EchoStar Agrees to Sell Spectrum to SpaceX, Raising Many Questions
In a move that could shape the non-terrestrial network (NTN) market, EchoStar announced an agreement Monday to sell SpaceX its AWS-4 and H-block spectrum for about $17 billion, equally divided between cash and stock. The companies also agreed to enable EchoStar's Boost Mobile subscribers to access Starlink’s direct-to-cell service, and SpaceX will underwrite $2 billion in interest payments payable on EchoStar debt through November 2027. Industry officials acknowledged there are numerous unanswered questions about the deal and how it will be viewed by the FCC.
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With the deal, EchoStar would sell off many of its remaining licenses. Last month, it unveiled a deal to sell its 3.45 GHz and 600 MHz licenses to AT&T for $23 billion (see 2508260052). The company had been under pressure from FCC Chairman Brendan Carr to put its extensive spectrum holdings into use.
The latest agreement will enable SpaceX “to develop and deploy our next generation Starlink Direct to Cell constellation which will be capable of providing broadband service to cell phones globally,” the company said Monday. SpaceX noted that it already has 600 cell service satellites in orbit. The direct-to-cell constellation “connects to the broader Starlink constellation (consisting of more than 8,000 satellites) through the Starlink laser mesh, which enables coverage anywhere in the world.” At 360 kilometers above the Earth's surface, direct-to-cell satellites “fly lower than any other constellation in order to optimize the link between the cell phone and satellite.”
EchoStar said the transaction “allows for the combination of AWS-4 and H-block spectrum from EchoStar with the rocket launch and satellite capabilities from SpaceX to realize the direct-to-cell vision in a more innovative, economical and faster way for consumers worldwide."
Carr “sought this outcome, [so] we see no reason for the FCC to hold up and/or deny this transaction,” New Street’s Blair Levin told investors, noting that this appears to be the first time SpaceX is buying spectrum. “We don’t think the FCC will now change its policy on satellite spectrum generally being shared among satellite providers,” he said. “It takes pressure off the FCC to accede to other SpaceX spectrum petitions, something that is in aggregate helpful to exclusive wireless providers.”
MoffettNathanson’s Craig Moffett said the purchase price appears to be $1.03 MHz/POP, higher than the projections of 75 cents MHz/POP for the AWS-4 licenses and 65 cents for the H-block. “We and others had wondered whether EchoStar really ever had any intention of launching a [direct-to-device] satellite constellation, as they proposed a few weeks ago,” and “it’s pretty clear that the answer is, and was, ‘no.’”
Questions remain including "does EchoStar actually own the AWS-4 spectrum?" Moffett said. Also unclear is what SpaceX “plans to do with the AWS-4 in urban areas,” he said. “The D2D opportunity is, by definition, a rural one.” Another question is whether Dish, which EchoStar bought, ever really intended to enter the market as a full-scale carrier, he added. “It seems relatively clear that the first spectrum purchase” Dish made, the AWS-4 band being sold to SpaceX, “was an opportunistic buy-and-flip if the FCC would only agree to re-license that spectrum for terrestrial … use.” Moffett also noted that the transaction could benefit T-Mobile, the national carrier working with Starlink to offer D2D service.
“Mobile carriers should be very concerned about this satellite spectrum sale and the apparent scale of SpaceX’s ambitions,” said Michael Calabrese, director of the Wireless Future Program at New America, in an email. SpaceX can potentially use EchoStar’s spectrum “to enter the mobile market as a competitor without a need to rely on mobile carrier spectrum, as it must for its texting service with T-Mobile.”
In some ways, “this is a variation on the recipe that Comcast and Charter used to enter the mobile market and win nearly 20 million subscribers” by leveraging a Wi-Fi network with mobile virtual network operator (MVNO) backup coverage from Verizon, Calabrese said.
The Rural Wireless Association said many details remain unclear, but the announcement is part of a worrying trend. The proposed deal “reflects a rapidly shifting market and could have significant implications for rural consumers if rural wireless carriers are no longer able to operate due to a lack of spectrum and fair roaming arrangements, as well as an inability to unlock handsets tied to the Big 3 Carriers.” With EchoStar “pivoting” to a hybrid mobile network operator/MVNO model, the group said, “the original vision of a competitive terrestrial fourth nationwide carrier appears to be falling by the wayside.”