Spectrium Auction Seen as Benchmark on Satellite/ATC Services

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  Space News Business

Spectrium Auction Seen as Benchmark on Satellite/ATC Services

By PETER B. de SELDING
Space News Staff Writer
posted: 22 May 2006
11:59 am ET


Mobile satellite services provider Inmarsat expects that a coming U.S. auction of radio spectrum will determine whether the market speculation about the value of future hybrid satellite/terrestrial mobile services is real or imagined.

London-based Inmarsat also said U.S. regulators’ temporary approval of a license to operate Inmarsat’s new mobile broadband service is likely to be followed by a permanent license for the service, called Broadband Global Area Network, or BGAN.

BGAN allows users equipped with laptop-size satellite terminals to send data at speeds of nearly half a megabit per second.

Inmarsat and rival Mobile Satellite Ventures (MSV) of Reston, Va., have been arguing for more than a year about whether Inmarsat has the right to use L-band radio spectrum for BGAN that it had been granted several years ago by MSV.

Inmarsat said the spectrum transfer was permanent; MSV has been urging the U.S. Federal Communications Commission (FCC) to deny Inmarsat a BGAN license until it returns the disputed frequencies.

The May 15 FCC decision to permit Inmarsat’s distribution partners in the United States to begin BGAN services under a 60-day temporary license means BGAN services may start in the United States.

Inmarsat Chief Executive Andy Sukawaty sought to reassure investors and prospective U.S. BGAN users that the 60-day authority would be followed by a permanent license.

“We fully expect the underlying license applications to be granted during the course of the next two months,” Sukawaty said during a May 17 conference call with investors.

Inmarsat spokesman Chris McLaughlin said May 18 that the company continues to seek a resolution of the dispute with MSV.

Eric A. Swank, vice president for finance at MSV, said MSV would not speculate on whether Inmarsat’s temporary license would be made permanent, but that the FCC’s decision demonstrates the agency’s concern that Inmarsat’s operations might interfere with other companies.

Even as Inmarsat and MSV continue to battle over spectrum, they have begun talks on how to collaborate. One example of this was made public May 15, when the FCC said MSV would share with Inmarsat — and only Inmarsat — confidential details of MSV’s billion-dollar, three-satellite construction contract with Boeing Satellite Systems International.

Inmarsat had filed a Freedom of Information Act request that MSV disclose details of its Boeing contract to assure that it was meeting payment and construction milestones required by its FCC license.

MSV ordered the satellites as part of its plan to introduce a hybrid satellite/terrestrial mobile communications service toward the end of the decade. The satellites would work in areas where terrestrial links are not available, and their signals would be boosted in urban canyons and other areas beyond the satellites’ reach by a network of signal amplifiers called Ancillary Terrestrial Components, or ATCs.

Inmarsat and other mobile satellite services providers are eyeing a similar service, but all prospective entrants into the market must confront the multibillion-dollar cost of building and installing the ATCs.

Inmarsat has said it would not invest in its own ATC network but would consider a partnership with a company willing to incur the cost. Inmarsat’s contribution would be its Inmarsat-4 satellites. Two Inmarsat-4 spacecraft have been launched and a third is available for launch.

Despite their spectrum antagonism, Inmarsat and MSV have begun talks on how they might combine forces to make it easier for outside partners to finance a satellite/terrestrial network.

Sukawaty said Inmarsat “is now cooperating much more cooperatively than in the past with MSV on how we can have a cooperative service offering with them. We’ve made very good progress on that. Combining our efforts creates a very attractive proposition for the types of people who would make the terrestrial network investment.”

MSV’s Swank declined to comment on the MSV-Inmarsat talks beyond saying that “both parties recognize the value of collaboration at some level.”

The value of a possible satellite/ATC network using spectrum allocated to MSV, Inmarsat and other mobile satellite services companies remains a subject of dispute, in part because of the high cost of installing the network.

An FCC auction of radio spectrum scheduled for June 29 will provide at least a partial benchmark for what a satellite/ATC service is worth to investors, according to Inmarsat. The auction, of what the FCC calls Advanced Wireless Services (AWS), may generate as much as $15 billion in revenues, according to some estimates quoted by FCC officials.

“When the dust settles on the AWS auctions, we’ll be sitting in a situation where the price has been established by the market,” Sukawaty said. “Very few [companies] have a national spectrum and I think that’s a good position to be in with ATC.”

The AWS auction will be divided up into regions, with more densely populated areas likely to fetch higher prices than rural areas.

Swank said MSV does not view the AWS auction as offering a clear valuation for the satellite/ATC business model, in part because “it does not account for the value associated with the satellite portion of the business and the benefits the satellite brings to the overall hybrid network. … [But] like everyone interested in the wireless space, we’ll be watching [the auction] closely.”

Comments: pdeselding@compuserve.com