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

An ostensibly routine decision by satellite fleet operator SES to cancel service to a customer more than a year behind in its payments has been caught in the Washington political spotlight amid claims that "life and death situations" hang in the balance if the service is canceled.

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

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

OnSat uses the SES satellite capacity to provide communications to the Navajo Nation's public safety agencies.

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

For their part SES officials said there was nothing arbitrary about their decision. OnSat, they said, has not paid for its satellite service for well more than a year, now owes more than $4 million plus interest and has shown no sign of being able to pay in recent weeks. In addition, SES officials said the contract expired June 30 and that SES has continued service only as a courtesy to the FCC, OnSat and its Navajo Nation customers.

On July 17, New Mexico's two U.S. senators, Republican Pete V. Domenici and Democrat Jeff Bingaman, wrote the FCC's Martin saying that the imminent satellite shutoff would 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 SES satellite transponder.

The senators asked why the agency that disburses funds for public safety communications to poor communities, including the Navajo Nation, had not sent OnSat the scheduled payments so that OnSat could pay SES.

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

The Navajo telecommunications services are paid by the Universal Service Fund's Schools and Libraries Program, which is budgeted at about $1.8 billion per year, an amount that is intended to provide impoverished communities with basic communications links.

Eric Iversen, a spokesman for Washington-based USAC, said the disbursements to OnSat have not been made because of a yearlong investigation by Navajo authorities, and by USAC, into alleged improprieties in the awarding of the Navajo telecommunications contract to OnSat.

A mid-2007 audit by the Navajo 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, he said.

For USAC, the inquiry raised legitimate questions about the OnSat contract. Under the organization's regulatory guidelines, which are overseen by the FCC, USAC was forced to stop payments to OnSat.

The issue became even more complex July 18 — the day after the New Mexico senators' letter to the FCC — when a Washington law firm representing the attorney general of the Navajo Nation wrote USAC asking that it "take no action" on the OnSat contract until the Navajo investigation of the OnSat contract was completed.

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

The letter was sent by the law firm of Garvey, Schubert and Barer to USAC, with a copy sent to the FCC.

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

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

OnSat's Stephens denied any improprieties in his company's contract with the Navajo Nation. He dismissed the Navajo attorney general's request that the payments not be restarted as "internal Navajo politics," and said the Navajo attorney general "in this matter ... is representing a disaffected faction" of the Navajo Nation.

Stephens also said USAC already has conducted a full review of the OnSat contract and has no valid reason not to release the funds.

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

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

In an Aug. 4 conference call on its financial results, SES officials, including SES Americom Chief Executive Rob Bednarek, expressed surprise that they should be cast in an unfavorable light given the history of the OnSat contract.

Responding to FCC Chairman Martin's letter Aug. 4, Kisilywicz said the company "cannot continue to be caught in the middle.... We have been extremely patient with OnSat's situation."

Kisilywicz also says in the letter that SES refrained from cutting OnSat off July 21 following FCC concerns, "with the expectation that the commission would make certain that all of the affected public safety customers had been notified" and advised to seek alternative service. "We expect that the commission has notified each of the approximately 25 public safety entities referenced in your letter of this situation and advised each to immediately obtain satellite phones or other substitutes."