February 6, 2020 / 5:50 PM / 16 days ago

UPDATE 3-FCC chairman backs $9.7 billion in incentive payments to satellite firms to shift spectrum

(Adds stock price, reaction from satellite companies, industry details)

By David Shepardson

WASHINGTON, Feb 6 (Reuters) - Federal Communications Commission Chairman Ajit Pai on Thursday proposed $9.7 billion in incentive payments to accelerate the freeing up of spectrum in the key C-band by shifting existing satellite users.

The telecommunications regulator had told lawmakers last month it was considering proposing "single-digit billions" in payments.Major satellite firms, including Intelsat SA, are expected to back Pai's proposal to shift them to different parts of the spectrum band. FCC officials told reporters they were optimistic of agreement.

Pai said in a speech on Thursday he backed the accelerated relocation payments to "make available the C-band for 5G deployment as quickly as possible" and to "align the satellite companies’ private interests with the public interest."

The C-band is a block of spectrum used by satellite company customers to deliver video and radio programming to 120 million U.S. households. Pai said an auction to use the freed spectrum will begin on Dec. 8 and is critical to the deployment of 5G wireless.

Pai said he expects the actual costs of relocating satellite companies is in the $3 billion to $5 billion range.

He said new satellites will need to be launched, and filters placed on earth stations to shift spectrum.

Pai said he wants to fund transition and incentive payments with a surcharge paid by winners of an auction of 280 megahertz of the C-band. The formal proposal will be released on Friday.

Major satellite service providers include Intelsat and SES SA, both based in Luxembourg, as well as Telesat, which all form the C-Band Alliance. The organization said last month it was seeking "fair compensation" to quickly clear the spectrum. The group said the expected order "reflects the tireless efforts of many over the past several years to ensure that this critical spectrum comes to market safely, quickly, and efficiently."

Intelsat shares rose as much as 6% on Thursday, but pared gains to close 0.5% higher at $3.74. Intelsat CEO Steve Spengler said on Thursday the company appreciated "the hard work of all stakeholders to get to this juncture."

U.S. Senator John Kennedy, a Republican, said the $9.7 billion figure "is much too high, and it’s highly unfair to those taxpayers." He added, "We shouldn’t be in the business of spearheading Luxembourg bailouts when there are towns in Louisiana and across the country without access to broadband service."

Kennedy has proposed a bill with some Democrats to sharply limit how much in compensation satellite firms could receive.

Pai said "if Congress wants to direct that auction proceeds be used to address national priorities like rural broadband, it will find no bigger supporter than me." He said that even if the FCC moves ahead on the auction at its Feb. 28 meeting, "Congress could still require this year that auction proceeds be used to close the digital divide." (Reporting by David Shepardson in Washington Additional reporting by Arriana McLymore in New York Editing by Jonathan Oatis and Matthew Lewis)

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