U.S. Senators, FCC Weigh in on Dispute Between SES and OnSat

An ostensibly routinedecision by satellite fleet operator SES to cancel service to a customer morethan a year behind in its payments has been caught in the Washington politicalspotlight amid claims that "life and death situations" hang in thebalance if the service is canceled.

The intervention of two U.S. senators and the chairman of the U.S. Federal Communications Commission (FCC) havegiven the customer, OnSat Network Communications, a few more days of servicefrom a transponder the company leases aboard a satellite operated byLuxembourg-based SES' Americom division.

Frustrated SES officials,clearly perplexed at how the matter has developed, said they will nonethelessswitch off the OnSat service Aug. 11, according to an Aug. 4 letter from RobertJ. Kisilywicz, SES Americom's chief financial officer, to FCC Chairman KevinMartin.

OnSat uses the SESsatellite capacity to provide communications to the Navajo Nation's publicsafety agencies.

As of Aug. 7 Park City,Utah-based OnSat continued to hope that public pressure would force SES tochange its mind about cutting off the company's service. In an Aug. 6 e-mailresponse to questions from Space News, OnSat Chief Executive David Stephenssaid: "It is the issue of public safety and endangerment to people's livesthat have led to the OnSat's appeal to SES to continue the service until a safeand seamless transition can take place. SES has refused to do so; instead ithas imposed arbitrary deadlines."

For their part SESofficials said there was nothing arbitrary about their decision. OnSat, theysaid, has not paid for its satellite service for well more than a year, nowowes more than $4 million plus interest and has shown no sign of being able topay in recent weeks. In addition, SES officials said the contract expired June30 and that SES has continued service only as a courtesy to the FCC, OnSat andits Navajo Nation customers.

On July 17, NewMexico's two U.S. senators, Republican Pete V. Domenici and Democrat JeffBingaman, wrote the FCC's Martin saying that the imminent satellite shutoffwould deprive a 69,930-square-kilometer territory that includes parts of New Mexico, Utah and Arizona of public safety services that use the OnSat-leased SESsatellite transponder.

The senators asked whythe agency that disburses funds for public safety communications to poorcommunities, including the Navajo Nation, had not sent OnSat the scheduledpayments so that OnSat could pay SES.

OnSat's Stephens agreeswith SES that OnSat owes more than $4 million. Stephens said OnSat has notfulfilled its contract obligations to SES because the U.S. government's Universal Service Administrative Co. (USAC), which handles the annualUniversal Service Fund, has not paid OnSat.

The Navajotelecommunications services are paid by the Universal Service Fund's Schoolsand Libraries Program, which is budgeted at about $1.8 billion per year, anamount that is intended to provide impoverished communities with basiccommunications links.

Eric Iversen, a spokesmanfor Washington-based USAC, said the disbursements to OnSat have not been madebecause of a yearlong investigation by Navajo authorities, and by USAC, intoalleged improprieties in the awarding of the Navajo telecommunications contractto OnSat.

A mid-2007 audit by theNavajo Nation "found problems with overbilling, competitive bidding,conflicts of interest, and compliance with local procurement rules,"Iversen said Aug. 4. A parallel inquiry by USAC raised similar concerns, hesaid.

For USAC, the inquiryraised legitimate questions about the OnSat contract. Under the organization'sregulatory guidelines, which are overseen by the FCC, USAC was forced to stoppayments to OnSat.

The issue became evenmore complex July 18 — the day after the NewMexico senators' letter to the FCC — when a Washington law firmrepresenting the attorney general of the Navajo Nation wrote USAC asking thatit "take no action" on the OnSat contract until the Navajoinvestigation of the OnSat contract was completed.

"On behalf of theNavajo Attorney General, who has received the concurrence of the President ofthe Navajo Nation, we therefore request that USAC and the FCC take no actionfor a period of sixty (60) days as to ? any filings made by the Nation or itsprovider related to pending requests for reimbursement" under theUniversal Service Fund, which is part of the FCC's E-rate program.

The letter was sent bythe law firm of Garvey, Schubert and Barer to USAC, with a copy sent to theFCC.

On Aug. 1 FCC ChairmanMartin wrote SES to urge the company to continue the service. "Theseagencies can ill afford to be confronted with the precipitous loss of servicewhen dealing with potentially life or death situations," Martin said inhis letter. "I therefore urge you to find a manner as expeditiously aspossible in which to ensure continued service, without interruption."

OnSat issued a statementthe day after Martin's letter saying the FCC chairman's involvement "ledSES to delay the shutdown threatened for noon Friday," Aug. 1.

OnSat's Stephens deniedany improprieties in his company's contract with the Navajo Nation. Hedismissed the Navajo attorney general's request that the payments not berestarted as "internal Navajo politics," and said the Navajo attorneygeneral "in this matter ? is representing a disaffected faction" ofthe Navajo Nation.

Stephens also said USACalready has conducted a full review of the OnSat contract and has no validreason not to release the funds.

USAC's Iversen said thatwhile USAC has no power to bypass its own rules in disbursing funds, the FCCcould order the agency to make payments given the special circumstances in thecase pending a resolution of the larger issues of contract propriety.

FCC spokesman ClydeEnsslin said Aug. 6 the commission would have no comment on whether it has anymeans at its disposal to release the funds, or whether it is pursuing any otheravenues besides asking SES not to discontinue the OnSat contract.

In an Aug. 4 conferencecall on its financial results, SES officials, including SES Americom ChiefExecutive Rob Bednarek, expressed surprise that they should be cast in anunfavorable light given the history of the OnSat contract.

Responding to FCCChairman Martin's letter Aug. 4, Kisilywicz said the company "cannot continueto be caught in the middle.? We have been extremely patient with OnSat'ssituation."

Kisilywicz also says inthe letter that SES refrained from cutting OnSat off July 21 following FCCconcerns, "with the expectation that the commission would make certainthat all of the affected public safety customers had been notified" andadvised to seek alternative service. "We expect that the commission hasnotified each of the approximately 25 public safety entities referenced in yourletter of this situation and advised each to immediately obtain satellitephones or other substitutes."

"Wecannot continue to be caught in the middle or required to provide service to agrossly delinquent customer because third parties are not taking action toprotect themselves from that customer's financial difficulties," the SESletter concludes. "[I]n deference to your letter and the situation, wewill once again extend service to OnSat until Monday, Aug. 11, at noon Easterntime."

 

 

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