08.14.25
Those who cannot remember the past are condemned to repeat it…
The famous saying from George Santayana is one that often comes to mind in the MSS industry, where companies repeatedly make the same mistakes as their predecessors a decade or two ago. And this blog has plenty of posts from 2009-14 about the mistakes made by MSV/LightSquared and Phil Falcone (who incidentally was so irritated by my posts that he was moved to comment on one of them from his Harbinger Capital computer – which is why my X/Twitter bio says that “I enjoy annoying billionaires”).
So it’s now particularly ironic to see that ancient history once again take center stage in the industry as the dispute between Viasat and Ligado/AST heats up. While Phil Falcone has other things on his mind nowadays, some of us remember those days only too well, including Jennifer Manner, who worked at MSV/SkyTerra from 2005-2009. Back then, Inmarsat and MSV signed a 100 year long Cooperation Agreement which was hugely advantageous to Inmarsat and has been a millstone around Ligado’s neck ever since. It has also been the source of endless disputes over the years as Ligado ran short of money, and Inmarsat tried to make sure it collected as much as possible.
The agreement was great for Inmarsat (which received ~$1.7B in spectrum lease payments, while its new owner, Viasat, stands to receive billions more between now and 2107) and Rupert Pearce, then General Counsel of Inmarsat, who negotiated the agreement and subsequently moved on to become CEO of Inmarsat. MSV’s then CEO Alex Good signed the agreement because Falcone had told him that an agreement was needed before Harbinger would provide a sorely needed $500M cash infusion (and Falcone had no understanding of what it actually said). Of course Falcone had many regrets later on, when LightSquared was forced into bankruptcy by GPS interference concerns, and once it became clear that Ligado was not going to deliver a windfall from its spectrum holdings, he unsuccessfully sued MSV’s executives and owners.
That brings us to today, when the dispute flared up once again, and both Viasat and Ligado filed competing motions with the bankruptcy court, detailing a dispute over the agreement to assume the Cooperation Agreement and sublease the spectrum to AST. There was a contentious mediation which had appeared to be settled back in June.
Now Ligado alleges that the Cooperation Agreement does not prohibit either Ligado or AST from seeking access to more L-band spectrum outside the US in the future, while Viasat alleges that the Cooperation Agreement has always prevented Ligado from operating outside the US, and AST should also be bound by these terms.
Ligado cites the drafting of the Mediation Agreement to support its argument that the only limitation is on AST’s initial application for its LEO constellation and nothing stops it from making modification requests in the future. It also includes a curious declaration from CEO Doug Smith, which sets out Ligado’s attempts to do a satellite lease deal with Avanti in 2016, at a time when there was lots of intrigue around Avanti’s future.
On the other hand Viasat argues that the Cooperation Agreement contains multiple references to Inmarsat’s exclusivity outside the US, and that the company would never have agreed to a deal that left Ligado or AST with the potential to interfere with its operations elsewhere in the world. Of course, Viasat has its own ambitions to build a LEO D2D constellation in partnership with Space42, operating in the L-band around the world, plus the 2GHz MSS band in Europe.
It remains unclear what the outcome of this dispute will be, especially as US bankruptcy courts often tend to favor the debtor in disagreements with creditors, but this could hold up the proceedings for quite a while. That may be one of Viasat’s objectives, as it looks towards an EU decision on 2GHz by the end of the year, and tries to cement its own LEO funding plans. Ligado’s submission even states explicitly that “Inmarsat’s position poses an existential threat both to the viability of the AST Transaction and the feasibility of the [Bankruptcy Reorganization] Plan”.
It is also intriguing why AST is so keen to pursue L-band rights outside the US, especially as these will undoubtedly be very difficult to secure, given the longstanding presence of both Viasat/Inmarsat and Space42/Thuraya. However, an application by Viasat to shift spectrum from GEO to LEO could provide an opening and AST would certainly prefer it if Viasat didn’t build another competing LEO NTN/D2D constellation.
But I also suspect that AST realizes the weakness of its claim to 2GHz (where the company claimed to have “priority rights” from last week’s deal with Sky and Space Global, omitting to mention that these are low priority) and the not insignificant probability that it will lose the EU 2GHz competition to either SES/Lynk or EchoStar (most observers think Viasat is fairly certain to retain its rights and there is only expected to be one other wideband license up for grabs). This would mean AST has little option other than to pursue L-band rights on a global basis if it wants to build a new constellation operating in “midband” spectrum in a few years time.
Now we wait to see how this develops. But for the time being AST may no longer be able to claim a clear path to developing what it asserts will be “broadband” D2D through use of MSS spectrum. So while this dispute continues, the company will have to focus on its very limited terrestrial spectrum leases with AT&T and Verizon, which will at best be sufficient to offer a narrowband service that is similar to Starlink (and will need the FCC to approve AST’s non-compliant SCS application, which is not at all certain).
