01.29.18

The art of the deal…

Posted in AT&T, DISH, Operators, Regulatory, Spectrum, T-Mobile, Verizon at 5:40 am by timfarrar

Before yesterday’s Axios article suggesting that President Trump’s National Security Council has set its sights on using the 3.7-4.2GHz satellite C-band downlink spectrum for a national 5G network, it was clear that analysts were underestimating the importance of this spectrum band for the US wireless industry. For example, Morgan Stanley’s January 17 downgrade of DISH Network identified Verizon as the “only suitor” for DISH’s spectrum but only suggested the CBRS auction as an alternative option for Verizon to acquire more spectrum.

It seems few people have read the reply comments filed by wireless operators in the FCC’s mid-band spectrum proceeding last November, where Verizon suggested there should be a a near term NPRM with market-based clearance mechanisms, rather than FCC-run auctions for this band. In contrast, AT&T asked for “substantial record development, including additional analysis and modeling” before the FCC moves forward with an NPRM, and T-Mobile said the FCC should reject Intelsat’s proposal and instead take control of the auction process, with a defined post-auction band plan and payments to incumbents from the auction proceeds, part of which would fund the clearance of existing users.

A logical conclusion is that Verizon believes it could be the sole player to acquire spectrum rights in this band (to supplement its 5G mmWave buildout plans) via a deal with Intelsat, while AT&T has relatively little interest due to its focus on the 700MHz FirstNet buildout and securing additional mmWave spectrum allocations, and T-Mobile is trying to ensure that Verizon is unable to monopolize this spectrum band by asking for a more open auction process.

One important consideration is that the power restrictions that will apply to the CBRS band to permit spectrum sharing may not be necessary above 3.7GHz and therefore with MIMO this band could be deployed for urban coverage on approximately the same cell grid used for PCS and AWS spectrum, as Qualcomm and Nokia have indicated, and as is planned in Europe, where the 3.4-3.8GHz band is being auctioned.

Since the reply comments were filed, Intelsat has continued to push hard for a near-term NPRM and given the difficulties that the FCC would encounter in defining how a “market-based” transaction should occur, it is entirely plausible that an exclusive spectrum deal between Intelsat and Verizon could be struck shortly after a draft NPRM was issued. By selling say 100MHz of spectrum to Verizon, Intelsat would establish a benchmark valuation for its C-band spectrum assets, while being able to maintain existing video distribution services within the remaining 400MHz of spectrum. Of course, Verizon would also presumably be happy to see Charlie Ergen left at the altar without his “only suitor”.

The Trump NSC memo only serves to increase the pressure to execute such a transaction, and pre-empt any (still remote) possibility of the spectrum being “nationalized”. Verizon could certainly promise to build a 5G network using this spectrum within 3 years, without government intervention, and gain an even more concrete lead in 5G network superiority. Meanwhile Intelsat (and other satellite operators including SES) could keep providing their existing C-band video distribution services and receive billions in cash plus additional billions in attributed spectrum value for the remaining 400MHz of spectrum, and the FCC could achieve a pioneering market-based transfer of spectrum to higher value uses. What’s not to like about that deal (unless you are AT&T, T-Mobile or DISH)?

01.09.18

Viasat’s curious antenna issues

Posted in Broadband, Financials, Operators, Services, ViaSat at 1:54 pm by timfarrar

Last fall, I found Harris’s announcement on its 2017Q3 results call that “we received our largest order for a single commercial satellite covering four reflectors, bringing total orders to eight over the past two years” to be particularly odd because the only commercial satellites on order with four unfurlable reflectors are ViaSat-3.

Viasat then effectively confirmed that they had made this order in their 10-Q, which showed that Viasat’s total satellite purchase commitments increased from $1037.5M to $1106.6M during the quarter and that the size of Viasat’s contract with Boeing had increased by $11.2M in the same quarter (presumably to cover integration of the Harris antennas).

Not only was Viasat’s order quite late in the game (some knowledgeable observers assumed that it would have been ordered back in 2016), but it is also just for one satellite, not for both of the ViaSat-3 satellites that are under contract with Boeing. Viasat may well have another purchase option (which it can exclude from its purchase commitments for the time being), but it is still surprising that it took so long to reach an agreement with Harris. And it may suggest that the construction schedule for Boeing’s second ViaSat-3 satellite will be longer than originally thought.

Another curious issue was Viasat’s decision to use a fake image of ViaSat-2, which Viasat’s President Richard Baldridge later admitted “in fact is not the actual ViaSat-2″ satellite, because “we obscured the sensitive parts”. It is hard to understand why Harris’s antennas are deemed so sensitive by Viasat when Harris themselves were happy to publish a mockup image back in 2016 (which has since been removed from their website) and the size of the antenna can easily be worked out from Viasat’s own FCC submissions.

Although I have no evidence to suggest this is actually the case, one possible reason for these two apparent coincidences would be if Viasat had sought to patent some features relating to deployment of the Harris antenna on ViaSat-2 in order to try and prevent rivals from making use of Harris’s unfurlable Ka-band antennas (in particular Hughes and SS/L will likely use them for Jupiter-3). That would certainly explain Harris’s decision to highlight during the Q3 results call that the commercial reflector business is “a commercial model driven business where we invest our own R&D to develop that offering. We sell it into the marketplace.”

Now we have Viasat revealing today that Boeing “has identified an in-orbit antenna issue, which has caused some spot beams to perform differently than they did during ground testing.” It seems very likely that the issue is related to the unfurlable 5m Harris antennas, since “Viasat believes the issue will not affect the coverage area of the satellite” and the smaller solid antennas will provide most of the geographic coverage, while the larger unfurlable antennas will provide the high capacity coverage within the continental US.

It also seems somewhat more likely that this is a deployment problem (i.e. an issue primarily for Boeing/Viasat) rather a problem with the antenna itself (i.e. an issue primarily for Harris), since the antenna performed “differently” (and presumably correctly) during ground testing. If this problem relates to a new feature that Viasat or Boeing introduced, then that would clearly be particularly contentious, especially if it was related to any patent issues that might have been in play previously. So now we need to wait and see how the blame game develops and what this means for the future relationship between Harris and Viasat.