When a Costas loop is operated in a PM mode, such as on the Space Shuttle Orbiter

-band uplink during the time when both data and a ranging subcarrier are linearly modulated on the carrier, and if the data modulation index is less than

, the loop must reconstruct its carrier reference from an input signal whose carrier component is not completely suppressed. This paper establishes a theory for the performance of Costas loops in the presence of residual carrier as a function of the key system parameters and applies this theory toward predicting the performance degradation in the PM mode (relative to PSK operation) of the Shuttle

-band uplink. The corresponding performance of the ranging channel is also given as a function of these same system parameters.