Less than one week after announcing its roll-up into a
single, national company, PrimeStar Inc. faced another delay in its long-awaited plans to
offer a high-power direct-broadcast satellite service.
PrimeStar said last Tuesday that it will postpone the
introduction of its 120-channel DBS service from the 119 degrees west orbital location
until the Federal Communications Commission rules on a request by Tempo Satellite Inc. to
extend the license at 119.
On April 3, Tempo filed for the extension to use 11
frequencies at 119 degrees. The license is set to expire May 1 if Tempo does not have a
DBS service in operation.
Dan O'Brien, president and chief operating officer of
PrimeStar, said he expects the FCC to rule on the request as early as Friday. Comments on
the extension request are due to the FCC early this week.
PrimeStar, now a privately held subsidiary of TCI Satellite
Entertainment Inc. (TSAT), has a deal with Tempo, also a TSAT subsidiary, to use the
spectrum for retail and wholesale DBS services. PrimeStar has eyed high-power DBS spectrum
for years so that it could compete more aggressively by offering consumers a smaller,
PrimeStar announced in early April that it would begin
test-marketing its high-power DBS service at 119 by April 17 in select RadioShack stores.
The move would have protected TSAT's interest in the satellite license. But last
week, PrimeStar said in a prepared statement, "The FCC indicated some concerns
regarding our launch of a retail service at 119 while the transfer applications are
O'Brien said in an interview that PrimeStar is trying
to be as cooperative as possible in its dealings with the FCC. To appease the agency,
PrimeStar is postponing the 119 retail launch, "at some risk to our
credibility," O'Brien said.
PrimeStar has admitted that its primary goal is to obtain
approval of the license transfers for 28 transponders at the 110 degrees west spectrum
from MCI Communications Corp. to PrimeStar.
The license at 119 has been seen by many as a bargaining
tool to help PrimeStar gain the license transfer for 110. It is widely believed that
PrimeStar would be asked to divest of the 119 assets as one condition for gaining access
But the 119 assets are also a backup that would allow
PrimeStar to offer a high-power DBS service in case the 110 license transfer does not go
through. PrimeStar would prefer to launch its DBS services at 110 because it could offer a
more robust, 250-channel service there. And PrimeStar ultimately hopes to sell its 119
spectrum to help defray the costs of its proposed merger with News Corp.'s U.S. DBS
If the FCC does not grant Tempo's license extension in
a timely manner, O'Brien said, "We will absolutely protect our investment"
by launching the retail service at 119.
O'Brien has said that initial marketing of the DBS
service at 119 would be limited in scope until the FCC rules on the license transfer for
110. If PrimeStar launches a service at 119 and then gains the spectrum at 110, it would
have to migrate its customers to the new service before it could divest of its spectrum at
119. Even given a best-case scenario, PrimeStar is not expected to have a DBS bird
operational at 110 until the end of the year.
Further delays in FCC decision-making could push that date
back even further if PrimeStar loses the launch window for its high-power satellite at
The license transfer for 110 must also be approved by the
Department of Justice. O'Brien said PrimeStar had meetings scheduled with the DOJ
last week and this week. While the DOJ had not yet raised the issue of a consent decree --
which would set the conditions by which PrimeStar might be granted the license transfer at
110 -- O'Brien said, "We've raised the issue. That's what we hope the
talks will center on over the next two weeks."
News and PrimeStar have a termination clause in their
merger contract that would allow the companies to pull out of the deal if the government
does not issue a favorable ruling by June 30.
Would News take advantage of that clause?
"There's a chance, from the perspective of
protecting their assets and their shareholder value," O'Brien said, but he added
that in PrimeStar's discussions with News, he's found that "this is the
best deal for both of our companies. As long as there's a chance that the approvals
will go through, we think that they'll stay with us."