ATC: Facing Steep Uphill Climb
Since the U.S. Federal Communications Commission adopted rules for licensing and operation of ancillary terrestrial component in 2003, satellite industry observers have been wondering whether or not the technology would ever become a reality. A handful of companies, including two with customers and operational satellites, think they are ready to silence the skeptics, but plenty of work remains to be done.
Two companies — ICO Global Communications and Motient Services Inc. — began prodding the Federal Communications Commission in 2001 to initiate a rulemaking proceeding on allowing the satellite companies to add a terrestrial technology known as ancillary terrestrial component (ATC) services to its plans. The companies wanted to use the terrestrial infrastructure to augment their mobile satellite services, and the government eventually agreed, believing that “ATC operation would serve the public interest by facilitating increased network capacity, more efficient use of spectrum [and] extension of coverage for handset operation to places where [mobile satellite services] operators have previously been unable to offer reliable service,” the Commission said.
But today, only Globalstar and Mobile Satellite Ventures LP (MSV), which is majority owned and controlled by SkyTerra Communications (Motient is a shareholder in SkyTerra), hold ATC licenses, and the roll out of services remains simply a promise.
ATC Ventures Remain Flexible
L-band licensee MSV estimates that the total cost to develop and construct a pair of satellites for its next-generation network that will cover the United States and Canada will be about $1.1 billion, but that may look small compared to the potential cost of deploying the ATC technology. “We estimate that the total cost to deploy the terrestrial portion of the network could range between $500 million and $2.6 billion depending on the choice of air-interface technology, the number of markets deployed, the scope of the terrestrial build within each market and the targeted service offering limited mobile, portable or fully mobile,” says MSV spokesman Gary Sharpe.
MSV is seeking what it calls anchor partners to help pay for the roll out of the terrestrial portion of its network, including video service providers, national wireless carriers and regional wireline service providers. Major technology vendors, content providers, Internet service providers, device manufacturers, Internet portals and mobile virtual network operators also are on the list, says Sharpe.
MSV is approaching its plan from both an enterprise and consumer standpoint and will offer field services and direct dispatch applications enabling businesses to directly tie the costs of mobile applications to a tangible return on investment. At the same time, Internet Protocol content delivered anywhere and anytime will be most important, says Sharpe.
This need for flexibility when it comes to both partners and plans seems to be conservative and prudent given the reality confronting these venture, says Jay Monroe, Globalstar’s chairman and CEO. Although potentially substantial, the cost of the ATC deployment is really business-model dependent. For example, a WiMax broadband buildout would be different than a hybrid voice or cellular service, and both of these would be different than the requirements needed for a mobile video application. “It is far too soon to say anything about an estimated cost for a potential ATC buildout,” Monroe says. “Building out an ATC network will be very expensive. Globalstar does not have any plans to build its own ATC terrestrial network but would look towards working with potential partners for any such venture.”
Because its satellite spectrum is international, Globalstar also sees ATC as a worldwide market opportunity, says Monroe. “This capability, especially if it is expanded, will enable Globalstar to partner with a number of industry players to fulfill both their and our requirements for new spectrum-dependent products and services,” he says. “Because our satellite spectrum is an international asset [joint ventures or other partnership arrangements] are possible in countries outside of the [United States] as well.”
ICO plans to enter the ATC arena later this year, says Craig Jorgens, ICO’s president. “We have a satellite-only, [instead of an] ATC, deadline of December 31, 2007, to allow us to be in satellite-only mode. This allows us to keep our 2-gigahertz license no matter what,” he says. “ATC is an additional functionality and approval process, but the process for ATC approval is well defined and short.”
ICO’s business objective is to provide consumers with mobile interactive media services, including navigation and interactive voice and data in North America. “Our network design intends to fully utilize and focus on the national coverage our satellite can provide. This is especially important for consumers who live or travel outside of current terrestrial network coverage,” says Jorgens. “ATC will be utilized, as it was intended, to supplement the satellite service in urban and suburban areas where satellite coverage may be more problematic and to add capacity.”
S-band licensee TerreStar’s strategy is to deploy over a WCDMA technology, says Dennis Matheson, TerreStar’s CTO. The company intends to have its network up and revenue ready in January 2009. “TerreStar will provide universal access and tailored applications throughout North America over conventional commercial wireless devices,” says Matheson. “TerreStar’s [mobile satellite services] network is the core component of TerreStar’s business plan and the terrestrial network will be ancillary. TerreStar’s ATC network will be built to meet customer requirements that otherwise cannot be supported by the satellite.”
Financing Not Only Obstacle
The huge sum necessary to fund the deployment of ATC infrastructures is not the only barrier here, as industry observers see a number of other challenges and obstacles which need to be overcome. The unprecedented supply of terrestrial spectrum has really put a damper on ATC, says Tim Farrar, president of Telecom, Media and Finance Associates Inc. “We have seen auctions from the [Federal Communications Commission] for 150-plus megahertz of national spectrum, including last year’s Advanced Wireless Services auction of 90 megahertz and this year’s 700-megahertz auction of 60 megahertz plus a few additional smaller auctions,” says Farrar. Spectrum owned largely by Sprint and Clearwire is not helping matters for the satellite companies.
“If spectrum demand weakens, many ATC systems will not get built,” says J. Armand Musey, a satellite industry analyst and consultant. “They are starting to get a bit nervous that wireless partners are not yet stepping up. They need a partner already in that business to make it viable. These ATC projects are no doubt being watched closely by the telcos as well. The telcos probably are just waiting until the ATC players get desperate and then will try to get them at a cheap price. At some price, that spectrum should be valuable to the telcos,” Musey says.
And telco play or not, ATC ventures need money. “The challenge now is that all the companies need additional funding within the next 12 months, and especially with the current upheaval in the debt markets, it is going to become increasingly difficult to raise this money,” says Farrar.
Iridium is one mobile satellite services company that has stepped back and let others pursue ATC strategies. “There are a lot of unknowns in terms of the technology sitting behind [ATC]. We see [mobile satellite services] as a niche market — not a mass market — and we remain focused on it,” says Greg Ewert, Iridium’s executive vice president for sales, marketing and business development.
As the ATC curtain begins to rise throughout the next 12 months, the satellites will start going up, too. One way or the other, that capacity will help to shape the future of the mobile telecommunications arena.