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- NSR
Spectrum. It is the new gold of the information age and has become a highly sought-after resource. So much so, the main goal of the U.S. National Broadband Plan is to find new spectrum allocations for broadband wireless access networks. This move by the U.S. Government may have simultaneously opened up a sizable new revenue stream for MSS-ATC operators and saved many from exiting the business, but at the expense of a true MSS-ATC play.
With its recent proposal to free spectrum allocated to MSS operators for terrestrial users, the FCC is carefully extending the precedent-setting Globalstar, Inc.-OpenRange Ltd. agreement it approved in 2008 to other players in the industry. This agreement allows leasing of MSS-ATC spectrum for terrestrial-only secondary leasing, in this case for WiMAX in rural areas.
Unlike terrestrial-only networks, the FCC required Globalstar-OpenRange to meet the ATC ‘gating criteria’ – offering a dual-mode device and continuous broadband satellite coverage. However, the FCC has granted several interim waivers for both of these criteria, extending compliance deadlines. Thus, it looks like the Globalstar-OpenRange agreement seems to be the first instance that the FCC is willing to allow decoupled MSS and terrestrial spectrum lease agreements.
A decoupled MSS-ATC offering is what NSR considers as the saving grace of the MSS-ATC operators, especially those operating as a ‘going concern’ or simply unable to pay debt and thus filing for bankruptcies, as was often the case in the first wave of MSS growth in the late 1990s and early this century.
But how much revenue can spectrum sales generate, and what is the impact on the MSS operators with ATC allocations?
Using previous spectrum auctions as a benchmark, NSR notes in its recent Mobile Satellite Services 6th Edition report that MSS-ATC operators will find enough funding through secondary lease agreements to pay debts, and/or begin satellite service offerings. As shown in the chart below, of the expected total revenues from secondary leases, SkyTerra (now LightSquared) has the most to gain, as new leasing revenue can significantly pay off its current estimated debt obligations. As another example, NSR’s spectrum holding valuation for Globalstar exceeds the entire reported capitalized expenditures for its new satellite constellation. With such high potential revenues, MSS-ATC operators will likely lease the maximum amount of their ATC allocations to terrestrial operators.
However, leasing MSS-ATC spectrum comes at a cost, as NSR feels MSS-ATC leasing agreements will sacrifice any potential for a large, robust MSS-ATC sector. As ATC leases push services further into rural areas, consumers will increasingly choose the lower cost ATC system, eventually eliminating the general demand for dual-mode devices. Instead, the few MSS-ATC enabled devices entering the market will need to cater to those requiring robust, redundant communications infrastructure – first responders or government agencies, both slow to adopt new technologies.
The Bottom Line
NSR certainly expects MSS-ATC operators to take advantage of secondary leasing agreements and monetize their MSS spectrum holdings. In doing so, secondary leasing agreements will provide the necessary funding for MSS-ATC operators to survive, to pay debts, and/or to offer satellite services. However, MSS-ATC operators may have to sacrifice any hopes of the general public utilizing full MSS-ATC enabled devices. One thing is clear; those betting MSS-ATC would be a spectrum play can now collect their winnings.
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