07.15.10
Posted in Globalstar, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 10:15 am by timfarrar
At today’s FCC Commission meeting, the Commission began its proceeding “to spur mobile broadband investment in MSS bands”, which will take the form of a Notice of Proposed Rulemaking (NPRM) and a companion Notice of Inquiry (NOI). The NPRM and NOI have now been published along with a press release and accompanying statements from all five of the Commissioners.
The NPRM is focused on two issues: First, it proposes to add co-primary fixed and mobile allocations to the 2 GHz band. Second, it proposes to expand existing secondary market policies and rules to address transactions involving the use of MSS bands for terrestrial services. However, given that the Commission notes that the Globalstar-Open Range lease was already evaluated under this standard, this second issue is more of a streamlining matter than a substantive change in policy.
The NOI “requests comment on further steps the Commission can take to increase the value, utilization, innovation, and investment in MSS spectrum. It builds upon the proposals in the NPRM and addresses, in part, the recommendations of the National Broadband Plan for increasing terrestrial deployment in the MSS bands. The NOI inquires about ways to create opportunities for more expansive and efficient use of the 2 GHz band for stand-alone terrestrial uses. It also asks, if the value of the spectrum increases, what actions the Commission should take to further the overall public interest.
The NOI further requests comment on other ways to promote innovation and investment throughout all three of the MSS bands while also ensuring market-wide mobile satellite capability to serve important needs like disaster response and recovery efforts, rural access for consumers and businesses across America, and various government uses.”
Most of the NOI is focused on the 2GHz band, as I suggested last month, and suggests that either incentive auctions or a voluntary relinquishment of part of the spectrum would be means of providing appropriate compensation for the step up in value for the remaining spectrum. Of course, if part of the spectrum was relinquished, and the license for the remaining spectrum was still based on the MSS rules, it would quite possibly be necessary to continue to operate an MSS satellite. Such an outcome would almost certainly require a merger of DBSD and TerreStar (and disposal of two of their three satellites – 2 in-orbit and 1 ground spare), in order to reduce their satellite operating costs.
What the NOI doesn’t do is make specific proposals about relaxing the ATC rules in the Big LEO and L-bands, although it asks whether there are “any other actions that the Commission could take that would increase terrestrial use of the MSS bands”. To me, the tenor of the NPRM and NOI suggests that the FCC feels it has given ground to Harbinger (in approving the SkyTerra transaction and ATC modifications) and Globalstar (with what will presumably be a near term approval of its ATC waiver requests, for which the deadline is now August 2). Now the FCC needs to sort out the 2GHz band and it appears to be adopting a somewhat harder line than some might have hoped.
In his statement, Commissioner Copps highlights his belief that “charging fees for the ancillary terrestrial use in the MSS bands could provide incentives to ensure that the spectrum resource is used more efficiently and intensively”. However, whether this position will be shared more widely by the other Commissioners is still to be seen.
This must be a disappointment to those who had hoped for a relaxation of the ATC gating requirements without any significant givebacks in exchange. In particular, it may be hard for the FCC to agree to such a relaxation if a hard line is taken over incentive auctions or other compensation for the “step-up in value” in the 2GHz band.
With this proceeding going forward at the same time as MSS-ATC proponents are trying to secure partners and further investment (and in some cases are in bankruptcy or on the verge of it), it is going to be very interesting to see how the regulatory and financing activities affect one another over the next few months.
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07.13.10
Posted in Globalstar, Handheld, Inmarsat, Iridium, Operators, Services, TerreStar, Thuraya at 2:37 pm by timfarrar
Inmarsat has now launched its ISatPhone Pro, which I was lucky enough to try out the other week. Although the phone itself is not particularly attractive, the call performance was better than I expected – voice quality was good (with the other party easily recognizable), and the ability to ‘walk and talk’ was far superior to my experience with the TerreStar Genus phone. Latency was also somewhat better than on the Genus phone. The main limitation was that the phone only registers on the Inmarsat satellite when the antenna is extended and pointed in the direction of the satellite, which means there is a delay of 1-2 minutes before a call can be made, and calls will rarely, if ever, be received on the phone (assuming the user doesn’t want to carry it around with the antenna extended).
Though Inmarsat’s phone is not expected to perform well at high latitudes (particularly in Alaska), it should generally be a good alternative for those MSS voice users who aren’t worried about carrying such a large device. The phone itself has been priced very aggressively, with pricing currently around $599 and in some cases close to $500.
However, the most surprising development is the airtime pricing that Inmarsat has set. Postpaid wholesale pricing has been set very low, leading to retail offers of $150 per year with 60 free minutes of calls. Even more extraordinary is the prepaid pricing, where a user can buy a 25 minute card, valid for 2 years, for only $20.
In my view the fact that Inmarsat has selected a uniform 2 year expiry date on its prepaid cards is a huge mistake, which I can only assume is due to the limitations of Inmarsat’s prepaid billing system (note also that prepaid service is currently not available in the US, due to patent litigation over the prepaid platform that Inmarsat uses). Iridium has previously indicated that about half of handheld MSS users are “glovebox”-type customers, who only use the phone for emergencies (and rarely use any minutes). To date such users have been paying at least $30 per month for satellite phone service (apart from occasional dual mode roamers on Thuraya), but now they will be able to get service for less than $1 per month. Inmarsat has thus completely undermined the economics of a significant part of the handheld MSS market, making it impossible for its service providers to justify targeting these customers (especially as SPs are busy competing away the margins which Inmarsat expected would be available on its handsets). In addition to leaving large amounts of money on the table, this action may also create added costs for Inmarsat, as these users are the least likely to be familiar with the limitations of satellite communications and thus may well end up consuming disproportionate levels of customer support resources.
Inmarsat may well have had a reason to act in such a destructive manner a few months ago, when it thought it might have the opportunity to prevent Iridium gaining funding in the public markets to pay for its NEXT contract. However, now that Iridium can rely on more money than expected from COFACE, such a calculation looks less sensible.
Despite having an attractive proposition for low end users, Inmarsat may still prove less successful than it hopes amongst higher volume users. In particular, these users will gain less of an advantage from the low occasional use tariffs, and may be somewhat reluctant to churn after making a substantial investment in buying an Iridium or Globalstar handset in recent years. Inmarsat has stated that it believes the average lifetime of a satellite handset is around three years, but in reality Iridium and Globalstar handsets are used for up to 8 years (and there is a thriving market for secondhand phones). As a result, churn in the handheld MSS market is much lower than Inmarsat apparently expects (even for Globalstar users, who have had to cope with a lack of two-way service in recent years), which will make it difficult to persuade large numbers of existing users to switch over rapidly to Inmarsat’s new service. On the other hand, competition from Inmarsat will potentially force Globalstar to offer rather more aggressive pricing as it tries to rebuild its subscriber base in 2011 and 2012.
In the end therefore, Inmarsat may end up being able to trumpet a fairly large number of handheld subscribers (potentially up to 150K by 2014), but many of these will be less desirable customers and ARPUs may be rather lower than expected. Thus the overall impact for the handheld MSS market of Inmarsat’s new service (even when combined with Globalstar’s two-way relaunch in 2011) may remain subdued, and at best we expect wholesale revenue growth of no more than 10% p.a. in the next five years. Indeed a more pessimistic view, assuming significant erosion of ARPUs at the low end of the handheld market could put wholesale revenue growth at less than 5% p.a. over this period.
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06.28.10
Posted in Financials, Globalstar, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:32 pm by timfarrar
The President has now announced his support for the proposal set out in the FCC’s National Broadband Plan (NBP) to free up 500MHz of spectrum for wireless broadband over the next decade. However, even though “Our nation’s ability to lead the world in innovation and technology is threatened by the lack of sufficient spectrum for wireless broadband applications and services” according to the FCC, it doesn’t necessarily mean that spectrum will prove to be a good investment over the next few years. (In this analysis, we’re looking at the opportunity for financial investors, as opposed to cellular operators – just like in the housing market, if you intend to use your spectrum, then that’s a different proposition from planning to flip it to someone else).
Indeed it is highly desirable from the FCC’s point of view that spectrum should become cheaper rather than more expensive, because that will enable more competition in the wireless market and result in lower prices for consumers. In the absence of lower prices for spectrum, it is likely that some cellular operators will be shut out entirely from 4G, or will be forced to merge with competitors in order to combine their spectrum holdings – not the outcome that the FCC wants to see. The FCC also doesn’t want to reward speculators – it would much prefer spectrum to be put to use, rather than see financial investors lock it up with a view to profiting from higher prices in the future. Although some might argue that the FCC also needs to raise money from auctions (not least to fund the buildout of public safety networks), it is far from clear that such motivations will weigh heavily in the FCC’s decisions (even if some members of Congress disagree). Certainly the concept of maximizing the proceeds of future auctions was not emphasized in the NBP.
From a historical perspective, despite this apparent crisis, spectrum prices in the US (on a per MHzPOP basis) are actually far lower than a decade ago. This is entirely logical: if it now takes 50MHz+ of spectrum to support $30 of monthly data services, whereas ten years ago operators required only 20MHz of spectrum to provide $50 of monthly voice services, then cellular operators simply can’t produce the same ROI from each MHz of spectrum as they did in the past.
Just the objective of freeing up 500MHz of spectrum (almost doubling the amount currently available for terrestrial cellular service) alone is likely to put a damper on spectrum prices. In recent months, we have also seen the FCC moving rapidly to finalize rules to enable use of 25MHz of WCS spectrum, and formulate policies to ensure that 90MHz of MSS-ATC spectrum is put to use. In addition, the FCC may also decide to limit the amount of additional spectrum that AT&T and Verizon (who accounted for the vast majority of spending during the 700MHz auction in 2008) can acquire in the future.
In my view, all of these developments point to lower spectrum prices in the next few years. In the short term, prices will be depressed further by the glut of spectrum owners seeking to monetize their holdings at the moment: Harbinger, Clearwire, NextWave and other MSS operators, to name just a few. This comes at a time when there is a relative lack of buyers, with most analysts hard pressed to name anyone other than T-Mobile that is an obvious partner for these companies. Investors who acquired undervalued spectrum assets a few years ago (particularly if that was prior to recent rule changes) may be OK, but new investors will need to be more cautious about the price they pay for these assets.
In summary, even if there is considerable long term demand for spectrum, it is a fallacy to equate this with increasing prices. In that regard, spectrum is like oil: you know there will be more demand in the future, but that tells you nothing about how the price will move in the next year or two. The short term price (and indeed the price in auctions) is determined by the balance of demand and supply today. That alone is a negative sign for investors in spectrum assets. However, when the FCC (unlike OPEC) would also prefer to see lower prices for spectrum, then it certainly looks like a risky bet to assume that prices will go higher anytime soon.
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06.21.10
Posted in Globalstar, ICO/DBSD, Inmarsat, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 2:36 pm by timfarrar
On Friday, the FCC’s Spectrum Task Force announced a “plan to increase value, utilization, and investment in mobile satellite service (MSS) bands”, beginning with a Notice of Proposed Rule Making (NPRM) which they hope to approve at the Commission meeting scheduled for July 15.
Although the announcement itself referred to the whole 90MHz of MSS spectrum identified in the National Broadband Plan (NBP) as suitable for terrestrial broadband, the focus of the discussion at Friday’s press conference appeared to be around the 2GHz (S-band) spectrum. Indeed the FCC highlighted that this spectrum, which is held by DBSD and TerreStar, is “right in the neighborhood of both the AWS spectrum and the PCS spectrum”. In particular, the FCC indicated that it would propose changing the table of allocation for the 2GHz spectrum, to allow primary terrestrial use (without ATC), and then enable secondary leasing for all three MSS spectrum bands. These rules would enable secondary leasing to begin “relatively soon”, if the FCC agreed to the proposal of the Spectrum Task Force.
According to Communications Daily, this proposal might include “charges”, presumably as “consideration for the step-up in the value of the affected spectrum” (as proposed in the NBP), but would avoid some of the delays associated with an incentive auction (which was one of the other options suggested in the NBP). Of course spectrum leasing for purely terrestrial use (as would then be possible in the 2GHz band) would be rather more straightforward than leasing under the current set of ATC restrictions, but the level of any FCC “charges” (and perhaps other conditions on terrestrial buildout or provision of satellite services) would dictate how much value could be realized by the existing spectrum holders.
What is particularly interesting is that this NPRM is being issued so quickly, when the Credit Suisse research conference call three weeks ago indicated that it was not expected until September. In addition, the NBP suggested that an S-band (2GHz) Order would not be expected until 2011 (as opposed to 2010 for the L-band and Big LEO bands), at least partly because decisions might be impacted by the outcome of the adjacent AWS-3 band proceeding.
Perhaps the reason for this change in timing is hinted at by the first line in the FCC’s announcement: the need to “increase…investment in MSS bands”. Certainly both Echostar and TerreStar were well prepared with immediate comments on the announcement (with Echostar also noting that the proposed change would “help spur investment”), and TerreStar desperately needs new investment in the very near future. It looks like the outcome of the FCC meeting in July (which according to Friday’s press conference is “still in flux”) might therefore prove critical to TerreStar’s future.
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06.02.10
Posted in Aeronautical, Broadband, Financials, Globalstar, Handheld, Inmarsat, Iridium, Maritime, Operators, Services, VSAT at 2:57 pm by timfarrar
So Iridium has finally announced the contract to build its NEXT satellites, which was won by Thales Alenia Space (TAS) with the support of a stunning $1.8B loan package which will be 95% guaranteed by COFACE, the French Export Credit Agency (ECA). By the sound of it, Lockheed had been confident of winning the contract, but the US Ex-Im Bank simply couldn’t match the level of support offered by COFACE.
Even Iridium appears surprised by the $1.8B Promise of Guarantee, given the suggestions in their March 2010 results call that the company would need to raise additional unsecured or subordinated debt in the public market. We had expected Iridium might need to raise $300M or more in backstop financing, based on Iridium’s April 2010 investor presentation which stated that the company was “seeking support for a[n ECA] facility of approximately $1.5B”. COFACE’s additional support therefore clearly appears to have tipped the balance in favor of TAS, because it removes the risk that Iridium would have faced in trying to tap the public markets at this point in time.
We now expect Globalstar to point out that Iridium has received an even more favorable financing package than Globalstar did last year (when Thermo was required to provide additional backstop funding as a condition of the $586M COFACE-backed facility) and potentially to seek a $200M+ extension of its current facility. This would provide funding so Globalstar could exercise its option to purchase the last 24 second generation satellites, allowing them to add more satellites to their constellation before NEXT becomes operational (and before radiation problems are expected to start impacting their 8 first generation spares in about 2015). Such a facility could also give Globalstar more firepower to market its new second generation services in 2011 and 2012, without the risk of eating into the contingent equity and debt service reserve accounts previously established by Thermo.
The next stage in this war of the Export Credit Agencies may then come in the shape of Inmarsat’s upcoming Ka-band constellation, which we expect to involve 3 or 4 dedicated Ka-band satellites (costing at least $200M each including launch and insurance), providing oceanic coverage to complement and extend its existing FleetBroadband and SwiftBroadband services. With Inmarsat’s new satellites expected to be deployed between 2013 and 2015, an order could well come as soon as this summer, when Inmarsat announces its investor guidance for the next five years. More details of Inmarsat’s plans and our expectations for their future Ka-band revenues were given in the March 2010 report, available to subscribers to our MSS information service.
The competition to build Inmarsat’s new satellites appears once again to be shaping up as a US vs European battle with TAS, SS/L and Astrium all bidding for the contract. Will ECA financing once again prove to be a key factor in the decision, even though Inmarsat has much less need for a guarantee than Iridium and Globalstar? Certainly Inmarsat has not been reluctant to seek cheap government-backed funding when it is available, as seen in its recent European Investment Bank loan to fund the Alphasat project.
In summary, its clear that ECA financing is now going to play a very substantial role in supporting the MSS industry. As a result, the prospects for a long awaited consolidation of the sector appear to be diminishing. That is certainly good news for end users of MSS, as well as service providers and distributors, who will be able to take advantage of an increasing range of competitive alternatives. This is particularly true in the maritime and aeronautical markets, where Iridium is really the only potential MSS competitor for Inmarsat. Indeed Iridium’s ability to serve these markets gives it a much more sustainable long term position than some other systems, because most maritime and aeronautical opportunities are much less likely to be undermined by the buildout of terrestrial wireless systems.
Nevertheless, it also seems hard to justify the $8B+ of capital investment that has been committed by Iridium, Globalstar and all of the other players (Iridium NEXT, Globalstar 2, Inmarsat 4, Orbcomm, ICO/DBSD, SkyTerra and TerreStar) in an industry sector which only generated $1.1B in wholesale service revenues in 2009, and though growing healthily, doesn’t appear poised to breakout from the 8% annual growth rate seen in recent years. Unless new sources of value appear (spectrum monetization being the obvious option for several players) it appears unlikely that all of the MSS operators will be as successful as they and their investors hope.
Indeed the main story of the next decade is likely to be the competition between Iridium and Globalstar, as they both strive to be the second biggest player in an MSS market that will continue to be dominated by Inmarsat, while other providers may fall by the wayside. If Iridium can grow from its current 19% share of wholesale service revenues to about a 25% market share, or Globalstar can grow from its current 5% share to 15% or more (based on its lower cost satellite system), then that should be sufficient to achieve an attractive return on capital for either company. However, with Inmarsat holding a more than 60% market share today, it appears unlikely that both Iridium and Globalstar could achieve this level of success simultaneously.
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02.24.10
Posted in Financials, Globalstar, ICO/DBSD, Inmarsat, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:32 am by timfarrar
So the cat is out of the bag. As we noted last December, the FCC has been looking hard at how to make sure MSS spectrum is put to productive uses, and now in a speech by Chairman Genachowski, he has stated that the Plan will propose a Mobile Future Auction “permitting existing spectrum licensees, such as television broadcasters in spectrum-starved markets, to voluntarily relinquish spectrum in exchange for a share of auction proceeds, and allow spectrum sharing and other spectrum efficiency measures”. Specifically:
“The Plan proposes resolving longstanding debates about how to maximize the value of spectrum in bands such as the Mobile Satellite Service (MSS) or Wireless Communications Service (WCS) by giving licensees the option of new flexibility to put the spectrum toward mobile broadband use-or the option of voluntarily transferring the license to someone else, who will.”
It is going to be very interesting to see whether this “new flexibility” involves further liberalizing the regulations governing ATC, over what would undoubtedly be the heated objections of existing wireless carriers (who have always had a problem with potential “windfalls” for MSS spectrum holders). For example, would the FCC contemplate removing the requirement that all terminals must include satellite capability and offer a dual mode service (similar to the European S-band licenses which do not include any such restrictions)? Presumably any such carrot might come with a corresponding “use it or lose it” stick, although if an operator chose to stay with MSS-only services, it is hard to imagine that any third party could use the spectrum for terrestrial services at the same time.
However, MSS operators will certainly now be faced with a choice: do they continue to bet that (what conceivably might be more liberalized) ATC is the best way forward, and hope they can either partner with a leading wireless operator or attract investors to a new entrant wireless business plan, or do they agree to return their spectrum to the FCC in exchange for a share of the proceeds in the proposed Mobile Future Auction? The rest of this year will certainly be filled with many twists and turns in the MSS sector as we see which way operators will jump.
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11.16.09
Posted in Globalstar, Inmarsat, Iridium, LDR, LightSquared, Operators, Orbcomm, Services at 12:37 pm by timfarrar
Inmarsat revealed in its 2009Q3 results that it is in negotiations to acquire a satellite services provider that generated more than $50 million in revenue in 2008, is currently profitable and will have no material indebtedness at closing, in a purchase that would cost less than $150M. There are very few companies in the MSS space that fit the profile given by Inmarsat, but one that does is SkyBitz, which Inmarsat noted in its June 2009 investor day presentation was one of the “key competitors” in the satellite Low Data Rate (LDR) market. Inmarsat also noted that one of its objectives in investing in SkyWave was to “stimulate consolidation in the [satellite LDR] market”.
Indeed, back in July we speculated that a possible resolution to the fight between Inmarsat and SkyBitz over what SkyBitz characterized as “restrictive trade covenants included by Inmarsat” in its SkyWave investment would be for Inmarsat to facilitate a buyout of SkyBitz. An Inmarsat acquisition of SkyBitz would have the added benefit (for Inmarsat) of taking out another of SkyTerra’s key LDR customers, in addition to the 50K GlobalWave customers who were moved from SkyTerra’s satellites to Inmarsat’s I4 satellite network in October 2009.
***We’ve now been reliably informed that Inmarsat’s current acquisition target isn’t SkyBitz. We understand it is most likely a system integrator focused on government business. We don’t have a name at this point, but one company in this area that would fit the disclosed parameters is Segovia. There are likely several other similar possibilities as well.***
We’ve lamented previously that no-one ever seems to leave the MSS industry, but if Inmarsat does eventually follow through on its stated ambitions to stimulate consolidation in the LDR market, then perhaps that sector could be one place where much needed MSS industry consolidation finally begins.
In that context, with Orbcomm having yet another disappointing quarter, we wonder if now is the time for a competitor to make a bid for Orbcomm. After all, the company expects to settle the $50M insurance claim for the failure of all of its QuickLaunch satellites “imminently”, at which point Orbcomm will not have spent too much on its second generation constellation and will still have a reasonable amount of cash on its balance sheet. That might be particularly attractive to Globalstar or Iridium, either of which would benefit greatly from moving Orbcomm’s subscribers over to their own networks (albeit with significant costs for terminal upgrades), and could allay investor concerns about whether Orbcomm can fund the rest of its second generation satellite constellation (which would be exacerbated if the company fails to receive something close to $50M from its insurance claim in the near future). With its partners postponing some new service offerings until messaging delays are resolved, Orbcomm will need these new satellites sooner rather than later if it to build a sustainable business and generate the rapid growth that has been promised ever since the company’s IPO in 2006, but to date has failed to materialize.
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11.13.09
Posted in Globalstar, Iridium, Operators at 9:56 am by timfarrar
It seems a lot of noise is being made about the potential impact of Globalstar filing the license application for its second generation constellation with the French regulatory agency ANFR instead of the FCC. Indeed this was even raised as a concern on Iridium’s 3Q2009 results call yesterday. In our view this is basically a storm in a teacup: both Iridium and Globalstar are licensed to use particular parts of the Big LEO L-band frequency allocation (1610-1626.5MHz), and in the US the FCC decided (in Nov 2007) to share this spectrum equally between the two companies (Globalstar has the bottom 7.775MHz, Iridium the top 7.775MHz and the middle 0.95MHz is shared). However, in certain other countries (e.g. Russia), some of this band is reserved for Radioastronomy and Microwave Landing Systems and so Globalstar is unable to use much (in some cases any) of the lower 8MHz of the band. Thus Globalstar wants to keep operating up to 1621.35MHz as it was allowed to in the US before the FCC’s November 2007 ruling.
In theory, the FCC’s November 2007 ruling applied to the global operations of both systems, although in reality, Iridium would still need to seek a license from individual country regulators to operate below its originally authorized 1621.35-1626.5MHz frequency band, which may or may not have been granted. Iridium still has the opportunity to make this argument, even when Globalstar is licensed by ANFR, but it will not be able to seek sanctions against Globalstar by the FCC if it is unsuccessful and Globalstar remains authorized to operate some of its gateways up to 1621.35MHz. Instead, the licensing of the two systems will depend on the decisions of individual regulators.
Some observers have seen this as a potential problem for Iridium, but that’s not really the case. Iridium will certainly need to build the capability into its next generation system to adjust frequency allocations on a country by country basis, but that’s far from an insurmountable (software) challenge. The places where Iridium will need additional frequencies for broadband and/or voice services include the oceans (for evolutions of OpenPort), where there is unlikely to be an issue as there is relatively little Globalstar coverage, and a few key countries (e.g. Afghanistan) where support from the DoD may count in Iridium’s favor in securing additional spectrum. Thus we believe Iridium is unlikely to face any meaningful incremental capacity constraints as a result of this decision. Globalstar will benefit by avoiding potential regulatory sanctions that Iridium might have pushed the FCC to impose, but there are much bigger issues for both companies: in particular, whether sufficient growth potential remains in the handheld MSS market for all of the MSS operators to be successful.
On another topic, we’ve just released the latest report in our MSS information service, with extensive discussion of the outlook for ATC, the growth prospects for in-flight connectivity and the competition between Inmarsat and maritime VSAT. In the last few months we’ve also produced detailed profiles of Iridium and Thuraya, and will be releasing profiles and forecasts for Inmarsat and TerreStar in the near future. Subscribers to the research service include the majority of leading MSS operators, distributors, equipment suppliers and satellite manufacturers, as well as a number of investors in the MSS sector. As one MSS operator recently told us: “your reports are the only ones on the MSS sector that actually provide valuable insight for someone working in the industry”. According to another provider: “I base my business targets on your forecasts; they are the only projections that you can rely on to be realistic”.
If you are interested in finding out more about our research, then contact us for more details.
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10.16.09
Posted in Globalstar, Handheld, Iridium, Services, TerreStar at 12:07 pm by timfarrar
At the SATCON conference in New York this week, TerreStar was showing its Elektrobit Genus phone. The company had conducted live demos of calls over the satellite at the IACP conference in Denver the previous week (with reportedly very good results in terms of call quality), but unfortunately a similar opportunity wasn’t available in New York. Nevertheless a few interesting facts emerged about the phone.
Firstly you have to switch manually into satellite mode (via a menu selection) in order to use either voice or data over the satellite. This was not necessary from a technical perspective (the phone could have roamed automatically since the satellite is basically treated like an international GSM network), but was insisted on by AT&T so that users know they will incur roaming charges, and that they will not be able to get the same quality of service that they would expect from a terrestrial network (i.e. they will have to stand outside, and not be inside a building or a car).
Secondly, as shown in the picture below, there is an external antenna port, enabling a cradle-type device with an external antenna to be connected, so that adequate link margin is available in Northern Canada and Alaska. The external antenna is a quad helix antenna about 0.3 inches in diameter (about the size of the Thuraya antenna) and 3 inches in length which swings up from the back of the cradle in the same manner as the rotating antenna on the old Iridium 9505 phone. These cradles will be sold separately (pricing is unclear but we’d guess in the $100-$200 range) and will increase the handset volume by about 60%.
In the lower 48 states and southern Canada (i.e. below the red line in the map above) the Genus phone uses an internal patch antenna located at the right upper corner of the phone in the picture above. It will be particularly interesting to see how sensitive the call quality is to the orientation of the phone when it is being used in practice – users are instructed to hold the phone so that their fingers do not obstruct the link (per the sticker on the back of the phone), but if you are moving around, then inevitably your head will come between the phone and the satellite some of the time. TerreStar’s very large (i.e. very sensitive) satellite antenna will certainly help to close the link, but given how many arguments there have been on conference panels we’ve chaired in the past between proponents of getting the antenna clear of the head (i.e. Globalstar, Inmarsat and Iridium) and those who don’t believe an external antenna is needed (i.e. TerreStar and SkyTerra), this will be one of the first things to examine when the phones become available for testing.
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09.09.09
Posted in Globalstar, Handheld, Inmarsat, Iridium, Operators, Services, TerreStar, Thuraya at 12:43 pm by timfarrar
Unfortunately its not new services, but the prices of current and future satellite phones and airtime that seem to be headed upwards. The last year has seen Iridium introduce its new, improved 9555 handset at a higher price than the 9505A that it replaced, with phones now selling for about $1500, while Thuraya has “simplified” (i.e. increased) its airtime pricing and introduced the more expensive ruggedized XT phone. Inmarsat admitted in June that its new GSPS handset may sell for up to $750 at launch in 2010, compared to the $500 retail price point it suggested previously. Even TerreStar has now indicated that its new handset may cost up to $800, with airtime pricing at “less than $1 per minute”.
We’ve commented before on how satellite phone revenues have been falling since 2005, and competition has certainly diminished as Globalstar has experienced problems with its two-way services over the last couple of years. However, it seems the consensus amongst current participants in the handheld MSS market is that there is little if any growth potential still left in satellite phones, and the actions of Iridium and Thuraya appear to indicate that their remaining customers are relatively price insensitive.
Even more surprising is that so far, at least, the new entrants do not seem to be particularly keen on shaking up the existing “premium price” paradigm for satellite phones. In the case of TerreStar this is rather worrying, given that their objective is to greatly expand the satellite phone market, and bring satellite-cellular roaming to a mass market, which seems very unlikely to happen with an $800 phone. Is TerreStar simply trying not to give too much away about its future pricing plans, while it focuses on developing all the other elements needed for a commercial service, such as distribution channels, billing systems, etc.? Will TerreStar actually be able to convince a cellular operator to subsidize its phone (which would require a significantly greater commitment from a partner than its current roaming agreement with AT&T)? We should find out soon, as TerreStar intends to launch commercial services at the end of 2009.
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