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Article Appearing in the March 2007 Edition of Satellite Finance

S-band mapped out in Brussels European Commission paves the way for CGC network
by Greg Francis, Access Partnership

In an unexpected turn of events last year, Europe's governments asked the European Commission to figure out whether it could divvy up a valuable tranche of S Band MSS spectrum that will be used with a complementary ground component (CGC). The Commission unsurprisingly accepted this challenge. In doing so, however, the EC knows that they need to facilitate a regulatory framework and process in a timeframe that keeps pace with the rollout of telecommunications networks. Their performance will inform the simmering debate on a pan-European spectrum agency.

A test bed
While the European policymaking process has for a long time involved the European Commission and its whimsically-named 'Directorate B', that involvement has been more a matter of courtesy than of conviction. Where the EU has formerly played an advisory or co-ordination role in deciding how Europe would allocate spectrum, the real work was done by the European Conference of Postal and Telecommunications Administrations, known by its French acronym, 'CEPT'. The last word on who gets to use what spectrum in any given country remains, as always, with the national governments, but the presence of an additional voice with legal clout now complicates matters - and may provide opportunities. If the EC can move quickly, it will outpace the work of the CEPT. In the eyes of Europe's telecommunications industry this will provide a comparative advantage, and the Commission will have taken a significant bridgehead in the development of pan-European policies.

The score so far
The Commission has indeed moved quickly to put a process together for awarding spectrum to the clutch of players hoping to roll out S-band networks with CGC. The jury is still out on the process itself.

In an effort to be brisk, the Commission might have followed the US lead, but did not. In the US, the FCC took a market-led approach to the allocation of S-band MSS spectrum that began in 1997 with the award of eight licences. It ended (if that word applies to regulatory processes) in late 2005 with the FCC order that the 20MHz on offer would be split between two players: TerreStar and ICO.

The market-driven milestone approach eventually allocates spectrum to those best-equipped to make use of it. It also identifies, eventually, the strongest players. By contrast, however, the Commission has settled on a hybrid process that will first impose tough milestones on anyone applying for spectrum and then - if needs be - decide upon those still left in the race by means of a beauty contest.

Who's in the race, and for how long?
In Europe, the main contenders so far are: TerreStar, SES, Eutelsat, Thuraya, EADS, ICO, Inmarsat, Alenia, and Alcatel. The simple fact remains that there is not enough spectrum for everyone and to reduce this number, nine milestones are currently proposed by the Commission. These include: filing a request for coordination with the Radiocommunication Bureau of the International Telecomunication Union (ITU), satellite manufacturing, launch and earth station contracts, verification of key construction milestones - specifically critical design review and satellite mating - and, finally, launch of the spacecraft and bringing service into use on a pan-European basis.

Meet the milestones, get the spectrum
Operators failing to meet specific milestones by a specific date will be eliminated from the process and forfeit their opportunity to gain access to spectrum. At present there is too little spectrum to support so many potential operators, so the milestone review process will be used to knock out those operators which are not committed to delivering service by some time in 2011.

The Commission is also proposing two sanity checks along the way. The first is at Milestone 1, 'request for coordination', after which no further operators will be allowed to participate in the process. The second check will come at Milestone 5, 'critical design review' at which time potential operators will already have had to make significant financial commitments (exceeding 100m euros) in order to meet the milestone. If at that time there is still a spectrum shortage, the Commission is proposing a selection and authorisation 'beauty contest' with four pre-defined selection criteria. The selection criteria are: (1) an ability to provide pan-European coverage, (2) a spectrum efficient network, (3) a system that confers competitive and consumer benefits as well as (4) public policy benefits.

Candidates will be scored on each of these criteria, with spectrum being awarded to those operators with the highest score. It is expected that only two or three systems will emerge from the process with sufficient spectrum to realise their business plans.

Seeking the best use of spectrum
The S-band CGC market in Europe is now split between two types of network. The first is group is led by TerreStar, ICO and Inmarsat, who want to use spectrum to provide two-way voice and broadband services. This group concentrates on the provision of strategic communications and public safety services, rural services - concentrating on lowering the digital divide in areas where broadband communications do not currently reach - and providing robust communications to emergency services.

The second group, broadly led by a Eutelsat - SES Global joint venture, among others, hopes to use the spectrum for mobile TV. SES and Eutelsat have joined forces to launch their S-band venture, placing a piggy-back payload on the Eutelsat W2A satellite, and from which they hope to offer 30 channels of mobile TV in a select group of markets, as well as some radio and data. This broadly follows the model of the Japanese venture MBCo.

Predictions
With 2 x 30MHz on offer, it is likely that three players will be awarded the spectrum in the long term, which might allow for both types of network to be accommodated. Established players on both sides have entered the fray and the milestone process alone, though tough, may not weed out enough of the weaker entries to allow the spectrum to be allocated before a beauty contest.

Learn to enjoy moules et frites
This is all new ground, but if too many applicants remain in the race, the various players will look to the Commission and the sometimes obscure decision-making processes of that institution. As they work overtime in project management meetings for their CGC network rollouts, operators would do well to stay in touch with the good people at the EC's Information Society Directorate. In this first-ever Commission-led authorisation process, the critical path leads to Brussels.

Greg Francis is the managing director of Access Partnership, a London-based regulatory consultancy firm with a focus on spectrum acquisition and telecoms regulation.

greg@accesspartnership.com
+44 (0) 20 7835 5910
www.accesspartnership.com