We currently offer a range of mobile satellite communications services ("MSS") using two geostationary satellites ("GEOs") that support the delivery of data, voice, fax and dispatch radio services. We are licensed by the United States and Canadian governments to operate in the 1.5 - 1.6 GHz frequency band (the "L-band") spectrum which we have coordinated for our use. We currently have coordinated approximately 30 MHz of spectrum throughout the United States and Canada. Our United States and Canadian spectrum footprint covers a total population of nearly 330 million. In operating our next generation integrated network, we plan to use the spectrum for both satellite and terrestrial service. Our spectrum occupies a portion of the L-band and is positioned between the frequencies used today by terrestrial wireless providers in the United States and Canada. We were the first MSS provider to receive a license to operate an Ancillary Terrestrial Component ("ATC") network from the Federal Communications Commission ("FCC"). We were a major proponent of the FCC's February 2003 and February 2005 ATC and ATC Reconsideration Orders, both of which were adopted on a bipartisan, 5-0 basis. Our ATC license permits the use of our L-band satellite frequencies in the operation of an advanced, integrated network capable of providing wireless broadband on a fixed, portable and fully mobile basis.
With access to approximately 30 MHz of spectrum that is conducive for mobile and fixed broadband wireless services, we believe we are well positioned to support an extensive wireless business plan. We believe access to this amount of spectrum provides us with the ability to pursue a network architecture using a choice of third generation ("3G") and fourth generation ("4G") wireless air interfaces, including such technologies as WiMAX, Code-Division Multiple Access-Evolution Data Optimized ("CDMA-EVDO"), WideBand "CDMA" ("WCDMA"), Long Term Evolution ("LTE") and Ultra-Mobile Broadband ("UMB"). We believe our next generation integrated network will create the opportunity to use our United States and Canadian nationwide spectrum, in its current configuration, to establish a strong position within the wireless industry.
To improve our spectrum assets, on December 20, 2007, SkyTerra, MSV, and MSV Canada (together the "MSV Parties") and Inmarsat Global Limited ("Inmarsat") entered into a Cooperation Agreement relating to the use of L-band spectrum for both MSS and ATC services in North America. The Cooperation Agreement addresses a number of regulatory, technology and spectrum coordination matters involving L-band spectrum, including:
• Coordination of the parties' respective next generation satellite systems covering North America;
• Provisions for re-banding the parties' L-band spectrum in North America that provide each party with increased contiguous spectrum bandwidth for their operations. This increased contiguity will occur in a phased approach, with certain phases dependent on the payment of designated amounts to Inmarsat by the MSV Parties, and upon the occurrence of various financial, regulatory and other governmental actions;
• Provisions for increased flexibility in system operations and system enhancements that will result in greater protection from harmful interference for all relevant systems operations, and that progressively increases flexibility and supports more robust MSS/ATC operations, from the onset of the Cooperation Agreement through the various options that the MSV Parties may exercise;
• Provisions for increased reuse of a substantial segment of North American L-band spectrum to support the deployment of new services and to provide increased innovation and customer service to all users throughout North America;
• Settlement of outstanding regulatory disputes presently pending regarding the operation of certain L-band MSS and MSS/ATC services; and
• Pre-negotiated financial and operational terms for an option for the MSV Parties to obtain additional spectrum and technical flexibility for the deployment and operation of a 4G ATC network.
In addition, upon the achievement of certain events, including regulatory approvals and coordination among the other L-band operators, MSV and MSV Canada, would, over time, have the potential for coordinated access for up to 2 x 23 MHz (including large blocks of contiguous channels). A more complete description of the Inmarsat Cooperation Agreement is included in "Item 7. Management's Discussion & Analysis of Financial Condition and Results of Operations".
We believe that the changing dynamics of the telecommunications industry have created a compelling market opportunity for our planned next generation integrated network. Increased competition, industry consolidation, wireless substitution for wireline services and the general convergence of media and telecommunications have led major service providers to attempt to offer consumers a bundle of four communications services: video, broadband data, voice and mobile wireless services. However, incumbent wireless providers may be constrained by certain factors, such as their spectrum positions and legacy second generation ("2G") and 3G circuit-switched network architectures, as the demand for an advanced bundle has increased. Wireless carriers may also be pursuing different market strategies based upon their existing networks and customers rather than offering new services like those we plan to provide using next generation integrated technology. New technologies are emerging to deliver advanced broadband wireless services and applications to a potentially wide range of devices at price points we believe will be lower than those offered by incumbents' legacy networks. We anticipate that our United States and Canadian nationwide spectrum holdings and strategy to deploy a wireless, all-IP network will allow us, through wholesale customers and other strategic distribution partners, to provide superior connectivity to an array of devices, satisfy the evolving needs of the industry and capture a greater percentage of the consumer's total spending on communications services. We believe the potential market opportunity includes participation from large enterprises that have limited access to the wireless services business (potentially including content companies, video service providers, web services firms, consumer electronics companies, enterprise service providers, device and chipset vendors and Internet service providers). Those enterprises have large, loyal customer bases and are exploring opportunities to incorporate broadband wireless connectivity to differentiate and expand their core service offerings.
Financing
We will actively pursue financing alternatives to continue to increase the amount of capital available to fund our current operations and development of our next generation network, including constructing MSV-1 and MSV-2, the satellite component of the network. We are considering means to raise capital, including strategic partnerships (for example, a technology partnership carrying a capital investment), vendor financing, sale of our interest in TerreStar Networks, and debt or equity financing, among others. We are actively evaluating various strategic alternatives as they arise, and weigh capital needs against technology commitments or other potentially limiting factors. There is no assurance that we can raise sufficient capital, or raise sufficient capital with terms that are favorable to us, under these various financing alternatives to continue to operate our business or complete our network.
Current Business and Primary Markets; Reporting Segments
The Company has three reporting segments: MSV next generation, MSV MSS, and SkyTerra Corporate. The MSV next generation segment is deploying a next generation satellite system complemented by ATC. The MSV MSS segment is providing mobile satellite services that support the delivery of data, voice, fax and dispatch radio services using its existing in-orbit satellites. The SkyTerra Corporate segment is managing the publicly traded holding company, SkyTerra Communications, Inc. Financial information regarding each reporting segment is set forth in "Item 7. Management's Discussion & Analysis of Financial Condition and Results of Operations".
MSV has more than ten years of operating history providing MSS in North America using two nearly identical geostationary satellites (located nominally at 101° WL and 106.5° WL) that support the delivery of data, voice, fax and dispatch radio services. We are licensed by the United States and Canadian governments to operate in the L-band spectrum positioned between the frequencies used by terrestrial wireless providers. Our coordinated spectrum over the United States and Canada covers a total population of nearly 330 million. We offer services to a number of vertical markets in these locations. Our penetration has been highest in markets where terrestrial wireless infrastructure is cost-prohibitive or non-existent, where point-to-multipoint services such as voice dispatch are essential for ongoing operations, or where network availability is a critical requirement for service.
Bulk Satellite Capacity
We provide wholesale satellite capacity to customers who implement their own networks. These customers typically purchase specified amounts of bandwidth and power. The bandwidth and power are dedicated to the customer once purchased and paid for, and are not subject to other sale, or to preemption except for emergency purposes as provided in our authorizations from the FCC and Industry Canada. A majority of these customers access our network for fleet management and asset tracking services.
Satellite Telephony and Dispatch Services
We market satellite telephony services directly through dealers in the United States and on a wholesale basis in the United States and Canada. The basic service is two-way circuit switched voice, facsimile and data at up to 4.8 kbps. A range of satellite handset configurations is available to address the particular communications needs of select markets. User equipment can be installed on trucks, ships, and airplanes or at a fixed location. Customers can use the phones for standard voice communication, including value added services such as call forwarding, call waiting, and conference calling, as well as for file transfers, faxes and e-mail. Many of these users are federal, state and local agencies involved in public safety and security that depend on our system for redundant and ubiquitous wireless services during daily operations and in the case of emergencies.
In addition to circuit switched service, we provide satellite-delivered "dispatch" service. Dispatch service provides the wide-area equivalent of push-to-talk two-way radio service among users in customer defined groups. Each user can belong to as many as 15 groups, and each group can have up to 9,999 members. Group members can operate anywhere in the United States and Canadian coverage area. Dispatch service facilitates team-based group operations and is highly suited for emergency communications.
Circuit switched users are charged both fixed access and variable usage fees. Dispatch users pay a fixed access fee for unlimited usage; however, the fee varies with the coverage available. Monthly fees for satellite voice users range from $25 for certain public safety and emergency applications to over $100 for high volume users.
Packet Data Services
Packet data services is distributed through a reseller channel and provides the capability to transmit data in an "always-on" fashion (circuit switched service requires establishment of a dedicated connection for every new data transaction). Common applications include fleet and load management, credit card verification, e-mail, vehicle position reporting, mobile computing, and data message broadcasting.
Equipment and Supplier Relationships
We currently sell a mobile transceiver for use with our Satellite Telephony and Dispatch Service. This device provides integrated GPS capability. We recently began offering a PSTN telephony interface box manufactured by Link Communications, Inc. The interface allows customers to use MSV's MSAT-G2 voice and push-to-talk services using a conventional analog cordless phone. For Packet Data services, we use terminal equipment from EMS technologies. The EMS PDT-100 is an integrated vehicle mounted antenna and transceiver unit that is used with a variety of user interface devices. Our system terminates calls from its telephony services via both the AT&T and Sprint networks in the United States and via Bell Canada in Canada.
