Giles Thorne, an equity analyst at investment bank Jefferies, says that the FCC Chairman Ajit Pai, in deciding to favour an in-house FCC controlled auction of 300 MHz of satellite spectrum over the US, has engineered a “Gordian knot: a public auction that has political and legal legitimacy but a roadmap of relentless disruption by the CBA to stop this administrative re-allocation of the band.”
Thorne is right. The CBA’s key members could now, if they wish, hold out on their initial plans to free up their wholly-owned C-band spectrum. Thorne says that while the CBA proposed private auction might have had a shakier legitimacy it nevertheless offered the benefit of expediency because of the full cooperation of the operators. “We still see room for a fudged middle-ground but, inevitably, timing is going to be pushed out,” said Thorne.
He added that background briefings to the press suggested that 50 per cent of the revenues generated by the auctioned spectrum will go to the US Treasury.
Indeed, Thorne said that the CBA’s proposal was the “least-worst” path forward, and that the CBA’s position might now harden. The CBA’s statement, saying it seeks to develop “[An] effective alternative plan and achieve the best outcome for the American public while protecting the interests of our users and the rights of our companies”.
The CBA statement read: “The [FCC] announcement does not address the critical involvement of the incumbent satellite operators in executing the complex task of reconfiguring and transitioning their networks. Nor does the announcement address the fundamental modification of the rights afforded by the existing FCC licenses held by the CBA members which would be required under a public auction approach.”
These closing phrases are a deliberate seeding of non-cooperation, said Jefferies.
Investor confidence has evaporated as far as Intelsat is concerned. Intelsat suffered a 24 per cent fall in its share price on November 19th, ending the day at just $6.09 per share. At one stage shares were trading at $5.59, and a $20 fall since the start of November.
Eutelsat (no longer a member of the CBA) welcomed the FCC’s decision, saying: “Eutelsat looks forward to engaging with the FCC in a fruitful and positive dialogue aimed at shaping an equitable and efficient process to facilitate the expedition of the auction and subsequent clearing of the frequencies, so that 5G can be rolled out in a timely manner throughout the [Continental US].”