06.20.11

Juggling spectrum…

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 11:32 am by timfarrar

LightSquared has now announced (as I predicted) that it plans to restrict initial operations to the lower 2x10MHz block of L-band spectrum as “a comprehensive solution to the problem of interference with Global Positioning System (GPS) receivers”. This follows last week’s letter to the FCC, indicating that “among the main reasons” for the delay in submitting the June 15 final report was that “based on preliminary test results, LightSquared determined that additional testing, beyond what had been planned initially, including alternative frequency plans to support its network roll-out, was necessary to permit a proper evaluation of various mitigation options for addressing the GPS receiver overload issue”.

In reality, LightSquared’s press release and FCC letter appear to obfuscate what has happened, because LightSquared’s renegotiation with Inmarsat was actually completed two months ago, and signed on April 25, as was revealed in Inmarsat’s Q1 results. Thus LightSquared devised this new plan at a time when (according to the second Working Group progress report filed April 15), many of the test plans had not even been completed (although it was clear to knowledgeable observers as early as March that operation in the upper band was unlikely to be feasible).

LightSquared’s press release does indicate some further detail about the nature of that renegotiation with Inmarsat (which involved LightSquared making an additional payment of $40M to Inmarsat). Specifically, it seems possible that Inmarsat may not only be removing its 9 months of excusable delay (Inmarsat was scheduled to make the spectrum available in February 2012, but had 9 additional months of potential excusable delay extending to November 2012) in making the 2x5MHz Phase 1A Channel 1 spectrum available (1526-1531MHz downlink), but it appears that LightSquared may have access to the full 2x10MHz Phase 2 Channel 1 spectrum (1526-1536MHz downlink) spectrum sooner as well (it was originally agreed that is would be made available in July 2013). This is reflected in LightSquared’s ambition to be able “to rent space to commercial service providers as soon as the middle of 2012″ under the revised plan (although that of course is yet another delay from the “early 2012″ we heard only a month ago).

Of course the key issue is that as I’ve previously highlighted, with only 20MHz of usable spectrum for its terrestrial network, it is very hard for Harbinger to justify its LightSquared equity investments (or raise additional money), when there is a $2B+ lease obligation to Inmarsat ($115M per year increasing at 3%) and $1.5B of first lien debt ahead of them. This is especially clear now that both DBSD and TerreStar are being sold in bankruptcy court (each with 20MHz of spectrum) for less than $1.5B apiece.

As a result, it is far from clear whether whatever conditions Sprint has imposed to move forward with the network sharing agreement can and will be met. Unsurprisingly LightSquared therefore insists that over “the next several years” it will “work closely with the FCC and the NTIA, as well as the relevant US government agencies and commercial GPS users, to explore mitigation possibilities and operational alternatives that will allow LightSquared to continue to expand its business” (i.e. persuade the FCC to mandate the rapid introduction of receiver standards so that it can use the upper L-band spectrum).

This proposal (which entails the FCC giving LightSquared the green light to proceed immediately in the lower band) is very unlikely to satisfy either the GPS industry or government departments such as the DoD and FAA, which have stated that they will request further testing before LightSquared is given the go-ahead. On the other hand, the FCC Chairman has already indicated that he is favorably disposed towards LightSquared. Thus the near term outcome may be determined by whether LightSquared’s Congressional opponents can force the FCC to back down.

6 Comments »

  1. spectrum said,

    June 20, 2011 at 11:47 am

    Hi Tim,
    So do you think Harbinger or PCS will now Bid on TSN…..
    Thanks…

  2. sandy_s157 said,

    June 20, 2011 at 3:03 pm

    Seems like Kirkland is still of the opinion that the Inmarsat frequencies will still create interference with GPS….

  3. timfarrar said,

    June 20, 2011 at 3:17 pm

    It is certainly the case that the precision agricultural equipment (into which farmers have invested over $3B) would have problems because it receives augmented GPS signals broadcast from Inmarsat’s satellites. The RTCA report said that there could still be some problems for aircraft if LightSquared used 2x10MHz in the lower band.

    Whether there are more bids for TSN will be determined by whether or not anyone feels they can outbid DISH. All MetroPCS (or the other first lien holders) would achieve by bidding unsuccessfully would be to put money in Harbinger and Solus’s pockets, while alienating someone (Charlie Ergen) that they may want/have to deal with later.

  4. cljsf said,

    June 21, 2011 at 2:17 am

    How can Inmarsat continue to use its satellites if Lightsquared goes ahead with any of its plans? I would have thought that if the ground-based LTE signals were strong enough to overload receivers listening in the GPS band, they would have a similar effect on receivers listening in spectrum even closer to that in which Lightsquared hope to operate. If the Deere augmented GPS doesn’t work, then why will any other signal from the Inmarsat satellites be ‘audible’? And isn’t some of the stuff in that spectrum for things like emergency location?

  5. waveslammer1 said,

    June 21, 2011 at 5:19 am

    Tim,
    I do agree an unsuccessful bid by anyone in need of spectrum will not help their cause with Charlie, but in the end if you need spectrum and you do not own it, you will pay out the nose for it later. Expecting Charlie or anyone else to be benevolent, just is not going to happen.
    So what that will do is force whoever needs the spectrum the most to pony up and take it away from the rest.

    JMO
    wave

  6. TMF Associates MSS blog » E ≠ mc²? said,

    September 28, 2011 at 8:49 pm

    [...] LightSquared itself has demonstrated that repeatedly in recent months, as it has shifted from one deadline and plan to [...]

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