06.24.15

A time to hold and a time to fold…

Posted in Globalstar, Iridium, Operators, Regulatory, Spectrum at 4:06 pm by timfarrar

In recent months Globalstar has vented its frustration with the slow progress of the TLPS NPRM, telling the Commission in April that “it is time for the Commission to move forward with an order in this proceeding and realize the substantial public interest benefits of TLPS.” Nevertheless Globalstar has previously been unwilling to compromise, indicating that it would only accept approval of the rules proposed in the November 2013 TLPS NPRM and that it would not relinquish spectrum to Iridium.

However, in the face of overwhelming pressure from Microsoft, Google, Sprint and others, it seems Globalstar has now decided it will have to accept a compromise as an interim measure to avoid being stuck in limbo for many more months. In a meeting with the FCC International Bureau last Friday, Globalstar struck a much different tone, urging the FCC “to grant Globalstar the proposed ATC authority,” a term which Globalstar has always declined to use, preferring instead to refer to the Commission’s “regulatory framework for low power wireless broadband.”

Moreover, Globalstar “expressed support for the Commission’s 2013 proposal” apparently hinting at the existence of a new 2015 proposal. Looking at the elements that Globalstar “urged” the Commission to adopt (apparently Globalstar’s bottom line) compared to those that it “encouraged” or “asked” the Commission to consider (those elements that are not essential), it is clear that Globalstar now wants a grant of “ATC authority” under “proposed rules” which no longer necessarily comport with the 2013 NPRM. Globalstar also “asked” (but didn’t “urge”) the Commission to “reject the unsubstantiated technical and policy requests by [its] opponents,” suggesting that any decision on TLPS OOBE limits can be deferred.

In contrast, back in May, Globalstar “urged the Commission to adopt its proposed rules expeditiously to add 22 megahertz to the nation’s wireless broadband spectrum inventory and ease the congestion that is diminishing the quality of Wi-Fi service at high-traffic 802.11 hotspots and other locations,” i.e. to approve TLPS specifically.

This move now points the way to a near term order written by the International Bureau on the narrower matter of ATC authority for Globalstar within its existing 11.5MHz of licensed S-band spectrum from 2483.5-2495MHz, in exchange for granting Iridium’s request to share more of the L-band. That would be a close parallel to the FCC’s ruling in November 2007, when it issued an NPRM on extension of Globalstar’s ATC authority in conjunction with the last reallocation of L-band Big LEO spectrum.

I would expect the FCC to defer any potential approval of the wider 22MHz TLPS channel to a further proceeding, with more testing and analysis of interference concerns to be undertaken. The main uncertainty relates to whether the approval of ATC authority would be for full power use, along the lines of the Open Range approval (but adapted to LTE), in conjunction with protection measures for BAS, or whether the approval will be limited to the much lower power levels contemplated in the TLPS NPRM.

I would assume that high power ATC usage is likely to be approved (as it is hard to see a limited low power channel being acceptable to Globalstar), with Globalstar welcoming this ruling as offering it more flexibility to either lease a single 10MHz LTE channel to a wireless operator in the near term or to later gain approval for TLPS at the end of the further rulemaking process.

Of course the debate would then move to appropriate valuation benchmarks, which are much easier to assess for standard licensed spectrum, albeit with upwards adjustments for lack of a buildout requirement and downwards adjustments for maintaining an MSS network and creating an ecosystem for a non-standard band. In addition the potential timeline and cost must be considered for the rebanding needed to avoid interference with grandfathered BAS users.

I’m sure that some will emphasize AWS-3 benchmarks of $2+/MHzPOP as a baseline, while others will highlight the MoffettNathanson assessment that spectrum around 2.5GHz, like that owned by Sprint, is only worth around $0.40/MHzPOP, and this enormous discrepancy means that the debate about what Globalstar’s spectrum is actually worth will certainly continue. Nevertheless, approval of a high power licensed spectrum block, even if limited to only a single 10MHz LTE channel, will make it harder to argue that Globalstar’s spectrum is completely worthless.

06.22.15

I come to bury Caesar, not to praise him…

Posted in General, Regulatory, Spectrum at 3:26 pm by timfarrar

Back in October 2012, despite their misleading press release, CTIA’s own data indicated that there had been a significant slowdown in data traffic growth and confirmed that the emperor/FCC Chairman had no clothes when talking about the non-existent spectrum crisis. Now it seems CTIA is at it again, releasing an error-strewn paper today on how the FCC’s October 2010 forecasts of mobile data traffic have supposedly proven to be “remarkable accurate.”

This groveling attempt to “renew the effort to bring more licensed spectrum to market” is clearly designed to distract from CTIA’s own release of its year end 2014 wireless industry survey results last week, which showed that US mobile data traffic only grew by 26% last year (from 3230PB in 2013 to 4061PB in 2014) compared to growth of 120% in 2013, a dramatic slowdown which CTIA conveniently ignores.

Instead CTIA is praising the “solid analytical foundation” of the FCC’s October 2010 paper, which was recognized at the time, by myself and others, to be fundamentally flawed. So perhaps its not so ironic that the CTIA’s new paper mischaracterizes the data that the FCC used, stating that the forecasts “were remarkably accurate: In 2010, the FCC’s growth rate projections predicted mobile data traffic of 562 petabytes (PBs) each month by 2014; the actual amount was 563 PBs per month.”

Firstly, the FCC did not actually state an explicit projection of mobile data traffic, instead giving an assessment of growth from 2009 to 2014, as the (simple arithmetic) average of growth projections by Cisco, Yankee and Coda (use of an arithmetic average in itself is erroneous in this context, a geometric average of multipliers should be used instead).

Secondly, the FCC was projecting US mobile data traffic, not North American data traffic, which is the source of the quoted 563PB per month (which is taken from Cisco’s February 2015 mobile VNI report). We can see the difference, because the February 2010 Cisco report (available here) projects growth for North America from 16.022PB/mo in 2009 to 773.361PB/mo in 2014, a multiplier of 4827%, whereas the FCC paper quotes Cisco growth projections of 4722% from 2009 to 2014. (The reason for the difference is that growth in Canada was expected to be faster than the US, because Canada was expected to partially catch-up with US in mobile data traffic per user over the period).

If CTIA had bothered to look at Cisco’s mobile VNI tool, which gives data for major countries, it could have easily found out that Cisco estimates US mobile data traffic grew by 32 times between 2009 and 2014, not 35 times as the FCC forecast, let alone the 47 times that Cisco forecast back in February 2010.

Moreover, CTIA completes fails to mention that Cisco’s figure for 2014 (which according to the VNI tool is 531.7PB/mo for the US, rather than the 562.5PB/mo for North America that CTIA quotes), is completely different to (and far higher than) CTIA’s own data, which is based on “aggregated data from companies serving 97.8 percent of all estimated wireless subscriber connections” so should obviously be far more accurate than Cisco’s estimates.

However, CTIA is instead running away from its own data, stating in a footnote to the new paper that:

“Note that participation in CTIA’s annual survey is voluntary and thus does not yield a 100 percent response rate from all service providers. No company can be compelled to participate, and otherwise participating companies can choose not to respond to specific questions. While the survey captures data from carriers serving a significant percentage of wireless subscribers, the results reflect a sample of the total wireless industry, and does not purport to capture nor reflect all wireless providers’ traffic metrics. CTIA does not adjust the reported traffic figures to account for non-responses.”

Compare that disclaimer to the report itself, which notes that “the survey has an excellent response rate” (of 97.8%) and that it is adjusted for non-responses (at least so far as subscribers are concerned):

“Because not all systems do respond, CTIA develops an estimate of total wireless connections. The estimate is developed by determining the identity and character of non-respondents and their markets (e.g., RSA/MSA or equivalent-market designation, age of system, market population), and using surrogate penetration and growth rates applicable to similar, known systems to derive probable subscribership. These numbers are then summed with the reported subscriber connection numbers to reach the total estimated figures.”

CTIA’s wireless industry survey states that total US mobile data traffic was 4061PB in 2014, equating to an average of 338.4PB/mo over the year. Even allowing for the fact that Cisco estimate end of year traffic, not year averages, it is hard to see how the CTIA number for Dec 2014 could be more than 400PB/mo, some 25% less than Cisco.

If we instead compare growth estimated by CTIA’s own surveys (which only provide data traffic statistics back to 2010), then the four year growth from 388PB in 2010 to 4061PB in 2014 is a multiplier of 10.47 times, whereas the FCC model is a multiplier of 13.86 times (3506%/253%) and Cisco’s projection is a multiplier of 19.51 times (4722%/242%).

Thus by any rational and undistorted analysis, the FCC’s mobile data traffic growth projections have proven to be overstated. Likely reasons for this include the increasing utilization of WiFi (which was dismissed by the FCC paper, stating that “the rollout of such network architecture strategies has been slow to date, and its effects are unclear”) and the effect of dilution, as late adopters of smartphones use far fewer apps and less data than early adopters.

Nevertheless, what the data on traffic growth does confirm is that the FCC’s estimate of a 275MHz spectrum deficit by 2014 was utter nonsense. Network performance has far outpaced expectations, despite cellsite growth being far slower than predicted (3.9% compared to the 7% assumed in the FCC model) and large amounts of spectrum remaining unused: if we simply look at the Brattle paper prepared for CTIA last month, its easy to calculate that of the 645.5MHz of licensed spectrum identified by Brattle, at least 260MHz remains undeployed (12MHz of unpaired 700MHz, 10MHz of H-block, 65MHz of AWS-3, 40MHz of AWS-4, 20MHz of WCS, and all but around 40MHz of the 156.5MHz of BRS/EBS).

Thus in 2014, the US didn’t require 822MHz of licensed spectrum as the FCC forecast (which would have increased to 861MHz if the FCC model was corrected to the supposed traffic growth of 32x, as estimated by Cisco, and the actual number of 298,055 cellsites, as reported by CTIA), but instead, as CTIA proclaims, US mobile operators enabled “Americans [to] enjoy the best wireless experience in the world” with less than 400MHz of actual deployed spectrum.

06.11.15

Round 1 to Wyler…

Posted in Broadband, General, Regulatory, Services at 6:00 pm by timfarrar

I’m told that after a fair amount of difficulty and a month or two of delay, Greg Wyler has now successfully secured commitments of about $500M to start building the OneWeb system, and he will announce the contract signing with Airbus at the Paris Air Show next week. The next step will be to seek as much as $1.7B in export credit financing from COFACE to support the project with an objective of closing that deal by the end of 2015.

This comes despite Elon Musk’s best efforts to derail the project, culminating in an FCC filing on May 29. That filing proposes the launch of 2 Ku-band test satellites in late 2016, which would presumably be aimed at ensuring OneWeb is forced to share the spectrum with SpaceX, as I predicted back in March.

Clearly Musk is not happy about the situation, since I’m told he fired Barry Matsumori, SpaceX’s head of sales and business development, a couple of weeks ago, after a disagreement over whether the SpaceX LEO project was attracting a sufficiently high public profile.

Most observers appear to think that Musk’s actions are primarily motivated by animus towards Wyler and question whether SpaceX is truly committed to building a satellite network (which is amplified by the half-baked explanation of the project that Musk gave in his Seattle speech in January, and the fact that I’m told SpaceX’s Seattle office is still little more than a sign in front of an empty building).

Google also demonstrated what appears to be a lack of enthusiasm for satellite, despite having invested $900M in SpaceX earlier this year, when its lawyers at Harris, Wiltshire & Grannis asked the FCC on May 20 to include a proposal for WRC-15 that consideration should be given to sharing all of the spectrum from 6GHz to 30GHz (including the Ku and Ka-bands) with balloons and drones (see pp66-81 of this document). Needless to say, this last minute proposal has met with furious opposition from the satellite industry.

However, one unreported but intriguing aspect of SpaceX’s application is the use of a large (5m) high power S-band antenna operating in the 2180-2200MHz spectrum band for communication with the satellites. Of course that spectrum is controlled by DISH, after its purchase of DBSD and TerreStar, and so its interesting to wonder if SpaceX has sought permission from DISH to use that band, and if so, what interest Charlie Ergen might have in the SpaceX project.

Nevertheless, it looks like Wyler is going to win the initial skirmish, though there are still many rounds to play out in this fight. In particular, if Musk truly believes that the LEO project, and building satellites in general, are really going to be a source of profits to support his visions of traveling to Mars (as described in Ashlee Vance’s fascinating biography, which I highly recommend) then he may well invest considerable resources in pursuing this effort in the future.

If that’s the case, then the first to get satellites into space will have a strong position to argue to the FCC that they should select which part of the Ku-band spectrum they will use, and so Wyler will also have to develop one or more test satellites in the very near future. Fortunately for him, Airbus’s SSTL subsidiary is very well placed to develop such a satellite, and I’d expect a race to deploy in the latter part of 2016, with SpaceX’s main challenge being to get their satellite working, and OneWeb’s challenge being to secure a co-passenger launch slot in a very constrained launch environment.

06.05.15

Sorry Charlie…

Posted in AT&T, DISH, Operators, Spectrum, T-Mobile, Verizon at 4:25 pm by timfarrar

Two people have now told me that with 99% certainty, the leak about the DISH/T-Mobile talks came from T-Mobile itself, not from DISH, based on the authorship of the WSJ report. Although it might be tempting to conclude that T-Mobile is trying to prompt a cable operator to consider an alternative bid, Charter has indicated that it will focus on TWC’s MVNO agreement with Verizon to provide wireless services if its TWC bid is successful and Comcast could presumably do likewise if desired.

Moreover, it seems this was not some sort of “official” leak, but instead simply reflects general conversations which got blown out of proportion, because Bloomberg has reported that the talks, which have been going on since last summer, have not advanced significantly in recent weeks.

That still leaves the perplexing analyst event that DISH held on Tuesday, and there’s been no convincing explanation of why that event was scheduled at short notice. Nevertheless, there’s now a frenzy of speculation leaving some convinced about the “inevitability” of a merger. What none of the reports deal with at all is how T-Mobile would actually make use of DISH’s spectrum without AWS-3/4 interoperability, and even then half of DISH’s spectrum in PCS H-block and 2000-2020MHz would still have no ecosystem available.

Instead analysts simply assume that interoperability doesn’t even need to be considered, and that the FCC “buildout requirements of its spectrum are so far in the future it’s not even worth starting the discussion about the weak enforceability of those deadlines.”

Of course a merger makes all the sense in the world if you assume DISH’s spectrum is just as usable as any other spectrum and that the FCC won’t enforce its buildout deadlines (in March 2020) so DISH has all the time in the world to strike a deal at a full price. Unfortunately that simply isn’t the case, and both Verizon and AT&T know that only too well.

06.03.15

Can you hear me now?

Posted in DISH, Operators, Regulatory, Spectrum, T-Mobile, Verizon at 8:07 pm by timfarrar

That’s seems to be the question Charlie Ergen is asking Verizon, with the leak of merger talks between DISH and T-Mobile to the Wall St Journal. Yesterday DISH held an analyst meeting at which nothing much of consequence was said, raising the question of precisely why DISH held that analyst meeting in the first place.

The logical conclusion is that DISH hoped it would be able to announce some sort of deal yesterday, but that wasn’t achieved, and so now there has been a decision to leak more specific details about the progress of the DISH/T-Mobile talks (which have been rumored for months). The details disclosed make it unlikely that the intent is to bring T-Mobile back to the table, given the statement that talks on valuation remain at a “formative stage”. If the leak came from the T-Mobile side then its plausible to imagine that the aim is to pressure a cable company to make a bid for T-Mobile, or simply that the WSJ made a mountain out of a molehill, given others are saying there has been no change in the situation in recent weeks.

However, (until now) I considered it more likely that DISH is sending a message to Verizon, after the breakdown of talks on a spectrum sale or leasing deal, that Ergen has other alternatives he can pursue. Its previously been reported that Verizon rejected DISH’s asking price of $1.50 per MHzPOP for the AWS-4 spectrum last summer, and even after the AWS-3 auction, I very much doubt Verizon has shifted its position on valuation significantly. For spectrum without an ecosystem like AWS-4, I would still not expect Verizon to be willing to pay much more than $1 per MHzPOP.

Nevertheless, if Verizon had been willing to commit to a partial lease of DISH’s AWS-4 spectrum and support interoperability into the bargain (perhaps with some AWS-3 licenses included to raise the average reported price), then that would have helped DISH to undertake a spectrum spinoff. By doing a deal now, I would expect DISH to also have been able to seek a compromise with the FCC by agreeing to repay the $3.3B DE discount it received in the AWS-3 auction, and thereby mitigate the bad feeling which would otherwise be likely to hamstring DISH’s ability to get help from the FCC in ensuring AWS-3/4 interoperability in the future.

So if Verizon has truly walked away for good, and cannot be forced back to the table by this leak, then I think this is unalloyed bad news for DISH. Without interoperability it is hard to see the value of DISH’s AWS-3 spectrum for T-Mobile, as I noted last week. And it is equally hard to see how agreement can be reached with Deutsche Telekom on the respective valuations of DISH and T-Mobile, especially when DT can hold out for a potential merger with a cable company in the future. So I think Verizon can still proclaim that when it comes to DISH’s spectrum, it’s heads we win, tails you lose.

All at sea?

Posted in Inmarsat, Iridium, KVH, Maritime, Operators, Services, VSAT at 8:53 am by timfarrar

Despite the delays in the launch of GX, it seems Inmarsat may be looking to stitch up an even larger share of the maritime market in the near term. Rumors are flying that Inmarsat may soon make a formal bid to acquire KVH, the largest maritime VSAT player in terms of vessels (though not in revenues), adding about 3500 more terminals to Inmarsat’s existing 2200 VSAT equipped ships.

KVH generated nearly $80M from its miniVSAT business in 2014 with an average service ARPU of $1500 per month, compared to Inmarsat’s $90M and ARPU of $4000 including equipment leases (this equates to $2500 per month after stripping out hardware, according to Inmarsat’s most recent results call, which is a more appropriate point of comparison with the KVH ARPU).

The difference in ARPUs between Inmarsat’s current VSAT business and KVH is striking, in fact KVH’s smaller V3 terminal (which has about 900 active terminals) is generating around $500 in monthly ARPU, below even Inmarsat’s FleetBB ARPU of $700 (note that the standard FleetBB package sold by KVH now only provides 20 Mbytes per month of data for $749, whereas KVH offers airtime at rates as low as $0.99 per Mbyte).

If Inmarsat does move ahead with a KVH bid, it would likely be seen as a counter to Airbus’s disposal of its Vizada business unit, because Inmarsat would then have by far the largest number of VSAT-equipped ships. Indeed it would not be surprising to see attempts by competitors to block the deal on antitrust grounds, not to mention the concerns that current KVH customers will have about potential future price increases.

However, it would also be something of an acknowledgement that GX is optimally positioned as a lower end off-the-shelf maritime VSAT service (like KVH’s miniVSAT), as a step up from FleetBB, rather than as a high end solution for cruise ships and oil rigs. KVH’s growth has slowed in the last year, with terminal shipments staying at close to 1000 per year in 2012, 2013 and 2014, but net adds and ARPUs declining. Pressure from Inmarsat will only intensify, once the low cost 60cm GX antenna is available with global coverage, so this looks like it would be a good time for KVH to sell out.

Inmarsat investors will presumably also welcome a deal, with a much clearer path established to a GX maritime business of $200M+ in annual service revenues over the next few years (though its important to note this represents a retail service business, not the wholesale spend on satellite capacity). However, the obvious question that customers will ask is whether low end price packages will still be offered for miniVSAT users, or whether Inmarsat will move them up to much higher price points, as it has done with FleetBB over the last few years.

And what will be the alternative for these users: will it be other VSAT solutions, or will it be the new broadband services (comparable in capability to FleetBB) offered by Iridium’s NEXT constellation? It will take some time for either of these options to emerge, with low cost small Ku-band VSAT antennas needed for the former, and completion of the NEXT constellation needed for the latter. That provides a further motivation for Inmarsat to move sooner rather than later, while its freedom of action in the low end of the maritime market remains relatively unconstrained by competitive alternatives.