PE firm to use MSS, terrestrial spectrum to build out nationwide LTE network

New York private-equity firm Harbinger Capital Partners Funds plans to deploy a nationwide Long-Term Evolution (LTE) network using satellite spectrum after getting the nod from the FCC to merge with SkyTerra.

In a letter filed with the FCC on Friday, Harbinger laid out its plans to design and create a wholesale mobile network that will be open to any company that wants to offer mobile broadband. The firm, which is creating a new corporation to acquire SkyTerra, said it plans to use MSS spectrum, the Ancillary Terrestrial Component (ATC) spectrum and terrestrial-only spectrum along with spectrum hosting and pooling agreements with all of the proper roaming agreements to swiftly roll out a network that will cover all major markets by the end of the second quarter 2013.

The network will include SkyTerra's next-generation satellites, about 36,000 terrestrial base stations, multi-frequency mode user handsets and other consumer devices, a terrestrial cell site and backhaul network, network operations centers and the networks of other terrestrial carriers with whom Harbinger plans to have roaming agreements with.

Some of the conditions Harbinger has placed on the network in exchange for being allowed to consolidate all of this spectrum include the requirement to be a wholesaler and not allow traffic from the largest and second largest wireless operators--AT&T and Verizon Wireless--to account for more than 25 percent of the total traffic on the network. Moreover, the network must be rolled out fast. The network is expected to launch before the third quarter 2011 and cover 9 million people, cover 100 million people by the end of 2010, 145 million by the end of 2013 and at least 260 million by the end of 2015.

Service will begin in two trial markets, Denver and Phoenix, with a commercial launch before the third quarter of 2011 providing service to up to 9 million POPs.

"After the construction of additional terrestrial base stations, the network will be able to support higher numbers of wireless subscribers, increasing spectrum utilization to more than 200 percent between 2011 and 2013," the firm wrote. "By 2015, the company expects to serve more than 40 million connected consumer terrestrial devices on a wholesale basis."

Harbinger plans to initially use 23 megahertz of SkyTerra's spectrum but could also bring Terrestar Networks in the fold since it owns a stake in that satellite company. In addition to the 23 megahertz, the company said it has access to quite a bit of spectrum through a cooperation agreement with Inmarsat and associated waivers of the commission's ATC rules. By 2013, Harbinger expects to have access to another 30 megahertz of ATC spectrum.

Harbinger said that as a wholesaler, it plans to offer data-only services and pricing plans that include a tiered, flat-rate and "advanced" option. In addition, "ATC devices will be subsidized to enable retail distribution customers to sell devices at conventional prices."

Back in 2003, the FCC wanted to give satellite operators a chance to compete with spectrum they garnered for free through ATC, allowing satellite operators to offer simultaneous satellite and cellular services over the licensed spectrum. This was supposed to drive down the cost of the network, enable satellite providers to offer more competitive handsets and penetrate buildings. Instead, it has continued to be an expensive proposition for satellite operators who have been looking for terrestrial partners without success.

For more:
- see Harbinger's letter to the FCC
- read this blog post from TMF Associates

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