Federal Communications Commission FCC 07-34
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Annual Report and Analysis of Competitive 
Market Conditions with Respect to Domestic 
and International Satellite Communications 
Services
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IB Docket No. 06-67
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
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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
I. 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 
Commissions 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, 
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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.
II. 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 19621 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.  
A. 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  
  
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 
(continued.)
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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.
B. 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.
III. MARKET STRUCTURE
A. 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  
(Continued from previous page)    
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 Commissions 
annual Video Competition Report.  EchoStar Comments at 1-5.  We agree with EchoStar.  See Annual Assessment of 
(continued.)
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Similarly, we do not discuss mobile satellite services, as they are encompassed in the 
Commissions annual report to Congress on Commercial Mobile Radio Service (CMRS).9
B. Organizational Structure of the Satellite Communications Industry
1. 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 
(Continued from previous page)    
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 Canadas 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.
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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 
  
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 2 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 Commissions 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).
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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 LEO23 and Big LEO24 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  
  
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 Commissions 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 Commissions 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).
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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
2. Organizational Changes Since 2000
20. Todays 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 
  
27 Amendment to the Commissions 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 Commissions 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 21 E.L. and 
to Co-locate it with AfriStar-1, Order and Authorization, 21 FCC Rcd 17 (2006).
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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, 
Canadas 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. 
  
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 LLCs licenses to 
become effective upon privatization (i.e., the transfer of Intelsats 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.  
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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
3. 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 
  
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 Intelsats 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 
Intelsats 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.
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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  
C. Market Description and Identification of Market Participants
1. 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
o Wholesale Services
 Capacity for Video Contribution
 Capacity for Video Distribution
 Network Services
o Retail Services
 Fixed Satellite Broadband Services
 SDARS
?  International 
o 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 
  
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 Commissions 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.
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Commission to Congress. 49 Satellite-based MVPD providers are part of the broader MVPD 
market that is analyzed in the Commissions annual video competition report.  Similarly, mobile 
satellite services providers are participants in the broader CMRS market that is discussed in 
Commissions 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 Commissions ownership rules, or other reports to 
Congress.   
2. The Relevant Market and Market Participant Concepts
28. Relevant Market.  Describing the "relevant market," a concept drawn from 
antitrust law, is the first step in assessing whether effective competition50 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
  
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) (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. 
(continued.)
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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.  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
(Continued from previous page)    
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 (6th 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 others 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), affd, 
SBC Communications, Inc. v. FCC, 56 F.3d 1484, 1492 (D.C. Cir. 1995).
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3. 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 earths 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.
  
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.
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4. 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.
  
61 Unless otherwise specifically noted, the United States in this Report includes Alaska and Hawaii.
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TABLE 1
DOMESTIC PRODUCT MARKETS
INVOLVING SATELLITE COMMUNICATIONS SERVICES
Wholesale Services Capacity for Video Contribution
Capacity for Video Distribution
Network Services 
Retail Services Fixed Satellite Broadband Services
Satellite Digital Audio Radio Services (SDARS)
a. Domestic Wholesale Markets
(i) Capacity for Video Contribution
37. Product Market.  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 networks63 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 
  
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.
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(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.  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 Commissions Permitted 
Space Station or ALSAT list70 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 spacecrafts 
geographic coverage. 
(ii) Capacity for Video Distribution
41. Product Market.  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 
  
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 (16th 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 CNNs 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).
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stations; from the hub locations of MVPDs and MVPD networks71 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.  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 Commissions ALSAT list.77
(iii) Network Services
43. Product Market.  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 backhaul78 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, 
  
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 MVPDs 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 systems consumers.  See Newton Telecom Dictionary 400 (16th ed. 2000).
73 When a broadcast stations transmitter is close enough to an MVPD headend for the latter to receive the formers 
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 Americoms IP-PRIME, Press Release, available at 
http://www.nrtc.coop/export/main/news_policy/pdfreleases/2005_Press_Releases/NRTC_SES_final_final_release.p
df (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.
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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 
  
80 Major teleport operators include Intelsat, SES Americom, Stratos, Loral, Globecomm, CapRock, and Ascent.  
World Teleport Assn, 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).
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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.  
(iv) 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.  
  
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.
Federal Communications Commission FCC 07-34
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b. Domestic Retail Markets
(i) Fixed Satellite Broadband Service
52. Product Market.  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. 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 Commissions 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. 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, 
  
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 High-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 WildBlues 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 WildBlues 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).
Federal Communications Commission FCC 07-34
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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
(ii) Satellite Digital Audio Radio Services (SDARS)
55. Product Market.  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.  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.  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.   
5. 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.  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
  
95 Seventh ORBIT Report, 21 FCC Rcd at 6749 (2006).
95 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.
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INVOLVING SATELLITE COMMUNICATIONS SERVICES
Wholesale Services Capacity for Video Contribution
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 technologys 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  
  
99 See, e.g., International Bureau Revises and Reissues the Commissions 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); Lockheed 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 
(continued.)
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63. Geographic Markets. 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.  
D. 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.  
1. 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 sectors 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, 
(Continued from previous page)    
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, 
(continued.)
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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 Americoms 
acquisition of Columbia Communications Corporation, which combined a predominantly 
domestic FSS provider with a predominantly international FSS provider (2000); (2) SES 
Globals acquisition of GE Americom and Columbia Communications Corporation, giving SES 
Global entry into U.S. markets (2001); (3) Intelsats acquisition of Lorals 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  
2. 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. 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, 
(Continued from previous page)    
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 rivals 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.
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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 markets 
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 markets 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 elasticities111 and diversion ratios are theoretical 
concepts and are seldom calculated by individual firms, market shares are frequently used as a 
  
107 See, e.g., Synthroid Marketing Litigation, 325 F.3d 974 (7th 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 Commissions Economists 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.
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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. 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 buyers 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 
  
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.
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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 operators share of capacity. We also note that, 
because Futrons 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 SERVICES115
Video Contribution and 
Distribution116
Network Services117Operators
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
  
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.
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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.  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 
(Revenue)
96.1% 87.7% 78.5% 69.7%
Sirius Market 
Share (Revenue)
3.8% 12.3% 21.5% 30.3%
HHI (Revenue) 9,262 7,843 6,627 5,779
XM (Subscribers) 92.1% 83.9% 73.6% 64.1%
Sirius 
(Subscribers)
7.9% 16.1% 26.1% 35.9%
HHI (Subscribers) 8,538 7,298 6,138 5,400
Source: Company Annual Reports.121
  
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, 
(continued.)
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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.
E. Market Entry Conditions
1. 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 industrys 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.
(Continued from previous page)    
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 See Amendment of the Commissions 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).
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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 industrys structure, conduct, 
and the degree of competition in the industry.
2. 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 
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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 
Variable 
Cost 
($ millions)
126
(1)
Replacement 
Value of 
Satellites
($ millions) (2)
Proxy Fixed 
Cost127
($ millions)
(3)
Ratio of Fixed 
to Total 
Economic Cost
[(3)/(1)+(3)]
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. 
  
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 operators 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).
Federal Communications Commission FCC 07-34
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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 supply129 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
0
200
400
600
800
1000
1200
North America Latin America Western Europe Central Europe Russia&Central
Asia
2000
2001
2002
2003
2004
2005
  
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.
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0
100
200
300
400
500
600
700
800
900
1000
Middle East&N. Africa Sub Saharan Africa South Asia Asia Pacific
2000
2001
2002
2003
2004
2005
CHART 3
WORLDWIDE TRANSPONDER SUPPLY AND DEMAND
8000
7000
6000
5000
4000
3000
2000
2000         2001             2002          2003        2004
Transponder
Reference Supply
Transponder
Demand
% of Unused
Capacity
Transponder Supply and Demand (World, 2000-2004)
25% 28%
30%
34% 36%
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 
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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.  
3.  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 pricing131 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 carriers cost structure that are predicated on forecast levels of demand that fail to 
develop or are delayed.  
  
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).
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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. 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 carriers 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. 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. 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 carriers 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. 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. 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 
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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. 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 customers requirements change.
105. Switching Costs. 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 customers flexibility to choose a 
different satellite carrier in response to a change in price or quality of service.132
4. 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
  
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); 
(continued.)
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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.
(Continued from previous page)    
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.
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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.
5. United States Market Entry Standard
a. 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. 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 Commissions DISCO II Order144
implemented the satellite market-opening commitments made by the United States in the WTO 
BTA.145
  
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 Commissions 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 ReceiveOnly 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 Commissions 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).
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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. 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 stations 
home market' and, in certain cases, the non-U.S.-licensed space stations 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
  
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 Commissions 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).
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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 stations home market.154  
b. New International Entrants to U.S. Markets
117. FSS. 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
  
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 Canadas ANIK F3, a Canadian-licensed satellite, to receive 
DTH FSS provided public interest benefits by facilitating EchoStars 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 Commissions 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 Telecomicaes 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 125 W.L. and ATLANTIC BIRD 2 at 8 W.L. to the Commissions 
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 
(continued.)
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Mabuhay Philippines Satellite Corp.,165 Binariang Satellite Systems SDN BHD (Malaysia),166 and 
Intelsat.167  
6. 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 
(Continued from previous page)    
Ruling to Add HISPASAT-1D Satellite at 30 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).
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of restricting access to that nations 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
a. 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. 
b. 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  
(i) 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; 
  
173 Notice at 5.
174 47 U.S.C.  703(b)(3).
175 See supra  III.E.5.
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(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 Inmarsats mobile satellite services it has encountered barriers in 
many, if not a majority of the worlds 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 USTRs 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 
  
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.
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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.
(ii) Discussion
129. We find that the Commissions 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 nations market for satellite services.  The Commissions 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
c. 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.
  
184 With regards to non-WTO Members and non-WTO-covered services, only if the United States finds that a 
foreign nations 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.
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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 countrys 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 .  
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. 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. 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 
  
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.
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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. 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. SIA notes that the United States does not require an applicant to 
complete international coordination before granting that applicants 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. 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  
F. 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.  
  
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.
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1. 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 coding201 and higher-order modulation 
techniques (e.g., 8PSK,202 16-QAM203) permitting significant increases in data rates within a 
given spectrum bandwidth (higher bit/s/Hz); and demand assignment204 techniques that 
maximize the number of satellite users that can access a given resource.
  
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.  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. 
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2. 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 operators business model.
IV. 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 consumers willingness to pay for the firms output compared to what is 
offered by competitors.    
A. 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 
  
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).  
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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.  
  
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.
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TABLE 6
RATIO OF OPERATING TO NETWORK SUNK COSTS 
FOR WHOLESALE SATELLITE OPERATORS209
Satellite 
Carrier
Estimated 
Replacement 
Cost of 
Satellites
($ millions)
Weighted 
Average 
Cost of 
Capital 
@8.5%
Per Annum
($ millions)
Depreciation@ 
8.3% Per 
Annum
($ millions)
Estimated 
Network 
Cost210
($ millions)
Ratio of 
Operating to 
Network 
Costs211
Intelsat 8,400.0 714.0 840.0 1,554.0 0.098
PanAmSat 3,300.0 280.5 330.0 610.5 0.184
SES 8,472.0 720.1 847.2 1,567.3 N/A
New Skies N/A N/A N/A N/A N/A
Source: Company Annual Reports.212
149. For wholesale markets, the Table shows that network costs dominate the cost 
structure.    
150. Price Competition. 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 
  
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 operators 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).
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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 
  
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.
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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.
  
217 It should be recalled that there are a number of other factors besides outside options that will affect price.
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TABLE 7
TRANSPONDER LEASE RATES AND EXCESS SUPPLY OF TRANSPONDERS
Region 2003/2004 Average 
Revenue/Transponder in 
Millions of $
Excess Supply/Total Supply
(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 
Africa
1.41 28.3 %
Latin America 1.36 38.8 %
Central Europe 1.40 52.0 %
Russia and Central Asia 1.31 52.6 %
Southern Asia 0.87 55.7 %
Source: Euroconsult 2006 Report.
B. 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 customers 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.   
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TABLE 8
RATIO OF OPERATING TO NETWORK SUNK COSTS 
FOR SDARS OPERATORS
Satellite 
Carrier
Estimated 
Replacement 
Cost of 
Satellites     
($ millions)
WACC 
@8.5%
Per Annum 
($ millions)  
Depreciation
@ 8.3% Per 
Annum
($ millions)
Estimated 
Network Cost218
($ millions)
Ratio of 
Operatin
g to 
Network 
Costs219
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.  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
V. 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 
  
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.
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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.  
A. Analytical Framework
160. Introduction. 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 markets performance may be sub-optimal 
relative to a theoretical benchmark of perfection, but effective competition can be 
developing.224  
161. Description of Economic Tests. 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. As described in Section III.D.2, a markets 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
  
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.
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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.  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.  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.  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 
  
226 Dennis W. Carlton & Jeffrey M. Perloff, Modern Industrial Organization 4th Intl 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. 
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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.  
B. Data and Application of Analytical Framework
1. 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 parents 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. 
  
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.
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171. Wholesale Market Shares.  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 customers 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.  
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TABLE 10
PERCENT OF DOMESTIC TRANSPONDERS
ACTIVATED BY FIXED SATELLITE OPERATORS231
TV Relay (Video 
Contribution and 
Distribution)
MVPD Network Services(VSATs)
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 
Americom) 33% 34% 0% 14% 37% 25%
New Skies N/A 3% N/A 0% N/A 9%
Other 7% 15% 0% 0% 20% 9%
DirecTV (self-supplied) 67% 52.5%
EchoStar (self-supplied) 33% 33.5%
Note: Percentages reflect the operators' proportion of utilized capacity for 
each application.
Source: Futron Corporation
173. Profitability Ratios and Lerner Indices for Wholesale Markets. 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
  
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.  
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TABLE 11
PROFITABILITY RATIOS
FOR MAJOR WHOLESALE FIXED SATELITE OPERATORS233
Profit/Sales
2001 2002 2003 2004 2005
Averag
e
Standard 
Deviation
St. Dev./
Average
PanAmSat
234 0.0352 0.1047 0.1198
-
0.0955 0.0845 0.1131 0.1005 0.8885
SES235 0.5360 0.3921 0.3078 0.3646 0.3782 0.3957 0.0746 0.1885
New
Skies236 0.1584
-
0.0234 0.0549
-
0.0243 N/A 0.0414 0.0669 1.6159
Intelsat237 0.4603 0.2764 0.1914
-
0.0371
-
0.2777
0.1226
6 0.1959 1.5971
Source: Company Annual Reports.238
TABLE 12
PROXY LERNER INDICES
FOR MAJOR WHOLESALE FIXED SATELITE OPERATORS239
Lerner Index
2001 2002 2003 2004 2005 Average
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, 
  
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.
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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.  
a. 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 sectors 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
  
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 Spacenets Portfolio of Services, available at http://www.spacenet.com/services/connexstar.asp (visited Aug. 9, 
2006).
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2. 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.
a. 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.  XM246 had its first full 
commercial year in 2002, followed by Sirius247 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. 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. 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 
  
246 XM 10-Ks.
247 Sirius 10-Ks.
248 In fact, for the second quarter of 2006, XMs 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, Wall St. J. at A12 (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.  
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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.
b. 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 companys 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 companys 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 PROVIDERS
WildBlue251
Downstream 
speed
0.5 Mbps 1.0 Mbps 1.5 Mbps
Upstream 
speed
128 Kbps 200 Kbps 256 Kbps
Upfront cost $ 299 $ 299 $ 299
Monthly price $ 49.95 $ 69.95 $ 79.95
Hughes252
Downstream 
speed
0.5-0.7 Mbps 0.8 -1.0 Mbps 1.5 Mbps
Upstream 
speed
N/A N/A N/A
Upfront cost $ 299.98 $ 299.98 $ 699.98
Monthly price $ 59.00 $ 69.00 $ 199.00
Starband253
  
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).
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Downstream 
speed
Up to 10x 
faster than 
dialup
0.75 Mbps Up to 20X faster 
than 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.  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 
business257) 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.
VI. 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 
(Continued from previous page)    
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).
Federal Communications Commission FCC 07-34
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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.  
VII. PROCEDURAL MATTERS
192. This First Report is issued pursuant to authority contained in section 703, 47 
U.S.C.  703.
VIII. 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
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APPENDIX A
List of Parties Filing Comments and Other Papers
Comments
DIRECTV, Inc. 
EchoStar Satellite, L.L.C.
Inmarsat plc
Mobile Satellite Ventures Subsidiary LLC
Stratos Global Corporation
The Satellite Industry Association
Reply Comments
EchoStar Satellite, L.L.C.
Inmarsat plc
Iridium Satellite, LLC
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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.
 Brazil
 China
 Egypt
 India
 Indonesia
 Russia
Countries Identified as Not Providing National Treatment (i.e., Most Favored Nation status) for 
U.S. Satellite Operators.
 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.
 Canada
 India
 Kazakhstan
 Russia
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Countries Identified as Requiring a Local Presence or Local Partner for U.S. Satellite Operators.
 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.
 Brazil
 Russia
Countries Identified as Having a Monopoly for the Domestic Satellite Operator.
 Egypt (duopoly)
 Indonesia
 Kazakhstan
 Russia
 South Africa
 Thailand
 Vietnam