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Dish Network, the second- largest U.S. satellite-TV provider, agreed to buy bankrupt 2-way satellite provider ICO, now reorganized as DBSD North America, for about $1 billion, reports Bloomberg. The $1 billion includes interest accruing on DBSD’s debt. The transaction is still subject to approval by the FCC and the courts.

A hedge fund group led by Highland Capital controls most of DBSD’s debt and plans to fight the proposal at a hearing on February 15, reports the WS Journal.

Dish provides satellite TV service to more than 14 million subscribers throughout the U.S. It competes with DirecTV, which provides satellite TV to 18 million subscribers. Neither have two-way internet capability. ICO planned to use the 2 GHz MSS band to deliver broadband to mobile devices using spotbeams from geosynchronous space. Their satellite is operational but their service never really got off the ground. As long as the ICO satellite remains operational, the company can keep their 2 GHz frequencies – and their key asset.

Through his companies, Charlie Ergen has built up significant positions in both DBSD and TerreStar Networks, by buying up debt that potentially converts into equity, explains the NY Times. Ergen has been a shrewd investor, acquiring shares of both Terrestar and ICO (DBSD) at a fraction of their value.

According to satellite consultant Tim Farrar, “This creates the opportunity for potential partners to consider using a rival 40MHz block of 2GHz MSS spectrum instead of investing in LightSquared or Clearwire. Now in addition to the Clearwire spectrum, apparently valued at “up to $2B” for 40MHz of spectrum, we may also have an even more direct comparison of 40MHz of MSS-ATC spectrum also valued at around $2B.”

LightSquared’s updated ATC plans were approved by the FCC (pdf). Dish, on the 2 GHz S-band, may now be able to create a new nation-wide, terrestrial LTE network that could compete with Philip Falcone’s LightSquared, on the 1.6 GHz L-band.

New FCC rulemaking allows Mobile Satellite Service providers to utilize at least some of their frequencies on a parallel terrestrial network. But building the terrestrial infrastructure won’t be cheap, even if the spectrum is (arguably) “free”. Tim Farrar suggests that requests from a conservative watchdog group for a Congressional investigation into the FCC’s LightSquared waiver appears suspiciously well timed, just like the news of an SEC investigation into Harbinger back in November.

The implication is that cellular operators are trying to kill this dual use of spectrum. Which, of course, they are (pdf).

The FCC rulemaking permits Mobile Satellite Service (MSS) licensees in the 2 GHz (1990-2025 MHz and 2165-2200 MHz) bands (where ICO and Terrastar operate), the L-band (1525-1544 MHz/1545-1559 MHz) and 1626.5-1645.5 MHz/1646.5-1660.5 MHz) bands (where Inmarsat and Skyterra operate), and the “Big LEO” (1610-1626.5 MHz and 2483.5-2500 MHz) bands (where Globalstar and Iridium operate).

TerreStar, ICO, Lightsquared and Inmarsat are geosynchronous satellite platforms. Globalstar and Iridium are the two LEO satphone constellations. Globalstar said, “We are pleased with the FCC’s continued recognition that the L-band portion of the mobile satellite spectrum is suitable for delivering mobile broadband to consumers and helping meet the Commission’s significant spectrum objectives outlined in the National Broadband Plan.”

DBSD and TerreStar (using 2 GHz) and Lightsquared and Inmarsat (using 1.6 GHz) are valuable not just because of their huge operational $250 million satellites, but because their spectrum can now be used terrestrially, via the Ancillary Terrestrial Component (ATC) rules of the FCC.

DBSD filed for bankruptcy in May 2009. It was formed in 2004 by Craig McCaw to develop a wireless communications system for areas where cell-phone service isn’t generally available. It later focused on broadband for vehicles. While the ICO satellite was successfully launched in 2008, the business never got off the ground.

Fixed satellite internet access is a completely different animal.

HughesNet competes with ViaSat/WildBlue in North America for fixed satellite internet access. Hughes operates Hughes Spaceway 3. ViaSat operates competitor WildBlue. WildBlue and Hughes are launching a new broadband satellite generation, moving from 14 GHz to the 20/30 GHz band. WildBlue will launch ViaSat-1 while its competitor Hughes plans to launch Hughes Jupiter. Both utilize more than a hundred spot beams.

The high frequencies and spot beams at 20/30 GHz allow more capacity for fixed satellite broadband — but they don’t allow terrestrial (ATC) mobile broadband. That’s the key advantage of the much lower frequencies of the MSS S-band (at 2 GHz) and the L-band (at 1.6 GHz). They can provide voice and mobile broadband direct via satellite (at 250-800 Mbps) as well as terrestrial LTE.

The new high capacity (Ka-band) satellites from the respective companies are ViaSat-1 (above), scheduled for launch in the first half of 2011, and the Hughes Jupiter-1, scheduled for launch in the first half of 2012.

ViaSat operates WildBlue, which serves over 400,000 subscribers within the 48 contiguous United States. WildBlue began offering residential broadband satellite access in June 2005. WildBlue was acquired by ViaSat on October 1, 2009 for $568 million. They currently hold a 44 percent of the U.S. satellite ISP market.

ViaSat’s new Ka-band ViaSat-1, is aimed at enhancing fixed broadband in the United States. ViaSat-1 was designed by SS Loral. ViaSat-1 involves a collaborative effort between ViaSat, Loral, Telesat and Eutelsat.

The chart (above) shows the capacity of ViaSat-1. The similar (but different) Hughes Jupiter was also designed by SS Loral.

A quad-play is everyone’s favorite target; voice, video, data, and mobile. Ergen may be positioning his assets for a final move.

Related DailyWireless Space and Satellite News includes; FCC Green Lights Lightsquared, LightSquared: In Trouble?, Lightsquared Unfurled, MetroPCS Eyes TerreStar, SkyTerra 1 Launched, Broadband Satellites: Black Hole?, MSS: Stuck in Space, Satellite with 328 ft Antenna to Launch, SkyTerra 1 Launched, Broadband Satellites: Black Hole?, LightSquared: Phase 1, LightSquared: 5K Basestations by 2011, LightSquared Announces LTE Network, FCC Okays Terrestrial LTE for SkyTerra, TerreStar Successfully Launched, AT&T/TerreStar Ready Satphone Service, TerreStar Phones Home, Motorola + SkyTerra Team for 700 MHz/Sat Radios, TerreStar’s 60 Ft Antenna Deployed in Space, TerreStar Successfully Launched , Eutelsat Launches Ka Band Internet Satellite , O3B: Funded for Launch, Satphones Maneuver, WildBlue: $30M, Shovel-ready, Alvarion, Open Range To Build 17 State Net, WiChorus Ropes Open Range, Satellites Collide, AT&T/TerreStar Ready Satphone Service, Godzilla SatPhones WiMAXed , WiMAX and/or Satellite

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