02.10.14
Posted in Globalstar, Handheld, Inmarsat, Iridium, Operators, Services, Thuraya at 4:20 pm by timfarrar
Last week, at its partner conference, Iridium announced the launch of its new GO! product, which will provide the ability to relay calls and data to and from a smartphone via WiFi, at a reported retail cost of $700-$800. Iridium is looking to boost its revenues from handheld data (i.e. email, texting, etc.) which to date have been fairly modest in the satellite phone market, and will offer lower cost bundles of data minutes, including unlimited packages for intensive users. Indeed, one of the likely use cases is on yachts and fishing boats, which don’t need a full blown high speed data solution. This is slightly different to Thuraya’s SatSleeve, which is more likely to stimulate incremental voice usage, because the SatSleeve is physically attached to an iPhone or Samsung S3/S4 phone and so is easier to use for voice communications.
Globalstar also threw its hat in the ring, pre-empting Iridium’s announcement with the Sat-Fi, which is “expected to receive final FCC certification…during the second quarter of 2014, with shipments starting shortly thereafter.” Globalstar has had a “puck-like” device on its roadmap for several years, but has always wrestled with whether it is worthwhile to invest in product development for a product based on its existing Qualcomm air interface, with a potentially limited lifespan, or if it is better to wait for the new Hughes chipsets in 2015, which will offer improved data capabilities and will be supported throughout the lifetime of the second generation constellation.
Its therefore interesting to note that (according to my sources) the Sat-Fi will be based on the Qualcomm GSP-1720 voice and data module rather than the Hughes chipset. This suggests that Globalstar either perceives a large near term opportunity, which would justify making the investment now, or was particularly focused on spoiling Iridium’s announcement. Iridium clearly thinks it was the latter, and doesn’t believe that the Sat-Fi is actually “real”.
Globalstar has kept details of the Sat-Fi pretty quiet (although it filed a patent application on some aspects of the concept two years ago), and none of the MSS distributors I’ve spoken to seems to know much about the size, price or market positioning of the Sat-Fi device. However, despite Globalstar’s greater focus on the consumer market, it does not appear likely that Sat-Fi would sell in significantly higher volumes than Globalstar’s existing satellite phones, assuming a comparable price point. Indeed estimates that there might be 150K hotspots in use by 2022 would represent only 10%-20% of the expected satellite phone market in that timeframe.
I’m sure this will be make for a fascinating discussion during the MSS CEO panel at Satellite 2014 and perhaps even a return to some of the contentious debates of prior years. Ironically, the barbs being thrown around over the GO! and Sat-Fi don’t fully reflect the competitive landscape in the MSS industry, with Iridium and Globalstar focusing to a significant degree on different distribution strategies, target customers, and (to some extent) geographies.
In that context, both could be successful in different parts of the market, which would make this much like prior arguments over Inmarsat’s ISatPhone Pro and its supposed advantages over Iridium (reflected in the Gabby Wonderland video produced by Inmarsat’s marketing agency in 2010). In that case Inmarsat’s initial belief was that the ISatPhone Pro would hurt Iridium’s satellite phone business significantly, but in reality Iridium continued to dominate the higher end of the MSS handheld market (and sold more satellite phones than Inmarsat at much higher equipment margins), while Inmarsat expanded the low end of market instead.
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11.06.13
Posted in Globalstar, Inmarsat, Iridium, LDR, Operators, Orbcomm, Services at 11:02 am by timfarrar
In my view the announcement of a partnership between Orbcomm and Inmarsat on Monday evening may represent a sea change for the MSS industry, as Orbcomm showed how its planned “multi-network operator strategy” could eventually lead to it getting out of the business of operating its own satellite fleet, allowing Orbcomm to be what it wants to be: a solutions provider rather than a satellite operator.
In the short term the deal means that Orbcomm will invest in developing a new low cost Inmarsat ISatDataPro (IDP) module, costing around $100 (i.e. aiming to be less expensive than Iridium’s SBD module) which OEMs and VARs can choose to drop into their terminals as a direct alternative to Orbcomm’s own OG2 module, using a common management interface provisioned by Orbcomm.
The choice of module will be up to the OEM, and will depend on their data needs (IDP has higher capacity and less latency, because there will sometimes be several minute gaps in coverage between the 17 OG2 satellites), the geographies they will serve (Inmarsat will provide access to Russia and China) and the price they are willing to pay (IDP service will be more expensive than the current Orbcomm $5-$6 OEM ARPUs). Note that this is somewhat different than Orbcomm’s arrangement with Globalstar, under which Orbcomm’s Solutions business offers a Globalstar tag to retail customers (and existing Comtech VARs), but Globalstar will not be a direct alternative for Orbcomm’s OEM customers (who buy from Orbcomm’s Devices and Products business).
In the longer term it seems to me that (although this is not part of the current agreement with Inmarsat) Orbcomm will very likely not build a third generation of LEO VHF satellites, as the nature of their network (where the LEO satellites search actively for channels that are free of interference as they orbit the Earth) would be very difficult to consolidate onto an Inmarsat GEO platform. Because Orbcomm will have access to Inmarsat capacity on an I6 constellation which will last into the 2030s, eventually (in a decade or more) Orbcomm could instead migrate its customer base onto Inmarsat’s L-band services, so that it will not have to spend hundreds of millions of dollars on another round of fleet replenishment. In fact, if Orbcomm has any substantial launch problems with OG2 (remember that the satellites from its last two launches have been lost) it might not even make sense to reinvest the insurance proceeds in replacement satellites and conceivably such a migration could take place more quickly.
The significance of this announcement is that it appears to represent the first step towards a reduction in the amount of capex being invested in the rather slow growing MSS market. The next question will be whether, when Inmarsat orders its I6 L-band satellites (likely in late 2014 or early 2015), it opts for a copy (or even a simpler version) of the I4 constellation, and thus whether, as I suggested last year, we really have now reached the “end of history” in the MSS L-band industry. After all, with the sale of the Stratos energy business to RigNet (and a likely disposal of Segovia), Inmarsat is now backing away from its strategy of going direct, and is continuing to focus on maritime price rises to boost revenues, in accordance with the other part of my “end of history” thesis.
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11.01.13
Posted in DISH, Globalstar, Iridium, Operators, Regulatory, Spectrum at 7:52 pm by timfarrar
So, as many expected, Globalstar’s NPRM finally emerged from the FCC tonight, before the new Chairman, Tom Wheeler, is sworn in on Monday. It appears that Wheeler has had a strong influence on the rather subdued language in this NPRM, which takes a much more equivocal stance than similar NPRMs (and has even been toned down compared to previous drafts, or so I’m led to believe).
As the language perhaps reflects Wheeler’s more cautious stance compared to former Chairman Genachowski’s “full speed ahead” approach, it is hard to predict what this will mean for Globalstar’s potential approval process. However, it is clear that it will take some time, because the FCC is seeking detailed technical studies from commenting parties, and has set a relatively long comment deadline of 75 days after publication in the Federal Register (i.e. January or February 2014).
Nevertheless, it is instructive to compare the language to DISH’s AWS-4 NPRM in March 2012, especially as that is the model that Globalstar sought in its petition, which stated that “the Commission’s rulemaking proposal on terrestrial use of Big LEO spectrum should incorporate a number of the basic reforms proposed by the Commission in the 2 GHz NPRM”. As a starting point, the DISH NPRM set a comment period of 30 days after publication, but more notable is how definitive the DISH NPRM was about its intentions:
DISH: “In this Notice of Proposed Rulemaking, we propose to increase the Nation’s supply of spectrum for mobile broadband by removing unnecessary barriers to flexible use of spectrum currently assigned to the Mobile Satellite Service (MSS) in the 2 GHz band”
Globalstar: “By this Notice of Proposed Rulemaking (Notice), the Commission proposes modified rules for the operation of the Ancillary Terrestrial Component (ATC) of the single Mobile-Satellite Service (MSS) system operating in the Big LEO S band”
DISH: “With this proceeding we intend to fulfill the Commission’s previously stated plan to create a solid and lasting foundation for the provision of terrestrial services in 40 megahertz of spectrum in the 2 GHz band”
Globalstar: “For all the reasons stated herein, we believe that Globalstar’s proposal to deploy broadband access equipment should be further examined and a record developed to determine whether this proposal has the potential to enable more efficient use of Globalstar’s S-band spectrum and spectrum in the adjacent band. This action could potentially increase the amount of spectrum available for broadband access in the United States”
DISH: “According to Cisco Systems, North American mobile Internet traffic more than doubled in 2011 and is expected to grow over 15-fold in the next five years. This explosive growth is creating an urgent need for more network capacity and, in turn, for suitable spectrum”
Globalstar: “The rapid adoption of smartphones and tablet computers, combined with deployment of high-speed 3G and 4G technologies, is driving more intensive use of mobile networks. According to Cisco Systems, global mobile Internet traffic is expected to grow over 13-fold from 2012 to 2017″
DISH: “In this Notice of Proposed Rulemaking (AWS-4 Notice), we build on the Commission’s recent actions to enable the provision of terrestrial mobile broadband service in up to 40 megahertz of spectrum in the 2000-2020 MHz and 2180-2200 MHz spectrum bands. We propose terrestrial service rules for these spectrum bands that would generally follow the Commission’s Part 27 rules, modified as necessary to account for issues unique to the 2000-2020 MHz and 2180-2200 MHz spectrum bands. Given the proximity of these spectrum bands to spectrum bands previously identified as AWS, in our proposal we refer to these spectrum bands as “AWS-4″ or “AWS-4 spectrum”
Globalstar: “We believe that Globalstar’s proposal to deploy a low-power terrestrial system in the 2473-2495 MHz band should be examined to determine whether it is possible to increase the use of this spectrum terrestrially in the near term, without causing harmful interference to users of this band and adjacent bands, and without compromising Globalstar’s ability to provide substantial service to the public under its existing MSS authorization. If supported by the record, this action could potentially increase the usefulness for terrestrial mobile broadband purposes of 11.5 megahertz of licensed spectrum. As a result, these changes may induce increased investment and innovation throughout the industry and ultimately improve competition and consumer choice. Therefore, we propose to make the changes to Part 25 of the rules necessary to provide for the operation of low-power ATC in the licensed MSS spectrum in the 2483.5-2495 MHz band”
(note that Globalstar also sought to operate under Part 27, which the Commission rejected, and I’m told that an earlier draft of the NPRM also contained a proposed new name for this band, although not the “AWS-5″ designation that Globalstar had sought)
As far as the specifics of the NPRM proposal goes, it appears that the FCC has gone along with Globalstar’s requested TLPS power and OOBE levels, while highlighting that “significant concerns have been raised about potential detrimental impact on unlicensed devices, such as Bluetooth, that are currently used extensively for various wireless broadband services and applications”. However, there are a number of lurking issues, such as the process to be used for approving any changes to devices to use the new service (which will fall under Part 25 so would normally require a new FCC ID to be granted for an existing Part 15 device operating in the WiFi band).
In addition, proposed use of Part 25 along with a simple modification to the existing ATC rules to require TLPS to be permitted (so long as Globalstar can “demonstrate the commercial availability of MSS, without regard to coverage requirements”), could make it harder to get LTE approval in the future, especially in the L-band, where the FCC warned Globalstar that “Should we find it to be appropriate, the Commission reserves the right to consolidate this proceeding with any proceeding addressing Globalstar’s L-band proposal and Iridium’s petition for rulemaking” (creating a risk that some L-band spectrum could be reallocated to Iridium if Globalstar pushes for LTE authorization: the FCC quietly issued a public notice seeking comment on Iridium’s petition for reallocation of L-band spectrum on Friday as well).
So now the question is whether Wheeler will be prepared to work through these issues, face down the interference concerns and push through a final order approving TLPS, or if he will instead prioritize the 3.5GHz band, where a public notice was also issued today (with a much shorter comment cycle), seeking further comment on how “Priority Access” licenses (which as I’ve remarked before could be somewhat similar to TLPS) might be allocated for exclusive use.
UPDATE (11/3): Globalstar’s press release noted that the release of the NPRM “represents a seminal development and yet another step forward in Globalstar’s renaissance”. However, unlike in September, when the NPRM was circulated, its notable that the company didn’t say that it was “very pleased” with the FCC’s action. Globalstar’s comment that “We look forward to receiving the public’s comments and working towards a final order over the next several months” is also a curious description of a process where reply comments won’t even be received for 3.5 months after publication of the NPRM in the Federal Register.
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10.21.13
Posted in Financials, Globalstar, Handheld, Inmarsat, Iridium, LDR, Maritime, Operators, Services at 9:33 am by timfarrar
I won’t belabor the errors of physics in the movie, instead just noting that even though you might think that in space things can keep going in a straight line indefinitely, they are still subject to gravity and you can’t get to a higher orbit without some form of propulsion.
We’ve now seen confirmation from Iridium of what I pointed out last week, that Q3 was very bad for the MSS industry. Iridium missed its expectations for equipment revenues (i.e. handset sales) and subscriber growth (i.e. M2M net adds), although at least the government contract renewal is more favorable than expected – the unlimited nature of the contract removes the incentive for the DoD to scrub its user base to remove unused handsets, which has been a headwind for Iridium in the last couple of years.
Its far from clear that anyone else is doing better: it looks like Iridium’s competitors also saw pretty poor handset sales in Q3 and the SPOT 3 has been very slow to arrive in stores as well. Moreover, the government business is dire – Intelsat’s profit warning (which included its off-net business reselling MSS) is a bad sign for Inmarsat, as are the large scale layoffs in Astrium’s government business last week.
Inmarsat has now followed up its promise not to raise FleetBB prices in 2014 with an enormous 48% rise in maritime E&E prices from January, in an attempt to sustain maritime revenue growth next year. While the stated intention is to persuade the remaining pay as you go customers to move off the E&E network and choose FleetBB instead, the vast majority of higher spending B and Fleet customers have already migrated and many of the remaining users are mini-M voice-only users or really want the PAYG service because they are only occasional users, so FleetBB is not necessarily the ideal option.
Inmarsat is clearly calculating that these customers won’t want to risk moving to Iridium after the OpenPort problems earlier this year and has stepped up its efforts to portray Iridium’s network as “failing”. Despite all this, no-one believes that Inmarsat could possibly achieve its 8%-12% revenue growth target for 2014 and I expect this to be “softened” in the near future as well. Inmarsat is also likely to emphasize its opportunities for internal cost savings next year and move to dispose of some retail business units like Segovia.
Its interesting to speculate about implications for the wider satellite industry as well. Last time around (in 1999-2003), problems in the MSS industry were a harbinger of a downturn in the FSS industry a couple of years later. That came in the wake of a peak in satellite orders in the 1999-2001 timeframe and after the launch of these satellites, which resulted in a sharp decline in prices, the FSS industry took a big hit. We’ve seen a similar peak in orders in recent years (2009-10), and while the major operators are much more likely to retain pricing discipline (in a far more consolidated industry than a decade ago), the advent of High Throughput Satellites, especially those owned by smaller players like Avanti (who might become the most desperate for contracts), could pressure prices in certain market segments and geographies.
Just as an example, in recent years, underlying transponder demand has grown at roughly 4% p.a., but revenues have been boosted by around 2% p.a. by price rises. Even if demand growth continues (not a foregone conclusion in some sectors like government where WGS is an alternative), a reversal of the pricing trend would certainly make a big difference to the FSS revenue outlook. As I said at the beginning of this post, gravity clearly exerts a force, even in space.
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10.14.13
Posted in Financials, Globalstar, Government, Handheld, Inmarsat, Iridium, LDR, Operators, Orbcomm, Services at 10:03 am by timfarrar
Incredible…it’s even worse than I thought
That’s been the reaction to my 57 page Globalstar profile, released on Friday (you can see the contents list here and get an order form here), because of the history of challenges that the MSS industry has faced in the past and more particularly the difficulties that the industry is seeing this year.
After discussions with a number of people in the industry over the last few weeks, it looks like Q3 has been pretty disastrous for MSS sales across the board, with none of the usual surge in demand expected in the summer months, as customers stock up to prepare for outdoor adventures or potential hurricanes. Part of that relates to slow government orders, as a result of the sequester (predating the current shutdown), but commercial demand has also been poor, and that’s much harder to explain.
In the handheld segment, one suggestion is that Hurricane Sandy proved that terrestrial cellphone networks are now considerably more reliable during disasters (and far more data capable than MSS phones), so companies are no longer giving as high a priority to MSS equipment in their disaster planning. In the M2M segment, a fairly convincing explanation is that service providers who formerly specialized in MSS are now focusing more and more on selling cellular-based solutions to customers who find they don’t need MSS as a backup.
As a result, I’m now convinced that subscriber growth (and equipment sales) will fall short of expectations this year, particularly in the handheld and M2M segments, for almost all of the major MSS players, with knock-on effects for subscriber revenues in Q4 and more particularly next year. The defense business also looks poor (as shown by Intelsat’s recent profit warning): the word on the street is that Inmarsat may dispose of its Segovia government FSS business, as revenues in Inmarsat’s US Government business unit fell by 11% year-on-year in the first half of 2013 and appear to have eroded further in recent months, particularly in Segovia’s VSAT business. The sale price would be a fraction of what Inmarsat paid for Segovia, but in exchange Inmarsat would hope to secure a GX airtime contract, similar to its RigNet deal in the energy sector.
In the case of Globalstar, the implications of the MSS downturn are that while Globalstar should be able to meet the new bank case revenue forecasts, it won’t be easy to beat them. However, unlike some other players, Globalstar is fortunate in having the potential upside from monetizing its spectrum, if it can complete a deal with Amazon or another company. The report looks at spectrum valuation for both LTE and TLPS and concludes that there could be substantial value for Globalstar, although realizing this will require both rapid approval from the FCC and for a deal to be struck fairly quickly, before new spectrum bands such as 3550-3650MHz develop an alternative ecosystem at what will likely be much lower prices. If you are interested in getting a copy, please contact me for more details.
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09.19.13
Posted in Financials, Globalstar, Handheld, Inmarsat, Iridium, Operators, Regulatory, Services, Spectrum at 9:32 am by timfarrar
Why didn’t Phil think of this first?
With MSS revenues in a bit of a funk this year, its not surprising that MSS operators are pursuing opportunities to attract consumers and expand the voice market outside the traditional verticals. We saw this first of all with Thuraya’s SatSleeve, announced at the Satellite 2013 conference in March. The SatSleeve connects via Bluetooth (and in the latest version WiFi) to an iPhone allowing the customer to use their iPhone contacts and touch screen interface. However, a key limitation is the need for compatibility of the sleeve with a particular phone form factor, and Thuraya has just launched a new version of the SatSleeve compatible with the slightly larger iPhone 5 handset rather than the original iPhone 4.
One way to overcome this handset compatibility issue is to use an external puck-like device, similar to a SPOT Connect or DeLorme inReach product, but offering voice and data capability in addition to simple messaging. This concept has been around for many years, and indeed was part of Craig McCaw’s new business plan when he bought ICO out of bankruptcy back in 2000: ICO told the FCC in its original ATC application in March 2001 that
“The use of already-permitted wireless technology such as Bluetooth or IEEE 802.11 could allow a whole range of consumer devices – standard terrestrial phones, PDAs, or laptop computers – to communicate with a satellite transceiver that houses the antennas, amplifiers, and other electronics unique and specific to the satellite link”.
Subscribers to my MSS research service heard 6 weeks ago about Iridium’s new handheld product, scheduled for launch at the end of the year, which is apparently exactly this puck-like device. It will be positioned to compete at the low end of the handheld market with a broadly comparable price to Thuraya’s SatSleeve (which was originally announced at $499 but is now selling for $599 to $799) and the Inmarsat and Globalstar handheld phones. I’m now told that Inmarsat is working on a similar device for release towards the end of next year, and meanwhile Globalstar has announced that it is “aiming to bring a $100 satellite device to market in 18 months time…to enter into a totally different market”.
I understand that Globalstar’s new device is likely to be the long-awaited two-way SPOT product, and may not be voice-capable like Iridium and Inmarsat’s new devices. It remains unclear whether the form factor will be a smartphone-connected puck (like SPOT Connect) or a standalone device: certainly the standalone device has sold much better for Globalstar to date, but equally well this might make it harder to expand beyond the current market of techie-focused backpackers and outdoorsy people (the vast majority of SPOT users are like me: 40-something relatively high income males with an interest in technology). Given the 18 month timetable stated by Globalstar, its also unclear whether this would be based on the new Hughes chipset or the current SPOT uplink plus a similar downlink channel, as the second generation ground segment upgrades are supposed to take about two more years to complete.
As Globalstar moves to raise its profile with investors, it seems the next stage will be a new round of fundraising (Globalstar noted in its 2013Q2 10-Q that “In June 2013, the Company entered into an agreement with Ericsson which deferred to September 1, 2013 or the close of a financing approximately $2.4 million in milestone payments scheduled under the contract”), presumably helping to reduce some of Thermo’s $85M backstop commitment (of which $40M had been provided by the end of July and $4.4M had been offset by receipts from termination of the 2009 share lending agreement). Indeed, it would be plausible for fundraising to go beyond this ~$35M level given the rise in Globalstar’s share price in the expectation of a positive outcome from the FCC, though it appears unlikely Globalstar will order more satellites anytime soon, given that the legal disputes with Thales are apparently still ongoing (Thales has “alleged that Thermo had failed to pay Thales $12,500,000 by December 31, 2012 as required by the Settlement Agreement“).
It seems Globalstar is highly confident that its NPRM will be issued by the time Chairman Clyburn leaves office, so it would be reasonable to suspect that this new financing is intended to take place in the next month or so, helping to cover payments of $20M+ due to Hughes between August 2013 and January 2014). Last week’s grand bargain over the 700MHz A&E blocks, DISH’s AWS-4 downlink waiver request and the H block auction, certainly indicates that I was too pessimistic in believing that Clyburn didn’t want to address spectrum issues and would leave these for Wheeler, and it would therefore now not be in the least bit surprising to see the Globalstar NPRM released at or around the time of the September FCC Open Meeting (when Clyburn will have what might be the last chance to trumpet her accomplishments as Chairman). Clyburn also appears less likely than Wheeler to pursue the “harm claim threshold” approach favored by the FCC’s TAC, which is good news for Globalstar in terms of how long it would take to issue an FCC order, although given that the FCC highlighted the speed with which it had moved to complete the DISH ruling last December (within 9 months of issuing the NPRM), it is still hard to imagine a final ruling on TLPS before early summer 2014.
So the key issues for Globalstar are likely to be how successfully it can build up its MSS business (note that the revenue projections given for the bank case in the new COFACE agreement generate just enough cash to cover debt, interest and capex payments through 2022 but little else) and more importantly whether Globalstar can find a partner to exploit its spectrum assets. We know about Amazon, but will there be other interest either from the cellular industry or (perhaps more plausibly) from non-traditional players? What are the best comparisons for spectrum valuation for TLPS and/or LTE authorization? I’ll be publishing my updated profile of Globalstar shortly and all of these issues will be discussed along with my revenue projections for the MSS business.
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09.09.13
Posted in Aeronautical, DISH, Financials, Globalstar, Inmarsat, Iridium, LightSquared, Operators, Orbcomm, Regulatory, Spectrum at 3:12 am by timfarrar
That seems an appropriate title, as I head off to London and Paris this week, to hear MSS and other satellite operators talk about their future opportunities. I found it interesting to note that Euroconsult released their updated MSS market assessment a couple of weeks ago, cutting their projection of future wholesale revenue growth from 7% p.a. (in the previous version of their analysis) to 5% p.a. over the next 10 years, getting back much closer to my forecasts from a couple of years ago.
However, by my estimate, MSS wholesale service revenues only grew at 2% in 2011 and 3% in 2012 (not 5% as Euroconsult estimates, perhaps due to double counting of Orbcomm’s revenue growth from resale of Inmarsat and now Globalstar services) and the majority of this growth in 2012 came from Inmarsat’s price rises. While it originally looked like 2013 was shaping up to see a bit better growth, Iridium has reduced its guidance, Globalstar’s second quarter results were nothing to write home about and Inmarsat is again seeing a significant part of its modest revenue growth being driven by maritime price rises. So its now far from clear that we will get even to Euroconsult’s lowered 5% growth projection in the near term.
While spectrum is a wildcard that could provide incremental revenues for Globalstar (through a potential deal with Amazon) and Inmarsat (through a resumption of lease payments from LightSquared), progress here may not be as fast as expected. Globalstar’s hoped for NPRM is not on the tentative agenda for the FCC’s September Open Meeting, presumably meaning that although the NPRM has now been placed on circulation this issue may be left for incoming Chairman Wheeler to finalize. The recent application by Oceus Networks for an experimental license to test TLPS for DoD users also suggests that a partnership with Amazon is far from set in stone as the way Globalstar will be able to realize value from its spectrum assets.
In contrast, it looks increasingly like DISH will succeed in its bid to buy LightSquared’s satellite assets later this year, and DISH has agreed to assume the Inmarsat Cooperation Agreement as part of its stalking horse bid. But buying LightSquared is a sign that DISH is unlikely to move forward quickly with its entry into the wireless market, because it would take until late 2014 or beyond before the FCC could approve any change to downlink use for the 2000-2020MHz AWS-4 uplink band. At the moment it seems that interim FCC Chairman Clyburn doesn’t want to take a decision even on LightSquared’s uplink band (let alone address the purported “swap??? of downlink spectrum, which Ergen doesn’t want or need – leaving MAST Capital Management stuck holding a largely worthless lease of the 1670-75MHz spectrum band), because the FCC will not receive reply comments until September 23 (shortly before Clyburn relinquishes the chairmanship). So even if DISH buys the satellite assets, and drops the request to get hold of the 1675-80MHz band, reaching any resolution of the current regulatory issues in the L-band will undoubtedly be a lengthy process.
Charlie Ergen hinted on DISH’s Q2 call that he doesn’t anticipate simply continuing the Cooperation Agreement in its current form, so it would not be at all surprising to see a fight between DISH and Inmarsat over renegotiation of the Cooperation Agreement in the early part of 2014. One possible compromise could be in the form of a partnership between DISH and Inmarsat to use the TerreStar-2 satellite to preserve Inmarsat’s S-band license in Europe, in exchange for further postponement of any cash payments under the Cooperation Agreement.
Despite (or perhaps because of) the challenges that the MSS market faces, M&A continues apace. Recent agreements include Inmarsat’s sale of its energy sector assets to RigNet and Rockwell Collins’ acquisition of ARINC. I understand a number of additional notable transactions are in the works. Rumors persist that SITA has put OnAir up for sale (only six months after buying Airbus’s stake in the business) and Honeywell appears to be the most likely buyer, while Orbcomm continues its acquisition of satellite M2M service providers and may now be in negotiations to buy Comtech Mobile Datacom.
UPDATE: According to an OnAir spokesperson “SITA has no intention to sell OnAir to Honeywell or to anyone else and remains OnAir’s sole shareholder.”
It will be particularly interesting to see the valuation put on OnAir, given the recent disastrous public offerings of Gogo and Global Eagle/Row44, because if OnAir attracts a much lower valuation than Gogo and Row44 it could be a sign that SITA is pretty pessimistic about the future of the inflight connectivity market. That would be a surprise to many, because after all inflight connectivity is seen as one of the major areas for growth in the MSS market going forward, but at present making an operating profit, let alone a return on investment, is a pretty distant prospect for most if not all of the service providers. So if now is the time for SITA to get out, will this turn out be the age of wisdom for the sellers and the age of foolishness for the buyers, or the reverse?
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08.23.13
Posted in Globalstar, Operators, Regulatory, Spectrum at 11:33 am by timfarrar
So it seems like everyone has finally woken up to Amazon’s tests of Globalstar’s TLPS service that I wrote about in early July. Presumably “people with knowledge of the matter” are talking to the press now because Globalstar is trying to get an NPRM issued by interim FCC Chairman Clyburn, before she steps down in favor of Tom Wheeler, who may be more likely to opt for lengthier approval process (as I noted last month, he appears to favor using TLPS as the test case for a negotiated “harm claim threshold” approach).
Of course the longer that approvals take, the more chance that one or more ecosystems for alternative bands will emerge, and undermine the value of TLPS, so its hardly surprising that Amazon rivals such as Microsoft expressed their “concerns about interference to unlicensed uses in the 2.4GHz band” after Globalstar’s experimental license application gave details of the test locations, and the Bluetooth Special Interest Group has been pushing to delay any NPRM “until a full technical analysis of the impacts has been completed and the impact on the existing users of the ISM spectrum is understood”.
Some questions also remain about the compatibility of TLPS with services other than Bluetooth, particularly legacy BAS license holders, which caused the FCC to limit TLPS testing in Silicon Valley to lower power levels and indoor locations only (and has prompted Globalstar to conduct the latest round of testing in New Orleans where there is no legacy BAS usage, although there are some nearby Part 90 public safety users).
TV White Space spectrum is one possibility as a substitute for TLPS, but a more direct alternative appears to be the 3550-3650MHz spectrum, especially if the FCC follows the licensing approach proposed by AT&T and Google in a joint letter to the FCC on August 6, urging the Commission to move forward with allocation of the 3550-3650MHz for small cell deployments via a streamlined (i.e. low cost) auction, with any applicant allowed access to a secondary exclusive tier of spectrum if they commit to a “substantial service requirement???. So it is obviously extremely important, if Globalstar is to have any chance of realizing the $3B it has maintained that its spectrum is worth, that approvals are received quickly.
However, what Bloomberg’s article didn’t appear to have any clue about, is how Amazon might actually use the spectrum and generate enough value to justify paying Globalstar billions of dollars. In my view, the only realistic plan (as GigaOm notes) is a dedicated WiFi deployment, allowing its own devices (such as Kindles) to use a very extensive small cell network instead of relying on cellular networks for data delivery.
To do that Amazon has to get a device into a huge number of homes, and hope that the higher power and longer range of TLPS (compared to unlicensed WiFi) provides widespread coverage in urban areas. The ubiquitous availability of WiFi access points is the theory behind FON, and its notable that in the UK, BT (which has provided FON service through all of its in-home DSL routers for several years) is now switching to licensed 2.5GHz spectrum that it bought in the 4G spectrum auctions earlier this year, in order to provide coverage over a greater distance.
So really the most interesting question here is how Amazon intends to get a TLPS access point into millions of homes. It seems highly likely that Amazon is developing a product much like an Xbox, which can serve as a “hub” for gaming and for delivery of its streaming video services (which perhaps explains Microsoft’s concerns about TLPS), connected to existing in-home broadband connections. Remember that Amazon has not been as successful as Netflix in ensuring that access to its streaming video service is widely available on consumer electronics devices like DVD players (probably because it is less willing to pay incentives for acquisition of streaming video subscribers), suggesting that Amazon may well want to push its own device instead. Its important to realize this is not about Amazon providing a rival broadband access service, like DISH’s wants to do with its former satellite spectrum in the AWS-4 band, but instead would compete with Microsoft’s Xbox and the home media hubs planned by Intel, Google and Apple, amongst others.
I’d speculate that Amazon will want to provide its “hub” to Prime users pretty cheaply, perhaps even for free, and its notable that Amazon has also been working on remote video processing capabilities using its cloud servers, potentially enabling it to simplify (and reduce the cost of) a gaming device. I’d also guess that Amazon wouldn’t want the launch of this device to be constrained by the timeline of TLPS approvals, not least because the FON-like service is only one part of the entire offering. Indeed its previously been rumored that Amazon is planning to launch a set-top box for video streaming as soon as this fall.
However, if TLPS looks likely to gain FCC approval (with the FCC establishing a way forward in the near future), an initial device launch could take place using standard WiFi (and perhaps other solutions like White Space spectrum), with the embedded capability to upgrade to TLPS, once approval comes through. That could mean an upfront option payment for Globalstar (perhaps some tens of millions of dollars?), if Amazon wants to embed the TLPS capability in its devices, but it may take a while longer before Globalstar finds out if it is going to achieve much more significant returns from its spectrum assets.
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04.22.13
Posted in Globalstar, Handheld, Inmarsat, Iridium, KVH, Maritime, Operators, Services, VSAT at 9:22 am by timfarrar
Its interesting to note that Inmarsat has been competing much more aggressively against key competitors in the last few months. First, I’m told that Inmarsat offered a bounty to Telemar to capture Anglo Eastern, a key Iridium Open Port customer with 350 ships, from Globe Wireless, in the fourth quarter of 2012.
Then Inmarsat announced in March that Nordic Tankers, one of KVH’s earliest headline customers, was migrating to XpressLink “for enhanced reliability”. Apparently the pricing on that deal is well below the standard list price for XpressLink, but Inmarsat was very keen to demonstrate its ability to take customers away from KVH.
Now (perhaps showing a little pique at losing the recent tender for the AT&T Genus replacement contract) Inmarsat is going after Globalstar, with new North American ISatPhone Pro regional voice plans which will start on May 1, and match Globalstar’s recently announced Orbit and Galaxy plans (though without Globalstar’s “double time minutes” promotional offer). Inmarsat is once again offering a huge bounty to service providers for these new signups, equivalent to multiple months of service revenue.
All of these developments suggest that Inmarsat is determined to seek topline growth in its L-band business and is no longer reluctant (as in the past) to explicitly target its competitors with selective pricing, even though this runs counter to Inmarsat’s recent tendency to increase list prices. Of course, it is less clear whether the new deals will be profitable for Inmarsat, given the incentives needed to achieve these sales.
But with Inmarsat’s investors focused intently on whether the wholesale L-band Inmarsat Global business has returned to growth, and apparently willing to overlook the recent significant contraction in margins within Inmarsat’s Solutions business unit (blamed on a transfer of margin from retail to wholesale operations), that might not matter for now. However, if Inmarsat wants to make more acquisitions (and it is hard to see in the long term who else might end up operating LightSquared’s satellites), then regulators might wonder whether industry consolidation could give Inmarsat even more market power.
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04.09.13
Posted in Globalstar, Operators, Regulatory, Spectrum, TerreStar at 11:38 am by timfarrar
For those of you not following my Twitter feed (@TMFAssociates), last week there were a couple of interesting developments related to Globalstar, which is currently negotiating with its noteholders under a forbearance agreement (lasting until April 15), after holders of $70.6M of the 5.75% notes exercised their rights to require repurchase of the notes, and Globalstar did not pay the $2M of interest due on April 1.
Firstly, Globalstar has been granted received approval from the FCC for the experimental authority it was seeking for tests of its proposed S-band TLPS service, on March 25 for testing in Cambridge, MA and on April 1 (no joke) for testing in Cupertino and Sunnyvale, CA. Globalstar has also told the FCC that it intends to submit further experimental applications “in the near future”. However, the authorizations are for testing only and are “subject to prior coordination with the Society of Broadcast Engineers”, because both locations are within BAS Channel A10 pickup areas. This coordination has apparently not yet taken place, and because the BAS community is rumored to be very unhappy with the situation, it could take some time to reach an agreement. The timeline for the FCC to issue an NPRM setting out the proposed rule changes to permit commercial use of TLPS also remains unclear, but it seems to be taking longer than originally hoped.
A second recent development is that last week AT&T notified the (less than 1000) subscribers to the TerreStar Satellite Augmented Mobility (SAM) service, that DISH has decided to shut down the service effective May 1, via the letter below, and has “made an arrangement with Globalstar” to offer a discounted replacement rate plan and Globalstar satellite phone.
Of course, those with long memories will recall that TerreStar Networks filed for bankruptcy in October 2010, less than a month after AT&T started selling the Genus phone. Given Globalstar’s current financial challenges, let’s hope that AT&T’s decision to start selling Globalstar service now is not a bad omen for the company.
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