DirecTV, EchoStar RFI Targets Wireless Broadband Network

The DBS firms sought information on all aspects of such a network, asking for data in the 1.5 GHz and 2.5 GHz spectrums. In the June 10 document, DirecTV and EchoStar said they were weighing the possibility of creating a new company to be “formed for the purpose of providing broadband data and voice services to DirecTV, EchoStar and possibly other distributors.”

If built, such a network would be the DBS operators’ long awaited answer to cable broadband and DSL, as the RFI said. But the RFI said the network would differ significantly from cable and DSL by virtue of being mobile -- partially mobile 2006-09, fully mobile from 2009 on, even at 120 km/hr. The network would blanket 80% of U.S. households within 5 yrs, the RFI said. “This wireless network should provide portability for devices that resemble today’s cable and DSL modems and possibly PCMCIA cards. Within 3-5 years, the network should support portability and mobility (i.e., hand-offs) for devices that resemble today’s PDAs, mobile handsets and laptops.”

DirecTV and EchoStar have alluded to incipient broadband endeavors, but during earnings calls officials from both firms have danced a broadband ballet around the topic. EchoStar CEO Charlie Ergen said in Nov. he has wavered from thinking “it doesn’t make sense to play in the broadband market” to entertaining the idea of “owning spectrum” (CD Nov 9 p6). In the meantime, satellite TV stocks are taking a beating on Wall Street, which prefers triple-play. Industry analysts bemoan DBS’s inability to offer 2-way services like VoIP and VoD, and are quick to note impending video threats from Verizon and SBC.

The current challenge to DirecTV and EchoStar “is they're stuck between the devil and the deep blue sea,” said Bernstein analyst Craig Moffett. The stock market is unhappy that the DBS operators don’t have a broadband play, Moffett said. But it would even less happy at what it would cost the firms to develop a nationwide broadband network, only to land squarely in the midst of broadband competition, which, Moffett said, isn’t for the faint of heart.

The RFI’s stated goal was to learn of technological options, estimated time frames, and costs associated with a national wireless broadband deployment. The document targets builders and providers of base stations, consumer premise equipment (CPE), firms that provide routers and switches to support IP networks and system integrators. Deadline for submissions was June 28.

The RFI contemplated WiMAX and CDMA, and said the firms “will likely prefer a standards-based solution if it is competitive in terms of service quality and cost.” It asked for responses assuming use of spectrum at 2.5 GHz and 1.5 GHz, “or another viable, cost-effective spectrum alternative.” It described 2 scenarios: (1) A wireless network with speeds of 2 Mbps downstream and 512 kbps upstream, increasing to 5 Mbps down and 1 Mbps up by 2011. (2) A wireless network with speeds of 4 Mbps downstream and 512 kbps upstream, rising to 6 Mbps down and 1 Mbps up by 2011. Neither scenario would give DBS operators enough speed to provide HD on demand via the network. That likely would require 10 Mbps, industry analysts said.

The RFI cautioned that “spectrum availability is one of the critical factors that will determine the feasibility of these estimated service levels.” DBS operators don’t own spectrum in either place. Wireless Communications Assn. (WCA) Pres. Andrew Kreig added that “2.5 GHz is one of the most complicated bands around.” WCA wants 2.5 GHz rebanding, a process the FCC began in 2004 with a new band plan. That effort would reorganize spectrum into distinct segments for higher power and lower power operations.

There’s a lot of spectrum at 2.5 GHz nearly 200 MHz, Kreig said. Over time, the FCC has used every available method to dispense licenses at 2.5 GHz, leaving the band a mixed-use blend. Historically, it has accommodated religious and educational broadcasting, and eventually 2-way services, but it’s also carved into small interleaved segments. Sprint/Nextel is the largest holder of spectrum, followed by Craig McCaw’s Clearwire and BellSouth, Kreig said. Clearwire is trying to build a national footprint by cobbling together the 2.5 GHz spectrum of educational licensees, Kreig said. Clearwire has begun service in select U.S. markets.

Sprint/Nextel has about 70% of the 2.5 GHz spectrum, said a Sprint/Nextel spokeswoman. FCC merger terms require that by 2009 Sprint/Nextel be serving 15 million customers using 2.5 GHz spectrum. Technical plans in the band are nascent, but Sprint/Nextel now is teaming with the top 3 cable operators to develop next generation services in the band, the spokeswoman said. “We're working with the cable companies to explore different business plans,” she said, calling 2.5 GHz very “4G-ish.” Sprint/Nextel officials declined to comment on the DirecTV/EchoStar RFI.

The FCC is circulating an order on the band’s structure, technical parameters and licensee obligations on interference protection, sources said. That order would set performance rules for broadband radio service (BRS) and educational broadband service (EBS) licensees in 2.5 GHz. A massive document, the draft order is to address issues raised on reconsideration of a 2004 FCC order on 2.5 GHz, and is said to be on the Commission’s Dec. to-do list (CD Dec 1 p1).

The RFI also mentioned 1.5 GHz spectrum, which falls into Mobile Satellite Services’s (MSS’s) L-band territory. L-band MSS spectrum is coordinated under a confidential pact with Mexico, Canada, Russia and the U.K. Mobile Satellite Ventures (MSV) and Inmarsat are MSS’s high fliers over the U.S., with around 30 MHz of spectrum each.

But 1.5 GHz spectrum comes with FCC requirements about communication with a satellite. The RFI noted this, asking if respondent plans comply with FCC rules on communication with a satellite. “Describe how the capability to communicate with the satellite is implemented (e.g. housed on a single chipset),” it asked: “What is the additional cost for the satellite capability? If the equipment does not communicate with the satellite, how does it comply with the FCC’s dual use requirements?”

If dual-use authority is needed, MSV is the only MSS operator that has an Ancillary Terrestrial Component license, the FCC green light to build a hybrid satellite/terrestrial system. MSV “is in serious discussions with three to five potential partners/acquirers,” including the DBS operators, according to a Nov. 9 report by Tejas Securities analysts. Tejas has done investment banking services for MSV parent Motient. Between now and June 2006, the Tejas report predicted, MSV will make a partnership announcement.