Satellite hopefuls urge Ottawa to exclude Telesat from orbital slot race

Potential new players in the Canadian facilities-based satellite market are urging the federal government to exclude the incumbent from a competition to award one of two remaining Canadian orbital slots for fixed satellite services (FSS). Four companies or partnerships -- including at least two foreign players -- want to challenge Telesat Canada's satellite monopoly, saying competition will lower satellite costs, promote efficiency, and facilitate the development of innovative, higher value services. The satellite hopefuls warn that if Canada ever expects to have a competitive facilities-based satellite market, the remaining two FSS orbital slots cannot be assigned to Telesat. This position will no doubt meet fierce resistance from Telesat, and will likely result in a heated debate about the future of Canada's satellite market. The number of companies or partnerships filing expressions of interest with Industry Canada to compete with Telesat in the FSS market came as a surprise to some industry observers, given the high up-front costs and risks associated with building and operating a satellite (CCR, November 10/99). A fixed satellite will cost upwards of $500 million to build by the time the licence holder is in a position to begin construction. As some industry observers expected, Canadian Satellite Communications Inc (Cancom) submitted an expression of interest to develop and operate a fixed satellite in the orbital position located at 118.7 degrees West longitude. Industry insiders are already picking Cancom as the front-runner if the federal government stays on course to open up competition in all telecommunications sectors. Cancom is controlled by Shaw Communications Inc, Canada's second largest cable operator, with Rogers Communications Inc, the country's largest cableco holding a small stake as well. Other companies or partnerships submitting expressions of interest to use the slot include 3692175 Canada Inc, which lists Luc Joly as a director, and 3037937 Nova Scotia Company, a company associated with Loral Space & Communications Ltd and Loral Skynet, one of the "big three" US satellite players. EUTELSAT, the European satellite heavyweight, has been given more time to file an expression of interest. At press time, the expressions of interest had yet to be released publicly by the department, so it's unclear exactly who is behind 3692175 Canada or who the Canadian partners are in the 3037937 and EUTELSAT partnerships. However, publicly available written comments on a potential competitive licensing process to award the orbital slot shed some light on the satellite proposals. Cancom says getting into the facilities-based satellite business would fill an important void in the company's current lines of business and enable it to become a fully integrated provider of satellite communications services. It would also create a strong competitor to Telesat, a unit of BCE Inc. Cancom currently competes with BCE's satellite unit, BCE Media Inc, in all areas except the operation of satellite facilities. "Cancom's desire to launch and operate a fixed satellite is not only a crucial ingredient in its overall business strategy, it is also consistent with Industry Canada's overriding policy goal of promoting competitive entry in all aspects of the telecommunications market in Canada, including satellite services," Cancom states in its comments on a potential competitive licensing process. Cancom and the other interested parties want Industry Canada to develop eligibility criteria to promote competitive alternatives in the supply of satellite services to all regions of Canada, including the exclusion of Telesat from this or any other FSS allocation process. The irony here is that Telesat was the one to kick-start this competitive allocation process when it applied for the 118.7 degrees West longitude orbital slot in early October. "If Telesat is authorized to use Canada's remaining unassigned FSS orbital positions, then it is extremely unlikely that there will ever be a competitive alternative to Telesat, and Canada will be required to rely solely on foreign satellite operators, with some coverage of Canada, to stimulate competition, innovation, choice and other Canadian policy objectives throughout Canada, including the far North," Cancom states. Cancom also wants Industry Canada to prohibit, by condition of licence, the entity that is granted authority to use the orbital position from transferring the licence to Telesat or any of its affiliates for a period of five years following the issuance of the licence. The satellite hopefuls note that Industry Canada has used eligibility criteria in the past to achieve a more competitive telecommunications marketplace. Dominant incumbents were deemed ineligible for certain new frequencies to encourage new players to enter the market during the recent 24/38 GHz spectrum auction. The interested parties say this approach should guide the department in this process. 3037937 Nova Scotia Company argues that the integrity of the competitive licensing process for the orbital slot would be seriously undermined if Telesat is allowed to participate. "Telesat will not be applying for an orbital position in like manner as other contenders, for Telesat alone will be applying to preserve its market power," the company states in its comments. "Telesat will attempt to safeguard the future profit stream it expects to receive by dint of its market power, and as such, it has an incentive to make offers that no economically rational competitor can be expected to match." For its part, Telesat suggests that it's the only company large and experienced enough to advance a strong Canadian presence in the global satellite market. Industry observers expect the company to dismiss proposals involving foreign players as nothing more than attempts to lock up increasingly scarce orbital positions. It should come as no surprise that all interested parties strongly oppose the use of an auction to award the orbital position, preferring instead a comparative selection process. Telesat argues that an auction is not the best way to allocate the orbital slot because there's no incentive or advantage for a bidder to surpass minimum eligibility standards or qualifications usually inherent in spectrum auctions.

Satellite hopefuls urge Ottawa to exclude Telesat from orbital slot race

Broadcast | December 22, 1999

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