03.12.11
Posted in ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:31 am by timfarrar
Could LightSquared meet its buildout obligations to the FCC without doing any buildout?
Amazingly enough, that could be one potential interpretation of the way in which LightSquared’s March 2010 agreement with the FCC is written.
Condition 2. Without regard to satellite service, SkyTerra shall construct a terrestrial network to provide coverage to at least 100 million people in the United States by December 31, 2012; to at least 145 million people in the United States by December 31, 2013; and to at least 260 million people in the United States by December 31, 2015. For purposes of this Condition 2, “terrestrial network??? shall mean the network comprised of: (a) SkyTerra’s L-band spectrum used by its terrestrial network; (b) other terrestrial spectrum that Skyterra is the licensee of or has access to under a spectrum manager lease or de facto transfer lease and deploys to provide the coverage and level of service requirements described in the paragraph 6; and (c) any other terrestrial spectrum that is used by SkyTerra’s terrestrial network or is made available to SkyTerra for pooling with its spectrum and that SkyTerra deploys to provide the Coverage and level of service requirements defined in paragraph 6. “Spectrum that is used by SkyTerra’s terrestrial network??? means spectrum that is licensed to or controlled by a party other than SkyTerra that has been incorporated into the infrastructure of SkyTerra’s terrestrial network.
The only additional requirement is that this buildout “must be capable throughout the coverage area of providing speeds to end users at least at a level commensurate with deployments of terrestrial networks using “fourth-generation??? (“4G???) technologies, such as the 3GPP Long Term Evolution (LTE) or Worldwide Interoperability for Microwave Access (“WiMAX???) standards”. Thus LightSquared is entitled to count towards its obligations any buildout by Airspan in the 1.4GHz spectrum (under their agreement last August) or by Open Range (as announced yesterday) in what is most likely the 1670-75MHz terrestrial spectrum block that LightSquared also controls.
Most significantly, if Harbinger can strike a deal with MetroPCS this weekend, to make a joint bid for the TerreStar and DBSD spectrum, then any LTE buildout in the 2GHz band (presumably under a “spectrum pooling” agreement) could also be counted towards these obligations. Even if a buildout in the 2GHz MSS spectrum did not take place, then MetroPCS has its own LTE buildout in the AWS band and has expressed an interest in entering into a roaming agreement with LightSquared, which could potentially be counted as “other terrestrial spectrum that is used by LightSquared’s terrestrial network” depending on how the agreement was structured.
Once you realize that MetroPCS already has about 97M covered POPs (although not all of them yet have LTE) and that OpenRange was intending to cover 6M POPs (with an option to grow to 12M POPs) under its original agreement with Globalstar, it becomes pretty clear that LightSquared might be able to meet its December 31, 2012 deadline for covering 100M POPs without building out any of its own network coverage. Though that would probably not be the case for the buildout requirements in subsequent years, this highlights that Harbinger might well be able to find a way around LightSquared’s looming deadline next year, even if it isn’t able to fund a large scale deployment in the near future.
As a result, I’ll be very interested to see what happens with MetroPCS, Harbinger and Solus this weekend. DBSD stated on Friday evening that it expects to receive a bid “later today or over the weekend” and will file a report on Monday “to designate the leading bidder”. It seems the exact details of how any agreement with MetroPCS is structured could prove critical to where we go from here.
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03.11.11
Posted in Financials, Globalstar, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:48 am by timfarrar
He came from a hardscrabble background, rising to prominence along with his flamboyant wife, who became a favorite of the tabloids. After raising hundreds of millions of dollars, his unstinting efforts to bring essential resources to millions of people in remote areas attracted the interest and favor of political leaders and government agencies alike.
No, its not the story of Phil Falcone, but the autobiography of Bob Geldof. After today’s announcement of a deal with Open Range, something that other MSS-ATC proponents openly scoffed at when Open Range signed its original deal with Globalstar, I’m also left asking “Is that it?”.
Its worth recalling that the prior spectrum lease contract between Open Range and Globalstar called for annual spectrum lease payments which in the first six years were projected to range from $0.6M to $10.3M, something that is little more than a Band Aid in the context of Harbinger’s $2.9B investment in LightSquared. I’m therefore left with the distinct impression that LightSquared intended to announce a much bigger deal with MetroPCS, as I suggested yesterday, but it has not yet been possible to reach agreement over a joint bid on the 2GHz MSS spectrum.
Given the pressure to reach a deal on any bid for the DBSD spectrum before the next hearing on Tuesday March 15, and DBSD’s intention to announce its preferred bidder the day before, we will have to wait and see if a MetroPCS deal can be struck over the next three days, or if Mr. Falcone will be the one left singing “I Don’t Like Mondays“.
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03.10.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:24 pm by timfarrar
It now appears that Harbinger may very shortly announce a change to the LightSquared business plan to focus first on development of its ATC network in the 2GHz band, through a joint $2.6B bid with MetroPCS and Solus for the DBSD and TerreStar spectrum. This could allow it to mitigate the growing chorus of opposition to its plans for deployment of an L-band network, including planned testimony by Trimble to Congress tomorrow (Friday).
Over the last month, LightSquared has been gradually changing its tune, from initially suggesting that Garmin’s tests were simply flawed, to admitting that there “may be some interference to GPS signals which…may require modification to some existing GPS units” to now conceding that some GPS receivers may need to be replaced.
As I’ve also noted over the last week, a partnership with MetroPCS has become increasingly likely, with a deadline for bids in the DBSD case of Tuesday March 15. On a very similar timeline, on Monday March 14 LightSquared will provide its response to the numerous Petitions for Reconsideration of its L-band ATC waiver that have been filed with the FCC.
UPDATE: I understand that LightSquared has not yet sealed the deal with MetroPCS. Given the upcoming deadlines, it may be a very busy weekend in Reston.
Assuming that Harbinger is able to pull together a bid for the 2GHz spectrum, I would expect LightSquared to propose that if it is given permission to build out its terrestrial network initially in the 2GHz band (with an associated waiver of the ATC gating requirements), it will take more time to resolve the GPS interference issues in the L-band. Because the key issue for GPS interference is that many existing GPS devices will be overloaded by the LightSquared signals within its own licensed spectrum (as opposed to LightSquared’s signal spilling over into the GPS band), a logical compromise would ultimately involve an order from the FCC that GPS devices sold after a certain date (say the end of 2012) will need to include filters that can prevent overload interference, while LightSquared will not operate at the upper end of the L-band spectrum until some time after this (perhaps 2014 or beyond), so that existing GPS devices can be replaced.
If MetroPCS funds the buildout of a 2GHz LTE network in its own coverage areas, then this may be largely sufficient to meet LightSquared’s initial buildout milestone of 100M POPs covered (although perhaps with a modest delay to the current objective of the end of 2012). Though there has been much talk about a deal between LightSquared and Sprint, it seems that the initial 2GHz buildout may not rely on that possibility. LightSquared and Harbinger would then presumably hope that something turns up, whether in the shape of a deal with Sprint, or something else, to fund the rest of the nationwide buildout in 2013 and beyond. Although details may not emerge for some time, it also seems plausible that LightSquared could eventually seek to renegotiate its Cooperation Agreement with Inmarsat, on the basis that Regulatory Changes have made it impossible for LightSquared to secure the originally planned benefits of the deal in the L-band.
Of course, if Harbinger only ends up with a minority stake in a 2GHz spectrum venture, and is unable to exploit the L-band spectrum to any significant degree in the next few years, then this would be a significant come down from its original plans. However, with MetroPCS potentially funding the initial rollout, this would push the problem of where LightSquared is going to get the cash to pay for a multi-billion dollar national network down the road by at least two years, allowing Harbinger to hope that spectrum values and data demand will grow enough for it to recover its $2.9B investment in the L-band and fund the rest of the nationwide buildout at that point.
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03.09.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 10:10 am by timfarrar
Today FierceWireless has confirmed that Nokia Siemens Networks will be “cut loose” by LightSquared and that LightSquared is instead basing its plans on completing a network sharing agreement with Sprint. Sprint’s has today also provided some limited detail on this issue, noting that “it is ‘technically feasible and possible’ to support different spectrum from a wholesale partner on its network”, but that “any wholesale deal would depend on how much Sprint had to pay to rent the spectrum versus what it makes on the eventual service”. This seems to imply that part of the deal would involve Sprint potentially leasing some of the LightSquared spectrum (perhaps as compensation for the hosting fees?), although it is uncertain if there would be a committed cash payment from Sprint to LightSquared and who would fund any incremental buildout costs.
Intrigiungly, FierceWireless also hints that “LightSquared will announce significant news at the upcoming CTIA trade show in Orlando” on March 23, perhaps involving its collaboration with Ericsson. It is rather less clear whether this would also involve a commitment from Sprint on network sharing (given that Sprint has indicated that we should only “expect more news by the middle of the year”), and could end up simply being a confirmation that NSN is out, to be replaced in some form by Ericsson.
It is worth noting that Ericsson is the LTE contractor for MetroPCS, and as I’ve noted previously, MetroPCS needs to decide whether to back the Harbinger/Solus bid for DBSD and TerreStar (as opposed to bidding on its own for TerreStar) by March 15. Thus, even in the absence of any Sprint deal, I would expect to see a tie-up between LightSquared and Ericsson announced at CTIA.
Whether LightSquared will have more to announce is unclear, though the company has previously indicated that it “has an agreement with a major retailer that it will name before the end of March”. However, with Sprint apparently keeping its options open for the time being, it seems more likely that any news will be around the 2GHz band and it may take longer before we find out what is actually going to happen in the L-band.
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03.08.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 5:57 pm by timfarrar
According to Broadband Reports, “things have changed significantly” with Nokia Siemens Networks’ $7B contract to build the LightSquared network, and NSN is now “out of favor” because LightSquared is planning to work with Sprint and its contractors Alcatel-Lucent, Ericsson and Samsung. This appears to confirm my suspicions of a couple of weeks ago, when I noted that NSN was being lukewarm about the LightSquared network build and appeared to have suspended its tower permitting and siting work.
This report confirms MetroPCS’s interest in the 2GHz spectrum controlled by DBSD and TerreStar, although it is unclear whether MetroPCS would bid alone for TerreStar or partner with Solus and Harbinger in a joint bid for both DBSD and TerreStar. It also indicates that a joint build (i.e. spectrum pooling agreement) may be undertaken for the L-band and 2GHz spectrum in conjunction with the Sprint network upgrade.
Of course if Sprint did collaborate with LightSquared then that would “allow for LightSquared to deploy its network much quicker” and at lower cost, because the two companies would work together to develop and deploy cell sites. Sprint also appears to be looking at securing options other than relying on Clearwire for its 4G network, which would presumably mean having at least an option to purchase capacity from LightSquared. However, as I noted last week, the challenge here will be in the financing of the network. There is very unlikely to be any reason for Alcatel-Lucent, Ericsson and Samsung to grant vendor financing to LightSquared, something that was widely expected from NSN. If Harbinger is to fund part of the planned TerreStar/DBSD bid in addition to the LightSquared buildout, then that would be even more of a stretch for its resources.
The most fascinating question is whether Sprint would commit to a joint buildout with LightSquared regardless of the progress of its discussions with T-Mobile and Clearwire and before a resolution of the current GPS interference testing. My initial view on hearing news of the T-Mobile/Sprint negotiations was that these could hold up any decision by Sprint. On the other hand, that news could have been leaked by someone trying to derail a Sprint-LightSquared deal. Certainly Clearwire would suffer from such a deal, and its share price has been on a rollercoaster over the last week, as differing portrayals of Sprint’s intentions have emerged.
Given both the buildout obligations that LightSquared is committed to, and the timescales on which Sprint plans to begin its upgrades, any deal would certainly have to happen very soon, most likely before the resolution of either the T-Mobile/Sprint merger discussions or the current GPS interference testing. If LightSquared has basically fallen out with NSN as Broadband Reports implies, then it looks like it is putting all of its eggs in one basket with Sprint and this may now be the “cornerstone” on which LightSquared’s nationwide LTE ambitions will rest. As a result, it will be very interesting to see how much of a stake Harbinger plans to take in the proposed bid for the DBSD/TerreStar spectrum, and therefore whether that remains a viable backup plan.
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Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 10:09 am by timfarrar
But if you try sometimes you might find
You get what you need
With news emerging about early stage talks between Sprint and T-Mobile over a potential combination of the two companies, or some other deal involving Clearwire, it now looks less likely that either Sprint or T-Mobile would be willing to move ahead with any partnership with LightSquared in the near term. However, Harbinger looks rather better positioned with MetroPCS, whose CFO recently described LightSquared as “a wonderful option for us”. MetroPCS has also just raised an additional $1B for “opportunistic” acquisitions of “nationwide” (i.e. MSS) spectrum.
Harbinger and Solus have to formalize their bid for DBSD by no later than March 15, in order for it to be considered as a realistic alternative to the current bid from DISH. In addition, TerreStar Networks’ exclusivity period to propose its own reorganization plan is currently scheduled to expire on March 9, opening up the possibility for Harbinger and Solus to submit their bid for TerreStar at that point.
Given these tight timelines, Harbinger and Solus may now have to move forward in partnership with MetroPCS (assuming a deal can be struck for a joint bid) in an attempt to buy DBSD and TerreStar. The structure of such a venture might not include LightSquared’s L-band operations, given the high value that Harbinger has placed on those assets, plus its (GPS interference) risks and liabilities (to Inmarsat for the L-band spectrum lease). Indeed if Harbinger did ultimately move forward with a separate 2GHz joint venture (based on much cheaper spectrum), it seems more likely that Harbinger would instead seek to distribute its holdings in LightSquared to investors requesting redemptions.
However, clearly Harbinger, Solus and MetroPCS would hope that the FCC will provide a similar waiver of the ATC gating criteria to that recently granted to LightSquared. Whether or not the buildout of a 2GHz terrestrial network then took place in conjunction with LightSquared’s buildout (through the sort of spectrum pooling/network sharing arrangement that has been discussed in the past between LightSquared and TerreStar) would presumably depend on whether and when the L-band GPS interference issues are resolved.
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03.05.11
Posted in Handheld, Operators, Services, Spectrum, TerreStar at 4:11 pm by timfarrar
TerreStar has finally admitted the obvious, and moved to reject its development and supply agreements with Elektrobit, asserting that “any benefit derived from the Agreement is insufficient compared to the relative burden because the Debtors no longer require the services provided under the Agreements”. TerreStar also asserts that “the Debtors do not believe that rejection of the Agreements will affect the TSN Debtors’ enterprise value…nor the TSN Debtors’ current efforts to market the TSN Debtors’ assets”.
This comes as something of a surprise because TerreStar had based its original plan for emergence from bankruptcy upon trying to sell the Genus phone on an ongoing basis, projecting that it would capture 41K subscribers by the end of 2011 and 156K subscribers by the end of 2014, which I noted at the time was a laughable idea. However, at least it shows that the company is now facing reality, given that only a few hundred phones have been sold and reviews of the Genus continue to be mediocre at best.
What I find most astonishing is that we got into this position in the first place, and people thought it was worth spending so much money simply to repeat the lessons of 1999, and prove once again that there simply isn’t “vast global demand” that will “only grow larger” for hybrid satellite-cellular phones. Investors in MSS spectrum assets have now gone through two business plans that turned out to be misguided, firstly that they could quickly flip the spectrum to major wireless carriers before they had even finished building their satellites, and secondly that they could utilize satellite roaming to keep these businesses afloat until demand for the underlying spectrum did emerge. Let’s hope that the current plan, to actually build out a terrestrial network and offer service, works out better than the last two attempts.
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03.03.11
Posted in Financials, Inmarsat, LightSquared, Operators, Regulatory, Spectrum at 3:52 pm by timfarrar
It now appears that Harbinger is focusing its energies on the 2GHz MSS band, with the potential assistance of MetroPCS in its $2.6B bid for DBSD and TerreStar. It is therefore interesting to note that LightSquared has a largely unrecognized way to get out of its spectrum agreement with Inmarsat if the uncertainty created by GPS interference makes it impossible to fund that deployment. According to the Cooperation Agreement filed with the SEC in December 2007, either party could terminate the Agreement if a “regulatory change” makes it impossible to renegotiate in a way that maintains “the benefit of the bargain”.
Section 7.3 Regulatory Change. Without limiting any specific provision herein to the contrary, if any court or federal, state or local government authority or international body with jurisdiction orders or takes any action which becomes effective and which requires the termination or material modification of this Agreement to comply with such action or otherwise with Applicable Law (a “Permissibility Determination???), the Parties shall use their respective best efforts to renegotiate this Agreement in good faith and recast this Agreement in terms that are likely to cure the defects caused by the Permissibility Determination while maintaining the benefit of the bargain to the Parties hereunder and to return a balance of benefits to the Parties comparable to the balance of benefits provided by the Agreement in its current terms and otherwise in a manner consistent with this Agreement. If the Parties are unable to recast this Agreement in a manner that cures such defects and otherwise is mutually agreeable to the Parties, this Agreement will terminate, subject to Section 7.4, effective on such date as the Parties’ activities are required to terminate pursuant to the Permissibility Determination.
Section 7.4 Force Majeure. If any Party is affected by Force Majeure it shall immediately notify the other Parties of the nature and extent of the Force Majeure event. No Party shall be deemed to be in breach of this Agreement, or otherwise be liable to another Party, by reason of any delay in performance, or non-performance, of any of its obligations under this Agreement to the extent that such delay or non-performance is due to any Force Majeure of which it has notified the other Parties and the time for performance of that obligation shall be extended accordingly. Each Party shall use its reasonable efforts to minimize the effects of or shorten the duration of any Force Majeure event and resume the performance of its obligations under this Agreement as soon as possible. If the Force Majeure in question prevails for a continuous period in excess of one hundred eighty (180) days and prevents any Party from carrying out any of its material obligations hereunder (which for the avoidance of doubt shall without prejudice to the generality of the foregoing include any obligation to pay money in excess of $1,000,000, any obligation to issue stock and any obligation to implement any Spectrum Plan), the Parties shall enter into bona fide discussions with a view to mitigating its effects, or to agreeing upon such alternative arrangements as may be fair and reasonable and failing agreement on the same within a further 90 days, any Party may unilaterally and in its absolute discretion terminate this Agreement with immediate effect by notice in writing to the other Parties.
Although Harbinger has invested a great deal in LightSquared to date, it is facing a major battle over GPS interference issues in the L-band. Indeed LightSquared now apparently “concedes there may be some interference to GPS signals which…may require modification to some existing GPS units”. If these problems cause a significant delay in its ability to roll out a terrestrial network in the L-band, it looks like LightSquared would have strong grounds to at least suspend its agreement and payments to Inmarsat, while it focused on rolling out an alternative terrestrial network in the 2GHz spectrum. Of course that would presumably require a waiver from the FCC to allow terrestrial-only devices, similar to the waiver LightSquared was granted in the L-band just a few weeks ago, but at this stage it wouldn’t be a surprise if the FCC came up with such a deal “to save GPS”.
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Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 11:31 am by timfarrar
Today MetroPCS revealed that it plans to raise about $1B to pursue “opportunistic deals” for “more wireless spectrum”. Their CFO also indicated that he is “open and supportive of 4G wholesalers such as LightSquared and Clearwire” and that he “would be interested in buying nationwide spectrum”. Yesterday I questioned where the money would come from for the proposed Harbinger/Solus bid for DBSD and TerreStar and the subsequent network buildout of LightSquared and TerreStar. Today’s announcement from MetroPCS might provide part of the answer, given MetroPCS’s previously expressed interest in TerreStar.
It now seems plausible that MetroPCS could help to fund a Harbinger/Solus bid for both TerreStar and DBSD and even participate in a subsequent network sharing arrangement (perhaps involving both LightSquared and Sprint). It would certainly seem easier to find the $2.6B contemplated in Harbinger and Solus’s court submission if MetroPCS contributed $1B and took a major stake in the consortium. However, the possibility of MetroPCS joining with DISH should not be ruled out at this stage. Either of these options would probably make more sense than MetroPCS bidding for control of just DBSD or TerreStar in competition with Harbinger/Solus and DISH, and would avoid many of the risks currently associated with the L-band interference issues. As a result, it looks like the next two weeks will be filled with even more drama, as we learn more about MetroPCS’s intentions.
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03.02.11
Posted in LightSquared, Operators, Regulatory, Spectrum at 4:42 pm by timfarrar
The GPS interference testing conducted by Garmin and submitted to the FCC in January has received widespread publicity due to the “disastrous jamming” it predicted for aeronautical and in-car navigation devices. However, details have now emerged of testing conducted by LightSquared which showed much less of a problem for three smartphones.
The two studies have a number of similiarities (e.g. both conclude that the amount of interference that is needed to make the signal is unusable is about 10dB SNR degration) but come to quite different conclusions about how far from the LightSquared base stations this interference will be experienced. Assuming that the base station power levels at a given distance are equivalent to those given in Figure 1 of the Garmin test (which may be disputed by LightSquared, given that the LightSquared test uses a different setup with two 10MHz channels at 1526-1536MHz and 1545-1555MHz while the Garmin test uses a single 5MHz carrier at 1550-1555MHz), the cellphones would only lose the signal at 100-200 meters from the LightSquared base station, not 1100 meters as the Garmin in-car navigation device did. Obviously this could dramatically reduce the extent of the interference problem.
Indeed we’ve heard from third parties that their own tests showed interference would be experienced “at least several hundred meters away” from a base station, perhaps implying that the real world impact will be somewhere between the LightSquared and Garmin tests. However, it also seems plausible that different devices will have vastly disparate levels of susceptibility to interference, because they use different chipsets, filters, etc. For example, GPS World has highlighted that high-precision GPS users are expected to be disproportionately affected because their devices use a wideband front-end which allows more noise to be received. LightSquared filed a testplan last Friday which notes that one of the next areas to be decided is to “Select the categories of receivers and receivers to be tested” prior to the first progress report to the FCC on March 15 and so it will be interesting to see how wide a range of receivers are to be tested.
In the meantime, the GPS industry is mounting a concerted campaign to overturn the LightSquared waiver and a number of petitions for review have already been filed. One allegation that is common to most of these submissions is that the waiver went beyond the scope of the International Bureau’s delegated authority, and should only have been decided by the full Commission (which would potentially require further comment as well as open any ruling up to Congressional review). LightSquared’s reponse is expected on March 14, with reply comments due on March 29. As a result, there will be a great deal of activity on both fronts over the next four weeks.
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