LightSquared & Sprint Announce Sharing Agreement

Posted by Sam Churchill on

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LightSquared and Sprint Nextel today announced a joint 15-year agreement that includes spectrum hosting and network services, for 4G wholesale and 3G roaming.

With this agreement, LightSquared can complete its 4G-LTE deployment more than one year ahead of the FCC mandate to cover 260 million Americans by 2015, and Lightsquared won’t have to build and run the network. That’s Sprint’s job.

Sprint will deploy LTE (with Lightsquared) using their “Network Vision” multi-mode base stations from Alcatel-Lucent, Ericsson and Samsung.

During an 11-year period, LightSquared will pay Sprint $9 billion in cash with credits valued at about $4.5 billion, reports Bloomberg. Sprint can use the credits to acquire capacity from LightSquared, which plans to offer wholesale wireless service to consumer electronics companies and other telecommunications operators.

Other Highlights of this agreement include:

  • A 3G nationwide roaming agreement with Sprint will enable LightSquared’s wholesale customers to offer combined 4G/3G data services as soon as LightSquared launches its first 4G markets in 2012.
  • Sprint receives approximately $4.5 billion in 4G-LTE and satellite purchase credits from LightSquared providing Sprint with a cost-effective option for LTE services, if Sprint chooses to incorporate L-Band into their 4G offering.
  • The 4G-LTE network will now be deployed first in major U.S. markets in 2H 2012 and early 2013 giving LightSquared’s wholesale customers significant selling opportunities in the largest markets for wireless broadband services.
  • LightSquared is also executing plans to make LTE services available in underserved rural markets through announced deals with Open Range, Cellular South and SI Wireless.

LightSquared says they now have all of the components in place to operate an integrated 4G-LTE wireless broadband and satellite network. LightSquared hasn’t got $9bn, but the payments will take place over 11 years and it should have the cash for the first few installments, enough to get the network operating in some cities and prove the concept.

LightSquared has come under fire for potential GPS interference problems, and said it would launch 4G LTE services “only when there is a comprehensive solution in place.”

The Lightsquared interference issue centers around high-precision GPS receivers that use augmentation signals, such as the Starfire system from John Deere and the Wide Area Augmentation System promoted by the FAA. Differential GPS uses separate radio systems to broadcast correction signal to receivers.

LightSquared chief marketing officer Frank Boulben says high precision GPS receivers reach beyond the GPS frequencies into the heart of the L-band where they access augmentation signals. For those devices, interference is still a huge problem. But, says Boulben, it’s not LightSquared’s problem. LightSquared says it has implemented all of the necessary network filters to prevent its networks from transmitting in the GPS and augmentation bands.

LightSquared has now moved their 1.6 GHz downlink to a 10 MHz slice of spectrum further from GPS. They’re using frequencies they acquired from a joint agreement from Inmarsat. Lightsquared says it resolves the GPS interference issue for 99.5% of all commercial GPS devices. But Inmarsat may have current users on that spectrum, so when that spectrum slice can actually be used has still not been made very clear by either Inmarsat or Lightsquared. Not to mention the FCC. The FCC’s authorization for Lightsquared is predicated on insignificant interference.

Sprint made no mention of the Clear network. Sprint owns about half of the nationwide WiMAX network, which now covers about 130 million people. Sprint, an early supporter of WiMax, may now have an LTE option on 1.6 GHz. Most observers believe Sprint will soon drop the other shoe and announce LTE on their 2.6 GHz spectrum, as well. Sprint said it would meet with the investment community on 7 October to fully detail its “technology and spectrum roadmap.”

Sprint has already pledged $5 billion to upgrade its network over the next three to five years. Sprint’s Network Vision brings together Nextel’s 800 MHz service, Sprint’s 1.9 MHz PCS cellular service, and Clearwire’s 2.6GHz 4G service on one tower. Lightsquared would likely be a part of this “Network Vision” as well. It should lower Sprint’s operational costs, especially when Nextel’s 800 MHz iDEN service moves to Sprint’s push-to-talk CDMA. Sprint’s tower density is pretty high because it relies on PCS frequencies.

The biggest loser is likely Nokia Siemens Networks which had an eight-year, $7 billion contract to build 40,000 cell towers for LightSquared.

Venture Beat says the deal suggests Sprint will likely move broadband customers to LightSquared 4G from its current Clearwire-backed WiMax 4G. But that wouldn’t make sense. Lightsquared’s narrow 10 MHz of LTE spectrum is still in dispute over availability and interference issues and their spectrum is limited.

Lightsquared is just another tenant on Sprint’s network. If there is a material breach of the contract, or if LightSquared faces insolvency, Sprint holds a second lien on LightSquared’s spectrum assets, reports Fierce Wireless.

Charlie Ergen’s 2 GHz satellite phone networks, TerreStar and ICO/DBSD, could also be a tenant for terrestrial LTE service. Ergen’s 2 GHz band wouldn’t have the interference issues.

Verizon’s LTE service at 700MHz uses two 10 MHz channels and provides better coverage, and AT&T is piecing together a 700 MHz LTE network using two adjoining spectrum bands to create similar bandwidth. Verizon’s 4G network now reaches 160 million potential customers, pulling ahead of Clearwire’s 130 million. Clearwire reported 4.86 million total wholesale (Sprint) subs in the first quarter.

The deal is not about fast speed. Lightsquared’s LTE service – if it is approved – will likely be restrained with limited spectrum, coverage and GPS interference issues.

The service could be valuable, however, for first responders and public service agencies. Like the still-born AT&T/TerreStar phone (above), a Lightsquared/Sprint phone could provide (inexpensive) cellular service in urban areas and switch to satellite service when out of service areas.

LightSquared says it will support existing Push To Talk kit, which uses the 2 GHz TerreStar 1 satellite, from TerreStar (now owned by Charlie Ergen) until at least 2014, but will replace all the customer kit “at no cost”, with devices using its new bird, SkyTerra 1 on Lightsquared’s 1.6 GHz service.

Lightsquared’s terrestrial 1.6 GHz service may have more range then Sprint’s 2.6 GHz service, but not if Lightsquared has to lower its power. Lightsquared’s LTE service seems unlikely to offer faster speeds or cheaper prices than AT&T or Verizon.

CNET leaked in early July that an announcement would be made right before Sprint’s second quarter earnings call on Thursday. So it is no coincidence that on Wednesday, anti-LightSquared factions released a damning report, reportedly prepared by the Federal Aviation Administration, that claims LightSquared’s LTE proposal would cause 794 deaths and more than $72 billion in additional costs to U.S. taxpayers.

In an effort to make satellite phone companies more solvent, the FCC allowed Lightsquared to use their frequencies terrestrially. This spurred LightSquared backer Harbinger Partners to propose a nationwide terrestrial LTE network using their “free” frequencies. Although Lightsquared didn’t have to buy their spectrum, they still had to build a terrestrial network.

Verizon spent nearly $10 billion on their 700 MHz spectrum — excluding the costs to build their network. Lightsquared’s space segment cost something like $1 billion for two high capacity satellites with ground controllers, but building and operating a terrestrial network from scratch would have cost $7 billion. At 1.6 GHz, that’s a lot of towers. Sprint already had them in place. Sprint also provides Virtual Network Operator services for companies like Virgin Mobile. A Sprint/Lightsquared deal should benefit both parties.

Sprint still owns half of Clearwire. Sprint has about twice the spectrum in the 2.6GHz band then AT&T and Verizon currently use in total. Sprint is widely expected to partition off part some of that spectrum and offer LTE.

Sprint’s anticipated move to LTE in the 2.6 GHz band is NOT likely to provide any significant benefit for users. The performance of WiMAX and LTE is similar. Verizon’s LTE currently has a significant edge over WiMAX – but only because Verizon uses the 700 MHz band (with 3 times the range) and provides double the spectrum (20 vs 10 MHz).

The roaming benefit also seems dubious since neither Verizon nor AT&T currently use the 2.6 GHz band. LTE in 2.6 GHz would mostly enhance Sprint’s wholesale growth potential. Since the 2.6 GHz band will be used world-wide for LTE, that may be reason enough for Sprint to make the Leap. It’s a MVNO move.

Clearwire’s “LTE 2X” trials in Phoenix use paired, 20×20 MHz blocks, twice the size Verizon’s LTE. But the economies of scale developing around TD-LTE may be compelling for Sprint. Operators going with TD-LTE include China Mobile, Vivid Wireless in Australia, Yota, in Russia, Global Mobile in Taiwan and Packet One in Malaysia. India and China will likely be dominated by TD-LTE, so equipment will soon be commoditized.

An LTE switchout has always been an option for partner Clearwire since its inception. The incremental cost for an LTE swapout isn’t much and dual mode (WiMAX/LTE) client support is now available.

Separately, Sprint reported a second quarter loss of $847 million, or 28 cents a share, on revenue of $8.3 billion. Sprint added 1.1 million net wireless subscribers, but the bulk of them were prepaid. Sprint ended the quarter with 52 million customers. Overall, Sprint still wound up losing 101,000 net postpaid subscribers. Sprint shares were down roughly 18% to $4.25, reports Market Watch. The stock has lost more than one-quarter of its value over the past two months.

The Lightsquared satellite was always something of a Trojan Horse for Harbinger. Neither Sprint’s 2.6 GHz LTE/WiMAX system nor TerreStar’s anticipated 2 GHz LTE system pose any GPS interference problem. But without terrestrial use of 1.6 GHz, Lightsquared’s $300 million satellite platform looks like a white elephant.

Ancillary Terrestrial Component tied the whole thing together. Without FCC authorization for ATC, the suitcase of money Lightsquared promised Sprint may be an illusion.

Related DailyWireless Space and Satellite News includes; Sprint to Announce LTE Plans July 28?, WiMAX to TD-LTE: Everybody’s Doin’ It, Will Sprint Go TD-LTE?, LightSquared Report Card: “F”, Lightsquared Files Official FCC Report , Lightsquared: Plan “B”, Lightsquared: Lawmakers Skeptical, Lightsquared + Sprint Deal Done?, Speculation on Sprint Infrastructure, LG Telecom: CDMA & LTE Handover, Ergen Likely Got TerreStar, Charlie Ergen’s Spectacular Triple Play, Lightsquared Gets 2-week Extension, Ergen Likely Got TerreStar, Harbinger: 59MHz or What?. Time Warner Cable + Lightstream?, Lightsquared Signs Cricket Wireless, Another Rumor: Lightsquared + Sprint?, Lightsquared + Sprint?, Charlie’s Big Play, LTE Spectrum: It’s War, Lightsquared: What GPS Interference?,

Posted by Sam Churchill on Thursday, July 28th, 2011 at 8:56 am .

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