Eutelsat leaves C-Band Alliance as spectrum decision looms

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Updated at 1:53 p.m. Eastern to include a statement from the C-Band Alliance. 

WASHINGTON — Eutelsat Communications has quit the C-Band Alliance, fracturing the group of global satellite operators as a regulatory decision on their spectrum plan nears. 

Paris-based Eutelsat did not say why it chose to leave the alliance, now comprised only of Intelsat, SES and Telesat. In a brief Sept. 3 statement, Eutelsat said it “announces its withdrawal from the C-Band Alliance,” having only notified alliance members today. 

The C-Band Alliance has proposed the sale of 200 megahertz of C-band spectrum to companies and organizations who want to use it for high-speed 5G wireless networks in the United States. The Federal Communications Commission, having deemed satellite C-band airwaves as important for cellular 5G rollout, is expected to decide on how to open up the band to multiple users this fall. 

Eutelsat said it still wants to “take a direct active part in the discussions on C-band clearing and repurposing,” but did not explain how that would happen outside of the alliance. 

Rodolphe Belmer, Eutelsat’s chief executive, hinted at frustrations with the alliance during a July 31 earnings call, saying the group had procrastinated on calculating proceeds for its members, and that no consensus existed on a voluntary contribution to the U.S. Treasury. 

“There is no real agreement and alignment on that question within the CBA, contrary to what has been said,” Belmer said.

Eutelsat spokesperson Marie-Sophie Ecuer told SpaceNews Sept. 3 that the company was “not aligned with the overall members of CBA leadership team on certain matters,” declining to be more specific. 

“We believe that in this context, leaving the CBA was the best way to have a direct involvement and to represent our interests and our stakeholder’s interest in the C-band process,” she said. 

The CBA issued a statement saying it “remains committed to delivering its expeditious, market-based proposal,” and that “the departure of Eutelsat does not impact the CBA’s ability to do so.”

“The remaining members of the CBA, which represent approximately 95% of the affected revenues of the US C-band market, are aligned and committed to the process of engaging with the FCC on the proposal of rapidly clearing C-band spectrum to support the deployment of 5G services in the US,” the alliance said Sept. 3.

Giles Thorne, an equity analyst at Jefferies who follows Eutelsat, described the move as a “high stakes game of brinkmanship” on Eutelsat’s part. 

“The forces driving re-allocation of the mid-band are too powerful to be disrupted, but Eutelsat is now betting its cooperation is worth more than the bad optics of its withdrawal,” Thorne wrote in a Sept. 3 research note. 

Market consensus was that Eutelsat would receive around 5% of any proceeds, Thorne wrote, though Eutelsat never gave an exact figure. A 5% windfall would equal around 400 million euros ($439 million), according to Jefferies, and places the aggregate value for the 200 megahertz at 8 billion euros. 

Belmer said in July that the C-Band Alliance was calculating proceeds based on the 2017 revenue each member generated through their use of C-band spectrum. In the U.S. C-band is most heavily used for television broadcasting. Its signal strength through clouds and rain make it a preferred band that satellite operators say cannot be easily replaced. 

Satellite operators have access to 500 megahertz of C-band downlink spectrum in the U.S., of which the 200 megahertz would be split into 180 usable megahertz for 5G and a 20 megahertz guard band to prevent signal interference, according to the CBA plan. 

Thorne wrote that the “acquiescent language” of Eutelsat’s statement “suggests that it wants to realise its original goals, but outside the CBA structure, in turn potentially giving it leverage to extract better terms from the CBA.”

Three regional satellite operators left out of the CBA — ABS of Bermuda, Hispasat of Spain and Star One of Brazil — have been urging the FCC to ensure they too receive a fraction of any proceeds generated from the sale of C-band. 

The regional operators, which had no U.S. C-band customers as of October 2018, argue that a spectrum sale would nonetheless devalue their investments in C-band satellites, licenses and ground infrastructure, and reduce their future income. 

Ecuer said Eutelsat believes the best approach is to balance the interests of all stakeholders, including the regional satellite operators, satellite dish operators, customers and incumbents. Eutelsat remains supportive of a market-based approach to making a portion of C-band spectrum available for 5G, she said, as opposed to a government-led reallocation. 

“We will cooperate fully to attain this goal,” she said. “We also remain committed to protect the quality and the realization of the services we provide to U.S. broadcasters, media and data companies.”