When the Costas loop is operated in the presence of a residual carrier space telemetry signal, the loop reconstructs its carrier reference from an input signal whose carrier component is not completely suppressed. The telemetry signal investigated in this work is generated by phase shift-keying the data onto a subcarrier and then phase modulating onto the sinusoidal carrier. The telemetry modulation index, telemetry bit rate, subcarrier waveform, and subcarrier frequency are shown to be the key system parameters that contribute to the performance degradation of a Costas loop. Furthermore, the effect of Doppler shift on the loop is also investigated in this work.>