08.22.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 2:08 pm by timfarrar
Today, DISH has filed its transfer application for TerreStar’s 2GHz spectrum licenses with the FCC, stating that it plans to combine the spectrum with that of DBSD, so that it can use the full 40MHz to launch a “hybrid satellite and terrestrial mobile and fixed broadband network…to provide American consumers with greater choice for mobile broadband services”. DISH plans to deploy its network “based on the LTE Advanced standard” for which “commercial devices are expected to be generally available by 2014″, and seeks permission “to provide dual-mode terminals to customers who want them, and single-mode terrestrial terminals to customers who do not want the satellite function” noting that “relief from the integration requirement is an important component of DISH’s plan”. DISH also seeks a waiver of the ATC gating requirement to acquire a backup satellite.
In exchange, DISH states that it “is prepared to work with the Commission to develop a reasonable, attainable buildout schedule keyed to commercial availability of the LTE Advanced standard” and make “certain substantial terrestrial network deployment commitments intended to increase wireless broadband competition, including in rural areas”. However, though DISH has previously indicated that it will seek partners for its mobile broadband play, it does not commit to make network available on a wholesale basis to third parties.
As I’ve pointed out previously, DISH is now in a perfect position to replace LightSquared as the FCC’s favored option for providing additional wireless competition. Indeed DISH highlights specifically in the TerreStar application that “use of the [2GHz] band also does not give rise to the GPS interference issues that have hampered the use of the L-band” which is one of the factors meaning that the “promise of MSS/ATC has yet to be fully realized”. DISH also notes pointedly that it is “a well-financed, capable, and recognized innovator in communications technology [with] unique experience in developing an innovative and competitive retail operation and growing it from zero to approximately 14 million subscribers”.
Thus this application now sets the scene for a negotiation with the Commission over the terms of the promised buildout, including the specific coverage commitments and perhaps even some later promise (depending on the views of DISH’s key partners) to enter into wholesale deals with smaller players. With the cable companies apparently aligning themselves with Sprint, it looks very much like DISH will now partner with MetroPCS and perhaps even DirecTV and/or Leap as well.
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08.18.11
Posted in Financials, Globalstar, Inmarsat, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 8:49 pm by timfarrar
In my last post I estimated that to in order to relocate and preserve precision GPS service for farmers and surveyors there might need to be a “delay of several years” before LightSquared was able to bring its lower 2x10MHz of spectrum into use in a terrestrial network. Indeed, according to one GPS industry commentator, a transition period of 12 years might be more appropriate to “allow a smooth transition with a manageable financial impact to the high-precision GPS user community.”
However, because of LightSquared’s prior assurances that it wanted to cooperate with the GPS industry to preserve existing services, no-one seems to have noticed that in fact the company does have a potential “nuclear option”, namely that because these services are provided on a commercial basis to Starfire and OmniSTAR, LightSquared and Inmarsat could simply decide to cease supporting these services in accordance with their capacity lease contracts. Given that LightSquared is now blaming the GPS industry for the interference problems and accusing GPS manufacturers of being unwilling to cooperate with its attempts to find a solution, it seems increasingly plausible that LightSquared could now say that it simply can’t continue to support these services unless the FCC mandates a rapid transition of precision GPS users to new equipment equipped with filters.
LightSquared (which provides capacity to OmniSTAR, now owned by Trimble) has previously indicated that it only plans to support its legacy services in “emulation mode” for a limited period of time, and it appears likely that the contract with OmniSTAR could therefore potentially be terminated at relatively short notice. While Inmarsat’s contract with Starfire may not operate under quite such a short time horizons, many of Inmarsat’s leases are renewable on an annual basis and so could possibly be terminated if desired. In reaching such a decision, Inmarsat would have to decide whether it prefers the ~$1M or so it receives each year from Starfire to the $115M it is being paid each year by LightSquared (indeed it is conceivable that this issue may have been addressed in the deal under which Inmarsat was paid an additional $40M by LightSquared earlier this year).
Some might argue that the FCC would surely step in to prevent such damage to precision GPS services. However, in March 2010 when it granted LightSquared the requested modifications to its ATC license, the FCC explicitly stated that it would refrain “from interfering unnecessarily with licensees’ business negotiations” even though “this may present challenges to earth station operators using the satellites involved, and may require modification of operations, deployment of new equipment, or other adjustments” because “it would not serve the public interest for the Commission to assume the role of an arbiter of disputes between a satellite operator and its customers.” Nevertheless, the FCC did leave itself one potential escape route, stating that it would not step into such disputes “in the absence of a prior determination that the satellite operator provides essential service and is unconstrained by actual or potential competition from providers of substitutable services.”
Of course, if the FCC did step in and force LightSquared to continue providing precision GPS services, then that might provide grounds for LightSquared to sue for compensation, especially if that was determined to be the main roadblock to offering commercial service in its lower L-band spectrum. As I’ve noted before, ending up in court certainly seems to be an increasingly plausible outcome to what the Economist describes as this “sorry tale of greed, haste and incompetence.”
As an aside, LightSquared does not seem to be the only MSS operator whose ATC services face interference challenges. A recent comment on one of my older blog posts highlighted that Open Range has been getting into difficulties with its use of Globalstar’s S-band spectrum in Indiana. Additionally, if LightSquared’s use of ATC handsets at 1627-1637MHz is a major concern for GPS users in the 1559-1610MHz band, then one would have to expect even greater concern about any future ATC deployment within Globalstar’s L-band spectrum at 1610-1617.775MHz (note that Open Range only uses Globalstar’s S-band spectrum in a TDD architecture). Similarly, there are now a number of comments in the 2GHz proceeding about the potential interference challenges at the bottom end of the TerreStar uplink spectrum (2000MHz).
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08.09.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 3:07 pm by timfarrar
It seems from today’s unexpected press conference that the FCC Chairman has finally realized that there is no way to avoid the fact that the GPS interference issues are a showstopper, and he is now preparing the ground to basically throw LightSquared under the bus. In particular the FCC is now characterizing the January waiver as a “stop work” order, stating that there is “no timetable” for the review (despite LightSquared’s recent insistence that it was “confident that the FCC will green-light its plans in mid-September”) and suggesting that there will now be more testing of the lower band plan, while use of the upper band will not be “happening anytime soon.”
Judging from these comments, my best guess is that there will now be six more months of testing on the lower band proposal (lasting into the spring or early summer of 2012, depending on how long it takes to issue the ruling), and a final decision could plausibly be deferred until after next year’s Presidential election (in order to avoid a political battle with the farming lobby). In addition, I suspect that even if LightSquared (assuming it is still around) received approval at that time, there could still be a delay of several years for precision users such as farmers and surveyors to modify their equipment before the lower band was brought into use.
Of course the reason that LightSquared had insisted on a mid-September approval is that it needs to raise additional funding before it can move forward with the Sprint deal, and as noted in Sprint’s 10-Q, there are “contingencies related to possible interference issues” in the network hosting agreement which give Sprint the right “to terminate the arrangement if certain conditions are not met either by September 30, 2011 or December 31, 2011.” However, this would apparently involve giving back LightSquared’s prepayments, so it seems more likely that the agreement would be “terminated for LightSquared’s material breach, non-payment or insolvency” in which case “Sprint maintains a second lien on certain of LightSquared’s spectrum related assets” (though that may be worthless) and presumably can also keep any payments made by LightSquared. Unfortunately, as stated today, although the FCC “would be sensitive to the financial situation of LightSquared’s owner, Harbinger Capital … that would not affect how it came to its decision on how to proceed” and FCC officials “insist they never told LightSquared the review would be completed by [mid-September].”
On the other hand, this morning, DISH stated that it plans “to make a mobile broadband play with its recently acquired S-Band satellite spectrum” and it intends to play a “significant role” in the wireless industry. When asked if DISH would reveal its strategy as soon as the Sprint announcement on October 7, DISH cautioned that they “wouldn’t expect anything in the near term.” Thus it seems that with LightSquared now left hanging, and the stock prices of Sprint, MetroPCS and Leap all suffering badly after their Q2 results, DISH is in an increasingly strong position, and may want to take more time to obtain the best possible terms for the partnerships needed for its wireless strategy. However, if that is the case, it is harder to see what might be a plausible “fourth chapter” for Sprint’s wireless strategy in early October, and it is always possible that DISH’s comment could be intended to put pressure on Sprint to offer them a better deal.
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07.13.11
Posted in ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 3:49 pm by timfarrar
As LightSquared continues to be engulfed by a tidal wave of criticism from the GPS industry, it now appears that this storm is setting up perfectly for DISH Network to solve the FCC’s problem: how to ensure that a competitive wholesale mobile broadband network can be deployed when it seems nearly impossible for LightSquared to use its L-band spectrum. While some think that DISH could lease its 2GHz spectrum holdings to LightSquared, to me it seems far more likely that DISH has plans for its own national 4G LTE wireless network, in partnership with “somebody who is more of an expert in that business than we are“.
Indeed in the application to transfer DBSD’s spectrum licenses to DISH, filed back in April, the company stated that “we expect the transaction to result in the provision of mobile broadband services” and in particular:
DISH plans to deploy a hybrid satellite/terrestrial system dedicated to the provision of mobile broadband services. If successful, consumers will be able to use their mobile terminals for high-speed Internet access as well as a myriad of Internet Protocol-based, over-the-top applications, including mobile video. DISH expects that the consumer equipment will include broadband-capable tablet computers, among other devices. DISH anticipates offering services both on a stand-alone basis and in a consumer-friendly bundle with its multichannel video services.
If DISH does manage to line up the partners to deploy such a network (potentially including MetroPCS, whose interest in the 2GHz band is well known), then that might well leave LightSquared to sink without a trace, as it would make it much easier for the FCC to defer to demands from the NTIA for six months of additional testing on LightSquared’s new spectrum plan. Of course, a six month delay would put the decision timeframe into the midst of a presidential election year, when it is all but inconceivable that either the White House or Congress would go against the wishes of millions of farmers, engineers, aviators and boaters.
In contrast, an alternative network proposed by DISH would have a ready made support base, not only from those parties demanding increased wireless broadband competition, but also from all those who have demanded that LightSquared’s network be moved outside the L-band. It seems both sides would therefore be eager to support the FCC granting DISH a waiver similar to LightSquared, permitting terrestrial-only devices, if DISH was to commit to aggressive buildout milestones and to providing wholesale access to its network capacity as Harbinger did back in March 2010.
Today there have been renewed rumors that Sprint will announce a deal with LightSquared during its Q2 results call on July 28, although another source has suggested to me that Sprint does not intend to set out its Network Vision plans at that time. Thus I’m left wondering whether this is an attempt to derail DISH’s plans, which certainly seem to be in pretty high gear, judging by the number of visits DISH has made to the FCC in recent weeks to discuss the 2GHz MSS spectrum band.
Maybe we are therefore moving towards the last few minutes of this Seinfeld episode. However, as Charlie Ergen knows only too well, in Seinfeld there are very few happy endings, except when they come at someone else’s expense.
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07.05.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 10:07 pm by timfarrar
I noted 10 days ago that one possible outcome for LightSquared would be for the company to sue the US government and/or FCC if it was unable to move forward because of the GPS interference issues. Last week’s Technical Working Group report submission was accompanied by a very strongly worded set of recommendations by LightSquared blaming the GPS industry as “it is inescapable that their disregard for the Commission’s policies regarding the immunity of receivers to transmissions in nearby frequency bands that is the source of the technical problem”.
This set of recommendations served to deflect from the results of the TWG itself, which highlighted widespread interference and the difficulties in mitigating this even under LightSquared’s revised plan. However, it also may act as something of a red rag to a bull, in terms of Congress’s reaction if the FCC does allow LightSquared to move forward. Of course, if Congress did act to ban LightSquared from operating, then that would provide a much more definitive trigger for any legal action by LightSquared (compared to a move by the FCC to delay any decision or postpone authorizing LightSquared’s operations until more testing is carried out).
On the other hand, while the FCC is still considering whether to give LightSquared the go ahead, it seems unlikely that we will see more overt legal threats. Indeed, the FCC’s deliberations about how to treat LightSquared are especially sensitive because it seems that some blame for the interference problems could very well attach to the FCC, given its apparent failure to live up to the commitments made in the 2005 ATC Order:
While we agree with the GPS Industry Council, NTIA, and other government agencies that it is essential to ensure that GPS does not suffer harmful interference, it is also important to ensure that new technologies are not unnecessarily constrained. In this regard, we recognize that the President’s new national policy for space-based positioning, navigation, and timing (PNT) directs the Secretary of Commerce to protect the radio frequency spectrum used by GPS and its augmentations through appropriate domestic and international spectrum management regulatory practices . . . . Furthermore, the President’s PNT policy calls for the establishment of an inter-agency Executive Committee, on which the Chairman of the FCC will be invited to participate as a liaison, and a National Space-Based PNT Coordination Office. It is our intention to establish discussions with other agencies, through the PNT Executive Committee and Coordination Office as appropriate, to better understand what protection levels for GPS are warranted. The results of those discussions may lead to future rulemaking proposals in order to ensure that all FCC services provide adequate protection to GPS, and produce a more complete record upon which to establish final GPS protection limits for MSS ATC
licensees
Since the release of the TWG report, LightSquared has been attempting to highlight other signs of progress, including raising $265M of additional funding today. However, it seems that the vast majority of this new funding is likely to have been in the form of Harbinger having to stump up its previously unfunded $250M commitment to LightSquared. Harbinger also seems to be experiencing some internal turmoil, and it will be very interesting to see what has happened at the end of the second quarter in terms of redemptions. Most problematically, with the FCC comment and reply period on the TWG report now extending until August 15, and indications that the FCC will not rush to judgment after that, it appears more likely that Sprint will announce details of its Network Vision plan before it has been determined whether LightSquared is able to move forward or not.
In parallel with this activity, it seems we may know more about DISH’s plans for DBSD and TerreStar relatively soon, as comments are due on Friday in the 2GHz spectrum consultation. After Charlie Ergen met with the FCC Chairman on June 22 to discuss matters including DISH’s recent 2GHz MSS spectrum acquisitions, it now seems ever more likely that DISH could provide a readily available alternative source of spectrum for prospective LightSquared partners.
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06.27.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:00 am by timfarrar
Last week’s Brattle Group report for LightSquared, not only highlights the regulatory “gift” from the FCC involved in their January 2011 waiver, but also contains an estimated value of $12B for LightSquared’s L-band spectrum. This valuation is derived by assuming that LightSquared’s terrestrial-only waiver means its spectrum should have an equivalent value to “unencumbered AWS wireless broadband spectrum”, which Brattle believes to be worth approximately $1.00 per MHzPOP.
Unfortunately, this valuation, which is derived from an April 2011 Brattle Group analysis, is also deeply flawed. As an aside, it is almost identical to the valuation put on LightSquared (then MSV) by Brattle back in October 2005, when they estimated that 30MHz of MSS-ATC spectrum had a “potential” value of $0.99 per MHzPOP (although ironically, at that point it was asserted that “there are questions regarding interference and other technical issues that potentially make L-band use for ATC problematic, which would require L-band spectrum to be priced at a discount to S-band spectrum”).
The most obvious problem with Brattle’s valuation of LightSquared’s spectrum is that is is just as inappropriate to use AWS spectrum as the sole benchmark for L-band valuation today, as it was to use PCS as the benchmark in October 2005. Today the AWS-1 block has substantial existing infrastructure already deployed (both base stations and handsets) which can readily make use of the spectrum, whereas LightSquared was not even able to provide test handsets or full power base stations for the recent Las Vegas testing.
In addition, there are also more subtle issues which render the AWS value in the April 2011 paper unreliable. Notably, Brattle estimates trends in spectrum pricing by reference to a spectrum price index created and maintained by Spectrum Bridge. Brattle suggests that the index “tracks changes in spectrum value reasonably well” because as one example, “the change in SpecEx Index values closely tracked the change in AWS spectrum value based on NextWave’s AWS spectrum sale to T-Mobile in July 2008. The NextWave sale reflected a 91% increase in AWS spectrum value, whereas, the SpecEx Index in the same period indicated an 86% increase in spectrum value.”
However, the cited transaction reflects the sale of spectrum which by July 2008 could be readily put into use in T-Mobile’s built-out AWS-1 network, compared to spectrum which in summer 2006 had not even been cleared of interference. It is as if I bought some farmland and then a developer put in utilities and roads on the adjacent tract of land. The value of my particular plot might have increased, but that would say nothing about the market price of farmland. In spectrum terms, no-one (including Brattle) would suggest that Aloha’s windfall on sale of its 700MHz spectrum to AT&T was largely due to a general increase in the value of spectrum, as opposed to the DTV transition and the 700MHz auction creating certainty about whether the spectrum could be put to use.
A second factor is that of survivorship bias: in the cited NextWave transaction, NextWave’s AWS holdings were sold because the offered price was acceptable (higher than the original price paid), but NextWave failed to sell its 2.3GHz and 2.5GHz spectrum holdings which were on offer at the same time (because the offers, assuming there were any, were too low). Spectrum Bridge claims that its index takes account not only transaction data but also a “custom weighting of value, spectrum, and macro-economic based factors driven by SBI’s valuation and trading data”. However, this inevitably obscures the methodology and makes it all but impossible to determine whether the index accurately tracks spectrum values.
Returning to my farmland analogy, it would seem that the most important factors in attempting to exclude both “improvement” and “survivorship” bias would be that (for currently unused spectrum) the ecosystem for use of the spectrum should not have changed dramatically in the intervening years, and the timing of the sale should be dictated by external events (e.g. a bankruptcy auction) rather than by whether or not the prior holder can make a profit over what it paid previously. In that context, the recent sale of DBSD and the current auction of TerreStar almost certainly provide a better indicator for trends in the value of LightSquared’s spectrum than the index used by Brattle.
At current levels (of roughly $0.25 per MHzPOP), DBSD and TerreStar’s spectrum has actually gone down in value compared to 2005 and is broadly similar to the trading price (and the Motient/SkyTerra exchange valuation) back in 2006 (before most of their satellite construction expenses were incurred and well before the spectrum could be brought into use). This compares to a SpecEx index which has doubled since mid 2006 and trebled since 2005.
If (perhaps optimistically) we assumed that LightSquared’s spectrum with the terrestrial-only waiver is similar to AWS-1 spectrum when it was auctioned in 2006, then based on the DBSD/TerreStar trend (of minimal change in price since 2006) the AWS-1 auction pricing ($0.54 per MHzPOP) might be an appropriate valuation to use. On the other hand, if DBSD and TerreStar also include in their current valuation some allowance for the possibility that the FCC might also grant them a waiver (so are more directly analogous to LightSquared), then their $0.25 per MHzPOP valuation might be more appropriate.
In order to come up with an actual dollar valuation of LightSquared’s spectrum assets, you then need to take into account the impact of interference (i.e. whether to use 20MHz or 40MHz as the basis of valuation) and the NPV of the Inmarsat payments (where a relatively low (8%?) discount rate would probably be used by any established wireless operator purchasing this spectrum).
At the low end (20MHz @$0.25 per MHzPOP), you come out with a negative valuation after the Inmarsat payments (minimal value for the first lien debtholders), whereas at the high end (40MHz @$0.54 per MHzPOP) you have a valuation of about $4B (before paying off the first lien debt). That’s why I said that “It is very hard to see how you justify an equity value for this business (in line with) what Harbinger has invested, unless it can show it will be able to use all the spectrum it owns”.
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06.15.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:28 am by timfarrar
Its now being reported that LightSquared plans to ask the FCC for an extension of today’s deadline for submitting its report on GPS interference until July 1, as the company is apparently claiming that “all the information required for the report had not yet been submitted”.
However, the supposed new target date of July 1 conveniently just happens to be the day after the rescheduled June 30 auction for TerreStar Networks. It seems a huge stretch to imagine that this is purely a coincidence, when DISH blocked Harbinger’s attempts to secure access to the TerreStar spectrum last night, which I understand was the cornerstone of Harbinger’s planned “2GHz first” strategy, that first emerged back in March. Its also pretty hard to explain why it would take another two weeks simply to compile the report, given that the tests were apparently completed a couple of weeks ago.
UPDATE: One reason unrelated to TerreStar is that it could be fairly convenient for LightSquared to bury the report on the Friday of a holiday weekend.
Now the question is whether the GPS industry (who want LightSquared to move to different spectrum although perhaps did not expect that to actually happen) and the FCC will play ball and allow the deadline to be postponed. If that happens then Harbinger will have two weeks to either put together a superior bid (presumably with MetroPCS) for TerreStar, or to strike a network sharing deal with Sprint (if today’s first lien debt amendment proves sufficient to persuade Sprint that they have adequate security). Depending on which path proves successful (if indeed either one does), LightSquared will then know if it can propose using 2GHz spectrum initially, or if it will need to try and defend its L-band spectrum rights to the death.
UPDATE: LightSquared has filed the request for an extension until July 1, which has been granted almost immediately by the FCC. I am told that other members of the Working Group (with the exception of Sprint) opposed LightSquared’s request for an extension, and a filing to this effect has now appeared in the IB docket. Today the National Public Safety Telecommunications Council (NPSTC) also filed comments detailing their portion of the test results, noting that some public safety applications would see “vast service outages” and suggesting use of the 2GHz MSS spectrum for downlinks paired with L-band uplinks as one (albeit somewhat impractical) alternative to prevent interference.
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06.14.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 3:32 pm by timfarrar
News emerged on Tuesday afternoon that TerreStar Networks (TSN) was close to agreeing a $1.2B to $1.4B stalking horse bid with DISH Networks. It appeared that DISH is likely to outbid a group of first lien debtholders and another bid from MetroPCS (possibly in conjunction with Harbinger), who jointly bid for DBSD with Solus and Harbinger back in March and were also outbid by DISH in that auction.
UPDATE: It has been confirmed to us that Harbinger was one of the parties attempting to acquire TerreStar’s spectrum assets, but its not clear whether Harbinger was aligned with MetroPCS or the other first lien holders (and it may even have been a potential customer/partner for both groups).
It seems that Harbinger had hoped to be in a position to announce a 2GHz first strategy, just as it planned back in March, in an attempt to head off the findings of tomorrow’s GPS Working Group report to the FCC which will state that testing demonstrated “widespread interference with GPS.” However, once again Harbinger may now have been thwarted by DISH.
UPDATE: Details on the agreed $1.375B stalking horse bid have now been filed with the Court. It is stated that the bid amount will exceed the secured debt (15% Notes plus PMCF plus DIP) by $90M. Thus the Exchangeable Notes (nearly $200M) and other unsecured creditors will have to make do with well under 50 cents on the dollar and no value would flow down to the equity holders in TSN (which is owned 88% by TerreStar Corporation and 12% by LightSquared). For these unsecured creditors to be paid in full and excess value to flow to the TSN equity would therefore require the winning bid in the auction to be increased to something between $1.5B and $1.6B (rather higher than I had previously estimated). Of course the disappointed equity holders (in TSN and by extension in TSC) may have some company, because at the current $1.375B bid level, Harbinger will also take a bath on its majority holdings of Exchangeable Notes, which it was buying at up to 82 cents on the dollar back in November.
Whether further bids might emerge in the subsequent auction is still unknown. The other first lien debtholders may be content to be paid in full in cash for their claim, though there were indications last night that they were still actively competing against DISH as the price rose towards $1.4B. Perhaps MetroPCS (and Harbinger?) could also try to outbid DISH in the auction itself. Unfortunately, that didn’t work in the DBSD case, and it could well be the case that no further bids emerge at the auction, given the protections that the successful stalking horse bidder will have.
If Harbinger is unsuccessful in securing rights to TerreStar’s 2GHz spectrum, its unclear where Harbinger and LightSquared go from here, unless Sprint is prepared to take LightSquared’s side in the GPS interference debate. However, if Harbinger did in fact team up once again with MetroPCS, that would make it harder to believe that a deal with Sprint is anything like as imminent as LightSquared has been hinting.
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Posted in Financials, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 9:35 am by timfarrar
In a recent Vanity Fair profile, Phil Falcone was summed up by a rival fund manager as “A roll-the-dice, put-everything-on-red kind of guy”. However, with the report on GPS interference coming up tomorrow, it also appears that the GPS industry is united in putting all their efforts into pushing the emergency stop button on LightSquared. Particularly significant is the decision of the PNT Advisory Board last week to file comments with the FCC:
The formal recommendation reads: “The PNT Advisory Board recommends the PNT Executive Committee (EXCOM) should file formal comments with the Federal Communications Commission (FCC) regarding the interference issues.
“1. Based upon information and test results provided to the PNT Advisory Board at the meeting of June 8-10, 2011, the provision of GPS services cannot be assured if the LightSquared proposal for satellite and terrestrial broadband provision using the MSS L-Band receives final approval.
“2. The only reasonable and viable option to continue ubiquitous availability of GPS and the provision of a new 4G wireless broadband capability would be for the FCC to assign an alternate frequency spectrum to LightSquared that has little or no probability of affecting the delivery or utilization of GPS/GNSS services.”
The recently passed House version of the National Defense Authorization Act (NDAA) would block the FCC from authorizing LightSquared operations until GPS interference concerns have been resolved. Thus, if the GPS community continues to receive strong Congressional backing, it may become impossible for the FCC to authorize commercial operation of LightSquared’s planned terrestrial network, whatever LightSquared decides to recommend in its June 15 report (note that this report will undoubtedly not have any meaningful consensus recommendations about how to proceed). Of course it is implausible that the FCC would simply assign “alternate frequency spectrum” to LightSquared, and the other spectrum controlled by LightSquared (8MHz in the 1.4GHz band, leased from TerreStar Corporation, and 5MHz in the 1670-75MHz band) is unlikely to be usable for a large scale mobile LTE buildout.
As a result, LightSquared and the FCC both face a dilemma about how to move forward. Perhaps Harbinger could partner with the first lien debt holders (other than Echostar) (or even partner once again with MetroPCS and Solus) to make a run at TerreStar Networks, similar to its efforts in the DBSD bankruptcy auction back in March. Although providing LightSquared with a waiver of the ATC rules in the 2GHz band might be one option for the FCC, that would not solve LightSquared’s funding problem, and more likely would exacerbate it, because LightSquared would potentially then have to lease TerreStar’s 2GHz MSS spectrum from the consortium buying the assets out of bankruptcy. Granting TerreStar a waiver of the ATC gating criteria would also potentially disrupt the FCC’s current consultation process, which seeks to persuade DBSD and TerreStar to give up their spectrum for incentive auctions. Even more problematically, a decision to use TerreStar’s spectrum initially might give the Congress the excuse they are looking for to completely prohibit LightSquared from using the L-band for future terrestrial operations, as the GPS industry is requesting.
As I noted a few days ago, Harbinger therefore needs to announce something big to turn around perceptions of LightSquared. At this point, some sort of deal with Sprint (with Sprint expressing confidence that the interference issues are manageable) appears to be the best option with a chance of achieving that, with a potential partnership with MetroPCS and Solus to bid for TerreStar a rather less attractive backup choice.
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05.31.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:08 pm by timfarrar
Although Charlie Ergen has his Seinfeld strategy for exploiting DISH’s new assets, including DBSD and Blockbuster, Harbinger’s plans for LightSquared are becoming ever harder to discern, with news today that LightSquared is “considering a deal with AT&T to buy network capacity from the carrier”. Presumably this story comes in response to concerns that LightSquared might be forbidden from operating its L-band terrestrial network indefinitely, if new language in the National Defense Authorization Act passed by the House of Representatives last week is ultimately included in the final bill. At the very least it now appears that the FAA will insist that LightSquared’s operations be confined to only the lower half of its 40MHz of L-band spectrum, while John Deere contends that “permitting LightSquared to operate its network as proposed or any variant of its currently proposed network will create massive interference into Deere’s StarFire system and other similar systems risking serious harm to the U.S. agriculture industry”.
This news marks yet another 180 degree turn in LightSquared’s ever-changing story, which over the last year has shifted from a $7B contract (or rather MoU) with Nokia Siemens Networks (which disintegrated in January) to a joint bid with MetroPCS for DBSD to a network sharing agreement with Sprint (which at one point was supposedly even going to supplant Clearwire) to now an “initiative” with AT&T, along the way apparently including talks with Cablevision, Time Warner Cable and any number of other companies. This extraordinary saga reads like something by Hans Christian Andersen, the only question being whether the final tale will turn out to be “The Ugly Duckling” or “The Emperor’s New Clothes“.
Meanwhile, the FCC appears to be doing its best to make the TerreStar bankruptcy auction even more confusing, releasing a Public Notice on May 20 which “invites technical input on approaches to encourage the growth of terrestrial mobile broadband services in the 2 GHz spectrum range”. Unfortunately for TerreStar, the FCC once again insists that “the public interest” requires that “any grant of terrestrial rights in the 2 GHz band [should] have ‘conditions designed to ensure timely utilization of the spectrum for broadband and appropriate consideration for the step-up in the value of the affected spectrum’” in the form of “Voluntary Incentive Auctions” or “Voluntary Return of MSS Spectrum Rights”, thereby potentially reducing the perceived value of TerreStar’s MSS spectrum in the upcoming auction quite significantly.
Of course, things are not looking that great for the FCC’s other attempts to bring additional spectrum into use for terrestrial mobile broadband (i.e. LightSquared and broadcast TV incentive auctions), so perhaps the buyer of TerreStar’s spectrum will simply tell the FCC to go pound sand, and continue to pursue a (loss making) satellite-based business plan until a better offer is on the table. However, in those circumstances, whoever buys TerreStar would need to have deep pockets, and be happy to wait for several years rather than seeking a quick flip of the spectrum. Given Harbinger’s experience with LightSquared, that might well put off some of the financial players who could otherwise have been interested in TerreStar’s spectrum.
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