Wireless	
  Spectrum	
  Research	
  and	
  Development	
  (WSRD)	
  
Promo%ng	
  Economic	
  Efficiency	
  in	
  Spectrum	
 ...
Who We Are
Barlow Keener

•  White	
  Spaces	
  regula9on	
  and	
  
transac9ons	
  
•  Muni-­‐Wi-­‐Fi	
  and	
  fiber	
  o...
1993 – The Conflict

Exclusive	
  
License	
  
Auc=ons	
  
1993	
  

Unlicensed	
  White	
  Spaces	
  	
  
2008	
  -­‐2010...
Licenses	
  Provide	
  Quasi	
  Monopoly/
Oligopoly	
  type	
  Compe==on	
  
•  Prevent competitors from entering
•  Allow...
No	
  License	
  –	
  Investment	
  Case	
  is	
  Hard	
  
•  Venture capital firms want chance at super-sized returns
–  ...
The Spectrum Sharing Formula
Spectrum Sharing = Spectrum Demand + Technology Innovation + Regulation

Limited Licenses Gra...
Shared Spectrum Chronology
1993 	
  	
  1993	
  2.4GHz	
  	
  Unlicensed	
  	
  -­‐	
  Part	
  15	
  
1999	
  DARPA	
  Mar...
Small Cell Locations
Many Cells, Not on Towers

Page 8
Some Solutions

•  Separate infrastructure from service provision
–  One infrastructure company can serve many service
pro...
Receiver Regulation

MHz	
  

Guard	
  Band	
  

Guard	
  Band	
  

FCC	
  2008	
  Shared	
  Spectrum	
  
Order:	
  “All	
...
FCC 3.5 GHz Small Cell Docket
Plan To Overtake DAS

Page 11
Small Cell Locations
Many Cells, Not on Towers

Page 12
Must	
  Create	
  Other	
  Entry	
  Barriers	
  
•  Examples
–  Long-term customer contracts
–  “Lock-up” distribution cha...
Equipment	
  Providers	
  are	
  Cri=cal	
  
•  Equipment provides have barriers to entry in the form of
their proprietary...
Macro Cells v Small Cells

Home	
  and	
  Business	
  Unlicensed	
  LANS	
  
$10	
  billion	
  in	
  businesses	
  &	
  ho...
Sharing Federal Spectrum
3550-3650 MHz

Page 16
Subscriber	
  Economics	
  Example	
  
Monthly 	
  

	
  

	
  Annual	
  

Revenue -

$50/mo

$600

Customer Care

($10)

...
Thank you
Barlow Keener & J. Armand Musey
bk@keenerlawgroup.com
671-671-1202

amusey@SummitRidgeGroup.com
646-843-9850

Va...
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Jumpstarting Investment in Wireless Spectrum R&D: Investor and Legal Perspectives

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Wireless Spectrum Research and Development (WSRD) Promoting Economic Efficiency in Spectrum Use
[Delivered at Massachusetts Institute of Technology -­‐ April 23, 2013]
Jumpstarting investment Investor and Legal Perspectives: Barlow Keener (Keener Law Group) and J. Armand Musey (Summit Ridge Group, LLC)

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Jumpstarting Investment in Wireless Spectrum R&D: Investor and Legal Perspectives

  1. 1. Wireless  Spectrum  Research  and  Development  (WSRD)   Promo%ng  Economic  Efficiency  in  Spectrum  Use         [Delivered  at  Massachuse=s  Ins%tute  of  Technology  -­‐  April  23,  2013]     Jumpstar%ng  investment     Investor  and  Legal  Perspec%ves     Barlow Keener Principal 617-671-1202 bk@keenerlawgroup.com J. Armand Musey Founder 646-843-9850 amusey@SummitRidgeGroup.com 535 Fifth Avenue, 4th Fl, New York, NY 10017 Tel: +1.646.843.9850
  2. 2. Who We Are Barlow Keener •  White  Spaces  regula9on  and   transac9ons   •  Muni-­‐Wi-­‐Fi  and  fiber  op9c   construc9on  legal  issues   •  Prac9cing  telecommunica9ons  law   for  20  years   •  Represent  fiber  op9c  service   providers   •  Distributed  Antenna  System  (DAS)   projects   •  Former  in-­‐house  counsel  for  RBOC   and  CLEC   •   B.A.,  University  of  the  South   •  M.A.,  North  Carolina  Central   University     •  J.D.,  Emory  University  School  of  Law       J. Armand Musey •  President/Founder  Summit  Ridge   Group,  LLC   •  Satellite,  Media  and  Telecom   Valua9on  and  Financial  Advisory   •  Significant  work  in  spectrum   valua9on   •  Former  top-­‐ranked  Wall  Street   research  analyst   •  Former  partner  in  bou9que   investment  bank   •  Chartered  Financial  Analyst  (CFA)   •  B.A.,  University  of  Chicago   •  M.A.,  Columbia  University   •  JD/MBA,  Northwestern  University   www.SummitRidgeGroup.com Page 2
  3. 3. 1993 – The Conflict Exclusive   License   Auc=ons   1993   Unlicensed  White  Spaces     2008  -­‐2010   Public  invests     $10b  annually   Verizon  invests   $10b  annually   Shared  Spectrum   “Verizon  Wireless  alone   has  invested  more  than   $80  billion  since   2000....       This  investment  relied,   in  part,  on  the   Commission’s   exclusive-­‐use  licensing   regime  ”   Unlicensed   Spectrum   2.4  GHz   1993   Small  Cell  3.5GHz    2012     •  •  •  •      Exclusive  Licenses     LSA    Licensed  Shared  Access   ASA  Authorized  Shared  Access   Unlicensed   “Combined  annual   contribu9on  ..$50  to   $100  billion  per  year.”   Wi-­‐Fi:  800m  homes  2016     U.S.  85m  homes  (65%)   Home  Wi-­‐Fi  RANs  =   Investment  ~$10  to  $4   billion  annually  home   Wi-­‐Fi  LAN     Page 3
  4. 4. Licenses  Provide  Quasi  Monopoly/ Oligopoly  type  Compe==on   •  Prevent competitors from entering •  Allows for abnormal non-competitive profits Source: http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2003_2/gupta/ Page 4
  5. 5. No  License  –  Investment  Case  is  Hard   •  Venture capital firms want chance at super-sized returns –  Expect many portfolio firms to fail –  Hope for a few “home runs” •  Hard to get “home runs” without barriers to entry •  Private equity firms want proven cash flow they can lever •  Hard to know capacity you will be getting – may only get a small faction of spectrum capacity after making large investment •  Can be tough to find a spot for shared-spectrum service companies Page 5
  6. 6. The Spectrum Sharing Formula Spectrum Sharing = Spectrum Demand + Technology Innovation + Regulation Limited Licenses Granted for Use of a Public Asset •  •  •  •  •  •  Particular Spectrum like 692MHz to 698MHz (Channel 50) Particular Spectrum size: 6MHz – TV, 5MHz blocks mobile, 60MHz 2.4GHz Limited Uses: fixed, Broadband, Land Mobile Radio (LMR), radar, mobile Specified Technology: Power, Antennas – for both receiver and transmitter License Time Limitations: 10 years (mobile) or 10 milliseconds Particular Use/Users: DOD, Public Safety, mobile carriers, TV, Radio Stations Page 6
  7. 7. Shared Spectrum Chronology 1993     1993  2.4GHz    Unlicensed    -­‐  Part  15   1999  DARPA  Mark  McHenry:  looking  at  amount  of  federal  spectrum  in  use   •  DARPA  Paul  Kolozody,  XG  program  >>  taken  over  by  Preston  Marshall   •  FCC  Spectrum  Policy  Task  Force:  Paul  Kolozody  &  FCC  Chairman  Michael  Powell   2004   FCC  White  Spaces  Order   “feasible  for  new  types  of  unlicensed  equipment  to  share  spectrum  in  the  TV  bands”   Intel  “unused  spectrum  could  be  used  by  unlicensed  devices  even  in  congested  areas.”     2008   FCC  First  Report  &  Order  –  Database,  Spectrum  Sensing,  Geo-­‐loca=on   2010  FCC  2nd  Report  &  Order  –  Database  Yes,  But  Sensing  is  Op=onal     Ofcom  2011,    LSA,    ASA  Priority  European  Union   PCAST  2012  –  LSA,  ASA  Priority  using  1000MHz  federal  spectrum    “The  devices  will  use  geo-­‐loca9on  technology  …  and  a  database  look-­‐up  that   iden9fies  the  unused  channels  that  are  available  at  their  loca9on.    This  type  of   “opportunis9c  use”  of  spectrum  has  great  poten9al  for  enabling  access  to  other   spectrum  bands  and  improving  spectrum  efficiency.”   Page 7
  8. 8. Small Cell Locations Many Cells, Not on Towers Page 8
  9. 9. Some Solutions •  Separate infrastructure from service provision –  One infrastructure company can serve many service providers –  Tower companies are reasonably well positioned to do this •  European Model –  Customers getting DLS/Cable modem get Wi-Fi routers with a public network –  Wireless service would be at least partially done by wireline operators. –  May result in spotty coverage Page 9
  10. 10. Receiver Regulation MHz   Guard  Band   Guard  Band   FCC  2008  Shared  Spectrum   Order:  “All  unlicensed  TV  band   devices  will  be  required  to  limit   their  out-­‐of-­‐band  emissions  in  the   first  adjacent  channel  to  a  level   -­‐55  dB  below  the  power  level  in   the  channel  they  occupy,  as   measured  in  a  100  kHz   bandwidth.”     FCC  2010  Shared  Spectrum   Order:  “We  recognize  the   pe%%oners’  argument  that  %ghter   emission  limits  could  result  in   higher  equipment  costs.”   Guard  Band   Lightsquare <=> GPS Receiver Interference MHz   MHz   MHz   Page 10
  11. 11. FCC 3.5 GHz Small Cell Docket Plan To Overtake DAS Page 11
  12. 12. Small Cell Locations Many Cells, Not on Towers Page 12
  13. 13. Must  Create  Other  Entry  Barriers   •  Examples –  Long-term customer contracts –  “Lock-up” distribution channels –  Exclusive alliances with valuable hardware providers –  Proprietary hardware standards –  Sub-contracts with existing service providers (backhaul, remote service provision etc.) –  Others •  These can be fundamental business decisions – make with care Page 13
  14. 14. Equipment  Providers  are  Cri=cal   •  Equipment provides have barriers to entry in the form of their proprietary technology. •  Seek vendor financing when possible •  In shared spectrum, equipment providers are smaller and often seeking their own financing –  Possible two-step process •  Equipment companies get financing •  Equipment companies use part to finance customers •  Large telcos may pressure equipment providers to avoid supporting small shared spectrum startups Page 14
  15. 15. Macro Cells v Small Cells Home  and  Business  Unlicensed  LANS   $10  billion  in  businesses  &  homes   Mobile  Carriers   $10  billion  in  Macro  Towers   •  •  •  •  •  •  •  Macro   4G  LTE   4G  WiMAX   Wi-­‐FI   GSM   CDMA   HSPDA   Carrier  backhaul   •  •  •  •  •  •  •  Wi-­‐FI   2.4  GHz   3.5  GHz   White  Spaces   600  MHz   5  GHz   Fiber  backhaul   Micro        Femto        Pico   Page 15
  16. 16. Sharing Federal Spectrum 3550-3650 MHz Page 16
  17. 17. Subscriber  Economics  Example   Monthly      Annual   Revenue - $50/mo $600 Customer Care ($10) ($120) Other ($15) ($180) Goss Cash Flow $25 $300 •  CF over Customer life $950 •  Cust Acq Cost $250 •  Breakeven 10 months •  Customer Life 48 month •  IRR 74% Page 17
  18. 18. Thank you Barlow Keener & J. Armand Musey bk@keenerlawgroup.com 671-671-1202 amusey@SummitRidgeGroup.com 646-843-9850 Valuation and Financial Advisory In the Media and Communications Sector Page 18

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