Telecom policymakers and special-interest groups are fond of talking about ubiquity, making sure communications — wireless, wireline, Internet and video — are within reach of all Americans. Indeed, there are government subsidy programs that address this very issue. Take the stressed universal service regime that is the subject of a controversial reform effort by the Federal Communications Commission. Four years ago, President Bush called for universal, affordable broadband access by 2007. Some now believe broadband service — a profitable business dominated by the Bell telephone-cable TV duopoly and increasingly pursued by wireless carriers — should be a component of a new and improved universal service model.
In truth, there is no such thing as universal service, and ‘nationwide’ wireless licenses are part fiction. There remain rural areas and remote pockets of the country where coverage is spotty or non-existent. Where there is coverage, service provider choices can be few and far between.
Back in the early 1980s, federal regulators were hopeful satellite technology could bridge the gap. But the economics of mobile satellite service have proved extremely challenging, though government officials — animated by 9/11 and Hurricane Katrina to seek more communications redundancy — are hopeful that spaced-based mobile satellite systems aided by terrestrial cellular networks can resurrect the MSS sector. Policymakers also are banking on WiMAX as a solution to a ubiquity challenge.
The D-Block dilemma
When the FCC fashioned service rules for the 1,099 700 MHz licenses for which it would seek buyers, it was mindful of consumer accessibility to new wireless services, the increasing scarcity of valuable airwaves up for bid in perhaps the last great spectrum auction and the possibility that a new national wireless entity could enter the market. Included in the 700 MHz mix were the D Block nationwide commercial/public-safety license and a nationwide collection of open-access regional wireless licenses, collectively known as the C Block.
To hold new licensees’ feet to the fire, federal regulators approved strict buildout requirements that, if left unfulfilled, would force auction winners to forfeit unserved portions of licensed serviced areas.
Seeing the lay of the land, Space Data Corp. last year began to float among prospective bidders and telecom policymakers an alternative solution that would address the FCC’s goal of wireless ubiquity, especially for the D Block, and offer an alternative to the steep capital expenditures for new licensees and incumbent alike. It involves the commercial leveraging of the proven and time-tested (since the 1930s) use of balloons by the government to help forecast the weather. It happens in near space, the region of the atmosphere sandwiched between the altitude at which airplanes fly and satellites orbit.
Space Data spectrum
It all sounds a bit out there, but the technology is for real. Space Data, privately held and based in Chandler, Ariz., has been providing telemetry services to the oil and gas industries the past four years in Texas, Oklahoma and New Mexico with transceivers attached to high-altitude balloons. “We’re trying to win enterprise accounts,” said Jim Wiesenberg, chief strategy officer at Space Data. The firm got its big break in 2005 after winning a five-year, $49 million contract from the U.S. Air Force.
Space Data, which has raised $75 million in funding and has about 100 employees, is also beginning a telemedicine program to monitor diabetes readings via wireless PDAs for members of the Navajo Nation on remote areas of their tribal lands in Arizona.
“We are a fly-by-night operator. We fly by day and night, everyday,” jokes Wiesenberg. He concedes selling the Space Data solution is not necessarily a walk in the park. “We’re a new, different technology, so some of these companies that are potentially more enlightened providers have listened to us more than others.”
Cell sites cost about $250,000. Space Data pays $50 to launch a balloon and $100 to retrieve electronics (valued at $1,500) that parachute down to the ground for reuse after the short, 24-hour life of each balloon expires. It’s a perpetual process of launching and recovery balloons. One balloon 100,000 feet high covers a 420-mile diameter circle. It would take 41 SkySites for nationwide machine-to-machine wireless connectivity, 200-plus SkySites for nationwide wireless voice coverage. The near-space platform is flexible and adaptable to technological advances. New communications chips can be readily changed out, and SkySites work will all major wireless technologies and handsets.
Space Data is the largest holder of nationwide narrowband PCS spectrum, and now has 21 new iDEN-capable channels. That could attract the attention of Sprint Nextel Corp. as it grabbles to comply with the FCC’s 800 MHz re-banding directive. Space Data also holds advanced wireless services licenses in the Gulf of Mexico and Alaska won in the 2005 auction.
700 MHz opportunities
But the 700 MHz band could hold a far bigger financial opportunity for Space Data.
“As we looked at the 700 MHz auction, we kind of had two choices,” said Wiesenberg. “We could go again in and buy some low-density areas ourselves, or we said, ‘Maybe there’s a bigger, better role just being an infrastructure provider to people who accumulate spectrum.’ “
Wiesenberg said Space Data has non-disclosure agreements with some 700 MHz bidders, but would not disclose their identities because of the FCC’s anti-collusion gag rule in place at the time. “At this point, our goal is that one or more of them emerge as a high bidder,” he said. “We hope one or more of the companies that we’ve been in contact with, and got to the NDA stage with, do emerge. “We also hope that other companies we’ve been able send information to…they’ve told us they will speak to us as soon as the auction ends.”
Wiesenberg declined to confirm reported interest by Google Inc. in either leasing access from or acquiring Space Data outright. “They’re an excellent company,” he said. “They know how to look at things far and wide, across many industries, and that’s all I can say.”
Space Data claims it can achieve up to 100% coverage with SkySites for 700 MHz A, B, C, D and E Blocks. However, the C and D Blocks appear to hold the most promise for Space Data if both or either are won at auction by a new national entrant.
“People say they have a national network. Well, they don’t really have a nation network,” Wiesenberg stated. “They have a national dense population network. They don’t have a national network; they don’t cover the low density areas.”
Prospects for new, national players in the C and D Blocks appeared nebulous at best when the auction was winding down in late February. If the FCC decides to re-auction the D Block because the $1.3 billion reserve price isn’t met, Space Data is still in the game. The construction requirements are brutal, especially for a newcomer. The FCC requires the D Block winner to provide coverage to at least 75% of the national service area in four years, 95% by year seven and 99.3% after 10 years. Even if D Block service rules are relaxed eventually, coverage requirements — because public-safety communications are involved — are unlikely to be diminish much, if at all.
Wiesenberg said Space Data can save a new national wireless player $2 billion, or construction of 8,500 new towers across the country.
“You can get revenue earlier than you would if you were just doing a sequential tower build,” stated Wiesenberg. “And we’re not saying not to use towers. You always want towers.”
It’s classic cost-benefit pitch to 700 MHz auction players.
“With us, you’ll get service into those [rural] areas. You’ll see the demand, so you’ll build out to smaller cities when there’s demand,” Wiesenberg said
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