TerreStar, Inmarsat at Odds on 2 GHz

2 GHz licensees ICO and TerreStar want to split all 40 MHz available for MSS, while Inmarsat, after often voicing interest in the spectrum, finally petitioned the FCC for a piece of what it called the 2 GHz “greenfield” 2 weeks ago (CD Sept 29 p6). TerreStar’s and Inmarsat’s CEOs said they're continuing to make their cases while awaiting FCC action.

Comments in the 2 GHz proceeding took a new tone after Hurricane Katrina illustrated the importance of satellite services, especially mobile services like telephony, during crises. Stepping from the shadows where it typically operates as a communications workhorse, the satellite industry instead has enjoyed a limelight turn in post-Katrina hearings on the Hill and testimony by FCC Chmn. Martin. “There used to be people debating if satellites are important. Mostly that criticism was coming from CTIA and companies that would like to have access to that spectrum,” said TerreStar CEO Robert Brumley: “But I think Katrina put that question to bed.” But competitors still dispute MSS’s future, with promises of small handsets for high speed mobile voice and broadband services for both consumers and emergency responders.

Inmarsat’s quest for 2 GHz spectrum came too late, TerreStar, ICO and Inmarsat L-band competitor Mobile Satellite Ventures (MSV) said in docket comments. In 2000, the FCC licensed 8 MSS operators in the S-band, with milestone stipulations. But during telecom’s hard times 6 of them, Inmarsat included, quit 2 GHz, leaving TerreStar and ICO. “Inmarsat is not only late to the party, they're late to the clean up of the party,” argued Brumley: “If this were a political campaign with 2 strong runners, it would be like Bill Gates dropping into the running at the last minute.” TerreStar dubs Inmarsat “a spoiler” in the proceeding with its 2 GHz petition. Brumley said Inmarsat is trying to snarl things at the FCC to hobble TerreStar and ICO financing efforts “so it can catch up to the American market.”

But Inmarsat CEO Andrew Sukawaty said that, until lately, his firm’s hands were tied on 2 GHz by the ORBIT Act. “The ORBIT Act said until we were a publicly traded entity, we couldn’t be licensed for service in the U.S.,” said Sukawaty. Inmarsat couldn’t stay in 2 GHz “with ORBIT hanging over our head” because Inmarsat would've had to seek a license and meet milestones without assurance of becoming a publicly traded entity, Sukawaty said: “We're probably the only healthy mobile satellite services operator through a 15-year period of bankruptcy after bankruptcy. We came out of ORBIT, and we have the right to apply for this spectrum… to shut us out of the next evolution in MSS, we think would not only be wrong but would be underplaying the competition.” The proceeding’s length “has nothing really to do with us and any spoiler strategy,” said Sukawaty: “We see that we can take a cozy duopoly and set it up as a competitive process.”

The S-band beckons because it isn’t as segmented as the L-band, Inmarsat said in its FCC petition. Suckawaty said L-band MSS spectrum was allocated differently when divvied up: “You were licensed to use the band and then assignments were given based on actual use in 3 international regions.” The end result was “salami-slice blocks” instead of “nice clean blocks,” which didn’t matter for older technologies, but could hinder new ones, he said. With new terrestrial technologies like WCDMA and WiMAX being eyed by Inmarsat and competitors in light of the FCC Ancillary Terrestrial Component (ATC) ruling, “you're talking 5 MHz blocks,” he said: “The L-band isn’t set up for that, you need what’s on offer in the S-band.”

Asked if MSS operations in the L-band and the S-band ever could merge, both CEOs wavered. “Engineers say anything is possible with a lot of time and a lot of money, but that would be a very long time, and lots of money,” said Sukawaty. He said he doesn’t know if dual L- band/S-band operations could be a first generation 2 GHz MSS endeavor, but said it would more likely be a 2nd generation 2 GHz MSS question. Brumley said the “simplicity of taking next generation MSS products to the mass market with just the S-band is appealing.” There might be a technical solution to making next generation L- band and S-band MSS offerings interoperable, said Brumley: “But that’s not in the business plan.”

A paradox lies in the fact that S-band licensee TerreStar and MSV, Inmarsat’s competitor in the L-band working on its own hybrid satellite/terrestrial system with the only ATC license, share much common ownership, but are destined to be competitors. TerreStar and MSV both are being “rolled up” by Motient (CD Sept 26 p6), and TerreStar is supposed to be spun off to Motient shareholders as a stand alone company, said Brumley. But the situation “is absolutely a concern,” said Sukawaty: “There’s so much common ownership here, I think anything other than to assume that they're one entity is missing the point.” Were the L- and S-bands to overlap, “the FCC should worry about TerreStar and MSV,” said Sukawaty: “Because they're sitting on more spectrum than we are.” When asked, Brumley said: “I wouldn’t be here if I wasn’t fully convinced TerreStar would be a stand alone company in the future.”