Do satellite providers have an ulterior motive?
A new report from ABI Research suggests that satellite operators such as TerreStar Networks, which plans to build, own and operate North America’s first next-generation integrated mobile satellite and terrestrial communications network, have an ulterior motive that may not have good consequences for public safety.
“The likely number of public-safety, law-enforcement and government market adopters is not enough to support a viable, high-growth market,” noted ABI analyst Kevin Burden. “But when you dig deeper, there appears to be a hidden agenda related to using the spectrum for 4G cellular services over the long term.”
While the satellite industry crashed and burned in the late 1990s because of expensive technology and flawed business plans, a 2003 FCC ruling — the Ancillary Terrestrial Component (ATC) — essentially gave satellite operators a chance to compete. The ruling allows satellite providers to offer simultaneous satellite and cellular services over their licensed satellite spectrum, thus driving down the cost of the network. Interestingly, terrestrial operators staunchly opposed the FCC’s move, saying satellite providers were given a free pass, because they didn’t have to pay for their spectrum. But the FCC placed what it thought was a key safeguard: satellite services must continue to be provided per the ATC order. A satellite operator couldn’t simply use the ATC order as a way to offer terrestrial services.
But, as Burden notes, handset chip makers and vendors appear to be preparing for that “satellite tax” by embedding dormant satellite connectivity in their Long Term Evolution (LTE) chipsets and devices. Moreover, the spectrum that satellite operators have is enough to offer 4G services in areas where dedicated spectrum for terrestrial operators is scarce and valued at a premium.
Right now, the success of satellite operators such as TerreStar is highly reliant on terrestrial operators. TerreStar is the first to announce a reciprocal roaming agreement with a major operator — AT&T Mobility. By the end of the year, consumers should be able to buy an HSPA handset that also provides communications via the new TerreStar satellite the operator launched earlier this summer when outside of the range of AT&T’s terrestrial network.
Burden believe the balance of power will shift: “We believe that the greenfield satellite companies’ plan is to forge short-term roaming partnerships with AT&T and other cellular operators, and then, when LTE services are deployed, position themselves to be acquired by these major players, including their prized spectrum. It’s unorthodox but clever.”
This sounds more like a conspiracy theory, but it makes sense if all of the pieces fall in place. That’s a big “if.” The new strategy of satellite players is not a slam dunk. Technology is still being tested. Go-to-market strategies are still being tweaked. It’s not enough to plan an entire business around the possibility that cellular operators will create roaming agreements and then assume that LTE coverage will be valuable where MSS operators plant themselves is not a good business practice and doesn’t attract financing.
If the end result is exactly as Burden projects, it would again make a sham out of the satellite industry.