03.09.16
Posted in Broadband, Financials, Globalstar, Inmarsat, Operators, Regulatory, Services, Spectrum, VSAT at 8:34 pm by timfarrar
The Satellite 2016 conference this week has reminded me of years past. All the talk has been of ViaSat and their new ViaSat-3 1Tbps high throughput satellite (depicted above), just like in 2004 when Mark Dankberg used his Satellite Executive of the Year speech to describe his ambitions to build a 100Gbps satellite. Unlike back then (when most dismissed Dankberg’s plans as pie-in-the-sky), ViaSat’s announcement has already caused some large investment decisions by major operators to be postponed, and re-evaluated or perhaps even cancelled. Indeed the entire industry seems frozen like a deer in the headlights, trying to decide which way to run.
Some competitors, like Inmarsat, have chosen to portray ViaSat-3 as a “mythical beast” and ViaSat’s current offering of free streaming video on JetBlue as a “marketing stunt”. However, its far more serious than that. One perceptive observer suggested to me that its like competing for the presidency against Donald Trump: how do you respond to a competitor who is clearly intelligent and has a plan to win, but deliberately says things that fundamentally contradict your (supposedly rational) world view.
In the satellite industry the prevailing world view is that (at least in the foreseeable future) there is no need to build 1Tbps satellites offering capacity at $100/Mbps/mo, because satellite broadband will never compete directly with terrestrial and capture tens of millions of subscribers. But if ViaSat is determined to blow up the industry, most current business plans for two-way data applications (including essentially all Ku-band data services) are simply no longer viable. And if competitors remain frozen (or worse still dismissive) in response to ViaSat’s plans, then ViaSat will gain a head start on building these new higher capacity satellites.
In addition to this overarching theme, several other nuggets of information emerged: Inmarsat is acquiring a seventh “GX payload” by taking over Telenor’s Thor-7 Ka-band payload in Europe on a long term lease, presumably at a very attractive rate (perhaps even approaching the Eutelsat-Facebook-Spacecom deal price of ~$1M/Gbps/year, given Telenor’s lack of Ka-band customers). And Globalstar now appears to have a roughly 60%-70% chance of getting FCC approval for TLPS in the next couple of months, given the FCC’s desire to set a precedent of protection for existing unlicensed services that can be used in the upcoming LTE-U rulemaking. However, it appears that any deal would require a compromise of 200mW power limits (the maximum level demonstrated to date) and sharing of Globalstar’s L-band spectrum above 1616MHz with Iridium.
Going back to the title of this post, if last year’s conference felt like 1999, with exuberance about multiple new satellite projects, this year felt like 2000, as attendees peer over the edge of the precipice. Following on from that, next year could be like 2001, with pain to be shared all around the industry: a sharp fall in satellite orders, as operators re-evaluate the feasibility of their planned satellites, a continuing fall in prices, and the possibility of stranded capacity, either at operators, who are unable to sell their growing inventory of HTS capacity, or at distributors, who entered into contracts for capacity leases at prices far above current market rates.
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02.04.16
Posted in General, Regulatory, Spectrum at 10:02 am by timfarrar
Last June, I pointed out that CTIA had taken the odd (but hardly surprising) decision to run away from its own data on US mobile data traffic growth in 2014, which showed only a 26% increase, in favor of an error-strewn Brattle Group paper that used Cisco’s February 2015 mobile VNI estimates to supposedly show the “FCC’s mobile data growth projection in 2010 was remarkably accurate.”
Now Cisco has released its February 2016 mobile VNI report, CTIA’s attempt to bury its own data has backfired, because Cisco has retrospectively revised its prior estimates of North American mobile data traffic downwards by more than one third. Cisco’s estimate of EOY North American mobile data traffic in 2014 has been reduced from 562TB/mo in the Feb 2015 mobile VNI to only 360TB/mo in the new release, which makes it almost the same as the estimate of 2013 traffic in last year’s publication (345TB/mo). Similarly the estimate of 2015 traffic has been reduced from 849TB/mo in last year’s publication to only 557TB/mo this year, a loss of more than an entire year’s growth.
The chart below highlights the impact of this massive revision to Cisco’s estimates, showing that when combined with previous revisions, the latest estimate of traffic in 2014 is less than half the figure projected by Cisco back in February 2010 (which was used by the FCC as one of the traffic estimates in its infamous October 2010 paper).
Ironically, Cisco’s latest revision actually brings its estimate of US mobile data traffic for 2014 (323TB/mo at the end of the year – from the online tool, the North America figure above includes Canada) below CTIA’s own total of 4.1PB for the year as a whole (i.e. an average of 340TB/mo) meaning that in fact CTIA would have been better off using its own data. Of course that wouldn’t have had the desired effect of trying to make the FCC feel good about its hopelessly flawed 2010 paper and justify CTIA’s own attempt to disinter this methodology and use it to claim a spectrum crisis is still imminent.
UPDATE (2/4): Oddly, in a blog post Cisco asserts that the revision was so that the “2014 baseline volume adjustment now aligns with CTIA’s figures.” That’s actually wrong: the Cisco estimate represents an end-of-year figure (the first line of the report states “Global mobile data traffic reached 3.7 exabytes per month at the end of 2015“) and given that the monthly traffic is growing (one assumes relatively consistently) through the year, it is implausible for the final month of the year to have less traffic than the average for the year as a whole. However, it is certainly very ironic that Cisco has chosen to (try and) align its traffic figures with CTIA at precisely the time when CTIA wants to bury its own numbers in favor of more optimistic growth estimates.
Specifically, Cisco’s latest VNI forecast shows that the FCC’s estimate that traffic would grow by 35 times between 2009 and 2014 (a reduction from Cisco’s own estimate of 48 times growth) was actually 50% too high, because according to the latest Cisco data, North American traffic grew by only 22 times between 2009 and 2014 (unless of course Cisco has also made some undisclosed retrospective revision to its 2009 data).
As usual, Cisco has not provided any detailed explanation of this dramatic change in its numbers, though part of the cause seems to be a further increase in the assumption of offloaded traffic in 2014 and 2015: the latest forecast claims offloaded traffic on a global basis will grow from 51% in 2015 to 55% in 2020, whereas the previous version claimed growth from 45% in 2014 to 54% in 2019. However, this certainly can’t account for the scale of the change and Cisco must have revised many other individual elements of its traffic estimates in order to reduce its estimates by such a large amount.
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01.15.16
Posted in Financials, Globalstar, Operators, Regulatory, Spectrum at 3:17 pm by timfarrar
“I’m half crazy all for the love of you” is a good description of the state of mind of Globalstar investors and perhaps even more appropriately, this is the song HAL sings as he’s shut down in 2001: A Space Odyssey. But now Globalstar apparently has its answer, delivered by “Smitty” and the heads of the International Bureau and the Office of Engineering and Technology in a meeting on January 14.
It seems Globalstar was nervous about the outcome, carefully scheduling its Odeon conference call several days before this meeting (on January 11), so that the company could say that it “has not been asked by the Commission to provide any further technical data or engage in any additional testing.” Even now there would not be any formal demand made by the Commission, merely a discussion of how the proceeding could be brought to a conclusion.
Globalstar’s hopes were raised by the intervention of Public Knowledge in November, who (while not thinking much of Globalstar’s attempt to devise “yet-another-sure-fire-plan-to–make-beaucoup-bucks-using-ATC-and-this-time-TOTALLY-not-go-bankrupt“), saw this as an opportunity to set a precedent for the upcoming rulemaking on LTE-U, requiring new users of unlicensed spectrum (i.e. cellular operators) to guarantee that they will prevent interference and resolve any complaints that do arise.
However, numerous technical issues remain outstanding, because Globalstar has steadfastly maintained that its program of demonstrations (rather than cooperative laboratory testing) provides a sufficient record for the FCC to reach a decision, and as I indicated previously, Globalstar rejected a proposed FCC compromise last summer.
What is notable about the latest ex parte filing is how half-hearted Globalstar’s statements are compared to its submission in December, which at least tries to highlight some of the technical arguments. In the new filing, Globalstar doesn’t even bother to put additional details about its “Network Operating System” for resolving interference on the record, despite Public Knowledge stating last week that “For the Commission to formulate service rules, Globalstar must provide greater detail on how its proposed mitigation mechanism would work” and Globalstar apparently telling investors on the Odeon call that the “Company will succinctly address ‘framework’ and ‘additional testing’ from the new PK Ex Parte in the coming days.”
Its therefore pretty easy to conclude that far from this representing the last step before approval as some of Globalstar’s “half crazy” investors apparently think, the FCC indicated that more information will be required before they are prepared to even consider moving forward, likely in the form of a cooperative testing plan agreed with opponents. Some have suggested that if such a discussion had happened, Globalstar would have been obligated to put it in the ex parte filing, but the FCC’s ex parte rules at §1.1204 (a)(10)(iii) specifically note that “information relating to how a proceeding should or could be settled, as opposed to new information regarding the merits, shall not be deemed to be new information” that must be summarized.
Given these developments, and a share price which has now fallen by more than 50% in the last six weeks, it hardly seems like great timing for Globalstar’s new COO to start work. However, if TLPS is not going to be approved any time soon, Globalstar will have to focus on making something (however modest) of the MSS business, if only to minimize the cure payments due under the COFACE agreement in the next couple of years, and hope that additional funding can be found to meet these obligations.
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11.29.15
Posted in AT&T, Clearwire, DISH, Financials, Operators, Regulatory, Spectrum, Verizon at 8:32 am by timfarrar
I woke up this morning to read New Street Research’s latest 3Q2015 Wireless Trends Review, subtitled “Competition Gets Ugly: The Big Guys Have A Problem” and while I agree that competitive pressures in the US wireless market are getting ugly, I’m afraid it is the analysts rather the “Big Guys” that have a problem. In particular, New Street’s “network capacity framework” that suggests Verizon “have half the capacity they will need by 2020 to maintain current network quality” is based on a completely flawed premise, just like most other pronouncements of an imminent spectrum crisis.
This network capacity framework calculates the number of “MHz-sites” that Verizon has for LTE in the top 25 markets and assumes that data demand will grow at 30% from 2015 to 2020 (reaching 10GB/LTE sub per month by then). Ignoring the fact that New St doesn’t know its Petabytes (1 million Gbytes) from its Exabytes (1 billion Gbytes), Verizon’s “aggregate LTE data demand” is projected to increase five fold between 2015 and 2020, while Verizon is expected to increase its deployed LTE spectrum from 68 to 138MHz and its number of LTE macrosites in these markets from 21K to 27.2K over the period, which supposedly will result in 2.5 times growth in network capacity. Thus New St concludes that Verizon will have only half the capacity needed to meet demand, without buying more spectrum from DISH.
This thesis is even more flawed than the Brattle Group study for CTIA back in June, because it completely fails to consider the potential for improvements in network efficiency over the period as LTE-Advanced technologies are deployed. Even Brattle Group acknowledges that “LTE+” will carry over 70% more bps per Hz than 4G LTE, based on a move from 2×2 MIMO to 4×4 MIMO, and the original source for these estimates (Rysavy Research’s August 2014 paper on “Beyond LTE: Enabling the Mobile Broadband Explosion“) acknowledges that many additional improvements are feasible.
Correcting for this error alone, and assuming capacity constrained locations are upgraded to LTE-Advanced by 2020, New Street’s supposed capacity shortfall is reduced from 50% to 14%, and so the number of additional macro sites that Verizon would need to build is reduced from 26.7K to only 4.5K (which based on the FCC’s October 2010 estimate of $550K per cellsite would cost only $2.5B in incremental capex). That hardly seems to justify Verizon spending tens of billions of dollars to buy DISH’s spectrum.
New Street also ignore other sources of incremental capacity (such as LTE-U) and reject small cells as infeasible because they have supposedly only 1/3 the capacity of macro sites (Rysavy in fact points out in Figure 68 of his report that through careful placement to meet hotspot demand, four picocells per macrocell could produce roughly a 10x increase in capacity).
Its hardly surprising that New Street conclude Verizon’s behavior is “perplexing” and suggest that rather than “discounting to hang onto subs” Verizon “should be taking up price to shed subs faster in congested markets to preserve superior network performance for their most valuable subs.” But perhaps Verizon do actually understand network engineering and the potential for network capacity enhancements better than analysts with a simplistic, erroneous spreadsheet model?
In these circumstances Verizon would also feel happy to say no to Ergen’s blackmail and refuse to pay more than their previous offer for DISH’s spectrum (which I guess is around $1/MHzPOP). In fact, it would seem likely that Verizon don’t want a deal at any price ahead of the incentive auction, if that would enable Ergen to bid up the price of spectrum once again. On the other hand, Ergen is undoubtedly keen to find a partner to endorse the value of his spectrum holdings and force Verizon back to the table. As part of that effort, I’m told he has been visiting Google again recently, just as he did back in 2012 when he was trying to pressure AT&T to do a spectrum deal.
One possibility for such a partnership would be to reinvigorate DISH’s rooftop small cell deployment plan, and meet Ergen’s AWS-4 buildout requirements, using the AWS-4 uplinks (2000-2020MHz) as downlinks in conjunction with his 1695-1710MHz uplink spectrum. Remember that Google has backed similar efforts in the past, when it funded Clearwire (rather than LightSquared) in 2008, in order to get a competitive 4G network built out quickly, and push Verizon and AT&T to do the same. However, Ergen has little more than a month left to get a deal done before the auction restrictions kick in, so time is not on his side.
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09.20.15
Posted in DISH, Operators, Regulatory, Spectrum, Verizon at 7:01 am by timfarrar
Charlie Ergen’s atypical absence from the Paris satellite conference this week was not the only pointer that something is happening at DISH which could lead to a spectrum spinoff being announced imminently. On Wednesday Northstar and SNR asked for and were granted a two week extension to the September 17 deadline to provide an irrevocable standby letter of credit for the $3.3B DE discount that the Commission has ordered to be repaid.
This move signals that DISH is close to a deal to restructure its spectrum holdings and presumably announce the spinoff of a spectrum leasing company before October 1. However, the question is who would be the anchor leasing tenant for that entity, which would enable it to raise tens of billions of dollars of debt in its own right, and allow the Spinco to pass the proceeds back to DISH and/or to fund a bid for additional spectrum in the upcoming incentive auction.
Back in August I speculated that Sprint was a potential wild card partner for DISH, but Verizon has always been the more attractive option, given its greater financial resources and that it bid against DISH in the AWS-3 auction earlier this year and will soon be deploying AWS-3 to supplement its existing AWS-1 network. Its therefore hardly a coincidence that Verizon was openly discussing on Thursday its interest in a deal with DISH, including that “we’ve had discussions about how we could provide [Dish Network Chairman and CEO Charlie Ergen] with megabytes and how he could pay for it with spectrum.”
It seems clear that Verizon would be interested in gaining access to both DISH’s AWS-3 winnings and the adjacent AWS-4 downlink through a leasing deal. However, by advertising its bottom line in public, and in particular that Verizon is not willing to pay DISH’s asking price in cash to lease this spectrum, it seems that Verizon has presented Ergen with a take it or leave it proposition, calculating that DISH has no other options.
If DISH really is serious about entering the wireless business, then it could use the “megabytes” offered by Verizon (which would presumably not be limited to being provided on the spectrum under lease) to set up an MVNO business, and the price established by Verizon could then serve as a benchmark for cash deals with other parties (i.e. a 700MHz E block deal with AT&T and an H-block/AWS-3 uplink deal with Sprint). Theoretically Verizon could offer quite a high price, especially if it calculated that DISH might not succeed in the MVNO business and would therefore leave most of the megabytes unused.
However, this outcome would leave DISH without the ability to raise substantial debt at the Spinco, unless and until further cash deals were struck. That’s likely a wise move for Verizon, since it would prevent DISH from bidding aggressively in the incentive auction, and potentially result in lower prices in that auction and a correspondingly lower benchmark for future spectrum transactions.
So now we’ll see if Ergen accepts Verizon’s offer or if he can come up with an alternative leasing partner in the next week and a half. Alternatively, and perhaps even more likely, is that no deal will be struck now. Then Ergen might have to wait for a long time for the next opening, as operators focus their attention on the incentive auction next spring and beyond that on the possibility that a change of administration in November 2016 could result in a different regulatory climate for deals that are impossible today (such as a Sprint/T-Mobile merger).
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09.14.15
Posted in Broadband, Financials, Globalstar, Inmarsat, LightSquared, Operators, Regulatory, Services, Spectrum, VSAT at 9:20 pm by timfarrar
Paris is the place to be in September for satellite industry gossip (though not the weather), and this year is no different. There’s been plenty of chatter already about the MSS sector, as people look forward to Inmarsat’s upcoming investor day on October 8. The company has seen some good news recently, displacing Intelsat General to win a large US Navy contract last week. However, Inmarsat’s aggressiveness on price is highlighted by the reduction in the total ceiling price from $543M last time around to only $450M over 5 years (which is in turn perhaps double the US Navy’s most likely spending profile). Though this contract should help Inmarsat show top line revenue growth in 2016 and beyond, a significant proportion of the capacity (in C, Ku and X-band) will have to be bought in from other players, limiting Inmarsat’s ability to make a profit.
However, the other main news about Inmarsat is that the company is expected to order its first I6 L-band satellite before the end of 2015, and it will include substantial additional Ka-band capacity to supplement the rather limited amount of capacity available on GX, even after the fourth GX satellite is launched in 2016 or 2017. That will likely mean a total capital expenditure of $450M-$500M, plausibly repeated once or twice more in the next few years, just to keep Inmarsat in the bandwidth race.
There’s also been some chatter about the FCC regulatory situation as it affects Globalstar, where a source confirms that my suppositions in June about the purpose of Globalstar’s change in tone to the FCC were correct and that a deal was on the table to approve terrestrial use just for Globalstar’s own MSS spectrum and not the wider 22MHz TLPS channel. However, this approval was only going to be for low power use, and would therefore not be of much import, except as a demonstration of regulatory progress.
Then after Jay Monroe met with several FCC Commissioners in late July he withdrew this potential compromise and insisted instead on full TLPS approval, presumably believing that if permission either to use the unlicensed spectrum or high power terrestrial use or the MSS band was treated as a separate, second stage of the process, a conclusion would be delayed for years, making it impossible for Globalstar to deploy or monetize its spectrum anytime soon.
So now it seems we are back to an impasse, and though Globalstar has recently added some additional information into the docket on an experimental deployment in Chicago, this documentation doesn’t provide quantitative information on (for example) the exact rise in bit error rates seen by services like Bluetooth, merely observing that no observable performance impact was noted. As a result, I believe it is unlikely that the FCC will feel able to rule on full TLPS approval anytime soon (i.e. this year).
Ironically, Globalstar’s consultants are also acting for LightSquared, and have proposed a similar program of tests for GPS interference, again based on a “KPI” criteria of observable degradation in performance, rather than actual quantified impact on the signal to noise ratio. Most observers seem to believe that LightSquared is no more likely to gain FCC approval for its plans than before, and that after the recent publication of the DOT test plan for their Adjacent Band Compatibility study, the FCC will wait for those tests to be conducted, which could take a considerable period of time.
Predictably LightSquared is already criticizing the DOT test plan, very likely setting us off on exactly the same well trodden (and ultimately disastrous) path as before. As a result, I’m sure that those hedge funds who committing funding to the bankruptcy plan (especially those in the $3B+ second lien, which sits behind $1.5B of first lien debt) must now be feeling pretty nervous. I wonder if any of them will now be frantically searching to see if they have any way to avoid funding these commitments once the FCC approves the transfer of control?
Finally, in yet more FCC-related news, the consensus here seems to be that the 14GHz ATG proceeding may also fail to reach a conclusion in the near term, as I predicted earlier this month, due to the uncertainty over how to protect NGSO systems. Instead, ViaSat’s Ka-band solution seems to be going from strength to strength, with the hugely positive reactions to the performance on JetBlue contributing to their recent win at Virgin America and to other airlines taking another look at what will be the best future-proof solution. All this makes Gogo’s predictions that its US market share is secure and that its revenue potential is “like a gazillion dollars” seem just as foolish as it sounds.
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09.01.15
Posted in Aeronautical, Inmarsat, Operators, Regulatory, Services, Spectrum at 4:14 pm by timfarrar
Often I wonder whether some companies understand how the FCC works and what they really shouldn’t say in an FCC filing. Gogo has just provided a classic example in its August 26 ex parte filing that tries to counter SpaceX’s recent intervention in the 14GHz ATG proceeding, where Gogo has been trying to get 500MHz of spectrum auctioned for next generation ATG networks.
Unfortunately for Gogo, it has been left as virtually the sole active proponent of this auction, after Qualcomm laid off the team that developed the original proposal and stopped participating in the proceeding. While I’m sure Panasonic and Inmarsat would take part if an auction was held, undoubtedly they are relishing the prospect of Gogo struggling to improve its “infuriatingly expensive, slow internet” service with 2Ku capacity that Gogo itself admits is roughly the same cost per Mbyte as its existing ATG-4 network (at least until it can renegotiate its current bandwidth contracts).
So when Gogo makes submissions that directly contradict those it previously put into the record, it shouldn’t be surprised if the FCC regards these rather skeptically. In particular, in July 2014 Gogo told the FCC that it “supports the proposed §21.1120 requirement that interference from all air-ground mobile broadband aircraft and base stations not exceed a 1% rise over thermal” whereas now “Gogo concurs with Qualcomm in that a 6% RoT has a negligible impact on the cost and performance of an NGSO system while creating an additional and disproportionate level of complexity or loss of performance for the AG system” and “Gogo supports the 6% RoT aggregate interference levels initially proposed by Qualcomm”. So suddenly Gogo thinks that its a perfectly acceptable to have six times more interference than a year ago.
Even more of a hostage to fortune was Gogo’s September 2013 comment about the unacceptable problems that an ATG network (referred to as Air to Ground Mobile Broadband Service or AGMBS) would cause for NGSO systems like that proposed by SpaceX:
“In its initial comments, Gogo expressed its concern that Qualcomm’s assumptions regarding the operating parameters of the hypothetical NGSO satellite systems were not representative of typical or worst case system configurations, and that the interference between a future system and AGMBS systems could be far greater than indicated by Qualcomm’s estimates. Gogo is not alone in this view, as the Satellite Industry Association (“SIA”), ViaSat, EchoStar and Hughes all raised similar concerns in their comments. SIA included an analysis within the Technical Appendix attached to its comments which illustrates the potential for much greater interference than had previously been calculated by Qualcomm. In Gogo’s view, some aspects of the analysis are subject to challenge because it overstates the level of interference that may be expected. Nevertheless, the overall conclusion remains valid – an AGMBS system operating consistent with the proposed rules would cause unacceptable levels of interference to many, if not most, possible future Ku-band NGSO system configurations. The analysis of EchoStar and Hughes, provided in Annex B of their comments, provides additional support for this conclusion. Similarly, ViaSat’s comments indicated that the NGSO analysis presented by Qualcomm is not representative of the range of potential Ku-band NGSO systems which have been previously proposed.”
Yet now Gogo, having previously claimed that Qualcomm’s calculations were flawed, suddenly decides that after “incorporating [SpaceX's] stated parameters into the Qualcomm interference calculation methodology” everything is fine and “the resultant RoT from an AG system into the SpaceX NGSO system is far less than [its newly relaxed] 6%” interference criteria.
I can only conclude that Gogo must be truly desperate to get the 14GHz ATG proceeding completed, because it needs the capacity ASAP. However, making contradictory filings is certainly not going to help the company to get a favorable ruling from the FCC anytime soon (especially when politics is lurking in the background, in the form of the Association of Flight Attendants expressing concern about the FCC taking action on this matter).
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08.23.15
Posted in DISH, Operators, Regulatory, Spectrum, Sprint, T-Mobile at 4:08 pm by timfarrar
It feels like an age since Ergen’s plan for fixed wireless broadband and hosted small cell deployment on rooftop satellite TV antennas was at the core of his bids for Sprint and Clearwire in 2013. And as I pointed out last year, the AT&T acquisition of DirecTV seemed to pre-empt DISH’s plan and threaten more competition if DISH did proceed with a rollout.
Now the prospects of DISH reaching agreement with T-Mobile seem as distant as ever, and Verizon and AT&T appears eager to dismiss any prospect of them buying DISH’s spectrum. In addition, DISH’s stock has fallen after the FCC ruled against it last week over the Designated Entity discounts in the AWS-3 auction and Ergen has hinted that as a result he might now seek to dispose of his spectrum rather than entering the wireless market.
However, in recent weeks, Sprint has been playing up its small cell plan, but has not yet named its partners, except to hint that it will look towards off-balance sheet financing for the buildout. So I wonder if Charlie’s next angle to put his spectrum to use could be through a partnership with Sprint to make use of DISH’s rooftop sites in the small cell buildout, and perhaps host some of DISH’s spectrum at the same time. After all, the time when Ergen claims he is definitely leaning one way is usually the point at which he moves decisively in the opposite direction.
Such a deal could include an exchange of equity, with Softbank investing in DISH and DISH investing in Sprint. That would be a logical explanation for Softbank’s otherwise incomprehensible recent moves to buy additional Sprint equity in the public markets, rather than injecting much needed incremental cash into Sprint.
DISH could even participate in the network equipment leasing company (perhaps reframed as a JV) if it can use the cellsites for its own fixed wireless broadband (and perhaps mobile broadband) offerings. And none of this would prevent DISH from entering into a spinoff of its spectrum holdings, perhaps even with Sprint agreeing to act as an anchor tenant, leasing spectrum such as the PCS H-block and the adjacent AWS-4 uplink, which could be repurposed as a supplementary downlink and might provide Sprint with an alternative to bidding in the incentive auction next year.
A spectrum spinoff (or other transaction) by DISH still seems a likely outcome, and the FCC appears to have helped DISH on its way, by stating it will accept an “an irrevocable, standby letter of credit” instead of immediate payment, which will only be drawn if DISH has failed to make the $3.3B repayment of the DE discount by 120 days after the release of the Order (i.e. mid December), instead of the 30 days available to make a cash payment. That concession (which doesn’t have any obvious precedents that I’m aware of) will save DISH 90 days interest (over $40M at a 5% interest rate) and gives Ergen much more time to sort out a deal to reorganize his spectrum interests.
It feels like DISH will now finally have to pull the trigger on something, though I’m surprised no analysts appear to have even contemplated the scenario I’ve described above. The current uncertainty in the financial markets may not be helpful to the prospects of a deal being reached, especially if it proves difficult to get financing for a spectrum spinoff. Nevertheless, that need not prevent a small cell hosting deal, and with Charlie you simply have to expect him to have an angle most people haven’t thought of.
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07.21.15
Posted in General, Regulatory, Spectrum at 10:46 am by timfarrar
Not content with disinterring the FCC’s infamous October 2010 working paper that most thought had been completely discredited five years ago, last month CTIA went on to commission Brattle Group to produce a new “updated” version of the FCC’s forecasts.
Ironically enough this new report confirms that the FCC was totally wrong in 2010, because the total amount of spectrum in use at the end of 2014 was only 348MHz, not the 822MHz that the FCC projected. Despite this clear demonstration of how ludicrous the original projections were, Brattle reuses the same flawed methodology, which ignores factors such as that new deployment is of cells for capacity not for coverage, and so the ability to support traffic growth is in no way proportional to the total number of cellsites in the US.
Now Verizon’s Q2 results, announced today, highlight another fundamental flaw in the methodology used by Brattle, in terms of the projected gains in spectral efficiency. Brattle assume that the gain in spectral efficiency between 2014 and 2019 is based on the total amount of traffic being carried on 3G, 4G LTE and LTE+ technologies, so with 72% of US traffic in 2014 already carried on LTE, there is relatively little scope for further gains.
This is completely the wrong way to account for the data carrying capacity of a certain number of MHz of spectrum, since it is the share of spectrum used in each technology that is the critical factor, not the share of traffic. Verizon highlighted that only 40% of its spectrum is used for LTE at present, while 60% is still deployed for 2G and 3G, despite the fact that 87% of traffic is now carried on LTE. Of course once that 60% of 2G and 3G spectrum is repurposed to LTE, Verizon’s network capacity will increase dramatically without any additional spectrum being needed.
Brattle’s methodology would suggest that moving the rest of Verizon’s traffic to LTE would only represent a gain of 5% in capacity (assuming an improvement from 0.72bps/Hz to 1.12bps/Hz) but in fact moving all of Verizon’s spectrum to LTE would produce a gain of 27% in network capacity (and an even bigger improvement once LTE Advanced is considered). Adjusting for this error in the methodology reduces the need for more spectrum very sharply, and once it is considered that the incremental cellsites will be deployed to add capacity, not coverage, the need for additional spectrum above the current 645.5MHz is completely eliminated.
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06.24.15
Posted in Globalstar, Iridium, Operators, Regulatory, Spectrum at 4:06 pm by timfarrar
In recent months Globalstar has vented its frustration with the slow progress of the TLPS NPRM, telling the Commission in April that “it is time for the Commission to move forward with an order in this proceeding and realize the substantial public interest benefits of TLPS.” Nevertheless Globalstar has previously been unwilling to compromise, indicating that it would only accept approval of the rules proposed in the November 2013 TLPS NPRM and that it would not relinquish spectrum to Iridium.
However, in the face of overwhelming pressure from Microsoft, Google, Sprint and others, it seems Globalstar has now decided it will have to accept a compromise as an interim measure to avoid being stuck in limbo for many more months. In a meeting with the FCC International Bureau last Friday, Globalstar struck a much different tone, urging the FCC “to grant Globalstar the proposed ATC authority,” a term which Globalstar has always declined to use, preferring instead to refer to the Commission’s “regulatory framework for low power wireless broadband.”
Moreover, Globalstar “expressed support for the Commission’s 2013 proposal” apparently hinting at the existence of a new 2015 proposal. Looking at the elements that Globalstar “urged” the Commission to adopt (apparently Globalstar’s bottom line) compared to those that it “encouraged” or “asked” the Commission to consider (those elements that are not essential), it is clear that Globalstar now wants a grant of “ATC authority” under “proposed rules” which no longer necessarily comport with the 2013 NPRM. Globalstar also “asked” (but didn’t “urge”) the Commission to “reject the unsubstantiated technical and policy requests by [its] opponents,” suggesting that any decision on TLPS OOBE limits can be deferred.
In contrast, back in May, Globalstar “urged the Commission to adopt its proposed rules expeditiously to add 22 megahertz to the nation’s wireless broadband spectrum inventory and ease the congestion that is diminishing the quality of Wi-Fi service at high-traffic 802.11 hotspots and other locations,” i.e. to approve TLPS specifically.
This move now points the way to a near term order written by the International Bureau on the narrower matter of ATC authority for Globalstar within its existing 11.5MHz of licensed S-band spectrum from 2483.5-2495MHz, in exchange for granting Iridium’s request to share more of the L-band. That would be a close parallel to the FCC’s ruling in November 2007, when it issued an NPRM on extension of Globalstar’s ATC authority in conjunction with the last reallocation of L-band Big LEO spectrum.
I would expect the FCC to defer any potential approval of the wider 22MHz TLPS channel to a further proceeding, with more testing and analysis of interference concerns to be undertaken. The main uncertainty relates to whether the approval of ATC authority would be for full power use, along the lines of the Open Range approval (but adapted to LTE), in conjunction with protection measures for BAS, or whether the approval will be limited to the much lower power levels contemplated in the TLPS NPRM.
I would assume that high power ATC usage is likely to be approved (as it is hard to see a limited low power channel being acceptable to Globalstar), with Globalstar welcoming this ruling as offering it more flexibility to either lease a single 10MHz LTE channel to a wireless operator in the near term or to later gain approval for TLPS at the end of the further rulemaking process.
Of course the debate would then move to appropriate valuation benchmarks, which are much easier to assess for standard licensed spectrum, albeit with upwards adjustments for lack of a buildout requirement and downwards adjustments for maintaining an MSS network and creating an ecosystem for a non-standard band. In addition the potential timeline and cost must be considered for the rebanding needed to avoid interference with grandfathered BAS users.
I’m sure that some will emphasize AWS-3 benchmarks of $2+/MHzPOP as a baseline, while others will highlight the MoffettNathanson assessment that spectrum around 2.5GHz, like that owned by Sprint, is only worth around $0.40/MHzPOP, and this enormous discrepancy means that the debate about what Globalstar’s spectrum is actually worth will certainly continue. Nevertheless, approval of a high power licensed spectrum block, even if limited to only a single 10MHz LTE channel, will make it harder to argue that Globalstar’s spectrum is completely worthless.
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