Inmarsat in talks with three national carriers about satellite services
We have looked in detail at how the mobile satellite (MSS) operators in North America could partner with terrestrial wireless providers in order to enhance their business models and maximize their returns on investment in the emerging ATC technology, which supports hybrid terrestrial/satellite networks and therefore more attractive economics for MSS.
Now UK-based international operator Inmarsat is upping the ante, and says it is in talks with Verizon Wireless, AT&T and T-Mobile USA about partnering on a new nationwide service. This would make heavy use of the 2GHz spectrum eld by MSV, with which Inmarsat formed an alliance and spectrum sharing deal in January, and which was allocated by the FCC specifically to support hybrid services using ATC, in which MSV holds the leading patent position.
Inmarsat said no agreement is ‘imminent’ but the idea is to lease capacity on its network to one or more cellcos. This would potentially enable them to address the problems of rural data services that continue to plague US cellcos, using satellite coverage rather than having to build uneconomic cell networks for sparsely populated areas.
It might also enable the cellcos to participate in the most lucrative market for mobile satellite, emergency response/public safety, where a gap has been left by the failure of the FCC’s plan to auction a swathe of 700MHz spectrum with a public safety mandate attached. Although this idea, which was thought to be the best way for the FCC to fulfil its obligation to support a nationwide, interoperable mobile network for first responders, could return to the table if the 700MHz block is re-auctioned with new terms or reserve price, some operators are casting around for alternatives in which they might gain some of the revenue with less of the build-out risk.
Sprint Nextel has been rumored to be considering selling its iDEN network to the government under a public/private deal geared to first response, but with the MSS players already strong in the emergency sector, a deal with one of them could bring Verizon or AT&T into the game far more cheaply than by acquiring a national license.
Inmarsat CEO Andy Sukawaty told the Reuters news agency last week that he had held discussions with Verizon Wireless, AT&T and T-Mobile and believed his firm could derive $115 million a year in revenue from leasing ATC capacity to them. “We are talking to potential strategic partners to launch a hybrid of terrestrial and satellite mobile services,” he said in the interview. ‘We would be the satellite supplier to the new license, and would be paid leasing of $115 million a year.”
Inmarsat is moving into the mobile satellite voice market for the first time from 2009 and its ATC partnership with MSV is important for this, since the hybrid technologies improve on the economics of satellite voice by allowing the terrestrial network to be used where possible and by supporting standards and smaller devices.
Three operators ‘ MSV, ICO and Terrestar ‘ gained specific 2GHz MSS/ATC spectrum in 2006 at very low rates, and Globalstar has also been allowed to set aside frequencies for ATC, leaving Inmarsat with the task of supporting hybrid services in its existing L-band spectrum, hence its tie-up with MSV.
Inmarsat has long stayed away from the commercial minefield of satellite phone services, but now believes that combining these with terrestrial wireless networks will finally deliver the business model that has eluded other ventures. By combining its new generation BGAN broadband satellites with one or more telecoms partnerships, Inmarsat says it will get ATC services to market more quickly than its competitors and with shared costs and risks.
Inmarsat is targeting 10% of the $350 million mobile satellite telephony market by 2010, an aim Sukawaty describes as “extremely unrisky”. The operator reported a 15.3% jump in annual revenues to $576.5 million last Thursday, while EBITDA was up 17%, an improvement largely credited to the well respected CEO, who recently extended his commitment to Inmarsat by another three years.
Although public safety and very remote access will remain the heartland applications for MSS operators, they and their potential telco partners are looking for other services that might be made viable by ATC. Partnerships are the order of the day, to spread risk, pool business models and increase overall capacity. For instance, satellite TV operator Echostar injected funding into Terrestar earlier this year, a deal that also added L-band spectrum to the MSS specialist’s 2GHz S-band holdings. Inmarsat and MSV have also pooled S-band and L-band assets, in their case contiguous. And the third 2GHz ATC player, ICO, is controlled by Craig McCaw and could look to a partnership with McCaw stablemate Clearwire with its 2.5GHz terrestrial network (or even Xohm, the Sprint 2.5GHz vehicle, should Clearwire end up investing in that, as widely expected).
Handset-sized devices will still find it hard to reach directly to the satellite, especially with obstructions such as buildings, so the overall effect of these alliances is likely to be a two-spectrum network where the terrestrial portions carry most traffic, but where some special devices can reach the satellite as well as commandeer emergency communication services ‘ rather than a system based on dual-mode devices. But just as easily, these MSS services might deploy other protocols, aiming to pick up the 30% or so of land area in the US where fixed broadband is currently not being delivered.
Currently proprietary satellite operations like WildBlue support expensive low end DSL-class services for most of the major carriers. AT&T, DirecTV and EchoStar all resell the WildBlue services. These new MSS satellites might take much of this business and it could become a handheld or laptop experience and far cheaper. This means that the major telcos could contract with the MSS carriers for rural broadband and even for rural cellular voice, using GSM and CDMA protocols, and save themselves any rural investment at all, and yet fulfill all FCC obligations in that area. Of course this might form the basis of a partnership with hundreds of rural incumbents also. It seems that Inmarsat may be setting the pace in attracting the most attractive partners in the US for such a plan.