02.01.11

More places to go…

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 8:42 am by timfarrar

“I have heard there are troubles of more than one kind.
Some come from ahead and some come from behind.
But I’ve bought a big bat. I’m all ready you see.
Now my troubles are going to have troubles with me!”
(Dr Seuss, I Had Trouble in Getting to Solla Sollew)

I commented last week that the waiver granted to LightSquared risked causing additional trouble in the TerreStar and DBSD bankruptcies, which could potentially be to Harbinger’s advantage, because it could limit the competition that LightSquared will face from the 2GHz MSS spectrum holders in the race to secure key partners like T-Mobile and MetroPCS.

Today it has been announced that DISH has agreed to acquire DBSD for $1B. In conjunction with TerreStar, which is also valued at roughly $1B in its bankruptcy, this creates the opportunity for potential partners to consider using a rival 40MHz block of 2GHz MSS spectrum instead of investing in LightSquared or Clearwire. The FCC’s LightSquared ruling last week, laid out a roadmap for the 2GHz players to gain the same waiver (i.e. to sell terrestrial-only devices), namely committing to a national terrestrial rollout with strict deadlines, and settling the ongoing dispute with Sprint over clearance costs for the 2GHz band. If both of these conditions were satisfied, it is now hard to see how the FCC could refuse to grant a similar waiver.

I’ve noted before the challenges of achieving a high spectrum valuation in the current situation of oversupply. Now in addition to the Clearwire spectrum, apparently valued at “up to $2B” for 40MHz of spectrum, we may also have an even more direct comparison of 40MHz of MSS-ATC spectrum also valued at around $2B.

This makes the $2.9B that Harbinger has invested to date in LightSquared look quite expensive, especially when considering that LightSquared must pay Inmarsat for its Phase 2 spectrum lease on an ongoing basis (amounting to a future liability of more than $2B). It will therefore be very interesting to see which way T-Mobile and other cellular operators decide to go now and whether this new development pushes back the decision point for any key potential partners.

3 Comments »

  1. ORBITRAX said,

    February 1, 2011 at 11:10 am

    The requirement of dedicating 6Mhz of spectrum to satellite services, which is a requirement of the LightSquared waiver, would be an impediment to those MSS operators who lack a robust inventory of available spectrum. A requirement the FCC would surely require of any “waiver applicant”. The FCC has made it clear that it has no intentions of providing a “level playing field” in the MSS industry.

    ORBITRAX

  2. timfarrar said,

    February 1, 2011 at 11:23 am

    The waiver analysis (pp16-18 of the FCC Order), which is the basis for finding “good cause” does not reference the 6MHz that LightSquared has promised to reserve for satellite services. Clearly any other applicant would have to ensure that there was sufficient capacity for MSS, it was actively marketed and that there were dual mode devices available. However, that is a considerably less difficult hurdle to meet than being prepared to invest billions of dollars to rollout a terrestrial network.

    Undoubtedly Globalstar would argue that it was attempting to do similar things through its deal with Open Range. However, the critical difference may be that Open Range was never going to provide competition for AT&T and Verizon, while that has been an explicit part of the LightSquared/FCC agreement from the get-go. The FCC could still achieve this objective if the 2GHz spectrum is used to build out such a network, whether or not LightSquared is successful.

  3. ORBITRAX said,

    February 1, 2011 at 12:56 pm

    The 6Mhz reserved for dedicated satellite services is set forth under Action and Conditions (pp18).

    However, it should be noted that paragraph 33. (pp17), the FCC espouses the advantages of providing LightSquared flexibility to rural operators. It explains.

    “Moreover, as the record shows, LightSquared’s actions will improve the ability of small, rural wireless providers to utilize ubiquitous MSS spectrum and the MSS/ATC device marketplace being advanced by LightSquared.”

    While three months earlier, the same International Bureau claimed that the public interest in improving the ability of small, rural wireless providers was NOT sufficient to override the ATC gating requirements.

    “Provision of improved broadband service generally serves the public interest. The question in this case, however, is whether that potential benefit is sufficient to override the policy underlying the ATC gating rules. As we concluded above, the proposed extension would substantially broaden the scope of the waiver, both in duration and in the number of markets and consumers receiving non-compliant terminals. Given the purposes of the ATC rules, we cannot conclude that, on balance, the public interest would be served by an extended period of non-compliance.”

    Here now, Lightsquared’s “ATC compliant terminals” equal Globalstar’s “non-compliant ATC terminals” Globalstar is required to provide High Speed MSS services as a condition, while it’s MSS competitors have no such requirement.

    The differences in regulatory “policy” between two direct competitors in the same market is not trivial.

    If the “policy” of the FCC is to transition what they perceive as “excess MSS capacity” into competitive CMRS spectrum. Then that should have been the outcome of the decision.

    Providing a highly uneven regulatory environment amongst MSS competitors that will drastically change the competitive environment to favor a single MSS provider, in exchange for providing additional competition to terrestrial CMRS licensees is not an acceptable exchange.

    Therefore, it is our opinion, that since the FCC has indicated that there is no “policy” in place to provide a level playing field amongst LightSquard’s MSS competitors as it pertains to like flexibility. Lightsquared should be required to “spin off” it’s MSS business and the 6Mhz of MSS only spectrum to allow a level, compeitive playing field amongst MSS licensees.

    ORBITRAX

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