FCC OKs terrestrial cell-type service using satellite spectrum

Satellite service without using a satellite?  In the FCC’s world, all things are possible.

Mobile satellite service (MSS) seemed like a good idea at the time: a cell-type voice service delivered through satellites, rather than local towers, so it could work over very wide areas. True, it looked expensive: over $1,000 for a handset, and several dollars per minute for airtime. But cell service was expensive, too, at the time MSS was being planned, and had spotty coverage to boot, concentrated mostly near cities.

It took some years to build and launch the satellites, during which the phone companies stayed busy. By the time MSS went on the air, only the most out-of the way places in the country lacked cell service, and the price had dropped to a dime or two per minute. MSS, priced many times higher, found a few niche markets in servicing off-shore oil platforms and such, but a mass demand for the service never materialized.

That was problem one.

Problem two was poor MSS reception in the cities. An MSS handset works only when it has direct line-of-sight to the satellite, which is not always possible from deep in the urban canyons. And a signal that manages to traverse the distance from satellite to ground is too weak on arrival to penetrate deeply into steel-framed buildings.

Problem two could be solved. Various MSS providers asked the FCC for permission to put up towers around urban areas to fill in the weak satellite signal.  That got the cell companies’ attention. MSS operation from satellites presented them with little competitive threat, but improved urban service via towers might cut into revenues. The cell companies, moreover, had paid billions of dollars at auction for their frequencies, money they had to recover from subscribers, while MSS spectrum originally came for free. They saw tower-based MSS as unfair competition.

A 2003 FCC decision nonetheless allowed land-based operation on MSS frequencies under the name “ATC,” for Ancillary Terrestrial Component. At the same time, the FCC adopted rules meant to ensure the terrestrial component indeed remained ancillary to the satellite component.

Those rules have evolved. Their present form requires minimum satellite coverage, an available spare satellite, commercial offering of service via satellite, and – this is key – an “integrated service” of satellite MSS and ATC. The provider can establish this last with handsets capable of both satellite and ATC service, or can try to persuade the FCC by other means. But the rules say it cannot provide ATC service alone.

The 2003 decision failed to revive the market for MSS. And in the years since, the FCC has come under pressure to find more spectrum for terrestrial mobile broadband services, particularly in the range 225 MHz through 3,700 MHz.

Two MSS bands, with a prime broadband location near 1600 MHz, are licensed to a company called LightSquared. Although the name is recent, the company descends from satellite companies SkyTerra, Mobile Satellite Ventures, Motient Services, and American Mobile Satellite Company, which itself was a consortium of multiple satellite companies. LightSquared wants to provide MSS/ATC service, but with a twist. Instead of offering service directly to end users, it would sell “in bulk” to other companies (we’re imagining Wal-Mart, Comcast, Amazon, etc.), which in turn would retail the service to customers under their own brand names.

LightSquared promised the FCC it would abide by all the ATC rules. Among other things, it committed to providing ATC service only in an integrated offering with satellite MSS, as the rules require.

The FCC did not disbelieve LightSquared, exactly. But it did anticipate the possibility that Wal-Mart, et al., could drop the satellite component and offer just ATC to their retail customers. If they did, that would violate LightSquared’s license obligations. The FCC accordingly found LightSquared’s plans to be inconsistent with the rules.

But in the very next paragraph, and over the strenuous objections of the cell phone companies, the FCC waived the rules to allow LightSquared to proceed anyway. It noted the benefits to be expected from widely deployed MSS/ATC bandwidth, and recited the magic waiver words: rural broadband and public safety/homeland security. To be sure, it also included a large number of specific conditions, including a requirement that LightSquared itself offer integrated MSS/ATC service to the public.

The substance of the order is clear enough. But some of its procedural aspects raise questions.

First, the FCC granted the waiver with blinding speed: just over two months from initial request to final order, including the public comment cycles. This process usually takes much longer – at least a year, and often two. Second, the FCC states repeatedly that it based the waiver on the “totality of facts and circumstances,” a signal that it stands ready to deny similar waivers to other MSS companies. And a third oddity: LightSquared sought a ruling that its proposed service complied with the rules, but did not even ask for a waiver, except for a bare mention in passing. The FCC granted one anyway.   The FCC may believe LightSquared’s service is so important to the public interest as to warrant ultra-fast, spontaneous, one-of-a-kind relief. But we would feel better if the FCC had spelled out its reasoning on why it bestowed these blessings.

We see another troubling point. LightSquared could, by contract, require its wholesale customers – the Wal-Marts – to pass on the fully integrated MSS/ATC service to retail end users. That would eliminate any prospective rule violation, and hence any need for a waiver. The FCC order does not even mention the possibility. Nor would this necessarily raise anyone’s costs. By the terms of the waiver, LightSquared cannot charge Wal-Mart less for ATC-only service, and must subsidize the handsets, if necessary, so that end users do not pay extra for satellite capability. So why not make Wal-Mart subject to the same satellite-service obligations as other MSS providers? That would relieve the uneasy sense that the FCC has marked off a special lane to benefit one company.

Perhaps the ultimate goal is simply to repurpose underused MSS spectrum for terrestrial services. That is a rational objective. But this order is a curious way to start going about it.