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Wireless upstart Northpoint Technology Ltd. may be making headway in its quest to get approval for a plan to share direct broadcast satellite spectrum for a terrestrial broadband data and video service.
The Federal Communications Commission is set to rule this month on the company's petition to use the spectrum, amid a fierce lobbying battle between the Washington, D.C.-based startup and such incumbent DBS powers as Hughes Electronics' DirecTV and Echostar Communications that fear signal interference from the new service.
While opinions differed about what exactly the FCC might do, any advancement would mark a tactical win for Northpoint and its controversial plans. The company, backed by the $2.2 billion venture capital firm Citizens' Advisers and its majority stakeholder, Sophia Collier, is developing a terrestrial fixed wireless service for consumers using the same Ku-band frequencies as DirecTV and Echostar's Dish Network. Using 500 MHz in cells averaging 50 to 100 square miles, Northpoint wants to offer high-speed Internet service along with a multichannel video service.
Collier-whose entrepreneurial pedigree dates to her 1977 creation in her Brooklyn, N.Y., kitchen of American Natural Beverage Corp. and its flagship Soho Soda, later sold to Joseph E. Seagram-says 68 local affiliates have signed up to fund and roll out Northpoint's service next year under the name BroadwaveUSA.
"The consumer equipment already exists in its current DBS form, and this eliminates a significant obstacle. We have a great service that will add to the competitive landscape," says Collier, who indicates tests are under way involving off-the-shelf set-top boxes and chip sets. No final vendors have been selected.
Jeffrey Wlodarczak, senior cable and satellite analyst at New York-based CIBC World Markets Corp., says Northpoint has a lot going against it given the task of starting a multichannel service from scratch that must compete with DBS incumbents and the cable companies. "The point is that much of the low-hanging fruit is gone," he says.
The DBS business argues that Northpoint essentially is trying to get the Ku-band spectrum for free, although FCC rules would appear to mandate an auction instead. "This is a question of interference, not of competition," says Andrew Wright general counsel at the DBS trade group, the Satellite Broadcasting and Communications Association (SBCA). "If Northpoint can operate its wireless cable service without interfering with DBS consumers then we would welcome the competition."
Wright says the FCC already has allocated spectrum where Northpoint could operate without causing interference to DBS subscribers, but that the company hasn't indicated why it should not be required to operate there. "What they are offering is microwave wireless cable, and this has never succeeded in the marketplace," Wright says.
Northpoint's delivery system was tested extensively over a two-month period of mid-1999 in Washington with Lucent Technologies Bell Labs Wireless and Multimedia System Development Group participating in the design of the actual tests. Additional tests were conducted in Texas. Lucent concluded that based on the test data, the interference claimed by DBS would not occur. "Perhaps even more important, not a single consumer or DBS subscriber came forward to file a complaint while these tests were underway," Collier says.
The DBS industry's level of political opposition is another matter entirely. Collier counted no fewer than 14 separate FCC filings by the DBS industry during the testing period. And the DBS industry still is clamoring for additional tests.
"Our opponents include DirecTV's parent, General Motors, along with companies like Alcatel and Echostar. They all have enormous resources," says Collier who estimates these companies spent over $22 million recently on various lobbying activities.
SBCA's Wright says only a fraction of the DBS industry's lobbying involves the Northpoint issue, whereas "all of Northpoint's extensive lobbying appears to be directed at trying to get their terrestrial wireless cable service injected into the DBS spectrum."
Northpoint isn't exactly playing David to the DBS Goliath: the company is using lobbyists such as Beltway heavyweight Podesta Associates to help carry its ball on Capitol Hill.
Wlodarczak indicated that while it is still a bit too early to predict outcomes if the FCC grants Northpoint a license, the company could wind up in a partnership with or be acquired by one of its DBS competitors. One DBS player in particular that appears to quite open to a hybrid terrestrial/satellite transmission scheme is Pegasus Communications in Bala Cynwyd, Pa., which in May filed for approval to use the same spectrum as Northpoint.
"If the FCC determines that interference is not present, it makes a lot of sense that an existing DBS player could partner with Northpoint to expand its capacity significantly to do such things as deliver local signals or expand its pay-per-view offering," Wlodarczak says.
Collier describes three different Northpoint configurations including a "super-charged dial-up service with wireless delivery" where ISP partnering would be stressed, a multi-hop rooftop architecture which is ideally suited for hilly terrain, and an "Angel" approach-named after AT&T's consumer-oriented, broadband fixed wireless technology-where signals would be funneled through fixed termination points onto the public switched network.
While reports are circulating that Northpoint is about to secure an approval from the FCC to share DBS spectrum, Wright believes otherwise. "We don't share the view that it is a done deal," Wright says. "Competition is not the issue, it is interference."
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