video
    Programming,* First Annual Report, 9 FCC Rcd 7442, 7542 n.532, ¶ 205
    (1994).

[^224]: For example, the European Commission defines "effective
    competition" as a continuing absence of players with significant
    market power or a "dominant" position in the market. OECD, Working
    Party on Telecommunication and Information Services Policies,
    *Indicators for the Assessment of Telecommunications Competition* at
    6 (Jan. 17, 2003),
    http://www.oecd.org/dataoecd/4/22/2496809.pdf#search=%22%22european%20commission%22%
    20%20%2B%20%22continuing%20absence%22%20%2B%20%22significant%20market%20power%22%22
    (visited Sept. 13, 2006).

[^225]: *See* *supra* ¶¶ 69-71.

[^226]: Dennis W. Carlton & Jeffrey M. Perloff, *Modern Industrial
    Organization* 4^th^ Int'l Ed. (Wesley, 2005) 137, 782*; see also
    id.* 195-96 (New York: Harper-Collins, 1994).

[^227]: The Lerner Index is defined as L = \[(p ‑ MC)/p\] where p and MC
    measure the unit output price and the marginal cost of production,
    respectively.

[^228]: When measuring the extent of market power of a given firm, the
    market and the firm demand curves must be carefully distinguished.
    If the entire market is served by a single firm, *i.e*., a monopoly,
    then the market demand curve is equivalent to the firm demand curve.
    Under perfect competition, each firm\'s demand curve is perfectly
    elastic and the market demand curve does not coincide with the firm
    demand curve.

[^229]: *See, e.g.*, *Motion of AT&T Corp. to Be Reclassified as a
    Non-Dominant Carrier,* Order, 11 FCC Rcd 3271, 3305-07, ¶¶ 63-66
    (1995).

[^230]: *See* SIA/Futron Study at 8-11. An exception to this industry
    average is SES Americom, which does provide data. That data
    indicate, however, that its net income is 21% of that of SES Global.

[^231]: Data used in this table do not reflect the recent mergers of
    Intelsat with PanAmSat or New Skies with SES.

[^232]: Company price data necessary for a pure Lerner Index are not
    readily available. The Commission does not require prices for
    satellite communications services to be filed in tariffs; rather,
    wholesale prices are negotiated on a customer by customer basis and
    are not published. In most cases, it is also difficult to compute
    reliable estimates of marginal cost at the equilibrium level of
    output. As a proxy for pricing data, we rely upon the ratio of
    operating cash flow to sales, or of free cash flow (operating cash
    flow minus investment) to sales reported in individual company
    financial statements.

[^233]: Data used in this table do not reflect the recent mergers of
    Intelsat with PanAmSat or New Skies with SES.

[^234]: PanAmSat Corporation 10-Ks at 48.

[^235]: SES Annual Report at 87, available at
    http://www.ses-global.com/ses-global/site/Sections/mediaroom/
    publications/financial/index/php, (visited July 20, 2006).

[^236]: New Skies Satellites B.V., Annual Report on Form 10-K Pursuant
    to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
    the Fiscal Years ended December 31, 2001-2005 ("New Skies 10-Ks") at
    34, available at http://www.sec.gov/edgar.shtml (visited July 11,
    2006).

[^237]: Intelsat 10-Ks at 38.

[^238]: Intelsat, PanAmSat, SES and New Skies 10-Ks.

[^239]: Data used in this table do not reflect the recent mergers of
    Intelsat with PanAmSat or New Skies with SES.

[^240]: Intelsat, PanAmSat, SES and New Skies 10-Ks.

[^241]: Markets for satellite communications services are characterized
    by substantial fixed costs: more than \$100,000,000 in capital to
    construct and launch a satellite, and the high cost of leasing
    transponders shown in Table 7 above.

[^242]: *Sizing the Teleport Market*, World Teleport Association (March
    2005).

[^243]: *See* SIA/Futron Study at 11.

[^244]: A Hughes spokesman notes that 'we use the appropriate platform
    to meet the needs of our customers' and Gilat has formally teamed
    with Cisco for its VSAT Network Module. Jason Bates, *The Future of
    Private Networks: What Next for VSAT Systems*, Via Satellite (Aug.
    2006).

[^245]: Spacenet's Portfolio of Services, available at
    http://www.spacenet.com/services/connexstar.asp (visited Aug. 9,
    2006).

[^246]: XM 10-Ks.

[^247]: Sirius 10-Ks.

[^248]: In fact, for the second quarter of 2006, XM's loss increased
    from \$ 148 million in 2005 to \$ 231 million, even though revenue
    nearly doubled over the same period. Sarah McBride, *XM Satellite
    Posts Wider Loss, Lowers Subscriber Targets*[,]{.smallcaps} Wall St.
    J. at A12 [(]{.smallcaps}July 28, 2006). Also, Sirius has reported a
    comparable loss of \$238 million and is forecast to have continuing
    losses at least through 2008 by UBS Investment Research. UBS First
    Read, *Sirius Satellite* (July 6, 2006).

[^249]: XM and Sirius 10-Ks.

[^250]: Arianespace, *Mission Update,*
    http://www.arianespace.com/site/news/news_sub_missionupdate2_index.html
    (visited Dec. 29, 2006)

[^251]: WildBlue, *About Wildblue*,
    http://www.wildblue.com/aboutWildblue/vs_dial_up.jsp, and *Get
    WildBlue*,
    http://www.wildblue.com/getWildblue/doServiceAvailabilitySearchAction.do
    (both visited Oct. 31, 2006).

[^252]: *HughesNet Broadband Unbound* available at
    http://www.direcway/bz/orderhughesnet.html (visited Aug. 10, 2006).

[^253]: Starband, Starband Telecommuter available at
    http://www.starband.com/telecommuter/index.asp (visited Aug. 30,
    2006).

[^254]: Hughes Commun., Inc. Overview, available at
    http://www.hughes.com (visited Aug. 10, 2006).

[^255]: Peter B. de Selding, *WildBlue On Par with DirecWay in New
    Customer Sign-ups,* Space News (Jan. 16, 2006), available at
    http://www.space.com/spacenews/archieve06/WildBlue_011606.html
    (visited Aug. 8, 2006).

[^256]: Spaceway, *Hughes Communications Inc. Announces Third Quarter
    2006 Results,*
    http://www.spaceway.com/HUGHES/Doc/0/OVSTPRT5QUCKFDAQF7CSGLI16F/11-14-06_HCI_Q3_Earnings_Release_Final.pdf
    (visited December 29, 2006).

[^257]: The Bridge, *The Hughes Net Business Case*, Aug. 25, 2006.

[^258]: *Wildblue completes \$350M Debt Funding Deal*, Communications
    Daily (Aug. 22, 2006).

[^259]: *Starband stabilizes under New Ownership*, Space News Business
    Report (Aug. 25, 2006).