April 5, 2010 The National Broadband Plan: Windfall for Wireless, but Catastrophe for Carriers

admin

Follow SecSovTMT on Twitter

The FCC’s recently released “National Broadband Plan” makes recommendations that would accelerate the adoption and deployment of 4G wireless networks by freeing 300-500 MHz of spectrum and stimulate dramatically more aggressive competition amongst providers, including entirely new entrants. This is unambiguously bad for network operators, not only in wireless, where rivalry is likely to force spending on spectrum licenses and network build-outs and pressure pricing, but also for fixed line and cable TV, as the performance trajectory of 4G makes it a clear alternative to fixed broadband and a possible long term competitor to multi-channel television.

The plan would benefit companies with a stake in 4G LTE wireless technology (Qualcomm, Nokia, Ericsson, Interdigital, Samsung, LG, Broadcom, et al.), those already controlling spectrum or tower assets (satellite operators [see below], American Tower, Crown Castle, SBA Communications) and those pushing internet TV (Google, Cisco, Apple, Netflix, Tivo). We also note that several application areas are called out by the FCC report: Education (Apollo, Capella, Strayer, Blackboard), Public Safety (Motorola), Smart Grid (Itron, EnerNoc, Comverge, IBM), and Telemedicine (Cisco).

120MHz of new spectrum would come from broadcast TV frequencies. As with the successful relocation of stations during the recent transition to digital, we do not expect station owner objections to be a significant hurdle. Another 90MHz would come from allowing mobile satellite services operators to offer terrestrial broadband in the same bands as their space-based services, a windfall for these struggling operators – Inmarsat (ISAT.L), DBSD (ICOG), TerreStar (TSTR), Globalstar (GSAT) and Iridium (IRDM). Harbinger Capital has already filed plans with the FCC to build a wholesale only 4G LTE network on 53 MHz of spectrum controlled by its SkyTerra business and its partner Inmarsat.

We believe 5-7 new 4G networks will be built out in the U.S. over the next few years, most using the recently ratified LTE standard. While initial LTE speeds will likely be less than 10 Mbps, it is likely that upgrades will increase this several fold over the next decade. The theoretical maximum for LTE is 326 Mbps, and the underlying technology has the potential to offer speeds of greater than 1Gbps. LTE has been selected by almost all of the world’s largest operators, portending dramatic scale and development trajectory advantages over alternatives like WiMAX. This compounds the bad news for Sprint and Clearwire.

These LTE deployments will benefit equipment makers – Ericsson, Nokia Siemens Networks, and Huawei control almost 75% of the 3G market – and IPR licensors – Qualcomm has 32% of the declared essential patents. The increased complexity of dual mode 3G/4G devices and the hefty royalties associated with them will greatly favor large handset players with strong 3G and LTE IPR (Nokia, Samsung, LG). Finally, the possibility that 4-8 new 4G networks with near ubiquitous coverage would be built over the next few years is a potential windfall for tower companies already growing double digits on 3G deployments.

The FCC is also plans to insist that cable providers terminate their multi-channel TV service into a bare-bones box offering only conditional access, tuning and reception, and explicitly forbidden from delivering advanced functionality like navigation tools and DVR. This opens the door to internet based service competitors, such as NetFlix and Apple, who would initially be viable competition for “Video on Demand”, but could eventually threaten channelized video entirely. Moreover, the increasing capability of 4G wireless technology may someday make cable networks true “dumb pipe” commodities

Member: FINRA / SIPC 

Print Friendly, PDF & Email