06.23.11

Weeks, months, years…

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 2:35 pm by timfarrar

The outcome of today’s joint subcommittee hearing of the House Committee on Transportation and Infrastructure was not a great surprise, with all witnesses (with the exception of LightSquared) and the chairman of the aviation subcommittee insisting that “comprehensive new tests” are needed to “make sure the [FCC] is not approving a system that would pose risks to aviation safety”. On the other hand, LightSquared stated that it “is optimistic that this further analysis [of interference to aviation] can be concluded in the next few weeks” and proposed that it “will commence terrestrial commercial operations only on those portions of its spectrum that pose no risk to the vast majority of GPS users”. LightSquared also stated that it “is prepared to underwrite the development of filtering technology for new receivers that can then be used consistently with the placement of our network” (although of course it is not offering to pay for the upgrading or replacement of the $3 billion+ of precision agricultural equipment that would be necessary to actually deploy these filters). However, it is inconceivable that the FAA and DoD would agree to just a few more weeks of testing, and a minimum of three to six additional months of testing (plus a subsequent consultation period) now seems far more plausible.

What the hearing testimony also revealed is that use of the upper L-band downlink block (1545-1555MHz) now appears to be completely infeasible. The reason I conclude this is that the GPS/WAAS aviation receiver specification, approved by the FAA in 2006, after LightSquared had been awarded its ATC license, allows these terminals “to receive satellite signals across 20MHz of bandwidth” (thus inevitably rendering them susceptible to interference from LightSquared upper channel operations). In addition, the FAA and airlines have invested $8B into the NextGen program to modernize America’s air traffic control system, based upon these specifications, and any changes to GPS receiver specifications “would cost billions of dollars and likely 7-10 years to retrofit the aircraft fleet after several additional years to develop new standards“. Thus, it is not the case that the GPS industry simply didn’t build “good enough” receivers to account for the potential LightSquared ATC network, but instead a government agency approved an incompatible receiver specification and then allowed (and in fact mandated) billions of dollars to be invested based upon this specification.

As a result, it appears LightSquared will now have to look elsewhere for downlink spectrum to replace the upper L-band block. However, LightSquared has now indicated that it intends to submit the GPS interference report to the FCC on June 29, apparently pouring cold water on the idea that it might intend to bid for TerreStar in the bankruptcy auction on June 30. However, I note that there is one convenient block of spectrum that could provide an alternative downlink, namely the unpaired AWS-3 spectrum (2155-2175MHz) which is part of the FCC’s current 2GHz consultation, and on which comments are now due July 8.

Of course, with Congress and the FCC seeking to raise $20B to $30B from spectrum auctions to pay for a national public safety network, giving away this spectrum for free to bail out a hedge fund manager might prove politically difficult. Even a couple of years ago, the prospects of M2Z building a free national wireless broadband network were not sufficient for the FCC to award this spectrum for free. However, as a less controversial alternative, auctioning downlink-only spectrum with strong buildout conditions (in line with those already committed to by LightSquared) might lower the selling price to a level at which Harbinger could conceivably afford to acquire this spectrum (if it is around to do so in a couple of years time when such an auction would actually take place).

8 Comments »

  1. sandy_s157 said,

    June 23, 2011 at 4:11 pm

    What do you mean by

    “LightSquared has now indicated that it intends to submit the GPS interference report to the FCC on June 29, apparently pouring cold water on the idea that it might intend to bid for TerreStar in the bankruptcy auction on June 30. ” ?

    Does this mean that the June 29th report to FCC will be enough to convince them and LightSquared does not need to bid for Terrestar anymore? Can you clarify a bit more on your statement?

  2. timfarrar said,

    June 23, 2011 at 4:26 pm

    I assumed one reason for the delay until after the TerreStar auction concluded might be that LightSquared proposed solution could differ depending on whether or not they had access to TerreStar’s spectrum. The fact that the report will apparently now be submitted before the auction result is known (unless there are no bidders in which case DISH will win) suggests that LightSquared/Harbinger do not intend to try and outbid DISH in order to use TerreStar’s spectrum as an alternative to the L-band.

  3. sandy_s157 said,

    June 23, 2011 at 4:33 pm

    But what is the guarantee that FCC will approve of L-band after this report and given so many objections? Also the Inmarsat does not seem to be completely agnostic of GPS interference.

    What other option LS have? You mentioned AWS-3 spectrum but again that is expensive and will take significant time. The only clean option they seem to have is the Terrestar spectrum.

  4. timfarrar said,

    June 23, 2011 at 4:38 pm

    That’s all true. But if they don’t have at least a billion and a half dollars (or a partner with similar resources) they can’t buy TerreStar’s spectrum either.

  5. sandy_s157 said,

    June 23, 2011 at 4:42 pm

    Given the affordability, in that case, they will never be able to afford AWS-3 spectrum. From what I see, the only viable option for LightSquared is to get Terrestar spectrum but as you said they need a good partner. Do you think LS+Metro PCS can bid after LS+Sprint deal?

  6. timfarrar said,

    June 23, 2011 at 4:51 pm

    The affordability of AWS-3 spectrum is unknown. It will depend on the conditions placed on that spectrum. Unpaired spectrum is usually cheaper than paired spectrum. If it survives LightSquared might also be better able to raise money to buy this spectrum in a couple of years time. While an AWS-3 “spectrum swap” (in exchange for not using the upper L-band) could be difficult politically, it can’t be ruled out either.

  7. sandy_s157 said,

    June 23, 2011 at 4:53 pm

    But they plan to roll out the LTE services by next year. Can they wait that long for the spectrum to be made available?

    Also just saw this.

    http://www.pcmag.com/article2/0,2817,2387521,00.asp

    Does not seem that it will be easy for FCC to approve LS to use L-band.

  8. timfarrar said,

    June 23, 2011 at 6:05 pm

    LightSquared’s current plan is to go ahead in the lower L-band. As noted above they expect to complete their testing in the next few weeks and presumably hope that the FCC will deem this sufficient. They expect Inmarsat to make this lower L-band spectrum available next year.

    Is there a contingency plan if Congress stops them from going forward in the L-band at all? I don’t know, but we probably won’t reach that point before the TerreStar auction anyway.

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