06.04.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 9:49 am by timfarrar
A first, very modest concession has now emerged from the FCC Chairman over the process for authorizing LightSquared’s commercial operations, in a letter dated May 31 to Senator Chuck Grassley. This letter is a response to the demand from Grassley on April 27 for records of communications between and within the FCC related to Harbinger and LightSquared. The May 31 letter completely ignores Grassley’s specific request and also fails to addresses the concerns he expressed about the very short comment period originally set for the November proceeding, which as the CTIA pointed out, was “unlike most satellite modification filings”. Unsurprisingly, Grassley is therefore still upset about the FCC’s “lack of transparency in this case”.
However, the letter does make one modest concession, in that it promises that the Commission “will establish a public comment cycle and give all parties further opportunities to present their views”. This was one commitment that was missing from the January 2011 waiver order, and was of considerable concern to the GPS community, although it does not go as far as the Save Our GPS Coalition requested, which was for a comment period of “at least 45 days” and for “further FCC actions [to] take place with the approval of a majority of the commissioners”.
The FCC Chairman is presumably very cognizant of the language in the House version of the National Defense Authorization Act (NDAA), which would forbid the FCC from authorizing LightSquared’s commercial operations until GPS interference concerns are resolved, and wants to prevent similar language from being included in the final bill. Whether his concession on a public comment period is sufficient to achieve that remains to be seen, especially given his conclusion that “I remain focused on ensuring that the Commission takes full advantage of the incredible economic opportunities that underutilized spectrum presents. This includes the opportunity presented by LightSquared…”
However, even if the FCC is successful in forestalling Congressional intervention, a public comment period (of say 30 days or longer if it includes time for reply comments) will certainly push back the timeline on which a final ruling from the FCC can be expected to at least the end of July, and more likely sometime in August. Unless and until the GPS interference issue is resolved, it hardly seems likely that Sprint will want to finalize a network sharing deal with LightSquared, or that LightSquared will be able to raise the money to pay for that buildout. Thus it appears that a LightSquared IPO in July is certainly off the table, and the supposed network sharing deal with Sprint seems to be no more imminent than it was in mid-March (when supposedly LightSquared was about to announce a deal with Sprint at CTIA) or in mid-April when these reports last emerged.
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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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05.26.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 12:24 pm by timfarrar
Over the last week, a clearer picture has begun to emerge of LightSquared and the GPS industry’s respective strategies, as interference tests continue in Las Vegas. Some data is now emerging from these tests, with a GPS World webinar this morning citing that in a rural test case (see presentation), high precision receivers were impacted up to 1800m from the base station (although the radius of interference would obviously be less for narrowband GPS receivers and for more urban environments with higher levels of clutter).
Given that the problem is mainly caused by transmissions in the upper channel (Phase 0 spectrum) closest to the GPS frequencies, LightSquared is already indicating that it will offer to operate only below 1545MHz, until the FCC introduces receiver standards and old GPS equipment is phased out (a process that will take many years to complete). As Jeff Carlisle of LightSquared commented in a May 23 Space News article: “If the most efficient and fair solution is not to do a receiver-side solution, we haven’t taken any of the possible transmission solutions off the table. We can look at ways of implementing our service, how we do it, when we do it, using what spectrum”. Indeed LightSquared has just paid Inmarsat another $40M to speed up the availability of the Phase 1A spectrum, and moved back its commercial deployment timeline into the first half of 2012 for precisely this reason.
However, as problems have emerged with the testing in Las Vegas, it appears that the GPS industry will demand that significant additional testing must be carried out, before LightSquared is given permission to launch commercial service even in the lower part of the band. As Alan Cameron of GPS World put it on this morning’s webinar, LightSquared does not have the full software [needed to operate its base stations in the way it plans to do commercially] so the current testing is premature. A letter sent to the FCC last week, signed by 33 senators, even asks the Commission to “rescind LightSquared’s waiver until this demonstration [of non-interference with GPS] is made”. Of course, as everyone should know, a demonstration of total “non-interference” is impossible.
Next week we should expect to see more data on the government’s testing of interference in New Mexico, based on the charter of the National Space-Based PNT Systems Engineering Forum, which was tasked to produce a final report “in a publicly releasable version” by May 31, 2011. Indications to date are that this testing certainly does not demonstrate “non-interference” with GPS (and the report itself will written by proponents of GPS not LightSquared), so this is likely to intensify the political firestorm aimed at LightSquared and the FCC.
UPDATE: The FAA report is also scheduled to be released on June 3 and, according to a report in FlightGlobal, the conclusions also appear to be problematic for LightSquared, notably a statement that “From an aviation perspective, operations at Phase 0, 1 and 2 spectral deployments, the upper channel [frequencies above 1536MHz] should not be permitted”.
FURTHER UPDATE: The FlightGlobal article has now been taken down, but is still available here and a more complete report on the study is available here. Also the House of Representatives has now passed the National Defense Authorization Act (NDAA), with strengthened language apparently requiring that the FCC should not provide “final authorization for LightSquared operations until Defense Department concerns about GPS interference have been resolved”. If that bill passes the Senate and is signed by the President, then it would seem likely to stop any prospect of near term commercial operations by LightSquared.
Of course, a requirement for more testing and a further delay to LightSquared obtaining permission to commence service (at best) or a withdrawal of the waiver (at worst) could very easily derail the LightSquared venture completely. I’m told that LightSquared had been hoping to raise money from private equity sources and then undertake an IPO in July, after signing a provisional network sharing agreement with Sprint. This new funding is a pre-requisite for Sprint to move forward with any buildout under the network sharing agreement, because of the upfront costs that it would incur, and so Sprint needs to be convinced that LightSquared will be able to reimburse these costs, either with cash or spectrum rights.
With Sprint expected to announce its plans for Network Vision this summer, LightSquared therefore needs to achieve some certainty about its spectrum position very soon, or risk missing that boat. Ominously, at a New America Foundation event in Washington DC two weeks ago featuring LightSquared’s CEO, Sprint noted that it would be able to host other spectrum on its Network Vision platform, including “possibly Clearwire, possibly public safety”, but conspicuously failed to include LightSquared on that list.
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05.18.11
Posted in LightSquared, Operators, Regulatory, Spectrum at 7:10 pm by timfarrar
Today, it was reported that LightSquared has revised its deployment plans, and now expects “field trials in the third and fourth quarter this year in Baltimore, Las Vegas and Phoenix” followed by “a ‘full-blown commercial’ launch…scheduled for early next year” rather than “by the end of this year” as was indicated in April. Even that was slower than in January, when LightSquared suggested that it was “testing LTE in Baltimore, Denver, Las Vegas and Phoenix now” and was “expected to launch up to nine Midwest markets this year”.
Back in January, LightSquared was granted a waiver by the FCC, based on commitments that the company was “confident that this [GPS interference] issue can be resolved without delaying deployment of wireless broadband, generally, or the LightSquared network specifically” and that “LightSquared was cognizant of this issue when we made the buildout commitments that served as the basis for the Commission’s own requirements in its March 2010 Order”. Indeed LightSquared also indicated that it would not “continue to roll out our network and meet the rigorous construction timetable that the Commission has made a condition of our authorization” unless the FCC takes “quick, favorable action” to approve its updated business plan.
However, despite the FCC acceding to LightSquared’s waiver request, based on these assurances, it now seems that LightSquared will delay the rollout of its network and blame the GPS interference issue, saying that “the company is watching the FCC before fully rolling out its ground-based network”. It would be understandable if in these circumstances the FCC was becoming somewhat impatient with LightSquared’s progress, and LightSquared’s CEO has recently been doing the rounds of FCC Commissioners, presumably with a view to shoring up LightSquared’s support at the FCC.
UPDATE: LightSquared has told DSLReports that “they’ve always planned their first commercial launch to be in early 2012″. Of course that’s not what LightSquared told the FCC in March 2010, who quoted as part of their public interest rationale for approving the Harbinger takeover that “Service will begin in two trial markets with a commercial launch commencing before the third quarter of 2011, providing service for up to 9 million POPs”.
Looking at LightSquared’s latest statements in more detail, it also appears that Denver has been dropped from the original deployment plan (indeed back in March 2010 LightSquared told the FCC that “service will begin in two trial markets, Denver and Phoenix, with a commercial launch before the third quarter of 2011 providing service to up to 9 million POPs”). It isn’t terribly surprising that the initial rollout will now take place in Las Vegas, because that is basically the easiest major city in the entire US to cover with a wireless network, due to the lack of foliage and the flat terrain. Indeed, ICO (now DBSD) was able to cover the city very well (albeit without the intention to provide indoor coverage) with only 3 base stations, during trials of its MIM service in 2008, as shown in the diagram below.
In Phoenix, I’m told that LightSquared’s site acqusition partner shut down its operations back in January, and at that point the tower companies were no longer being paid rent for the 20 site leases that had been signed. In Baltimore I understand that only a very limited proof of concept deployment was planned (with a handful of base stations at most), to determine the extent of interference with Inmarsat’s maritime safety services. Given this information, unless something significant has changed in the last few months, it seems that at best only a minimal deployment effort is taking place ahead of the potential network sharing agreement with Sprint, and associated contract with Ericsson, that everyone expects to emerge soon (and which today’s Clearwire agreement with Ericsson presumably provides a template for).
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Posted in LightSquared, Operators, Regulatory, Spectrum at 9:04 am by timfarrar
As more information starts to emerge from real world testing into whether LightSquared’s terrestrial network will interfere with GPS receivers, the news appears to be fairly bad for LightSquared on both the technical and political fronts. In addition to Qualcomm’s comments last week, suggesting that the filters in their A-GPS chipsets might need to be upgraded, New Mexico state officials have submitted a letter stating that their testing “substantiate[s] concerns that the LightSquared network will cause interference to GPS signals and jeopardize 911 and public safety nationwide”. Meanwhile the FCC has been asked by Sen. Chuck Grassley (R-Iowa) “for more information on its review” of LightSquared’s plans, including “all communications between the FCC and Falcone or any other Harbinger Capital and LightSquared employees [and] all internal FCC communications regarding LightSquared or Harbinger Capital” and language has been included in the National Defense Authorization Act (NDAA) that “requires the U.S. Secretary of Defense to notify Congress if he determines that widespread interference with the military’s use of the GPS is caused by a commercial communications service”.
What I’ve always found intriguing is that this issue apparently came out of nowhere to potentially derail the whole LightSquared buildout plan. LightSquared has highlighted that terrestrial use of the L-band has been anticipated since 2003, and that the GPS Industry Council negotiated several agreements with LightSquared (previously SkyTerra and before that MSV) on out-of-band emissions into the 1559-1610MHz band, starting in 2002 and extending right up until August 2009. Indeed in March 2004, the GPS Industry Council urged “the Commission to grant the above referenced [ATC] applications of Mobile Satellite Ventures Subsidiary LLC (“MSV???), and to do so as soon as possible”, commending MSV “for its proposal to use its spectrum in a responsible manner that ensures the continued utility of GPS receivers operating in the vicinity of MSV ATC stations”.
However, it appears that the GPS Industry Council never recognized the potential for GPS receiver overload from transmissions within LightSquared’s own L-band frequencies. Given their comments above, it seems plausible that they were lulled into a false sense of security by LightSquared’s cooperation over out-of-band interference, including limiting the PSD to -100dBW/MHz or less, a very aggressive commitment, giving a high level of protection to GPS receivers. Of course, LightSquared also benefited from that commitment, because to filter LightSquared’s emissions to this level requires about 3-4MHz of separation between the edge of the GPS band at 1559MHz and LightSquared’s terrestrial transmissions at 1550-1555MHz. When similarly challenging constraints were imposed on Globalstar at 1610MHz, it meant that Globalstar would be less able to operate high power terrestrial transmissions at the bottom edge of its L-band frequencies, restricting Globalstar’s ability to support ATC in its more limited Big LEO L-band allocation (and thereby hampering potential competition to LightSquared).
Given the complexity of these issues and how critical their resolution was in obtaining LightSquared’s ATC license, it is hard to believe that no-one at LightSquared was aware of the possibility of GPS overload interference until it was raised in December 2010. Indeed, in an offhand comment in March 2011, even Mr. Falcone’s wife apparently suggested that “this type of interference has always been a potential issue for GPS”. Nevertheless, it appears that no mention is made of such problems in the risk factors section of SkyTerra’s 10-K filings with the SEC, and the 2009 10-K filing basically states the opposite, noting that “We have also agreed to comply with requirements on our user terminals and base stations that we negotiated with the GPS industry to provide additional protection to GPS receivers, beyond existing mandatory limits. Our compliance with these limits is a condition of our ATC license. All of our broadband wireless system designs take into account these requirements and specifications. We believe that they do not materially limit our network deployment or our ability to achieve our business plan”.
Summing up, it seems that the GPS Industry Council clearly dropped the ball when it came to analyzing the potential impact of LightSquared on GPS receivers. However, they may very well feel that they were the victim of a bait and switch play, thinking that MSV/SkyTerra was being extremely cooperative with its expressed intent to “ensure the continued utility of GPS receivers operating in the vicinity of MSV ATC stations”, when in reality out-of-band interference was not most important issue to consider.
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05.10.11
Posted in Inmarsat, LightSquared, Operators, Regulatory, Spectrum at 3:04 pm by timfarrar
As testing continues into whether LightSquared will interfere with GPS signals, Qualcomm has filed the results of its own initial cellphone testing with the FCC. Of course, LightSquared is depending on Qualcomm as its principal supplier of chipsets and developer of the GMSA/S-EVDO air interface for its satellite services, so it might have been expected that Qualcomm would confirm the position asserted by LightSquared supporters, that cellphones won’t need to use filters to prevent interference with their A-GPS location chips. However, in fact Qualcomm has come to the initial conclusion that “additional rejection of 30dB may be required” and that the current filters used in its A-GPS chipsets may need to be upgraded, in view of how close the upper part of the LightSquared downlink band (the Phase 0 spectrum at 1550-1555MHz) is to the GPS band. Given that most people agree that the interference problem will likely be much worse for other types of GPS receivers, this is not an encouraging result for LightSquared.
LightSquared may therefore be unable to use the Phase 0 spectrum unless receiver standards are imposed on GPS receivers, as the FCC suggested in its recent 2GHz ruling, which indicated that “incumbent users…must use receivers that reasonably discriminate against reception of signals outside their allocated spectrum”. However, Inmarsat indicated yesterday that on April 25, it signed an amendment to its Cooperation Agreement with LightSquared, and received an additional payment of $40M to accelerate the clearing of the Phase 1A spectrum (i.e. to free up the additional 2x5MHz block at the bottom of the L-band, which under the original agreement would have been made available sometime between February and November 2012). Thus it appears that even LightSquared may be acknowledging that the top part of its frequency band will be largely unusable for the foreseeable future, unless and until receiver standards are imposed on the GPS community, requiring a multi-year program of equipment upgrades and recertification, with all of the additional costs and delays that would imply.
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04.07.11
Posted in Regulatory, Spectrum at 12:08 pm by timfarrar
As I noted when AT&T announced its deal with T-Mobile a couple of weeks ago, one of the most interesting facts in AT&T’s presentation was that it included significant detail on the traffic growth experienced on AT&T’s wireless network. Back in January, T-Mobile also put forward its own expectations that traffic would grow at 60% p.a. between 2010 and 2015.
If we compare these figures (assuming T-Mobile’s figure holds for 2009 as well) and look at the ratio of 2014 data traffic to that in 2009 then the Cisco projections are a striking outlier, and the AT&T and T-Mobile expectations are dramatically lower than any of the analyst forecasts. It should also be noted that the AT&T network traffic estimates appear to include the acquisition of TMO, so the actual growth in traffic per subscriber is even lower – AT&T states that its expectation is for 8-10 times growth between 2010 and 2015, very much in line with TMO’s growth projection. Even if data traffic on other wireless networks grows faster than on AT&T’s network, it hardly accounts for a factor of two difference in overall growth, let alone a factor of 4-5 as Cisco estimates.
So why do we hear so much from the FCC Chairman about the Cisco forecast as justification for the FCC’s actions to save us from the supposed “spectrum crisis”? As commentators have pointed out, it is after all primarily a sales brochure for Cisco’s network equipment. As an aside, the latest Feb 2011 Cisco forecast even appears to overestimate current wireless traffic, estimating North American wireless data traffic was 49Pbytes per month in 2010, when an extrapolation from AT&T’s figure of 12Pbytes per month at the end of 2010 (assuming AT&T is 40% of US traffic, and the US is 90% of North America) would indicate that the actual traffic is closer to 33Pbytes per month. Why also is the FCC basing policy on its deeply flawed October 2010 paper, which assumes 35 times growth between 2009 and 2014?
In my conversations with knowledgeable observers since the AT&T/T-Mobile deal, there seems to be an increasing recognition that the “spectrum crisis” is exaggerated and that there is no near term shortage of spectrum. If the FCC wants to make the case that we need more spectrum by 2018 or 2020 then that’s fine, and maybe it is true that political action is needed on incentive auctions now so that broadcast TV spectrum can be brought into use by 2018. However, basing your arguments on projections that are hugely exaggerated risks the whole edifice tumbling down once these errors are exposed.
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04.06.11
Posted in LightSquared, Operators, Regulatory, Spectrum at 10:50 am by timfarrar
One of the key issues for LightSquared is that the downlink transmissions from its base stations are expected to interfere with a wide range of GPS devices, which operate in adjacent frequencies. LightSquared will be using part of the L-band downlink frequencies (1525-1559MHz), while GPS (and GLONASS) operate within the 1559-1610MHz band. Though LightSquared’s base stations will be fitted with filters which cut off the signal abruptly at the top of the L-band, so LightSquared’s signals do not leak into the GPS band, the filters on most GPS devices do not have such a strict cutoff at the bottom of the GPS band, and so can be overwhelmed by the very high power LightSquared terrestrial transmissions in the adjacent L-band frequencies. A good illustration of the impact is given in this chart from a Deere & Company submission to the FCC:
As this chart shows, the types of receivers that are most affected are high precision receivers used in applications such as farming and surveying, although lower precision receivers such as those incorporated in automobile navigation and even in cellphones may be impacted closer to the LightSquared base stations. Aeronautical navigation is an area of particular concern, given the safety critical nature of this application. Testing is now ongoing to determine the extent of interference, and early estimates of the impact vary greatly, ranging from a few hundred meters or less up to several miles for low precision receivers, and potentially tens of miles for high precision receivers.
It appears that LightSquared expects that GPS manufacturers should “fix” their devices, in order to mitigate these interference issues, although unsurprisingly this is being resisted strongly by the GPS community, because the costs would be very significant. PRTM estimates that it will only cost 30 cents per device to fit filters to the “40M standalone GPS devices” made worldwide each year for a total of $12M. PRTM also assumes that no additional filters will be needed for the much larger number of GPS-enabled cellphones sold each year, despite Qualcomm telling the FCC in January 2011 that it plans to use a filter to prevent self-interference in L-band enabled cellphones, and had “not determined whether this filter provides sufficient protection to avoid interference to the GPS receiver from LTE base stations operating on the L band.”
In reality, whether or not cellphone manufacturers ultimately decide an additional filter is needed to protect their GPS receivers, the overall cost impact would be far, far greater than PRTM indicate. To take a directly analogous situation, LightSquared is paying Inmarsat $250M to fit filters to its L-band satellite terminals on up to 10K aircraft and perhaps 50K ships. If we assume these filters cost $30 rather than 30 cents each, then following PRTM’s calculations the cost of solving the problem would be less than $2M. However, Inmarsat expects to spend the vast majority of the $250M it is receiving on actually fixing the problem, and the filters themselves are less than 1% of the total cost. Instead, the bulk of the expenditure will go on securing approvals (including from safety authorities) for replacement equipment, then going out and fitting this equipment on ships and aircraft.
Across the GPS industry the same considerations would apply – dramatically increased costs for testing, safety approvals, retrofits of existing equipment, etc. not to mention the markups that would apply to the filter component costs as they flow through to an increased total cost of the devices sold. Many of these costs would be concentrated in lower volume and safety critical applications such as the aeronautical market, and if some GPS users experienced a permanent loss of accuracy, then there could be additional indirect costs to consumers (e.g. reduced crop yields leading to higher food costs). Just to give one example, the National Association of Wheat Growers indicated that its members have invested $3B in GPS equipment for precision farming, in order to increase the productivity and efficiency of farm processes.
Thus it is more credible to look at the total cost impact on manufacturers and consumers as being of order $1B+ per year over the next decade, as tens of billions of dollars of equipment needs to be upgraded or replaced. As in the Inmarsat situation, PRTM’s estimate of the filter hardware costs (for what was in any case only a subset of the overall GPS equipment market) likely represents no more than 1% of the total bill. Given that such a large cost impact might well outweigh the value of freeing up additional L-band spectrum, it would be very interesting to see a detailed cost-benefit analysis of these issues, so that economic rationality can play some part in the ultimate decision.
Nevertheless, despite the significant cost impact on the GPS industry and end users, the FCC might still decide to impose “receiver standards” on future GPS devices. However, it would still take considerable time before these standards became effective. For example, the FCC could easily take 12-18 months (or longer) to decide on what receiver standards to mandate, and then it might require that all new GPS receivers manufactured after say the end of 2014 were capable of withstanding potential interference. Then there would need to be several more years for older devices to be replaced or updated, with a sunset date perhaps as late as the end of 2018 or 2019 (or beyond).
Assuming that this is the path the FCC decides to follow, it is still unclear what spectrum LightSquared would then be able to use for its network in the near term. The Phase 0 spectrum which is currently available to LightSquared has its downlink between 1550 and 1555MHz, which is the channel closest to the GPS band, and so its use would likely be heavily restricted or completely prohibited until GPS receiver standards came into force. LightSquared gains access to an additional 2x5MHz channel (the Phase 1A spectrum) sometime between February and November 2012, depending on how quickly this is cleared by Inmarsat. This channel is at the bottom end of the band (1526-1531MHz downlink) and so is the least likely to interfere with GPS. LightSquared then adds 2x10MHz of additional spectrum (Phase 2) with downlinks at 1531-1536MHz and 1545-1550MHz at the end of July 2013. However, it is uncertain whether and under what conditions the use of the 1545-1550MHz band would be permitted before any receiver standards came into force.
This timeline indicates that (if Channel 1 is usable) LightSquared should have access to 2x5MHz of spectrum sometime in 2012 and at least 2x10MHz of spectrum from the end of July 2013. However, it is far from clear (even assuming LightSquared has a network contractor in place) how the company expects to offer service by the end of 2011.
More broadly, the outcome of the GPS interference testing and FCC deliberations also remains in doubt. PRTM characterized this as “a situation where the neighbor [GPS] built the fence too far over the property line and may not have realised it at the time. Now the other neighbor wants to build a pool and there is not enough space. So the question is: who has to pay to move the fence?”. However, I look at the analogy somewhat differently – regardless of where the fence is, if you have protected butterflies [defense and aviation systems] living at the bottom of both gardens, will the government let you build a pool at all?
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03.28.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 8:23 am by timfarrar
In recent days, the LightSquared PR machine has moved into ever higher gear, in an attempt to persuade Sprint that it should choose LightSquared over Clearwire. Given the frantic pace of announcements, I think that Sprint’s decision may come as soon as the next few weeks, in an attempt to disrupt the AT&T/T-Mobile merger, which was partly justified by citing the competition from Clearwire and LightSquared. However, it does feel a bit like something out of Monty Python, when LightSquared claim that the disappearance of their supposed deals with Sprint and MetroPCS is just a flesh wound.
Now we have another Monty Python scene coming into view, as the House of Representative’s Committee on Energy and Commerce moves ahead with an investigation into the FCC and their “management of commercial spectrum”. As Dave Burstein reports, there are clearly some senior staff at the FCC who share my concern about whether a “spectrum crisis” is being “manufactured”.
However, with not only the FCC Chairman’s reputation, but also the fate of the AT&T/T-Mobile merger, riding on the perpetuation of a “spectrum crisis” (not to mention billions of dollars of projected future budget revenues), it seems likely that the investigation will be more focused on political point scoring than on a serious debate about future spectrum demand.
Nevertheless, if Sprint’s upcoming decision leads to the failure of either LightSquared or Clearwire, then that really ought to prompt some hard questions about whether there actually is a spectrum crisis. Let’s hope that Congress’s investigators have more analytical resources at their disposal than “fear, surprise, ruthless efficiency…and nice red uniforms”.
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03.25.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 9:30 am by timfarrar
It looks to me ever more likely in the wake of the AT&T/T-Mobile deal that Sprint will soon have to choose to back either Clearwire or LightSquared, but not both. LightSquared is doing its best to talk up the idea that Clearwire’s customers are going to jump ship, having announced a deal with Best Buy with a “trial” of its LTE service starting in the first quarter of 2012, and now suggesting that it is “in discussions” with Time Warner Cable for a major deal, despite that company’s “not very impressive” results with Clearwire and TWC stating that it is “trying to spend not too much money while we are [exploring whether packaging wireless data with our wireline offerings is something that consumers want]“.
Neither of the deals that LightSquared has announced this week will generate very much revenue (I estimate a few tens of millions of dollars per year at best from Leap and rather less than that from Best Buy) and so most people are looking towards a LightSquared network sharing agreement with Sprint to show how LightSquared will move forward. This is hardly surprising given that the previous MoU with Nokia Siemens Networks appears to have fallen apart, and there is still no news about a partnership with MetroPCS on the 2GHz MSS spectrum.
Before the AT&T/T-Mobile deal it seemed that Sprint would try and have it both ways, continuing to work with Clearwire, and hoping that a spectrum sale or investment from T-Mobile would solve Clearwire’s funding challenges, while signing a network sharing agreement with LightSquared to offset some of its network upgrade costs and allow it to play Clearwire off against LightSquared when it came to negotiating wholesale bandwidth pricing.
However, it now looks more likely that Sprint will have to choose between Clearwire and LightSquared, because the two companies are competing for the same diminished pool of potential deals, and as Strategy Analytics asserts “there are probably too many 4G wholesale networks going after too few large wholesale customers”.
Despite the problems that Clearwire is facing, it has spent at least $5B so far on rolling out a network, mostly using other people’s money, and has a commercial network covering 120M people with capacity that can be sold today. From that perspective alone, it would be much less of a risk for Sprint to choose Clearwire over LightSquared. As Walter Piecyk of BTIG put it with regard to the “talks” between LightSquared and TWC: “Signing a roaming deal with LightSquared is kind of like planning a trip that goes over the bridge to nowhere. There is currently no network to use, there are material interference issues to resolve and then there is the small detail of coming up with $14 billion of cash. Good luck.”
Given these challenges, a decision by Sprint that provided LightSquared with a path to move forward would cast its already difficult relationship with Clearwire in an even more negative light. Similarly, if Sprint decides to back Clearwire as its primary provider of 4G service, it is hard to see why Sprint would expose itself to having to put up even more investment if Clearwire’s future revenue growth is impacted by competition from LightSquared. Given that AT&T has used the availability of both Clearwire and LightSquared’s networks to support its assertion that the mobile broadband market is highly competitive, the AT&T/T-Mobile merger might also be less likely to be approved, if one or other of Clearwire and LightSquared was to fail in the near term. As a result, I think that whichever choice Sprint makes could be fatal for the company it leaves on the sidelines, and ironically Sprint might even benefit from that outcome.
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