Start-Up Adds New Wrinkle to 4G With Hybrid Satellite-LTE Plans

Sanjiv Ahuja, chairman & CEO, Harbinger

Sanjiv Ahuja, chairman & CEO, Harbinger

May 3, 2010 – One of the more interesting wild cards among the forces shaping the emerging competitive landscape in next-generation wireless is Harbinger Capital Partners.

In late March, the private-investment firm submitted a plan to the FCC to build a hybrid satellite-terrestrial network that would eventually cover roughly 100 percent of the population. Harbinger declined an interview request, and its public comments thus far have been limited to information provided in its FCC application. But that’s enough information to do two things: provide a rough sketch of its business and network plans and generate plenty of skepticism.

First, the plans:

* If approved, Harbinger will use Long-Term Evolution (LTE) technology for a terrestrial network that will launch by Q3 2011 with about 36,000 base stations. This network will cover at least 100 million people by the end of 2012, 260 million by December 2015 and eventually more than 90 percent of the U.S. population. Denver and Phoenix will be the trial markets.

* Sometime this fall, SkyTerra – in which Harbinger now owns a controlling interest – will launch the first of a series of satellites for a fixed broadband service that eventually will cover 100 percent of the U.S. population. Harbinger says the satellites are powerful enough to enable handsets that are “very similar” to its LTE devices in terms of cost.

* Harbinger plans to offer mobile voice and broadband, although as is the case with 3G, LTE and WiMAX, Harbinger’s mobile services could displace some wired rivals, such as landline voice and DSL.

* Harbinger would be a carrier’s carrier, instead of selling directly to consumers and businesses. The effect would be that instead of creating a single competitor – itself – Harbinger could give rise to multiple ones.

By using LTE, Harbinger’s terrestrial network will be employing a wireless technology that eventually will have a market share and vendor ecosystem on par with GSM, simply because virtually all GSM carriers, representing 80 percent of the global market, are migrating to LTE. The catch is that Harbinger is doing so outside of the bands that virtually every other operator will use. As a result, Harbinger’s LTE network and user devices will require customization, which doesn’t come cheap – assuming that it can convince vendors to build its gear.

“Nobody likes to do these things when the volume is small,” one vendor says privately.

Customization and small volumes translate into a price premium, which has to be passed on to customers. If that premium is significant, then it will undermine Harbinger’s ability to compete with operators whose cellular or WiMAX networks use common frequencies and off-the-shelf gear.

Harbinger’s plan to go an unconventional route has some in the industry wondering aloud if it’s destined to become another NextWave in the sense that it winds up drawing attention for years without actually getting off the ground.

A Qualcomm spin-off, NextWave won $4.7 billion worth of C-block licenses in the FCC’s 1996 auction. NextWave then spent the next several years fighting to keep its licenses after defaulting on its payments to the FCC. It eventually sold its licenses to carriers such as Verizon Wireless.

Some in the industry also wonder whether Harbinger will be an attractive wholesale supplier to mobile virtual network operators (MVNOs) and other companies that want to offer broadband wireless but without owning a network.

“I don’t think they will have the spectrum position or the footprint to compete for providing MVNO service with Clearwire, which has 150 MHz nationwide [per market] on average,” one vendor says privately.

Harbinger’s plan picked up some credibility in late April, when it hired Sanjiv Ahuja – CEO of Orange from 2004 through 2007 – as chairman and CEO. And although its LTE plan has garnered the most attention, Harbinger has several other wireless investments.

“[Harbinger chief investment officer] Phil Falcone’s ambitious plan is a major piece in what appears to be a multi-faceted play for the wireless telecom business, as evidenced by his recent [purchase] of almost 10 percent of Palm, heavy investments in Sprint-Nextel and current holding in SkyTerra and Leap Wireless,” says Horace Kim, director of program management at Franklin Wireless, whose CDMA-WiMAX modems are sold by carriers such as Clearwire, Cox, Comcast, Sprint and Time Warner Cable. “Harbinger’s success in this effort would bode well for competition and is indicative of the ecosystem approach for the future of wireless communication/entertainment.”