The big idea
Harbinger Capital Partners took a majority stake in LightSquared back in March. At that time Harbinger laid out an ambitious proposal that uses the spectrum holdings of two satellite companies as a means to break into the U.S. wireless market. I covered them here:
The planned network would launch before the third quarter of 2011 and cover 9 million people, with trials set initially for Denver and Phoenix. The next milestone is that 100 million people have to be covered by the end of 2012, 145 million by the end of 2013 and at least 260 million people in the United States by the end of 2015. Harbinger said in its statements to the FCC that all major markets will be installed by the end of the second quarter of 2013.
In an interview today, Frank Boulben, chief marketing officer of LightSquared, said the company would meet those dates, and that so far LightSquared has been negotiating leases with the “main tower companies” in the U.S. for space for some of the 40,000 base stations the company, or rather NSN, plans to deploy.
The nitty gritty details
Harbinger is taking advantage of a ruling made in 2003 by the Federal Communications Commission that allows satellite firms to also offer terrestrial wireless services as long as they provided dual-mode devices and the terrestrial aspect of the network is “ancillary.” Seeing the demand for wireless Internet rising, satellite companies and their private equity backers flocked to the space, banking on the fact that the satellite companies owned a chunk of the airwaves that are so essential for providing mobile broadband service.
However, mobile broadband via satellite is a slow, clunky affair that requires large, temperamental devices and delivers speeds of less than 1 Mbps down. Broad adoption, which is what LightSquared will need, requires terrestrial networks to deliver faster service and modern devices on that network that appeal to consumers. Boulben notes that LightSquared will be able to offer partners three options for coverage: satellite-only, terrestrial-only or a combination of the two.
All told, LightSquared has access to 59 MHz of spectrum through its own holdings, a lease agreement with Inmarsat and some other purchases. But only 13 MHz of the 59 MHz of that spectrum will be available for terrestrial-only services. That’s not a large amount for what will likely be the most popular type of service that LightSquared’s reseller partners will want. Boulben says the company plans to deploy its spectrum for LTE in 5×5 MHz chunks (with 5 MHz allocated to the downlink and 5 to the uplink). The breakdown for the spectrum holdings are 46MHz in the so-called L band at 1.6 Ghz, 8 MHz at 1.4 GHz band and 5 MHz at the 1.6 GHz block that’s not in the L-band. Those last two are where the terrestrial-only networks could be deployed.
The issue with the combined network boils down to the device and network speeds. Having a dual-mode device has historically meant big compromises on style and battery life. Plus, satellites can’t offer fast speeds like the LTE network could. Beurbon said that new chips inside devices, to be detailed later this year, make the combined satellite and terrestrial devices less clunky. He also says that a new, larger satellite SkyTerra is launching will help reduce the need for big antennas and battery-draining radios inside handsets or broadband dongles.
The money side of things
The release out today from LightSquared notes that the company has so far received $2.9 billion in assets from Harbinger Capital Partners to make its LTE network a reality and says that it has raised up to $1.75 billion in debt and equity. However, it hasn’t raised the full $1.75 billion yet — merely an initial round. Boulben did not disclose the investors, nor the amount raised so far but said the round was oversubscribed. Given the hype about the looming spectrum shortage and the complexities of spectrum rules and network deployments, I’m not surprised that LightSquared could find investors who see only the increase and demand, but may not understand all of the complexities associated with the spectrum or the requirements of a cellular network. But the key is whether or not LightSquared can get its network operating and generating revenue in time to repay them and also pay NSN. LightSquared did not disclose when it’s initial debt repayment would be due.
The history of satellite companies is littered with bankruptcies and near-bankruptcies, and financing the costs of building out a terrestrial and satellite network aren’t trivial. The debt and equity raised will fund both NSN’s contract as well as the satellite requirements. So while this is an essential first step for LightSquared, the news today is somewhat less exciting than it appears if we’re keeping our eye on the goal of building a nationwide wholesale LTE network.
We have a rebranding of an existing company with a few new faces on the executive team, notably a CEO from Orange and an SVP for engineering and operations from Clearwire, an undisclosed amount of new money into a venture that has already swallowed billions and a contract with a reputable vendor to build out an LTE network at a cost of $7 billion. At this point, the Nokia Siemens Networks adds the most credibility to this whole effort. I hope it gets paid.
Related GigaOM Pro content (sub req’d):
Everybody Hertz: The Looming Spectrum Crisis
Viacom v Internet: round one to Internet
Google's won the first round of the enormous lawsuit Viacom brought against it. Viacom is suing Google for $1 billion for not having copyright lawyers inspect all the videos that get uploaded to YouTube before they're made live (they're also asking that Google eliminate private videos because these movies -- often of personal moments in YouTubers' lives -- can't be inspected by Viacom's copyright enforcers).
The lawsuit has been a circus. Filings in the case reveal that Viacom paid dozens of marketing companies to clandestinely upload its videos to YouTube (sometimes "roughing them up" to make them look like pirate-chic leaks). Viacom uploaded so much of its content to YouTube that it actually lost track of which videos were "really" pirated, and which ones it had put there, and sent legal threats to Google over videos it had placed itself.
Other filings reveal profanity-laced email exchanges between different Viacom execs debating who will get to run YouTube when Viacom destroys it with lawsuits, and execs who express their desire to sue YouTube because they can't afford to buy the company and can't replicate its success on their own.
On Wednesday, U.S. District Judge Louis Stanton ruled that YouTube was protected from liability for copyright infringement by the 1998 Digital Millennium Copyright Act (DMCA). The DMCA has a "safe harbor" provision that exempts service providers from copyright liability if they expeditiously remove material on notice that it is infringing. Viacom's unique interpretation of this statute held that online service providers should review all material before it went live. If they're right, you can kiss every message-board, Twitter-feed, photo-hosting service, and blogging platform goodbye -- even if it was worth someone's time to pay a lawyer $500/hour to look at Twitter and approve tweets before they went live, there just aren't enough lawyers in the universe to scratch the surface of these surfaces. For example, YouTube alone gets over 29 hours' worth of video per minute.
Viacom has vowed to appeal.
In dismissing the lawsuit before a trial, Stanton noted that Viacom had spent several months accumulating about 100,000 videos violating its copyright and then sent a mass takedown notice on Feb. 2, 2007. By the next business day, Stanton said, YouTube had removed virtually all of them.
Stanton said there's no dispute that "when YouTube was given the (takedown) notices, it removed the material."
Calling Stanton's reasoning "fundamentally flawed," Viacom said it was looking forward to challenging the decision in appeals court.
Judge sides with Google in $1B Viacom lawsuit
(Thanks, Mike P!)
(Image: Viacom, a Creative Commons Attribution Non-Commercial Share-Alike (2.0) image from mag3737's photostream -- used with permission)
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