On November 18, LightSquared filed an updated showing with the FCC of its plans for compliance with the ATC gating criteria. LightSquared states that it will ensure that its wholesale offering includes 500 kbytes of satellite capacity for every 1 Gbyte of terrestrial capacity it provides to a partner, and that dual mode chipsets are available through its $50M development agreement with Qualcomm. However, LightSquared also admits that its “retailer customers will have the ability to offer terrestrial-only plans to their own end users” and that it intends to “file reports with the Commission every six months providing the number of terminals in service falling into each of three categories: MSS only, dual-mode MSS/ATC, and terrestrial-only” (implying that terrestrial-only chipsets and/or devices will also be developed).
In view of the poor reception that the TerreStar Genus phone has received, both in the MSS community and amongst terrestrial-oriented reviewers, it is hardly surprising that potential LightSquared partners are unlikely to be enthused about attempting to sell a dual mode satellite-terrestrial service to a mass market, and would much prefer the opportunity to offer terrestrial-only service. Indeed, as I noted previously, the responses from Leap Wireless and T-Mobile in the FCC’s current MSS NPRM/NOI proceeding, were supportive of interpreting the ATC gating requirements in a manner which would allow for terrestrial-only devices.
While LightSquared states that its “revised business plan satisfies the Commission’s integrated service requirements for L-band MSS systems” the original ATC rules did not consider the business plan that LightSquared now envisages, that of a wholesale provider whose customers are retailers (or other operators) who repackage and sell on the service. For example, the FCC’s February 2005 ATC report and order states:
The purpose of ATC is to enhance MSS coverage, enabling MSS operators to extend service into areas that they were previously unable to serve, such as the interiors of buildings and high-traffic density urban areas. We will not permit MSS/ATC operators to offer ATC-only subscriptions, because ATC systems would then be terrestrial mobile systems separate from their MSS systems. We therefore clarify that “integrated service” as used in this proceeding and required by 47 C.F.R. § 25.147(b)(4) forbids MSS/ATC operators from offering ATC-only subscriptions.
LightSquared appears to be arguing that because it is offering integrated service to its customers, it is irrelevant whether or not those customers offer ATC-only subscriptions to their end users. Likewise, instead of seeking the safe harbor that all devices will be dual mode, LightSquared apparently intends this narrative (as required by the February 2003 ATC Order) to provide “for Commission review evidence demonstrating that the service they propose to offer will be integrated. This can be accomplished through technical, economic or any other substantive showing that the primary purpose of the MSS licensee’s system remains the provision of MSS.”
It will therefore be interesting to see the responses to this application (although as noted below the short timeframe may limit the number of comments) and the degree of support that LightSquared receives from the FCC. It seems all but certain that AT&T and Verizon will continue their hostility to LightSquared, while assuming Sprint remains committed to Clearwire, it would also likely be counted on to oppose the application. On the other hand, I would expect most of the smaller cellular operators including T-Mobile, Leap and US Cellular to be supportive, as they look to ensure that more spectrum options are available when they eventually decide how to move to 4G.
One additional (and more speculative) conclusion that could also be drawn from this submission is that LightSquared may now push off the announcement of any major partnerships (for example with one or more cellular operators) until more clarity is available on the FCC’s attitude to both this application and the MSS NPRM/NOI (where LightSquared has requested that the FCC reconsider the requirement for a ground spare satellite). This is because it would seem surprising for LightSquared to introduce additional regulatory uncertainty over its business plan if the company was in a position to announce a series of partnerships in the near term (which until recently I had expected might come shortly after the launch of SkyTerra-1). Nevertheless, LightSquared has announced previously that it intends to exercise its Phase 2 option with Inmarsat before the end of the year (which will involve substantial additional payments), and Harbinger appears to be under considerable pressure from its investors to demonstrate the progress it is making, so there will undoubtedly be more developments in this story soon.
UPDATE: Given that the FCC has placed this submission on an extremely accelerated timescale, with comments due by November 29 (immediately after the Thanksgiving holiday) and reply comments due by December 6, it seems plausible that LightSquared might well be expecting to receive a decision on this application very soon. Assuming this ruling was favorable, LightSquared might therefore still be able to announce its planned partnerships and exercise the Phase 2 spectrum option with Inmarsat before the end of the year.