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content


Satellites and spectrum

Satellites and spectrum

The mobile satellite services industry once the sweetheart of the financial world in the late 1990s believes it can claw its way back to respectability
  • Written by Urgent Communications Administrator
  • 1st March 2003

The mobile satellite services industry — once the sweetheart of the financial world in the late 1990s — believes it can claw its way back to respectability in the telecom arena now that the Federal Communications Commission has allowed MSS operators to reuse their frequencies and offer cellular-like service alongside their satellite services.

The MSS industry has argued for two years that incorporating an ancillary terrestrial component (ATC) would solve a fundamental problem plaguing the MSS industry — operators’ inability to penetrate buildings with satellite signals, a technical shortfall that had a tremendous constraint on demand and resulted in higher operating and equipment costs.

“We were trying to learn from some of the mistakes made by others,” said Carson Agnew, president and chief operating officer with MSV, the first company to file a petition with the FCC to allow ATCs. “We concluded the problem was that satellite signals were blocked too easily, and we had to find some way to provide coverage. If we could do that, then more customers would buy from us, and we would have economies of scale.”

These MSS petitions sparked heavy debate on Capitol Hill. Terrestrial wireless operators such as Verizon Wireless and Cingular Wireless vehemently opposed ATCs, arguing that the FCC gave the MSS industry free spectrum to provide satellite services-not terrestrial services that could potentially compete with them.

In late January, the commission attempted to please both sides by giving ATC capability to MSS players in the 2 GHz, Big LEO and L-bands but reallocating 30 megahertz of MSS spectrum in the 2GH band to the terrestrial wireless industry. The FCC reasoned that ATCs would increase the efficiency of MSS spectrum and improve coverage, aid in homeland defense and open the MSS market up to innovative services. The Cellular Telecommunications & Internet Association vowed to legally challenge the ruling.

MSS operators believe their ability to incorporate ATCs into their satellite systems will attract the necessary investment to launch the next generation of services, which will include high-speed data capabilities. ICO, bailed out of bankruptcy in 2000 by cellular mogul Craig McCaw and a group of international investors, had said it survival depended on the FCC’s ruling.

“It makes no sense to try something that we know is a failure,” Gerry Salemme, vice president with ICO said in a recent interview when asked what the company’s plans would be if the FCC failed to approve ATCs.

Bankrupt Globalstar has attracted a group of five lenders who will provide $10 million in debtor-in-posession funding to help Globalstar emerge from Chapter 11. The lenders include Blue River Capital, Columbia Ventures, ICO Investment, Iridium Investors and Loeb Partners. A previous deal with real estate investment firm New Valley fell apart because Globalstar’s creditor committee believed the company was worth more in light of the FCC’s favorable ruling.

“We believe that [the FCC’s ruling], together with our record of continuing growth despite challenging circumstances, has helped to attract the interest of potential new investors, and that this new financing agreement will be an important step toward our successful emergence from bankruptcy,” Olof Lundberg, chairman of Globalstar, said in a recent statement.

An Iridium spokesman said the company is still determining the impact of the FCC’s ruling on its business.

“We made it clear. The problem was financing,” said Lon Levin, vice president of regulatory affairs with MSV, one of the industry’s few players operating in the black. “The business is a modest one, and to have to put the next generation of satellites up would have cost far more than the business could have supported.”

Still, it’s difficult to find many in the telecommunications industry who believe ATCs will ensure the survival of the MSS industry. Adding terrestrial capability requires MSS companies to invest in and build out infrastructure on the ground unless they team up with the very carriers who opposed the FCC’s ruling.

Others argue that the market for anywhere communications has a limited audience, regardless of whether customers can use the services inside buildings.

“I look at it as a stay of execution,” said John Byrne, wireless analyst with Kagan World Media. “The ability to have a terrestrial connection helps, but it doesn’t ensure survival. They still have to attract people. To try and tap into new or old market segments is a tough sell.”

Rough road

To even say the MSS industry is a beleaguered one is an understatement. Iridium, the sector’s poster child in the late 1990s, spent $5 billion to create a service allowing mass-market customers to use portable phones around the world. It was the master of marketing, hyping the demand for its wares so much that many investors became rich from the company’s stock before it even launched service in 1998.

A year later, the hype turned into a miserable reality. Iridium filed for bankruptcy in the summer of 1999, followed by ICO Communications two weeks later. Globalstar filed the next year. While players emerged from bankruptcy with more focused business plans and more efficient cost structures, the vertical segments MSS operators began targeting are too small to offset the enormous costs associated with operating a constellation of satellites, many operators complained.

MSV and ICO began floating this idea of offering terrestrial services. McCaw drummed up some influential supporters in Washington who were beginning to see ATC proposals as a solution to a key public policy issue-bridging the “digital divide.” In 2001, the FCC issued a notice of proposed rulemaking on the topic.

Hope shines through tragedy

In the wake of the FCC’s ruling, all MSS players see a large opportunity in the homeland defense market in light of the terrorist attacks on Sept. 11, 2001. MSV, which plans to have it next-generation satellites up in the sky and incorporate ATCs by 2005, sees its existing customer base that includes safety agencies and groups such as the American Red Cross expanding because it will have the ability to offer sleeker and cheaper devices.

MSV also has a capability no one else has: multipoint dispatch service that allows groups such as global emergency agencies to create a talk group of up to 10,000 users globally.

“When we talked to people on the Hill about this, we told them to imagine being in South Dakota on the campaign trail and being able to get everyone on the same talk group at the end of the day,” said Levin. “People going to a forest fire from different jurisdictions can talk to different groups on the fly.”

Globalstar has already provided in-building coverage through dual-mode handsets that operate on cellular and satellite networks, and at one time was using carrier partners such as Vodafone to sell the service. Its carrier partners had a difficult time selling the service because the bulky handsets operated in cellular mode using one phone number and airtime plan and in satellite mode using a second phone number and yet another different airtime plan. Globalstar hopes terrestrial operators will see a new business opportunity from the FCC’s new ruling.

ICO’s Salemme also believes his company can assist terrestrial operators by bolstering their government-mandated enhanced 911 deployments in areas where terrestrial networks won’t reach.

ICO, which has been spending money in anticipation of the FCC’s ruling, plans to launch 11 next-generation satellites.

While the MSS industry’s new survival plan is skeptical to many, it’s difficult to discount the Midas touch of Craig McCaw. His sheer will might just make the MSS industry fly again.

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