GLG News by Tim Farrar

Implications: Satellite radio is (and always has been) a car-based service. Auto manufacturers can rely on satellite radio to be there for many years to come (due to the long-lived satellite assets) and so don't risk obsolescence, which has been a big problem for navigation systems. In comparison terrestrial wireless technologies change too rapidly for auto manufacturers to commit to a single standard (viz OnStar's problems) and so probably aren't a realistic substitute except as a user-provided device (like iPods).

Analysis: The main threats to satellite radio comes from:
a) a lack of willingness to pay (i.e. free to air radio and iPods)
b) alternative user-provided wireless devices (in the same way that portable sat-nav devices have massively outsold OEM versions)

Free to air alternatives including iPods have already impacted the market to the extent that only about 50% of new car purchasers subscribe after the free trial period. Long term this could decline to 40%, as sat radio is included in lower end vehicles, but that will still enable growth to 30M-40M subscribers. One new threat comes from a migration to personal wireless handsets which can receive broadcast audio/video (e.g. MediaFLO). However, these services are video-oriented and are unlikely to provide a sufficient range of audio content. Further down the line, individually streamed content could become more widespread, allowing wireless users to listen to internet radio. However, with limited capacity on most 3G wireless networks, operators will tend to discourage this mode of usage (preferring broadcast alternatives) and it will be a big challenge to provide sufficient QoS. Even though higher capacity 4G networks such as Clearwire may have enough capacity for streaming media, they will have a hard time providing sufficient coverage of highways outside the major cities. It will also be hard for new players to secure sufficiently attractive content to compete with the critical mass which satellite radio has already established, so most content will likely be niche channels with a hard time attracting a mass audience. 
Its therefore important not to write off satellite radio too soon. It may not be the transformational service originally anticipated and will definitely fall far short of the 80M-100M subscribers projected by optimists a few years ago. However, it will be around for many years to come and will continue to be a key part of the audio equipment available in most vehicles.

Implications: DISH has not stopped believing that its long term future lies in a merger with DirecTV, and the SATS spinoff was made with this in mind. The WSJ analysis (http://online.wsj.com/article/SB121784781012209687.html) indicates that a merged company would market "a potential broadband offering" in urban areas, which presumably means revisiting wireless broadband options such as ATC (Ancillary Terrestrial Component), the 700 MHz D-block and the AWS-3 auction.

Analysis: From late 2005 through mid 2006, there was considerable speculation that DirecTV and DISH would enter into a broadband JV to deploy wireless broadband via the acquisition of spectrum in FCC Auction 66 or by partnering with Skyterra, an MSS (Mobile Satellite Services) operator with Ancillary Terrestrial Component (ATC) authorization. A key rationale was the competitive parity this would give the DBS providers in facing the threat from both telco TV/cable bundling. and the associated potential for churn reduction. 
This broadband push lost momentum with the sale of DirecTV to Liberty, as Murdoch had been one of its strongest supporters. However, DISH continued to believe that ultimately wireless spectrum would prove valuable to the company, perhaps for broadcast mobile TV, so it invested in mobile TV ventures in Korea and China, and made further investments in 700MHz spectrum and in TerreStar, another MSS-ATC player in the US. It also spun off SATS, which would focus on these new developments, positioning DISH for either a merger with DirecTV or a sale to AT&T.
As DISH faces increasing competitive challenges, as it anticipated back in 2006, and mobile TV appears much less attractive than originally expected, it now appears to be revisiting wireless broadband and the prospect of a broadband JV with DirecTV, as part of a full merger of the two companies. However, it still faces a challenge covincing Liberty to move into broadband, because DirecTV is having much more success with the large number of HD national and local channels enabled by its new Spaceway Ka-band satellites.
Since Harbinger is willing to throw billions of dollars at MSS-ATC spectrum plays (and is partnering with SATS to fund TerreStar), ATC may provide one option to move forward. However, there are alternatives in the form of the upcoming 700MHz D-block reauction and the AWS-3 auction. If Echostar wants to get the FCC onside then a move to support the D-block auction, conditional on approval of a merger with DirecTV, could be a very clever way to cut through the Gordian knot that faced XM and Sirius in their merger approval process.

Implications: The long term market potential for satellite radio is probably 30M-40M subs. The subscriber base will come from the car market, though it is possible content may be syndicated to other platforms (e.g. MediaFLO). Growth will be driven by OEMs, since unlike the retail channels they are less likely to move on to newer products.

Analysis: The market value of XM and Sirius has fallen significantly, despite expected approval of the merger, but the competitive outlook in the auto market is not that bleak and so the pessimism may be somewhat overdone.
Car manufacturers will stick with satellite radio, as a technology platform that will be around for the long term. Compared to in-car navigation, where technology moves so quickly that a system built into a vehicle quickly becomes obsolete, the XM and Sirius satellites will be around (and remaining compatible with the installed base of equipment) for the next decade.
On the other hand, retail channels will move onto the next hot item, and the limitations of satellite (little or no in-building coverage) mean that handheld sat radio devices will always tend to perform disappointingly when outside the repeater network. To take advantage of the personal (cellphone) market, XM and Sirius will need to syndicate their content to other platforms, or rely on Internet streaming (though this will produce little or no incremental revenue if it is used largely by existing subscribers).
Thus the key issue will be how much the competition from free in-car alternatives (iPods, HD radio, etc.) pulls the OEM take-rate down from the current 50%. It seems likely that it will eventually fall to perhaps 40%, as car manufacturers have been installing sat radio in increasingly low end vehicles, and at the same time adding iPod jacks, etc. which make it easier to use alternatives.
However, even at a 40% take-rate with stable churn rates, the long term market size is probably 35M-40M subscribers, which (assuming EBITDA margins can be increased to 35%+ as the suggested cost savings would indicate) would imply the combined business is worth somewhat more than current valuations.
On the other hand, securing additional financing in today's market will inevitably be challenging and the value of XM and Sirius on a standalone basis is fairly low. Any significant increase in churn would also be a big problem, both increasing the need for cash in the short term and limiting the long term market potential to perhaps as little as 30M subs.

Implications: Hughes continues to dominate MSS system development contracts. However, it is unclear how Globalstar will pay for this contract, given the lack of any vendor financing arrangements.

Analysis: Hughes has established itself as unquestionably the leading vendor for MSS system development projects, now working with MSV, ICO, TerreStar and Globalstar, as well as Thuraya. It is likely also well positioned for work with Iridium in the future.
Hughes is therefore a sensible choice for Globalstar, but the challenge will be how to pay for the work. Globalstar's recent convertible offering left it with a potential funding gap of ~$300M, before signing this contract. Globalstar is hoping that as much as $250M in cashflows will be generated from its existing business in the next few years to close its funding gap, although its (~$100M annual) revenues have been declining and it is close to (if not below) cashflow breakeven at present.
As a result, the lack of any vendor financing associated with this contract is a notable omission and will make Globalstar's fundraising requirements even greater. Globalstar is therefore likely to need to lean even more heavily on the continued support of its CEO, Jay Monroe, who has already invested $400M in the company.

Implications: Mobile satellite operators are struggling to find partners to finance an Ancillary Terrestrial Component (ATC) buildout. Doubts are rising about the value of their spectrum, but Harbinger is keeping several players afloat. However, predictions of mergers and bankruptcies are likely to prove correct over the next year.

Analysis: Harbinger's investments are proving essential to keeping MSV and TerreStar (TSTR) in business, but there are limits to what it can achieve in terms of finding a major terrestrial partner. Harbinger's investment in Leap could be one component of a deal, but that may not be sufficient on its own to finance a $5B+ terrestrial buildout. Larger players like AT&T and Verizon seem unlikely to validate ATC when they've just paid $16B between them for 700MHz spectrum. Its equally hard to see where a new entrant would come from - Comcast would almost certainly be better off buying Sprint (or even Xohm) than investing in an ATC network with its associated complexities and lack of exit options.

Of course Harbinger's perspective must be different - they presumably see a high probability that a deal will ultimately emerge. "Spectrum becomes more valuable over time" has usually been a winning strategy (as Craig McCaw has shown) but this is not always the case, e.g. LMDS in the late 90s. In reality, McCaw has driven up the value of spectrum by putting it to use in a successful business, not simply by warehousing an unused spectrum band. Even Clearwire may struggle to realize a high valuation for its 2.5GHz spectrum in the current financial markets if the proposed Sprint JV falls apart.

In the absence of an ATC deal, attention is instead likely to turn to potential consolidation and possible bankruptcies. In the interim, cost saving measures such as the layoffs at TerreStar are unsurprising.

The rumored merger between ICO (ICOG) and TerreStar mentioned in this article is in reality more likely to be an agreement to share the TerreStar 2 ground spare satellite (and will probably be announced within the next few weeks in order to meet objections to ICO's ATC application). The announced DISH trial of DVB-SH appears to be a quid pro quo for such an agreement. A full merger would be far more complicated and is unlikely to lead to meaningful cost savings in the near term.

Globalstar faces challenges in financing the rest of its second generation constellation, after a complex debt offering which has had a very negative effect on its stock price. It could well merge with Iridium, though the price Iridium could pay would be very low (since there would be no ATC premium).

Most intriguing is the prospect of a Harbinger bid for Inmarsat (ISAT) (which it holds a 29% stake in) followed by a merger with MSV (SKYT). It is hard to see any other credible next steps for Harbinger in the MSS industry now it holds such large stakes in MSV and Terrestar, and Inmarsat would be unlikely to buy (and fund) MSV unless Harbinger forced it to. This would simplify funding of MSV's 2 new satellites (assuming there is a hiatus in possible ATC deals) and hold out the prospect of ATC being extended to other countries if it succeeds in the US.

Implications: The 700MHz D-block spectrum wasn't worth $1.3B, especially to a new entrant. It seems highly likely that the reserve price will have to be reduced and/or the buildout conditions loosened. This may delay the date for completion of the auction considerably, with implications for other players (e.g. ATC spectrum, AT&T/DISH, Leap/MetroPCS) whose future plans depend on it.

Analysis: The public-private partnership envisaged by the FCC to build a broadband public safety wireless network never made much sense with the onerous buildout conditions and dependence on the dictates of the public safety community, especially once a very high reserve price ($1.3B) was imposed.

The overall public safety communications market is worth about $4B per year, most of which goes on network equipment, installation and maintenance. Given that existing networks would still be used for critical voice communications, its likely that even in the most optimistic situation no more than 10%-15% of this spending (in the medium term)would flow to Frontline. This is far too little to justify building what would likely be a $10B network (covering over 99% of the US population) even if the spectrum were free, let alone at the $1.3B auction reserve price, unless there is substantial additional revenue from commercial services.

The Frontline plan for commercial service (to be a carriers' carrier wholesaling capacity to commercial service providers) is a model that has never been successful on a large scale anywhere in the wireless market. Unsurprisingly, given the difficulties of many MVNOs in the US market, it was unlikely to work for them either.

The problem for both the FCC and other players waiting for the auction to be completed, is that if no bids are received which match the reserve price for the D-block (now the most likely outcome), the FCC needs to go back and re-evalate the rules, either loosening buildout requirements or reducing the reserve price (or both), prior to rebidding this block. This could prevent the completion of the auction and the point at which anti-collusion rules are removed (even in other blocks where the reserve price is met) for several months (until as late as this summer). Since some players are likely to need to wait for the auction completion before executing their own plans (e.g. investments in ATC spectrum, AT&T purchase of DISH, MetroPCS/Leap merger) there could be significant knock-on effects for the US telecom market as a whole.

Implications: The problems of TU Media in Korea highlight the very challenging business case for broadcast mobile TV. The lack of information emerging about MediaFLO in the US probably indicates initial take-up has been disappointing. European satellite players such as Inmarsat and SES-Eutelsat may also re-evaluate their commitment to satellite-based mobile TV networks

Analysis: TU Media was the first large scale subscription-based broadcast mobile TV system in the world, launching in summer 2005. Despite providing a very wide deployment of terrestrial repeaters (even covering the Seoul subway system, where take-up by commuters was relatively strong), the system has failed to reach critical mass.
Competition from terrestrial free-to-air mobile TV (which has 5M+ users compared to only 1.2M TU Media subscribers) has been one factor, along with the high price of terminals and regulatory restrictions on content availability.
Korea had one of the best opportunities for mobile TV, since lengthy commutes on public transit provided a ready-made audience. In comparison the opportunity in the US is much less, since there is little need for mobile TV while driving to work. Even in Europe, the difficulty of covering (underground) public transit systems in major cities makes it harder to identify a poromising opportunity.
The implications for MediaFLO are not positive: little information has emerged about progress, since the service was launched 9 months ago, indicating that take-up is likely disappointing. Echostar has invested in both the Korean TU Media company and in development of a similar satellite-based system in China (CMBSat), and since splitting off from DISH has tied its future to the success of mobile TV (though Slingbox provides other options if on-demand mobile TV is preferred to broadcast). ICO is also developing a mobile TV-based satellite DVB-SH network.
In Europe, both Inmarsat and an SES-Eutelsat JV are developing satellite-based mobile TV networks (using DVB-SH and backed by Alcatel) in 2GHz MSS spectrum. While SES-Eutelsat may be too far along to make any changes, Inmarsat may now re-evaluate its commitments to this concept.

Implications: Aloha has admitted by selling out to AT&T that the business plan for a second mobile TV player is not very attractive. The spectrum is far more valuable to an incumbent and when used for two-way voice and data services. The benchmark established for a non-national 700MHz spectrum footprint at $1.06/MHzPOP makes it very likely that auction values will significantly exceed the reserve prices (of up to $0.70/MHzPOP for the national 22MHz C-block license). 

Analysis: The $2.5B price paid by AT&T offers a huge windfall for Aloha, which paid only a couple of hundred million dollars for its original spectrum licenses. Compared to the value that would be generated by a mobile TV system (especially as the second player in a market dominated by MediaFLO), the two-way voice and data applications that AT&T will deploy will generate far more value. As an incumbent, AT&T can rollout the new band to its existing customer base more quickly than a new entrant could acquire customers, further raising what the spectrum is worth.

This is another indication that it is likely to be hard to find common spectrum for mobile TV where providers are competing head-to-head with mobile operators that can use the spectrum in their existing two-way cellular networks.  The implication is that use of "orphan" spectrum is the best way to avoid this conflict, and at least in Europe and Asia this will often mean mobile satellite spectrum. Providers such as Eutelsat and Inmarsat in Europe and TU Media in Korea have adopted this approach. Whether ICO's satellite-based mobile TV system for the US will be successful is still to be seen, since MediaFLO is well established and ICO is focused on in-car mobile video for now. However, it could now well become the obvious candidate for anyone willing to break ranks with MediaFLO and fund a wider buildout of ICO's repeater network (this could for example include Echostar which is backing the Korean TU Media system). However, as noted above, the upside of a mobile TV business plan is limited, so ICO shareholders couldn't expect a similar windfall.

The implications for the 700MHz auction are that AT&T may be more likely to focus on the lower 700MHz band where it can pick up smaller licenses, leaving Verizon to monopolize the upper band. While there is speculation that this move will reduce overall bidding pressure in the auction, AT&T will certainly need more than 12MHz to make it economic to deploy a widespread 700MHz network, so we still expect both AT&T and Verizon to bid aggressively. The ultimate prices in the auction are very likely to exceed $1 per MHzPOP on average and may go as high as $1.50 for the larger licenses (implying $6.2B to $9.5B for the C-block that Google is contemplating bidding on). At this price is seems very unlikely that it would make sense for Google to buy the spectrum. Simply entering the auction to push up the price for Verizon also doesn't make sense, since that will act against Google's aim of commoditizing wireless service.

Implications: The Echostar spin-off is likely to make additional investments in international (and perhaps even domestic) mobile TV platforms, which could have significant ramifications for Ancillary Terrestrial Component (ATC) players in Europe and even the US. The Sling Media acquisition pairs well with Echostar's investments in these mobile TV platforms, since both are directed towards enhancing the mobile TV experience.

Analysis: News coverage of Echostar's Sling Media has focused on the set-top box angle but less on the other assets which will be part of the spinoff, including Echostar's holdings in TU Media (a South Korean mobile TV company) and CMBSat (a similar project in China). Both systems use satellites operating in the S-band (in conjunction with terrestrial repeater networks) to deliver about 20 TV channels to cellular handsets. 
Echostar is making substantial investments in developing these mobile TV platforms internationally, with CMBSat representing a $150M+ commitment. These broadcast delivery mechanisms pair naturally with the ability to receive (unicast) Slingbox content on a cellular handset.
Similar projects are underway in Europe to exploit spectrum in the 2GHz band, notably the Solaris joint venture between SES and Eutelsat (announced in October 2006) and what appears to be a prospective Inmarsat-backed project to deploy a similar satellite. It would not be surprising if Echostar also invested in one of these European ventures, most likely the Inmarsat-backed one (since Inmarsat would probably prefer to share the risk).
Any such commitment would make life more difficult for some other Mobile Satellite Services (MSS) operators, specifically TerreStar, who are also seeking to exploit this spectrum band for two-way ATC in Europe, and would then be competing with two well-funded projects for what will likely only be two licenses.
On the other hand, further recognition of the potential of broadcast mobile TV could help ICO, which has chosen to focus its US efforts on broadcast services. Even so, the value of MSS spectrum for such broadcast applications is likely to be much lower than the AWS-based benchmarks that ATC players have highlighted previously. For comparison, TU Media and CMBSat have obtained their spectrum free-of-charge, while US competitors such as Qualcomm's MediaFLO and Hiwire paid only a few cents per MHzPOP for their 700MHz spectrum.

Implications: WiMAX only has significant value as a mobile technology, and has only a few years to establish itself before wireless carriers (in most of the world) continue down the W-CDMA LTE path. The best WiMAX can hope for as a fixed broadband competitor is to establish a modest niche, with room for one (profitable) operator at most in each market.

Analysis: This article highlights Intel's original vision of WiMAX as a fixed broadband alternative, which is clearly not where it is best positioned. While WiMAX is OK next to today's DSL, it will struggle to keep pace on data rates and capacity against cable and fiber. A good marketer, such as Clearwire can capture a 10-15% market share, but its unlikely that two such players can succeed in one market. Remember that a major reason Project Angel failed was because it couldn't deliver in-building coverage - WiMAX can do this, but only in cells up to a couple of miles radius. As such the buildout costs for WiMAX (as Clearwire has shown) only justify coverage of areas which already have cable and/or DSL (often both).

In reality, WiMAX needs to establish itself as a viable mobile solution to have a long term future (and justify the spectrum prices being paid at 2.5GHz). We still have a long way to go, although Sprint/Clearwire are headed in the right direction. However, there is a short window of opportunity for WiMAX (say 2009 to 2012) to get the costs and power consumption right, before W-CDMA LTE comes along. This will incorporate many of the advantages of WiMAX (including higher speeds and greater capacity) and probably presents the preferred option for mobile operators in most developed countries outside North America.

Implications: Google's CEO indicates he can live with the open access rules and will probably bid in the upcoming auction. However, AT&T and Verizon will want to keep Google out and can afford to pay much more for the spectrum. End result is likely to be bids as high as $10B for the 22MHz open access block and perhaps $18B for the auction as a whole. Clearly this would be bad news for Vodafone's prospects of receiving dividends from Verizon Wireless in the near term, since they are expected to be the biggest bidder.

Analysis: Even if Google does bid in the 700MHz auction, AT&T and Verizon have a strong motivation to bid more to keep them out. It seems unlikely Goggle's shareholders would be happy for it to spend $10B on spectrum, as a data-oriented business plan for a new entrant (excluding advertising revenues) probably doesn't justify spending $4.6B let alone $10B.

The most obvious partners for Google - DirecTV and Echostar - have aligned with Clearwire/Sprint and now probably wouldn't want to invest in a competiing 700MHz network. There are few other potential candidates with billions of dollars to throw around, and only Google is in a position to get the spin-off benefit of advertising revenue.

The end result of Google bidding would likely push up the prices of the spectrum, which could actually run counter to Google's objective of reducing wireless service pricing and stimulating high speed data deployment.

Implications: The FCC is unlikely to accommodate Google's requested wholesale access conditions for the 700MHz auction, since these would make incumbents unlikely to bid. The 22MHz of spectrum may not be worth $4.6B for the data-oriented wholesale business model Google has in mind, but incumbents could justify paying $10B for spectrum to provide additional 3G network capacity. There has never been a successful operator with a wholesale cellular business model, despite several attempts, and data-oriented MVNOs have not fared much better.

Analysis: AT&T's reluctant embrace of the open access (Carterfone) model, but rejection of the requirement for wholesale access, makes it likely that the FCC's eventual 700MHz auction rules will broadly follow Martin's proposal, because the FCC will not want to alienate incumbents who could justify paying far more for the spectrum (perhaps $10B or ~$1.50 per MHzPOP for this 22MHz block).
Note also that Sprint has indicated it will support open access for its new WiMAX network. Open access will remove the need for handset subsidies, but risks making operators a dumb-pipe. However, its hard to see that walled garden approaches really need as much bandwidth as an open access model (where users are free to watch as much Slingbox/Youtube content as they want), and so it potentially makes sense to adopt open access if your competitive differentiator is the amount of bandwidth you can offer (as with mobile WiMAX). 
Google's $4.6B indicative bid (~70 cents per MHzPOP) is probably more than the spectrum is worth for a data-oriented (WiMAX?) wholesale business model, especially in competition with Sprint and Clearwire, so if the FCC's eventual auction rules complied with Google's conditions (and thereby excluded incumbents), they might not need to pay more than the reserve price. However, that wouldn't matter to Google because their return comes from more searches, not from the network access themselves. From this point of view overpaying for the spectrum is really just a subsidy to the network buildout, just like free WiFi in San Francisco. The more interesting question is whether they would pay the $10B or so necessary to compete with incumbents, if there is no wholesale requirement in the final auction rules (remember wholesale access is not prohibited, merely not required in the draft rules).

Implications: The Sprint-Clearwire joint venture for WiMAX deployment appears to leave the 2005 "exclusive" agreement between Sprint and the cable consortium of Comcast, Cox, Time Warner and Advance/Newhouse in tatters. While DBS players may not be able to access fixed WiMAX deployments in Sprint areas via the Sprint-Clearwire JV, they should have the flexibility to deliver a quad play in most other respects, with none of the capital cost that would have been needed to deploy their own network. It appears implausible that cable companies will now put money in to support Sprint's deployment, given the risk of boosting their main competitor.

Analysis: Both the 2005 cable alliance with Sprint and the cable bids in the AWS auction appeared at the time to be designed to limit DirecTV and Echostar's options in seeking a quad play solution, forcing them to pay billions of dollars to build out their own national wireless network.
DirecTV and Echostar's distribution agreement with Clearwire is hugely enhanced by the Clearwire-Sprint JV, giving them national access for mobile services (including voice and data roaming on Sprint's EVDO network to enable a true cellular wireless solution). It may not give them access for fixed deployments in Sprint markets as yet, but look for an agreement with Sprint in 2008 when the "exclusive" agreement with the cablecos will likely be quietly dropped.
This deal potentially enhances DBS's competitive position vis-a-vis the cable companies and telcos significantly in the medium term. However, it also removes any perceived need for DirecTV/Echostar to participate in the 700MHz auction or deal with other spectrum holders such as MSS-ATC proponents.
The timing of this deal is potentially significant for the 700MHz auction, highlighting that a "Google block" is not really necessary to achieve a third national broadband pipe, and perhaps prompting reconsideration of Chairman Martin's proposals. It also makes it less likely that a serious consortium will come together to bid on this block if it is available, since the DBS players were usually mooted as a major source of funding for such a buildout.

Implications: The proposal for one large national 22MHz block, with numerous restrictions promoting open access, limits the number of potential bidders. The resulting spectrum valuation for this part of the 34MHz total commercial allocation could be closer to $2B-$3B ($0.30-$0.45/MHzPOP) than the originally mooted $1.50/MHzPOP ($15B for the auction as a whole). This would have negative consequences for other spectrum holders, particularly MSS-ATC proponents, especially if prospective partners (DirecTV, Google, etc) opted to join forces to build out the 700MHz block.

Analysis: It is not clear if Martin's proposal will be acceptable to either the other FCC commissioners or to Congress (especially if they realize what the loss of revenue might be). However, it is a signal that the eventual compromise might favor the interests of a new entrant over incumbents, and might even effectively prevent incumbents from bidding on this block (unless they bid solely to block new entrants, and do not intend to deploy a network in it).
As such it would be likely to depress the value of this spectrum, since the value to incumbents would be higher than for new entrants (lower cost of capital, more rapid rollout, lower subscriber acquisition costs, etc.), especially if these new entrants follow a data oriented (WiMAX) business model, which will generate less revenue per MHz than a voice-oriented cellular business model.
For example, in the AWS auction, DirecTV/Echostar couldn't justify paying more than about $0.40 per MHzPOP, whereas incumbents could justify paying $1.00+. With potentially less competition, a new entrant could acquire the 700MHz spectrum even more cheaply.
Other spectrum holders may be negatively impacted. The companies with the most to lose are MSS-ATC proponents, who generally seek to promote the same "4G" business model as a 700MHz new entrant consortium would be likely to follow, and are encumbered with substantial satellite costs as a condition of their ATC authorizations.

Implications: Use of standard Internet browsers on cellphones now looks a lot more plausible as a result of the revolutionary iPhone interface This application could provide the demand needed to fill up new high speed mobile data networks (whether mobile WiMAX or HSDPA/UPA) Sprint and Clearwire would benefit because the value (and potential differentiation) of their large 2.5GHz spectrum holdings will increase

Analysis: A month ago it looked like video was the only obvious major new source of demand for new mobile data networks (and was subject to many questions, not least whether broadcast a la MediaFLO was good enough). The iPhone suddenly makes use of standard Internet browsers on cellphones look practical (and attractive). This is also the first time for quite a while we've really seen vocal complaints about the speed of cellular mobile data networks (although EDGE is admittedly not the latest and greatest technology).

If use of standard Internet browsers on mobile phones becomes commonplace, it will significantly increase the requirement for additional capacity (as well as speeds) on mobile data networks. This would raise the demand for spectrum, and potentially make Sprint and Clearwire's 2.5GHz holdings (which can't be duplicated by any competitor) a huge long term competitive advantage. It would also promote near term deployments by Verizon and AT&T in the AWS spectrum (benefitting other holders like the cable consortium), and raise the level of competition in the 700MHz auction.

Implications: It appears unlikely that mobile WiMAX at 2.5GHz will be economic for rollout to the last 5M-10M US homes. Cellular operators will be able to pay far more for 700MHz spectrum than broadband access providers, and cellular providers probably won't emphasize fixed data solutions in their deployment. The key issue for satellite broadband providers is whether partners such as AT&T will be motivated to push the service or whether these deals are simply a maneuver to make AT&T look good with regulators.

Analysis: WiMAX providers such as Clearwire are focused on second tier metro/suburban areas with relatively high pop densities. Sprint is expected to focus even more intensely on the top metro areas. WiMAX deployments in rural areas tend to be led by community action and/or small players and so will probably remain fairly fragmented.

The 700MHz spectrum auctions are supposed to lead to a "third pipe" for wireless broadband, but its implausible to expect broadband access business plans to sustain as high a value as portable cellular applications. Assuming incumbent cellular players dominate the auction then its unlikely they will put much effort into deploying fixed broadband wireless (especially since AT&T and Verizon have lots of wireline broadband customers already). 

As a result, the addressable market for satellite broadband is likely to remain at 5M-10M homes in the US for the next decade (depending on the traction that small scale/community oriented WiMAX deployments achieve). However, satellite broadband can't compete with terrestrial solutions (for consumer applications) where these are deployed.

Wildblue and Hughes could split perhaps 2M customers between them in five years time, but growth will be highly dependent on getting more consumer mindshare. Wildblue's partnerships with AT&T and Satellite TV are the right way to go, but it is still unclear how much these companies will really promote the service. AT&T in particular could treat satellite broadband as a way to convince regulators that it shouldn't be forced into rolling out more DSL, rather than actively pushing service to customers in rural areas.