Monday, November 28, 2011

LightSquared Gets Real: Signs First Deal with an ILEC 11/28/2011 San Francisco - LightSquared LLC today announced its first wholesale wireless services deal with an incumbent local exchange carrier.   The signed agreement with Louisiana based EATEL demonstrates that LightSquared, the ambitious privately held national broadband venture of Harbinger Group chief Philip Falcone, has crossed an important threshold of business credibility.

According to a LightSquared release of this morning, the two firms “announced that they have entered into a wholesale agreement that will allow EATEL to offer its subscribers high-speed wireless data and voice services using LightSquared’s nationwide 4G-LTE network.”

While Lightsquared has previously announced a plethora of other distribution agreements with a variety of retail sales channel partners, none of them have been with a traditional regulated operating telephone company. 

EATEL is, according to rural telco funding experts JSI Capital Advisors, the thirty-eighth largest telco in the United States.  JSI’s Phone Lines 2011 directory, the bible of American telecom independent operating companies (IOCs), lists EATEL with 11,542 broadband subscribers and 28,854 access lines as of December 2010.

“LightSquared’s network not only allows EATEL to offer our existing customers wireless broadband services, it also gives us a critical competitive advantage as we expand our services into new markets,” stated John D. Scanlan, EATEL president, in today’s release.

Who cares about a rural telco with less than 30,000 access lines, or a seemingly star-crossed national wireless start-up that engenders more conservative conspiracy theories than the Federal Reserve Bank? 

Anyone who cares about the future health of the independent rural telecom sector should care. Rural incumbent carriers face a continuing decline in access line customers, looming changes in Universal Service Fund subsidies for rural high cost operations, and then growth of wireless services in and near their service footprints.  They typically lack access to licensed spectrum or the economies of scale to bring up and wireless offering.

Taken together, these factors mean that many rural carriers don’t have the quadruple play – voice telephone, Internet access, video services AND a wireless offering – to compete against new entrant cable operators and overbuilders. “EATEL, founded in 1935, is the incumbent local phone carrier in the Ascension and Livingston Parishes of Louisiana where it provides innovative products including high-speed Internet, phone and television service over a fiber-to-the home (FTTH) network,” according to the LightSquared statement.

“With LightSquared, EATEL will be able to offer its growing customer base world-class wireless service that will enable EATEL to build on its long heritage of providing local communities with cutting-edge connectivity.”

Rural rate of return carriers, many of which are USDA legacy borrowers paying down loans from the Broadband and Telecom Loan Programs of the Rural Utilities Service (RUS), are prudent operators. For one of the larger such ILECs in the nation to sign with Lightsquared must be seen as a stamp of approval from the sector for the oft-criticized venture.
“EATEL is exactly the type of company that LightSquared is building its wholesale network to serve,” said Sanjiv Ahuja, chairman and chief executive officer of LightSquared.

“We believe EATEL and the many other ILECs around the country provide critical and valuable communications services to their communities, and their customers deserve the benefits including ubiquitous connectivity and lower prices enabled by partnering with LightSquared,” concluded Mr. Ahuja.
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