03.10.11

Harbinger’s new plan: 2GHz first?

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:24 pm by timfarrar

It now appears that Harbinger may very shortly announce a change to the LightSquared business plan to focus first on development of its ATC network in the 2GHz band, through a joint $2.6B bid with MetroPCS and Solus for the DBSD and TerreStar spectrum. This could allow it to mitigate the growing chorus of opposition to its plans for deployment of an L-band network, including planned testimony by Trimble to Congress tomorrow (Friday).

Over the last month, LightSquared has been gradually changing its tune, from initially suggesting that Garmin’s tests were simply flawed, to admitting that there “may be some interference to GPS signals which…may require modification to some existing GPS units” to now conceding that some GPS receivers may need to be replaced.

As I’ve also noted over the last week, a partnership with MetroPCS has become increasingly likely, with a deadline for bids in the DBSD case of Tuesday March 15. On a very similar timeline, on Monday March 14 LightSquared will provide its response to the numerous Petitions for Reconsideration of its L-band ATC waiver that have been filed with the FCC.

UPDATE: I understand that LightSquared has not yet sealed the deal with MetroPCS. Given the upcoming deadlines, it may be a very busy weekend in Reston.

Assuming that Harbinger is able to pull together a bid for the 2GHz spectrum, I would expect LightSquared to propose that if it is given permission to build out its terrestrial network initially in the 2GHz band (with an associated waiver of the ATC gating requirements), it will take more time to resolve the GPS interference issues in the L-band. Because the key issue for GPS interference is that many existing GPS devices will be overloaded by the LightSquared signals within its own licensed spectrum (as opposed to LightSquared’s signal spilling over into the GPS band), a logical compromise would ultimately involve an order from the FCC that GPS devices sold after a certain date (say the end of 2012) will need to include filters that can prevent overload interference, while LightSquared will not operate at the upper end of the L-band spectrum until some time after this (perhaps 2014 or beyond), so that existing GPS devices can be replaced.

If MetroPCS funds the buildout of a 2GHz LTE network in its own coverage areas, then this may be largely sufficient to meet LightSquared’s initial buildout milestone of 100M POPs covered (although perhaps with a modest delay to the current objective of the end of 2012). Though there has been much talk about a deal between LightSquared and Sprint, it seems that the initial 2GHz buildout may not rely on that possibility. LightSquared and Harbinger would then presumably hope that something turns up, whether in the shape of a deal with Sprint, or something else, to fund the rest of the nationwide buildout in 2013 and beyond. Although details may not emerge for some time, it also seems plausible that LightSquared could eventually seek to renegotiate its Cooperation Agreement with Inmarsat, on the basis that Regulatory Changes have made it impossible for LightSquared to secure the originally planned benefits of the deal in the L-band.

Of course, if Harbinger only ends up with a minority stake in a 2GHz spectrum venture, and is unable to exploit the L-band spectrum to any significant degree in the next few years, then this would be a significant come down from its original plans. However, with MetroPCS potentially funding the initial rollout, this would push the problem of where LightSquared is going to get the cash to pay for a multi-billion dollar national network down the road by at least two years, allowing Harbinger to hope that spectrum values and data demand will grow enough for it to recover its $2.9B investment in the L-band and fund the rest of the nationwide buildout at that point.

3 Comments »

  1. jhc8d said,

    March 11, 2011 at 1:47 pm

    Tim -

    Really enjoy your blog. Couple of questions though:

    1) I’m under the impression that the FCC Waiver was given to Lightsquared with respect to the L-Band Spectrum. Not necessarily a blanket waiver for other MSS spectrum that Lightsquared may acquire. Is that correct?

    2) The milestones for the network build were imposed on Lightsquared when they “acquired” SkyTerra’s L-Band Spectrum. So – if Lightsquared and MetroPCS were to partner together to purchase and build out the S-Band Spectrum – would that be helpful to Lightsquared and their 100MM POP hurdle for 2012?

    If the above is true, I just don’t see why MetroPCS needs Lightsquared at this point. They should acquire the S-Band spectrum directly – all 40 MHz or just TSTR

    Looks like they can pay $0.22 per MHzPOP to beat the current non-binding offer from Solus/Lightsquared. Adjusting for the fact that Metro’s markets only cover 142MM POPs – that’s $0.48 per MHzPOP – still below the average price paid for spectrum in both the AWS and PCS auctions. Those went for $0.54 and $1.08 per MHzPOP, respectively – and are in neighboring frequency bands.

    If they were to go this route – doesn’t seem like they’ll have a problem getting a similar waiver from the FCC.

    Do you agree?

  2. timfarrar said,

    March 11, 2011 at 2:11 pm

    The big question is whether anyone other than LightSquared is in a position to get a similar waiver from the FCC. Arguably the LightSquared waiver has made it difficult for the FCC to sustain its original position on the 2GHz spectrum, that there would need to be “appropriate compensation for the step up in valueā€¯ from any change in the ATC rules (see http://tmfassociates.com/blog/2010/11/29/could-the-fcc-end-up-torpedoing-its-own-nprm/).

    However, in granting the waiver to LightSquared, the FCC set out a “public interest” justification based on the commitments LightSquared had made, including that it was building out a nationwide network and restructuring the L-band (see http://tmfassociates.com/blog/2011/01/26/order-and-confusion/).

    If someone like MetroPCS wanted to buy the 2GHz spectrum on its own, then the question is what commitments could it make to the FCC in respect of the “public interest” to avoid paying “appropriate compensation for the step up in value” to the government.

    With regard to the specific points above, it is true that LightSquared’s ATC waiver (to allow terrestrial-only devices) appears to only cover the L-band. However, with respect to the 100M POP buildout the situation is slightly less clear. The requirements can be met using “any other terrestrial spectrum that…is made available to SkyTerra for pooling with its spectrum” (see http://www.tmfassociates.com/Harbinger-SkyterraOrder.pdf). At the moment the 2GHz spectrum might not necessarily be considered as “terrestrial spectrum”, but the current MSS NPRM proposes to change that designation.

  3. IM Gadgets » Lightsquared Signs Cricket Wireless said,

    March 23, 2011 at 10:46 am

    [...] If Harbinger can strike a deal with MetroPCS to make a joint bid for the TerreStar and DBSD spectrum, then any LTE buildout might also be counted towards Lightsquare’s build-out obligations, according to satellite consultant Tim Farrar. MetroPCS already has about 97M covered POPs. [...]

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