FCC OKs TerreStar’s Terrestrial Network

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PARIS — Startup mobile satellite services company TerreStar Corp. has avoided what the company had said would have been a “catastrophic” event by securing U.S. regulatory approval of its proposal to use its satellite frequencies for terrestrial communications as well.

Reston, Va.-based TerreStar announced Jan. 14 that the U.S. Federal Communications Commission (FCC) approved the company’s request for a license to deploy a terrestrial wireless network using the same S-band frequencies used by the TerreStar-1 satellite launched in mid-2009.

The terrestrial wireless network, called an Ancillary Terrestrial Component (ATC), is viewed by TerreStar and other mobile satellite companies as crucial if they are to deploy service throughout the United States, including urban canyons, mountainous regions and other areas where satellites do not have line-of-sight links to user handsets.

FCC rules require that companies planning ATC service have a spare satellite on the ground and be ready for launch within a year of beginning operational service.

TerreStar creditors lent the company money on condition that the FCC approve the company’s ATC application within three months of the in-service date of the TerreStar-1 satellite. A failure to win FCC approval by that date would trigger an increase in the interest rate on the debt.

TerreStar-1 entered service July 20. With no FCC approval by Oct. 20, the cost of its debt went up, and it went up again Nov. 20 and again Dec. 20.

The lenders also stipulated that if the ATC authorization did not arrive by Jan. 20, then TerreStar would be considered in default on its loans.

In an Oct. 20 letter to the FCC, TerreStar said defaulting on its loans, given the company’s fragile financial circumstances, “would likely be catastrophic.”

TerreStar has told investors it will need to raise cash to fund its continuing operations sometime before the end of 2010.

“We thank the FCC for its ongoing support as we continue to execute on the vision of an integrated satellite and terrestrial mobile wireless network,” TerreStar President Jeff Epstein said in a Jan. 14 statement. “With the successful launch of TerreStar-1, the validation of our revolutionary smart phone and the FCC’s grant of ATC authority, we are on track to reshape mobile communications when we launch commercial service later this year.”