The Basics
The C-band Alliance (CBA) has its genesis in a proposal by Intelsat, in partnership with Intel, in late 2017 that outlined a way to repurpose C-band spectrum for 5G applications. In the weeks following the Intelsat announcement, Luxembourg-based satellite operator SES expressed willingness to discuss, and in February 2018 formally joined Intelsat in the C-band spectrum reallocation proposal, with the two satellite operators controlling over 80% of the US C-band market. In late 2018, the two companies were joined Eutelsat, and Telesat—the three other satellite operators with significant C-band spectrum resources in the United States—in forming the C-band Alliance.
The CBA aimed to unite the satellite operators under one voice in negotiating with the US Government and the mobile network operators over the future allocation and value of the spectrum, and it may have been able to do so. However, as mentioned in part I of this article, Eutelsat recently exited the alliance. Last week at the World Satellite Business Week in Paris, the CEO of Eutelsat Rodolphe Belmer noted that despite the fact that Eutelsat remains in favor of the CBA as a “facilitator” of spectrum allocation from satellite to terrestrial, that “our share of the C-band alliance was very, very small. In that context, it is difficult to get your voice heard”. In short, it’s hard to get a good deal when you have a very small piece of the pie, and so Eutelsat would rather go it alone than go with a deal that they cannot agree with.
Most likely, the operator to whom the CBA is most critical is Intelsat. As a side effect of the company’s historical leveraged buyouts in the late 2000s and early 2010s, Intelsat is by a wide margin the most heavily indebted satellite operator. How indebted could a large, publicly traded company be, one might ask? Well, for the financiers of the group—Intelsat’s 2018 revenues were $2.16 billion. The company’s total debt as of EoY 2018 was US$14.02 billion. So, for every dollar of revenues (not profit), Intelsat has roughly seven dollars of debt. Put another way—of Intelsat’s $2.16 billion in revenues, the company paid US$1.2 billion in interest on its debt in 2018! (admittedly, this is higher than most years, where interest payments are only about $1 billion). That is to say, in 2018, 60% of the company’s revenues went to paying the interest on the debt, and 40% is left over for, well you know, everything else!(salaries, CAPEX for new satellites, office space, taxes, and, you know, paying down the $14 billion of actual debt).
So, in short, Intelsat’s best chance of ever paying off its debt would be if some magic event were to occur that would involve the raining down of billions of dollars of free money from the sky into Intelsat’s coffers. Fat chance of that happening, right? Well…..
If satellite broadcast (DTH) is the industry’s golden goose, the reallocation of C-band spectrum is the Gold Rush of all Gold Rushes, and indeed, there is Gold in them there Megahertz.
That is to say, especially for SES and Intelsat—which each control more than 40% of the C-band market in the United States—the reallocation of C-band spectrum could represent a literal bonanza of cash. That said, much like the Hotel California, the C-band reallocation could be heaven or could be hell, with the opponents in this battle royal being the vastly larger, vastly more politically influential telecoms industry, and with the prize being just your average billions of dollars.
With this being the case, the CBA had, initially, set out trying to determine what percentage of the C-band market is controlled by each satellite operator, how many C-band antennas are currently in the United States, and how might the existing C-band demand be condensed from ~500 MHz of spectrum to ~250-300 MHz of spectrum (the answer? More efficient video compression technology, among other things). These efforts had been, to a certain extent, in vain, with the satellite operators never seemingly coming to agreement on allocation of future funding, and with surveys of customers to ascertain C-band antenna counts being, to put it mildly, difficult, with one excellent industry journalist highlighting the fact that customers being surveyed “could not identify the actual C-band frequencies they’re using, or enter the correct GPS coordinates at their facilities. They undercounted the number of antennas at a given site, even when the total number was a less-than-daunting number, like seven”. Indeed, the work of the CBA, during its short life, was not easy, with this being exacerbated by the fact that organizations such as Google have consistently been lobbying the US government, stating that the number of C-band antennas reported by operators is exaggerated, with many antennas being no longer in use.
While the CBA appears to be no-more with the exit of Eutelsat, it remains extremely likely, bordering on certain, that some of the C-band spectrum in the United States will, in the next couple of years, be repurposed from satellite to terrestrial for the rollout of 5G. As such, despite Eutelsat’s dropping out of the alliance, we will probably still see a windfall to the satellite operators, with the questions now being “how much?”, and also “under what terms?”
Here in Paris last week at the World Satellite Business Week, and in a subsequent article, several highly qualified people presented wildly varying figures. While one analyst suggested something in the neighborhood of “a couple billion dollars” to both SES and Intelsat, another mentioned around $3.3 billion to each, with this figure taking into account time value of money and clearing costs. A third group—ACA Connects—stated a figure as high as US$60 billion for the full 500 MHz of spectrum, implying potentially US$24 billion for 200MHz thereof, and thus around $10 billion each to SES and Intelsat. At the end of the day, while the figures vary wildly, there is at the very least some consistency—they all start with a “b”, and end with an “illion”…that is to say, the stakes are high.
If and when an agreement does get reached, what then? How will we reallocate spectrum that is currently being used by tens of thousands or more C-band dishes in the United States? The answer—slowly and delicately. The CBA’s original plan called for 180 of the 500 MHz of C-band to be reallocated to 5G, with a 20 MHz “guard band” to prevent interference, leaving 300 MHz as accessible for satellite operators. Such a plan was estimated to cost the satellite operators between US$1-2 billion, with this figure including cost of replacement satellites, as well as filters to be placed around C-band receive-only earth stations.
Other proposals—most recently from Charter Communications among other telcos—have called for auctioning off nearly the entirety of the C-band spectrum, leaving less than 200 MHz for satellite operators to utilize, in a plan that would also leave some funding available for transitioning from satellite to fiber. This proposal—clearly a short-term worse outcome for the satellite operators—should be seen as a warning that the operators are playing against powerful opponents, and that the position of the operators is far from certain.
Overall, it is clear that no one has a particularly good grasp of how much C-band spectrum is worth, and there is clear difference in opinion from different parties with their own vested interests on how it should be reallocated. Most likely, the spectrum reallocation process will be primarily market driven, and ideally would be public and transparent. Given the degree of influence by various tech and telco companies in Washington, and the amounts of money at stake, any less would be most likely a bad sign for the US taxpayer, and for the satellite operators (being the rather politically weaker of the various interest groups). 5 years from now, much of the United States will likely be covered by 5G, with a large part of the C-band spectrum reallocated to terrestrial MNOs. How quickly we get there, and by what means, and for how much money, remains to be seen.
About The Author
Blaine Curcio
Founder at Orbital Gateway Consulting
Blaine Curcio has spent most of his career working in the satellite communications and commercial space industry, with experience at satellite operator SES, and with a multiple industry consulting and research firms. Blaine has spent his entire career in Asia, and is a recognized expert on several topics related to China. This has included giving lectures on the Belt and Road Initiative, China’s macroeconomy, and the Chinese space industry. He regularly attends conferences throughout Asia as a speaker and moderator, and is a contributor to SpaceWatch.Global, Talk Satellite, and the Satellite Executive Briefing, among other industry publications.
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