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.
Permalink
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.
Permalink
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.
Permalink
06.22.15
Posted in General, Regulatory, Spectrum at 3:26 pm by timfarrar
Back in October 2012, despite their misleading press release, CTIA’s own data indicated that there had been a significant slowdown in data traffic growth and confirmed that the emperor/FCC Chairman had no clothes when talking about the non-existent spectrum crisis. Now it seems CTIA is at it again, releasing an error-strewn paper today on how the FCC’s October 2010 forecasts of mobile data traffic have supposedly proven to be “remarkable accurate.”
This groveling attempt to “renew the effort to bring more licensed spectrum to market” is clearly designed to distract from CTIA’s own release of its year end 2014 wireless industry survey results last week, which showed that US mobile data traffic only grew by 26% last year (from 3230PB in 2013 to 4061PB in 2014) compared to growth of 120% in 2013, a dramatic slowdown which CTIA conveniently ignores.
Instead CTIA is praising the “solid analytical foundation” of the FCC’s October 2010 paper, which was recognized at the time, by myself and others, to be fundamentally flawed. So perhaps its not so ironic that the CTIA’s new paper mischaracterizes the data that the FCC used, stating that the forecasts “were remarkably accurate: In 2010, the FCC’s growth rate projections predicted mobile data traffic of 562 petabytes (PBs) each month by 2014; the actual amount was 563 PBs per month.”
Firstly, the FCC did not actually state an explicit projection of mobile data traffic, instead giving an assessment of growth from 2009 to 2014, as the (simple arithmetic) average of growth projections by Cisco, Yankee and Coda (use of an arithmetic average in itself is erroneous in this context, a geometric average of multipliers should be used instead).
Secondly, the FCC was projecting US mobile data traffic, not North American data traffic, which is the source of the quoted 563PB per month (which is taken from Cisco’s February 2015 mobile VNI report). We can see the difference, because the February 2010 Cisco report (available here) projects growth for North America from 16.022PB/mo in 2009 to 773.361PB/mo in 2014, a multiplier of 4827%, whereas the FCC paper quotes Cisco growth projections of 4722% from 2009 to 2014. (The reason for the difference is that growth in Canada was expected to be faster than the US, because Canada was expected to partially catch-up with US in mobile data traffic per user over the period).
If CTIA had bothered to look at Cisco’s mobile VNI tool, which gives data for major countries, it could have easily found out that Cisco estimates US mobile data traffic grew by 32 times between 2009 and 2014, not 35 times as the FCC forecast, let alone the 47 times that Cisco forecast back in February 2010.
Moreover, CTIA completes fails to mention that Cisco’s figure for 2014 (which according to the VNI tool is 531.7PB/mo for the US, rather than the 562.5PB/mo for North America that CTIA quotes), is completely different to (and far higher than) CTIA’s own data, which is based on “aggregated data from companies serving 97.8 percent of all estimated wireless subscriber connections” so should obviously be far more accurate than Cisco’s estimates.
However, CTIA is instead running away from its own data, stating in a footnote to the new paper that:
“Note that participation in CTIA’s annual survey is voluntary and thus does not yield a 100 percent response rate from all service providers. No company can be compelled to participate, and otherwise participating companies can choose not to respond to specific questions. While the survey captures data from carriers serving a significant percentage of wireless subscribers, the results reflect a sample of the total wireless industry, and does not purport to capture nor reflect all wireless providers’ traffic metrics. CTIA does not adjust the reported traffic figures to account for non-responses.”
Compare that disclaimer to the report itself, which notes that “the survey has an excellent response rate” (of 97.8%) and that it is adjusted for non-responses (at least so far as subscribers are concerned):
“Because not all systems do respond, CTIA develops an estimate of total wireless connections. The estimate is developed by determining the identity and character of non-respondents and their markets (e.g., RSA/MSA or equivalent-market designation, age of system, market population), and using surrogate penetration and growth rates applicable to similar, known systems to derive probable subscribership. These numbers are then summed with the reported subscriber connection numbers to reach the total estimated figures.”
CTIA’s wireless industry survey states that total US mobile data traffic was 4061PB in 2014, equating to an average of 338.4PB/mo over the year. Even allowing for the fact that Cisco estimate end of year traffic, not year averages, it is hard to see how the CTIA number for Dec 2014 could be more than 400PB/mo, some 25% less than Cisco.
If we instead compare growth estimated by CTIA’s own surveys (which only provide data traffic statistics back to 2010), then the four year growth from 388PB in 2010 to 4061PB in 2014 is a multiplier of 10.47 times, whereas the FCC model is a multiplier of 13.86 times (3506%/253%) and Cisco’s projection is a multiplier of 19.51 times (4722%/242%).
Thus by any rational and undistorted analysis, the FCC’s mobile data traffic growth projections have proven to be overstated. Likely reasons for this include the increasing utilization of WiFi (which was dismissed by the FCC paper, stating that “the rollout of such network architecture strategies has been slow to date, and its effects are unclear”) and the effect of dilution, as late adopters of smartphones use far fewer apps and less data than early adopters.
Nevertheless, what the data on traffic growth does confirm is that the FCC’s estimate of a 275MHz spectrum deficit by 2014 was utter nonsense. Network performance has far outpaced expectations, despite cellsite growth being far slower than predicted (3.9% compared to the 7% assumed in the FCC model) and large amounts of spectrum remaining unused: if we simply look at the Brattle paper prepared for CTIA last month, its easy to calculate that of the 645.5MHz of licensed spectrum identified by Brattle, at least 260MHz remains undeployed (12MHz of unpaired 700MHz, 10MHz of H-block, 65MHz of AWS-3, 40MHz of AWS-4, 20MHz of WCS, and all but around 40MHz of the 156.5MHz of BRS/EBS).
Thus in 2014, the US didn’t require 822MHz of licensed spectrum as the FCC forecast (which would have increased to 861MHz if the FCC model was corrected to the supposed traffic growth of 32x, as estimated by Cisco, and the actual number of 298,055 cellsites, as reported by CTIA), but instead, as CTIA proclaims, US mobile operators enabled “Americans [to] enjoy the best wireless experience in the world” with less than 400MHz of actual deployed spectrum.
Permalink
06.05.15
Posted in AT&T, DISH, Operators, Spectrum, T-Mobile, Verizon at 4:25 pm by timfarrar
Two people have now told me that with 99% certainty, the leak about the DISH/T-Mobile talks came from T-Mobile itself, not from DISH, based on the authorship of the WSJ report. Although it might be tempting to conclude that T-Mobile is trying to prompt a cable operator to consider an alternative bid, Charter has indicated that it will focus on TWC’s MVNO agreement with Verizon to provide wireless services if its TWC bid is successful and Comcast could presumably do likewise if desired.
Moreover, it seems this was not some sort of “official” leak, but instead simply reflects general conversations which got blown out of proportion, because Bloomberg has reported that the talks, which have been going on since last summer, have not advanced significantly in recent weeks.
That still leaves the perplexing analyst event that DISH held on Tuesday, and there’s been no convincing explanation of why that event was scheduled at short notice. Nevertheless, there’s now a frenzy of speculation leaving some convinced about the “inevitability” of a merger. What none of the reports deal with at all is how T-Mobile would actually make use of DISH’s spectrum without AWS-3/4 interoperability, and even then half of DISH’s spectrum in PCS H-block and 2000-2020MHz would still have no ecosystem available.
Instead analysts simply assume that interoperability doesn’t even need to be considered, and that the FCC “buildout requirements of its spectrum are so far in the future it’s not even worth starting the discussion about the weak enforceability of those deadlines.”
Of course a merger makes all the sense in the world if you assume DISH’s spectrum is just as usable as any other spectrum and that the FCC won’t enforce its buildout deadlines (in March 2020) so DISH has all the time in the world to strike a deal at a full price. Unfortunately that simply isn’t the case, and both Verizon and AT&T know that only too well.
Permalink
06.03.15
Posted in DISH, Operators, Regulatory, Spectrum, T-Mobile, Verizon at 8:07 pm by timfarrar
That’s seems to be the question Charlie Ergen is asking Verizon, with the leak of merger talks between DISH and T-Mobile to the Wall St Journal. Yesterday DISH held an analyst meeting at which nothing much of consequence was said, raising the question of precisely why DISH held that analyst meeting in the first place.
The logical conclusion is that DISH hoped it would be able to announce some sort of deal yesterday, but that wasn’t achieved, and so now there has been a decision to leak more specific details about the progress of the DISH/T-Mobile talks (which have been rumored for months). The details disclosed make it unlikely that the intent is to bring T-Mobile back to the table, given the statement that talks on valuation remain at a “formative stage”. If the leak came from the T-Mobile side then its plausible to imagine that the aim is to pressure a cable company to make a bid for T-Mobile, or simply that the WSJ made a mountain out of a molehill, given others are saying there has been no change in the situation in recent weeks.
However, (until now) I considered it more likely that DISH is sending a message to Verizon, after the breakdown of talks on a spectrum sale or leasing deal, that Ergen has other alternatives he can pursue. Its previously been reported that Verizon rejected DISH’s asking price of $1.50 per MHzPOP for the AWS-4 spectrum last summer, and even after the AWS-3 auction, I very much doubt Verizon has shifted its position on valuation significantly. For spectrum without an ecosystem like AWS-4, I would still not expect Verizon to be willing to pay much more than $1 per MHzPOP.
Nevertheless, if Verizon had been willing to commit to a partial lease of DISH’s AWS-4 spectrum and support interoperability into the bargain (perhaps with some AWS-3 licenses included to raise the average reported price), then that would have helped DISH to undertake a spectrum spinoff. By doing a deal now, I would expect DISH to also have been able to seek a compromise with the FCC by agreeing to repay the $3.3B DE discount it received in the AWS-3 auction, and thereby mitigate the bad feeling which would otherwise be likely to hamstring DISH’s ability to get help from the FCC in ensuring AWS-3/4 interoperability in the future.
So if Verizon has truly walked away for good, and cannot be forced back to the table by this leak, then I think this is unalloyed bad news for DISH. Without interoperability it is hard to see the value of DISH’s AWS-3 spectrum for T-Mobile, as I noted last week. And it is equally hard to see how agreement can be reached with Deutsche Telekom on the respective valuations of DISH and T-Mobile, especially when DT can hold out for a potential merger with a cable company in the future. So I think Verizon can still proclaim that when it comes to DISH’s spectrum, it’s heads we win, tails you lose.
Permalink
05.26.15
Posted in AT&T, DISH, Financials, Operators, Regulatory, Spectrum, Verizon at 12:06 pm by timfarrar
Its been interesting to note that AT&T and Verizon did not file any petitions to deny the AWS-3 license applications of DISH’s two Designated Entities, NorthStar and SNR, despite Verizon and AT&T both having earlier been vocal in denigrating DISH’s bidding strategy in their comments in the FCC’s bidding procedures docket 14-170.
Instead the opposition was left to a couple of small bidders plus a collection of ‘public interest’ organizations, who followed the path set out by Verizon, and alleged violations of antitrust laws by DISH and its DEs. DISH’s response argued that there was no antitrust violation and that the joint bidding arrangements (including realtime coordination of bids during each round, which most people including myself thought was not allowed) were fully disclosed.
While the eventual FCC decision on DISH’s $3.3B discount remains uncertain (and according to FCC Chairman Wheeler would not in any case involve denial of the licenses or reauctioning of the spectrum), it is far from a slam dunk (as some argued originally) that DISH will keep the discount. Nevertheless, it seems to me that Verizon and AT&T could even be better off if DISH kept the DE discount, and that might provide one reason why they held back from challenging DISH’s licenses directly.
Of course DISH would lose $3.3B if the DE discount was rejected, but in that case, DISH would acquire NorthStar and SNR under the terms of its agreements with the DEs, and would be free to consolidate and restructure its AWS-3 and AWS-4 spectrum holdings. After that, in my view, the most likely end game would be to spin-off all of DISH’s spectrum (AWS-3, AWS-4, 700MHz E-block, PCS H-block) into a holding company, which could lease individual licenses to any wireless operator, and raise perhaps $20B-$30B of debt at the spinco level, flowing that cash back up to DISH (and perhaps allowing Ergen to take some chips off the table).
Any repricing of the AWS-3 spectrum would presumably increase Ergen’s asking price for his leases, meaning that Verizon and AT&T might ultimately be the ones to suffer from the removal of the discount. In fact Verizon might even decide it had to pay up and pre-empt the spinoff because of the prospect that this arrangement would make more spectrum available in key markets for both T-Mobile and Sprint.
However, in order to execute these spinoff plans and enter into meaningful leases of AWS-4 spectrum, it is critical that DISH secures interoperability for its AWS-4 downlinks (2180-2200MHz) with the AWS-3 blocks. T-Mobile and Sprint know all too well that building out networks in bands without an ecosystem (such as T-Mobile’s deployment of WCDMA/HSPA in the AWS-1 band, which was ultimately abandoned, and Sprint’s PCS G-block LTE network) makes it much more difficult and expensive to secure handsets (hence there was no WCDMA iPhone operating in AWS-1 and Sprint had to guarantee billions of dollars of purchases to secure a G-block iPhone). As a result, they are unlikely to want to get into bed with DISH and make use of AWS-4 unless and until there is some guarantee of a handset ecosystem.
While DISH can pursue a band class designation for AWS-4 supplementary downlinks through 3GPP, we only need to look at the story of Band Classes 12 and 17 (in the lower 700MHz band) to see that a band class designation on its own, without any regulatory mandate for interoperability, is insufficient to ensure a handset ecosystem is created. And at the end of the day, the FCC was forced to intervene and broker a deal to ensure interoperability in the lower 700MHz band, before T-Mobile moved to buy 700MHz A block licenses for its low band coverage buildout.
Its therefore hardly surprising that AWS-3/4 interoperability was a key request of DISH in March 2014 before the auction, and fiercely opposed by Verizon and AT&T. At the time, the FCC decided not to impose a mandate, but strongly suggested that cooperative efforts should be made to ensure interoperability with AWS-4:
In the absence of technical impediments to interoperability, if the Commission determines that progress on interoperability has stalled in the standards process, future AWS-3 licensees are hereby on notice that the Commission will consider initiating a rulemaking regarding the extension of an interoperability mandate that includes AWS-4 (2180-2200 MHz) at that time. Should we undertake such a rulemaking, relevant considerations may include considerations of harmful interference, technical cost and difficulty of implementation, and the extent to which licensees are common to both the AWS-3 and AWS-4 bands.
Given the likelihood that AT&T and Verizon will engage in delaying tactics (not least due to the relatively short period in which DISH needs to start moving ahead on deployment), DISH will very probably need help from the FCC to push AWS-3/4 interoperability forward. However, if DISH is seen to have gamed the auction rules and secured an unwarranted multi-billion dollar discount, it will be far more difficult for the FCC to help out DISH on interoperability over AT&T and Verizon’s objections.
That might in fact be AT&T and Verizon’s ultimate goal: box DISH in with no possibility of a deal with T-Mobile or Sprint to put its AWS-4 spectrum to use, and wait for Charlie to cry uncle when he runs up against his AWS-4 buildout deadlines. Note that it is pretty much a foregone conclusion that the 4 year interim deadline to cover 40% of the population in each Economic Area by March 2017 will be missed, which will bring forward the final 70% coverage deadline to March 2020 (the timeline was extended to 8 years as part of the H-block deal in December 2013, but one year will be deducted if the interim deadline is not met).
Thus if DISH is unable to reach lease agreements with T-Mobile and/or Sprint for an AWS-4 buildout by the first half of 2017 at the latest (which will require interoperability to be secured in the next 18 months or so), Ergen will be under considerable pressure to moderate his price demands for a sale to Verizon or AT&T. As a result, AT&T and Verizon may win even more if DISH keeps the DE discount, than the $3.3B that DISH loses if the discount is rejected.
Permalink
05.05.15
Posted in Globalstar, Iridium, Operators, Regulatory, Spectrum at 7:04 am by timfarrar
In the wake of Globalstar’s TLPS demonstration at the FCC in March, it seems that the company has gone all in to push for an order approving TLPS in line with the rules proposed in the November 2013 NPRM. Indeed, Globalstar now seems to be losing patience, telling the FCC last month that “it is time for the Commission to move forward with an order in this proceeding” and that “it would also be bad policy and bad precedent for the Commission to require additional test data for every potential deployment scenario that would be possible under the Commission’s proposed TLPS rules.” Globalstar has also taken the decision to ignore short sellers, such as Gerst Capital, who raised additional questions about potential interference with Bluetooth.
In contrast, it seems Iridium is trying to appear as more reasonable by scaling down its L-band spectrum proposal to only involve sharing of the band, while WiFi and Bluetooth interests are requesting more testing and hinting at a possible compromise where the operating parameters of TLPS are further restricted (though it is clear that both would like to delay any order on TLPS indefinitely).
Now that LTE-U/LAA has emerged as a major concern for users of unlicensed spectrum (and an issue for the FCC), due to the potential to crowd out existing applications, the freedom that the existing NPRM proposal would grant Globalstar to shift to a supplementary LTE downlink configuration (if that ultimately provided the best opportunity for monetization) brings additional complications to the FCC’s decision. And Google has also weighed in, presumably because it sees TLPS as a potential rival ecosystem to its work to open up additional small cell spectrum in the 3.5GHz band.
The FCC has not yet given much of an indication about how it will act, although it is notable that NPRMs which confer a substantial benefit on a private company often involve additional compromises to benefit the public interest (as happened with DISH’s AWS-4 order, which, over DISH’s vigorous objections, changed the uplink OOBE limits to ensure the PCS H-block could be auctioned). However, in late April an unnamed FCC official told Bloomberg that “The Commission will consider the results [of the demonstration] in determining what next steps may be appropriate in the pending rulemaking.” The mention of next steps in the plural is particularly intriguing, since issuing an Order to conclude the rulemaking at this point would only require a single step.
Globalstar continues to maintain in investor presentations that “process completion/TLPS authority” is “expected shortly”. That appears to assume that the FCC rejects the demands for more testing of TLPS and simply moves forward with the NPRM as written, since we have not yet seen any evidence of potential compromises (such as for example a response to Iridium’s latest proposal). As I noted at the beginning of this post, this looks to be a high risk approach: if Globalstar doesn’t get what it is asking for, and doesn’t proactively offer to move forward with additional testing and/or other compromises, then any resolution of this matter is going to be delayed for many months, possibly even beyond the end of 2015.
Permalink
03.26.15
Posted in Broadband, Operators, Regulatory, Services, Spectrum at 1:51 pm by timfarrar
At last week’s Satellite 2015 conference, considerable attention was focused on new LEO constellations, most prominently OneWeb, whose founder Greg Wyler made a keynote speech to introduce the system and a couple of mockup terminals. Although many doubts exist about the feasibility of the OneWeb system (particularly with regard to the very ambitious cost estimates and the plausibility of building a profitable global Internet access business), its clear that OneWeb is moving aggressively to try and secure funding and sign a contract for satellite construction with one of five bidders in the next month.
Much less was said at the conference about SpaceX’s proposed 4000 satellite constellation, which Elon Musk announced in January with a half-baked speech in Seattle, which included many off-the-wall and some completely incorrect statements (such as that Teledesic “were trying to talk to phones”). Back in January, Google’s investment of $900M in SpaceX was seen as initiating a partnership to launch this new satellite system. However, at Satellite 2015, SpaceX made clear that the satellite venture was in the “very early stages” and Google’s investment was “not for the global internet project we’re exploring right now.”
A logical conclusion to draw, given Musk’s usually impeccable technical depth and the later change in description of Google’s investment, is that the announcement of the SpaceX constellation was rushed out in order to overshadow Wyler’s announcement of the much more modest investment he had secured from Qualcomm and Virgin.
However, what SpaceX has already done (on March 2) is make a filing at the FCC, which “support[ed] the extension of proposed changes to the Commission’s ITU coordination procedures to NGSO systems to encourage such filings through the U.S. administration”. SpaceX noted that there were “incentives for foreign administrations to pursue NGSO broadband satellite filing strategies that effectively block access to available spectrum and orbital resources” in contrast to the FCC’s “modified processing round” approach.
SpaceX proposed that licensees also be required to launch and operate a percentage of the authorized number of satellites (such as 5%) within 3.5 years and then 75% of the authorized satellites within 6 years, rather than the current milestones of 1 satellites then the entire constellation. In addition, it was proposed that the initial milestones for contracting for, and beginning construction of, the satellite constellation should each be shortened by 6 months.
All of these proposals are clearly intended to make OneWeb’s life more difficult. However, the more important subtext of SpaceX’s submission is that it would clearly like to be subject to the FCC rules, which mandate a sharing of both Ku-band and Ka-band NGSO spectrum between all entrants, regardless of ITU filing priority, based on avoidance of inline interference events.
Under these rules, the spectrum is split in half when two satellites from different systems are inline with one another and would therefore interfere with terminals at a particular location on the ground, and the first system to launch simply gets to indicate which (fixed) half of the spectrum it will use during these inline events. Given the large number of satellites that SpaceX and OneWeb both propose to launch, this splitting of the spectrum would happen almost all the time, and therefore for all intents and purposes, OneWeb would lose access to half of the Ku-band NGSO spectrum once both systems were operational.
Some have argued that OneWeb could simply rely on its ITU priority and not seek a license from the FCC. However, its hard to imagine that ignoring the US market is practical, given that the vast majority of the world’s satellite broadband subscribers today are in North America, and OneWeb has expressed its ambitions to provide inflight connectivity services, when most equipped aircraft are also based in North America. Moreover, if as many suspect, one of Qualcomm’s reasons for investing in OneWeb is to gain access to spectrum that could eventually be authorized for terrestrial 5G use (just like the ATC applications by LightSquared, Globalstar and others for 4G in the L-band and S-band), it is hard to imagine trying to pursue such an approach through any administration other than the FCC.
While it might be more difficult for the FCC to enforce its mandated allocation on systems licensed through other administrations when they are operating outside the US (notably Globalstar licensed its second generation constellation through France for precisely this reasons, after the FCC reallocated some L-band spectrum to Iridium), mutually assured destruction could potentially result if a US-licensed system decided to transmit in half of the spectrum in accordance with US rules, wherever its satellites were operating around the globe. (Note that, in contrast, Iridium and Globalstar have reportedly not noticed any interference from the two systems operating at relatively low levels of loading in the portion of the L-band spectrum that the two operators share.)
With OneWeb looking to close an investment round of between $300M and $500M in April, and start manufacturing satellites, it would therefore not be in the least surprising if SpaceX decides to ask the FCC to initiate an NGSO processing round in the very near future (perhaps in both the Ku-band and Ka-band) as a way of impairing OneWeb’s ability to move forward, and perhaps even preventing the investment round from closing. Musk certainly seems to have decided that he wants to destroy Wyler’s project (perhaps because he doesn’t like any potential imitator as a publicity-seeking space entrepreneur), and it is notable that the Steam filings, through Norway, which are generally believed to be controlled by SpaceX, were received at the ITU on June 27, 2014, when Wyler and Musk were still in discussions about potential collaboration.
The effects of an FCC processing round would be to delay any regulatory certainty about NGSO spectrum allocations for at least a year and possibly much more, while the FCC decided whether to confirm its existing rules for spectrum sharing, and it became clear whether this approach would be adopted elsewhere. There could also be some notable knock-on effects from any Ka-band processing round on O3b, whose FCC authorization specifically states that O3b’s use of the NGSO Ka-band spectrum is “subject to the sharing method specified in Establishment of Policies and Service Rules for the Non-Geostationary Satellite Orbit, Fixed Satellite Service in the Ka-band, Report and Order, IB Docket 02-19, 18 FCC Rcd 14708 (2003) and 47 C.F.R.§ 25.261.”
Thus the FCC has mandated that O3b must share its existing NGSO Ka-band spectrum with future systems, and the launch of a new large NGSO Ka-band system (which might include SpaceX’s constellation, if it operates in both Ku- and Ka-band) could have a meaningful effect on O3b’s operations in the future, whether O3b complies with the FCC ruling or withdraws from operating in the US in (what might end up being) a futile attempt to evade these constraints.
Permalink
01.31.15
Posted in AT&T, DISH, Financials, Operators, Regulatory, Spectrum, Sprint at 4:00 pm by timfarrar
Despite it coming as a “surprise” to many reporters (and Wall St analysts) that DISH ended up with more total winning bids (before DE discounts) than Verizon in the AWS-3 spectrum auction, and that DISH got a 25% DE discount on its bids, the outcome is exactly what I predicted from the bidding patterns back in November. I was particularly amused to look back at Jonathan Chaplin’s comment from his December 7 report which poured scorn on my thesis, stating:
Some have suggested that DISH is distorting prices by bidding against themselves (DISH has three bidding entities that can’t communicate with each other during the auction). While possible, this is highly, highly unlikely.
[As a reader suggests, perhaps I should take this opportunity to note Chaplin's follow-up proposal on January 11 that DISH should do a LightSquared and set up a wholesale capacity business generating $10B per year. While possible, this is highly, highly unlikely.]
Its useful to examine exactly why DISH was so successful in driving up the price of the AWS-3 paired spectrum to a price far beyond anyone’s expectations. One of the key objectives for a bidder in the early rounds of an auction is to discover the amount of spectrum that its rivals are looking to acquire (only later does it become possible to discover how much they are prepared to pay for that spectrum). The price usually rises fastest in the key cities and then as the mix of demand becomes clear, bidders can switch over to second tier licenses knowing roughly how much spectrum they will end up being able to win.
We know that AT&T was looking to buy a paired 10MHz block, and it seems likely that Verizon would have been seeking roughly the same. Meanwhile T-Mobile wanted to selectively pick up one or two paired 5MHz blocks. If DISH hadn’t been bidding then everyone could have got what they wanted at close to the reserve price. However, adding DISH to the mix meant that the four key players were trying to buy more than the 2x25MHz of paired spectrum that was available.
More importantly, DISH was bidding through three separate entities and instructed them to bid on all the licenses simultaneously in key cities, to ensure that AT&T, Verizon and T-Mobile simply didn’t know how much spectrum each other and DISH were looking to buy.
The chart below shows the bidding patterns for the G, H, I and J blocks in New York (the G block is a smaller 2x5MHz CMA license, while the H and I blocks are 2x5MHz BEA licenses and the J block is a 2x10MHz BEA license).
We can see that all three DISH entities bid on every one of the New York paired license blocks they weren’t already holding all the way through Round 15, by which time the total combined gross price had reached $2.81B ($2.28/MHzPOP). In fact, it wasn’t until Round 18 (when the price reached $3.81B or $3.12/MHzPOP) that DISH’s bidding on these licenses began to slow (and SNR even overbid its own winning bid in Round 17).
[Incidentally, DISH's 3 entities combined were the biggest bidder for much of the auction, notably as late as Round 63, where they held $14.7B of gross PWBs or 35% of the $41.6B total, compared to $12.6B for AT&T, $10.5B for Verizon and $2.1B for T-Mobile. When the reserve price was met in Round 13, DISH held a total of $5.4B of PWBs, 44% of the $12.3B auction total at that point in time, compared to only $2.7B for AT&T, $2.1B for Verizon and $1.3B for T-Mobile.]
DISH clearly wrote the instructions to its DEs very well, because in the end there were very few cases where the final winning bid from SNR was topping an existing bid from NorthStar or vice versa (the largest license I’ve seen where this happened is the B1 unpaired license in Tampa BEA034 which sold for $21.4M before the DE discount). And it does seem that DISH complied with the letter of the rules: even though the FCC still needs to rule on whether the DE discount should be granted, it seems unlikely the FCC would want the auction to descend into chaos (which could theoretically result in a re-run).
However, its clear that the rules for future auctions will need to be rewritten significantly – I would expect severe restrictions on DE discounts and common ownership of different bidding entities at the very least. Indeed, it will now be very difficult to come up with a workable structure to advantage smaller operators like Sprint and T-Mobile in the incentive auction next year.
Where does the outcome leave us? Ergen did not buy a readily deployable collection of spectrum, instead seeking a blocking position in key cities (including New York and Chicago) in an attempt to force other operators to make a deal with him. Interestingly, most of DISH’s paired AWS-3 spectrum is in the G block, which is adjacent to and perhaps more quickly usable with the AWS-1 spectrum band, rather than being aggregated directly with the adjacent AWS-4 downlinks in the longer term like the J block. DISH also acquired most of the unpaired uplink blocks, which appears to be a hedge against the potential (and now perhaps likely) loss of LightSquared.
However, with AT&T winning enough AWS-3 to meet its spectrum needs (and make it highly indebted) for the next few years (not to mention AT&T’s ownership of DirecTV which makes a tie-up with DISH very difficult), it seems clear that Ergen is setting his sights squarely on a deal to sell DISH (or perhaps more likely lease its spectrum, given the difficulty of reaching agreement on a sale price) to Verizon.
So now, as I pointed out in November, the key question is whether Sprint will take this opportunity to satisfy Verizon’s spectrum needs through a sale of 2.5GHz spectrum? Given everyone in the industry is fed up with Charlie, that certainly seems like a plausible next step.
Permalink
« Previous Page — « Previous entries « Previous Page · Next Page » Next entries » — Next Page »
