FCC Okays Transponder Sales by Hughes, Others—SCG Journal October 1982 transcribed by Faith MacPherson

“Positive Effect” on Industry

In a decision likely to have a significant impact on the communications satellite market, the Federal Communications Commission has authorized the sale of transponders on Hughes Communications’ (HC) Galaxy spacecraft and other domestic birds. Prior to the commission’s action, customers couldn’t buy satellite channels for their exclusive use but had to lease them instead.

“(This decision)” will have a very positive effect on the expansion of new competitive telecommunications services,” remarked Clay Whitehead, president of HC, the company subsidiary which owns and will operate the Galaxy communications satellite system. “It is a sound continuation of the FCC’s long-standing policy of keeping the communications satellite business competitive and open to new entrants.”

According to the FCC, permitting the sale of transponders would stimulate activity within the industry by providing a new way for satellite owners to obtain capital for system facilities. It also said that this action would make it easier for new satellite operators to enter the field.

Besides breaking new ground for the satellite industry, the commission’s action specifically authorized HC to sell transponders on Galaxy I and II. (The FCC deferred action on Galaxy III sales.) Western Union also got the nod to sell transponders on Westars IV and V, with action deferred on Westar VI. Five transponders may likewise be sold on Satcom IV by RCA Americom; the commission deferred action on Southern Pacific Communications’ request.

HC, RCA and Western Union had sold transponders under previous agreements, but the contracts could not be consummated until the FCC placed its imprimatur on the idea. Hughes, Western Union, and Southern Pacific also have asked for blanket authority to sell an unspecified number of transponders; their proposals are being reviewed by the commission.

Pioneering Spirit

The FCC’s decision to allow transponder sales has an additional significance to Whitehead and others at HC who pioneered the concept. When the subsidiary began selling space aboard Galaxy I early last year, it was a first for the industry. Aware of the sizeable investment that the Galaxy system required, Whitehead and his advisors were working the problem of how to generate funds to amortize the outlay. It was noted that TV transmission to feed cable systems was in enormous demand, a situation which has been aggravated by the loss of RCA’s Satcom III spacecraft in 1980 and that firm’s transponder allocation approach. In addition, “Major programmers, like Home Box Office (HBO), needed to be absolutely sure of their transmission capability,” Whitehead explained in an interview last year. “Although they didn’t require an entire 24-channel satellite, customers wanted to be on solid ground concerning channels they would use.”

Whitehead then had a brainstorm: Why not sell individual transponders? The owner would have complete control of those channels for the life of the satellite (in Galaxy’s case, at least nine years), plus the tax advantages of ownership. “By selling transponders,” he explained, “HC would not be bound by common carrier restrictions. This would allow us to selectively aggregate the major cable programmers on Galaxy I. And if all the channels were filled with compatible, quality video programming, CATV operators now tuned into RCA’s Satcom IIIR (the existing major cable bird) might choose to receive Galaxy programming too,” he said.

Birth of a ‘Shopping Center’

Thus was born the “video shopping center” – an amalgam of programming from seven of the largest cable TV distributors in the country. Transponders have been sold to Time Inc.’s HBO, Time Mirror, SIN Television Network, Turner Broadcasting, Group W, Viacom, and C-SPAN. And to further encourage users, HC and another Hughes subsidiary, Microwave Communications, developed an inexpensive dual feed system so TVRO antennas can simultaneously pick up the signals of both Galaxy I at 135 degrees west longitude and Satcom IIIR at 131 degrees west.

 

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