Anterix Inc (ATEX) 2016 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Pacific DataVision first-quarter earnings update.

(Operator Instructions)

It is my pleasure to turn the floor over to your host, John Pescatore. Sir, the floor is yours.

Good evening everyone, and welcome to pdvWireless' earnings call for the first quarter of FY16. Joining me today to discuss our results are Brian McAuley, our Chairman; Morgan O'Brien, our Vice Chairman; Tim Gray, our Chief Financial Officer. Before we begin, I want to hand it over to Tim to remind everyone of a few important items.

Thank you, John. Before we begin the substance of today's call, I would like to make some brief introductory comments. Earlier today, we issued a press release, which outlines the topics we plan to discuss today. If anyone has not yet had the opportunity to review this press release, it is available on the pdvWireless Corporate website at www.pdvwireless.com, It is also available on the SEC's website. Additionally, I would like to remind our listeners that this conference call is open to the public, and an audio replay of our discussion will be available on the Company's website.

During this call, we will discuss some factors and matters that are likely to influence our business going forward. Including statements relating to regulatory issues, expected market launches, customer acceptance of our service offerings, and our spectrum initiatives. Any matters discussed today that are not historical facts constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those found in the risk factors section of our filings with the SEC, which could cause our actual results to differ materially from those suggested by our forward-looking statements. We encourage all of our listeners to review our SEC filings, including our quarterly report on form 10-Q, which we filed with the SEC today, and our annual report on form 10-Q, for the fiscal year ended March 31, 2015, for a more complete description of these risks and uncertainties. We undertake no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of the relevant SEC filing.

In addition, the financial information we plan to discuss on this conference call includes a non-GAAP financial measure, adjusted EBITDA. The Company defines adjusted EBITDA as net income or loss, with adjustments for depreciation, amortization, interest income or expense, income taxes and stock-based compensation. We use adjusted EBITDA to evaluate the Company's performance, and provide this financial measure to investors as a supplement to the Company's reported results, because we believe this information provides additional insights into the Company's operating performance, by disregarding certain nonrecurring items, or items are not reflective of the day-to-day offering of its services. Adjusted EBITDA should not be considered in isolation, as a substitute for, or as superior to, financial measures calculated in accordance with GAAP. And the Company's financial results, calculated in accordance with GAAP, and any reconciliation to our GAAP financial statements, should be carefully evaluated. As appropriate, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results, prepared in accordance with GAAP, are included in the earnings release, which is posted on the Company's website.

With that, I will hand it back over to John.

Thanks, Tim. Our first quarter was a busy one. We made important progress on our broadband initiative, we launched our first market area and began turning up sites in additional markets. We also improved our cash position by completing our secondary offering, raising around $65 million on a net basis. With that fundraising, we are well capitalized to move through the regulatory process, to enhance our spectrum position, and to continue to develop our dispatch business. Over the last few months, we have advanced our regulatory initiative, aimed at increasing the efficiency and customer value of our spectrum. Together with the Enterprise Wireless Alliance, we filed proposed rules with the SEC in May, which outlined recommended procedural and technical operating parameters related to the proposed realignment of the 900 MHz band. Should this realignment be approved, our spectrum could then be used for broadband technologies. The dates for applied comments and comments have now passed, and the FCC has a more complete record of the issues. The issues raised in this round were as expected by PDV, and for the most part, we've spoken about them on previous calls. We remain confident that we will be able to work through those issues with the incumbents in the band. Morgan will speak more to this in a few minutes.

As to the near-term buildout and launch of our Next-Generation DispatchPlus networks, I'm happy that we can now report that during the month of June, we commercially launched DispatchPlus in Houston, and we had sites in service in Dallas, Atlanta and Philadelphia. We are still in the early stages of market development, especially on the sales and marketing front. As I have said in the past, we expect that the buildout of our networks, and ultimately the development of our distribution and customer base, will happen over time. We are selling business solutions, not a shrink-wrapped consumer service. Our sales model is primarily indirect, which means we are selling from dealers and not building out a large direct sales force. From a cost perspective, we benefit from success-based compensation, but it also means that we have to get the dealer signed up as our first step in the ramp-up process. They need to buy into, and be trained on, the value of our solutions, and then ramp up their efforts. While we are working to develop the best formula for growth, we expect the ramp-up period to extend for at least six months post-commercial launch.

From a quality and coverage perspective, the Houston network is performing better than our expectations. Given the initial launch system is complete in Houston, and based on the progress we've made in other markets, we can confirm that the Company's estimates for capital required to deploy a typical market, including the cost per site and the number of sites, were within the averages per market we'd previously discussed. As a reminder, we previously said that it would take, on average, about 10 to 12 sites per market, and it would cost up to about $2 million per market. Given the data from our buildout activity, we expect to be able to keep our overall buildout cost, as we previously stated, between $30 million and $40 million for 20 markets. As for the development of our distribution channels, as we said previously, it will take time to ramp. We not yet reporting subscriber metrics, as it still too early for those numbers to be meaningful. We are pleased, however, that in the early stage of customer acquisition, we are seeing interest from the business verticals we have been targeting, such as transportation, distribution, construction and field services. Initial indications are also positive, in terms of our $30 per month bundled price, and our differentiated offering. We have a good complement of dealer partners in Houston, and have begun the process of signing up dealers in numerous other markets. Our dealer program has been well received so far. In Houston specifically, our dealer partners are pleased with the coverage and quality of our network, and our differentiated offering. We are providing dealer training and support, as we ramp up our sales and marketing activities. All of the early indicators are consistent with what we previously discussed, and again, we always expected a ramp-up period after a commercial launch in a market. This will give the dealers the ability to demonstrate our solutions, as they begin to then invest in their own sales and marketing activities.

With that, it is my pleasure to turn the call over to Morgan O'Brien, our Vice Chairman, to discuss our regulatory initiatives.

Thank you, John, and good afternoon, and thanks, everybody, for participating. As most of you know, my major function for the Company, at this juncture, is to oversee our regulatory process, because it has a very significant amount to do with taking our asset and making it more valuable. Just as a bit of a refresher, after acquiring, last year, the spectrum from Sprint, we now have approximately 240 channels, at 900 MHz, in each of the top 20 markets. And our spectrum position is national, and is roughly 240 out of the 399 channels that the Commission has made available, or 10 MHz. As John has described, we have a two-pronged approach to our spectrum that we acquired from Sprint. On the one hand, beginning to deploy immediately, narrow band dispatch services in the top markets, and these are services which can use the spectrum under the current FCC rules, and that process is well underway. But at the same time, when we raised our capital last year, we told investors that it was our expectation that soon after acquiring the spectrum, we would make an approach to the FCC, and suggest that the channels that we had bought could be used much more efficiently if there were some changes in the rules.

So to review a little bit, our prediction was that this kind of a rule-making process at the FCC, on average, takes something from 18 to 24 months. There is no set of rules that specifies exactly how something like this works. It is based, really, more on experience, and on the particulars of a given case. But our prediction was, 18 to 24 months was a reasonable way of looking at that. We are now nine months into the process, and we feel pretty good about how much has been accomplished. Joined with Enterprise Wireless Association, we filed our petition roughly nine months ago. And there are now, on file at the FCC, two complete sets of comments and reply comments. And also are ex-party, in which we laid out specific rules for how to accomplish what we were proposing.

In essence, without going into too many of the technical details, what we are proposing is that, out of universe of 399 channels, where we are by far the largest incumbent, having on average 240 channels in each of the top markets, that those channels be -- the allocation be altered in such that 240 channels, or 6 MHz, would be made available for broadband. And the rest of the spectrum would be where incumbents at narrow band would be reassigned and realigned. So in essence, this is a re-banding proposal, comparable to what has been done in the past, comparable to what Nextel has been involved in, couple of times in its history, and so it is a familiar process. The Commission recognizes the need to do this, because virtually all spectrum that's useful in a mobile environment has already been assigned, and has licensees operating on it. And so to move to the ability to have new technology, the FCC has to consider processes like the one that we have proposed.

So as I say, we are nine months into the process. I would say all of the incumbents in the 900 MHz space, other than ourselves, through their representatives, and acting individually, have responded. And so the Commission now has a good record of what the interference and other type of issues would be involved in a process of this kind of complexity. So what we are expecting -- but there is no set of FCC rules that would suggest when it would happen -- but what we are expecting is for the Commission -- what we've asked is for the Commission to issue a so-called NPRM, or notice of proposed rulemaking, in which the Commission would respond to our proposal. They, of course, can grant it, as it was suggested. They can deny it as it was suggested.

They can modify the proposal. And there' s a tremendous amount of variety in the ways the Commission could respond. As we see the issues, as they have now been flushed out through this nine-month process, as we often say, we see no surprises. On the other hand, of course, the incumbents, particularly large incumbents, when they are asked to submit to retuning their radios, it has an inconvenience factor that cannot be avoided. And so we just have to look at that process, and this is what the FCC will do.

We had an opportunity, after the last set of comments -- our reply comments were filed in the middle of July. We have subsequently, at our request, had a meeting with the staff of the FCC, and I want to talk a little bit about that. But first, I have to say that these kinds of meetings are tremendously valuable, and they are available, of course, to any party in a proceeding. But to make them really useful, there is an expectation, on the part of the FCC, that what is said in the meetings is not reported in a he said/she said type of process. So while I know that a lot of investors very much would like me to say, we went in there, and we said, we said, we said, and they said, they said, they said, I really cannot do that. But what I can say, which I think is constructive and useful, is that we went into that meeting feeling like we knew -- at the end of the two rounds of comments, that we knew what the interference and other issues were that would be at the heart of any FCC decision in this matter. And I believe that the conversation that we had in this meeting last week reflected that. And that there was a positive and constructive discussion, and an ability for us to make clear what our points were, and the kind of back and forth that you would expect.

I have had it mentioned that perhaps any meeting at the FCC could be characterized as positive and constructive. And I mentioned that, regrettably, over the years, I have been in such meetings in which there was much more of a feeling of, we basically, as FCC decision makers, owe everybody an audience. But we are not responding very well to what your -- the comments, and the arguments that you are making. So I know what a polite but not responsive environment is, and I think it is fair for me to say that that is not what we are seeing here. It is not what we've seen here, from the very beginning. That, of course, is not a prediction. It is not a commitment, on the part of the FCC. It's only to say that a party who is proposing something such as our proposal wants to believe that the FCC gets it, understands what is at stake. And then will proceed to make it -- a decision in the public interest. And I feel completely comfortable with that -- that we are in that position, it is that kind of a process.

We have had good and constructive discussions with trade associations, representing some of the loudest opponents to the proceeding, who are making points about what they want to make sure, or what they do not believe would work under these circumstances. We have had plenty of opportunities. We continue to explore those opportunities, to get a deeper and deeper understanding of what's involved here. But -- and then we can - I am sure a lot of you have questions. I can say that if you read, for example, our reply comments that were filed on July 14 -- and that you can get access to on our website. If you read those reply comment, it is, as best we could lay it out, our position on the issues, and our contention that, on any reasonable definition of harmful interference, our proposal can address and meet. And we can agree to not cause any harmful interference to any existing operations, with the very large proviso that harmful interference is a definite FCC term of art. The FCC doesn't say, when you introduce a new technology, your adjacent channel neighbors cannot be aware that you are there.

That's not the Standard. The Standard is, what is the level of interference potential? And is it consistent with current rules? And is it consistent with a policy of encouraging innovation, and by stakeholders using -- driving to use new technology. So we are agreeing and proposing what we think are very stringent standards. We believe that LTE technology, in its current state, with advanced filtering and other devices, and other techniques, can allow us to operate fully the kind of system we are envisioning. Which is a build-to-suit LTE broadband for critical infrastructure and others. That is the proposal that we have put on the table, and we feel good about where we are. We think the process has moved very efficiently so far. Of course, no commitments, there never are at this point in the process. But after many, many years, and many of these processes, I do feel confident about how this is proceeding. That is probably enough detail, until we get to the point of asking questions. So unless you want me to go in some other direction, John, I will stop talking now, and wait for the question-and-answer period.

Thanks, Morgan. This is Tim, I will take over from here. I will review the key highlights of the Company's financial results for the first quarter of FY16. My review is not intended to replace the full financial disclosure enclosed in the Company's quarterly report on form 10-Q, filed with the SEC today, and we encourage listeners to review that filing for additional information.

Revenue for the quarter ended June 30, 2015 was $841,000, compared with $831,000 for the quarter ended June 30, 2014. For the first quarter, the Company reported a net loss of negative $4.35 million, or negative $0.32 a share, compared with a net loss of $2.59 million, or negative $0.92 per share, the previous year. The increase in revenue for the quarter is principally a result of the spectrum leasing revenue from Motorola, offset by decreases in the Company's lower margin International application solutions business, and higher customer churn in its legacy application solutions business. The US business has been the Company's primary focus over the last several years, during which time we have significantly expanded the functionality of our solutions, much of which is included in the new DispatchPlus service offering. General and administrative expenses for the three months ended June 30, 2015 increased by $1.3 million, or 53.6%, from $2.42 million for the three months ended June 30, 2014. The increase for the quarter is primarily due to an increase in headcount and related costs, in order to support the Company's business initiatives.

Adjusted EBITDA for the quarter was a negative $2.95 million, as compared with a negative $0.28 million in the prior year. The increase in adjusted EBITDA losses in the first quarter was caused by the combination of the decreasing gross margin, related to the decline in application solutions revenues, and planned higher selling, general and administrative costs, as the Company incurred costs to implement its business plan. The Company has a strong cash position, with approximately $176 million in available cash, as of June 30. The Company's cash position was further enhanced by $65 million in net proceeds from the public offering of common stock in May 2015. In the first quarter ended June 30, 2015 the Company spent $1.4 million for the acquisition of equipment and design of its networks. We continue to estimate that the capital expenditures necessary to deploy networks in 20 major metropolitan areas, including what we've already spent, will be between $30 million and $40 million.

With that, I'll now turn it back over to John.

Thanks, Tim. We are thrilled with the opportunities in front of us. We remain intensely focused on executing our plan to become the best private wireless carrier, dedicated to business and critical infrastructure companies. We've attracted a great team, now over 60 strong, and are well capitalized, as we continue to advance our regulatory initiatives, enhance our spectrum position, and to continue to launch and ramp our dispatch networks. In closing, we are pleased with the progress we have made to date, and remain optimistic that our FCC petition will be granted.

I'd like to turn it over to the Operator now, to facilitate any questions.

(Operator Instructions)

James Breen.

William Blair. Thanks for taking the question. Just a couple questions. One, Morgan, as you look, as I read through the comments that came in, obviously there were a lot that were negative, and fewer that were positive. Can you -- given your experience, can you comment on how normal this is, relative to this type of process with the FCC? And then just overall, for John or Tim. From the business perspective, you've got a few markets launched now. When do you think you will start to see revenue from those markets start to show up in the books? Thanks.

John, do you want me to take a first stab at the first part of James' question?

Sure.

Okay. I always like to say to people that the FCC does not use a scale to weigh comments for and against a proposal. They are quite capable of ignoring those kind of factors. In terms of how many for, and how many against. Because their watchword is -- what's in the public interest? And frequently, what's in the public interest isn't immediately popular. But having said that, there is nothing more important, for a proponent of change, such as ourselves, then to understand the environment that we are asking to be inserted into, and the legitimate rights of incumbents. So we are absolutely focused on what the incumbents have to say, and the arguments that they are making. And you can break them down into various categories. An awful lot of time, there's repetition, of course, as various parties make a lot of the same points. I would be happy to have more in the record emphasizing the positives, after a re-banding, of getting broadband capabilities, particularly broadband capabilities that are specially focused on critical infrastructure. Unfortunately, that gets lost.

There's plenty in the FCC's record, from earlier proceedings, about the importance of that for critical infrastructure. But in a proceeding like this, what you hear is a lot more -- and it is not surprising -- a lot more from the incumbents, who are concerned about investment, and what they already have in place. So it isn't a popularity contest. It is a, what's in the public interest? I feel like our position, which agrees unequivocally to pay all costs of comparable facilities, and agrees to take the full burden of mitigating any harmful interference, should it occur, and suggest numerous ways of making a new entrant in this space a good neighbor. All those things are true.

On the other hand, particularly below 1 gigahertz, where this spectrum is, the Commission will not have any opportunities, now or in the future, of working with virgin spectrum. There is always incumbents. And the FCC has to take that as one part of the equation, but also look at encouraging stakeholders to make the investment, to introduce new technologies, to provide more competitive services, and to stay with the rest of the world. So when people ask me, how can you be confident when a lot of people are negative, I say, because we are on the side of the thrust that the Commission has been committed to for at least the last 25 years, inspector management. And while incumbents, and their interests, are absolutely necessary to be considered, it is not a popularity contest. So that's how I would respond to that.

Great.

David Dixon --

(multiple speakers) Can we stop one second? Because there was another half of that question.

Part two of the question was around the customer activity. And remember, we are building a customer base that will take some time to ramp up. We've begun seeing early customers on the network. There are orders in multiple markets, for example. But we do not believe the numbers are meaningful enough to disclose. You will obviously see the impact of the revenue in our financials, as we share our operating results, moving forward. I do think I said earlier that, as we get the markets commercially launched, there's a ramp-up period, and we will use the six-month timeframe.

We're going to see a lot more, so it is still very early. We launched Houston in June. We have three additional markets that have sites in service. And that doesn't mean all the sites are up. So it does give us the ability, though, to start and get the process of our dealer partners to kick the tires, get comfortable with the quality, get comfortable with the solution, and begin getting their mind share, because really, that's our first sale. We've got to get them behind us, and in indirect mode. That's the challenge, and the opportunity. And then they, in turn, will make the right investments alongside us, in sales and marketing. So it is still too early to give you some of those numbers.

I think David Dixon was next?

Sure, John, thanks. And so a two-part question, really. First one, just directed for -- towards Morgan, and the second just more generally perhaps. But firstly, I know you've attempted some discussions with Sensus during this process with the FCC. I'm just wondering if it is necessary for you to have those discussions mature and develop positively, in order to move the FCC process forward? That would be the first question, for Morgan.

And then the second question is with respect to the significance of the SouthernLINC Wireless [LTE] launch in Birmingham. Whether there's any insights you can provide there? Or whether that's significant at all? They have some other markets planned there. I'm thinking in terms of the markets they're planning to serve. Any feedback on the technology? How it performs? Because as I understand it, it is lining up against narrow band, perhaps some similar issues there? The lack of a guard band, and the speed of the launch. So just any insights there? It may be too early, I'm not sure, but just appreciate your thoughts there. Thanks.

All right, should I start answering that question? (multiple speakers) Okay, hey, David.

Hey, Morgan.

We have had multiple meetings and conversations with Sensus, always civilized and constructive. It is peeling an onion, to get to a sufficiently deep understanding of everything that they have deployed. At the moment, as we understand it, as we define the rights and interests of them and their customers versus ourselves, we think this can all be accommodated at the FCC. And I know, and I'm sure you know, that the FCC is very enthusiastic when parties get together and work things out. So we are continuing to seek those encounters, and we incorporate everything that they say on the record, and that they say unofficially. And I'm sure they are doing the same. I fully expect that more meetings with them are in the offing. (multiple speakers)

Let me just say one thing about Southern Company, which is that Southern Company is very unusual in that, over the years, they acquired 800 megahertz spectrum. Our proposal that we've all been talking about here is 900 megahertz. But at 800 megahertz, in their regions, which is parts of, I think, five states in the Southeast, anchored more or less by Atlanta. The Southern Company, the utilities that make up Southern Company, created SouthernLINC. And SouthernLINC acquired spectrum, and became a very viable regional iDEN player, using 800 megahertz spectrum.

When the process unfolded, of moving to re-banding as result of the public safety issues, et cetera, over the last decade or more, Southern Company and Nextel, now Sprint, made a deal with each other, and with the FCC, in which, ironically, roughly 6 megahertz, so 3 megahertz paired of 800 megahertz channels, were in the hands of Southern Company, or SouthernLINC. And they are now deploying an LTE system, which I do not know much about. But what I do know about it, it is a reasonable analogy to what we are proposing to do.

So I have been puzzled by Southern Company's opposition to our proposals, since I had an opportunity to read a lot of what they said in their comments, as they attempted to get this 800 megahertz broadband opportunity. And in essence, what they said was, the utilities of the future absolutely have to have broadband capabilities, and we are going to provide them. So I don't know what John may be able to add to that, but we are all enthusiastic about what they are doing at 800 megahertz. But of course, that can only be done in that one region, because other than in that region, no utility has any broadband spectrum.

Correct, yes.

Yes, and I don't have much to add to that, Morgan. I think it is a good indication of the value of broadband to the utility community, and -- that a 3x3 megahertz is being planned to meet those requirements. So I think it is a good thing, in comparison. The only other point I was going to make, to the earlier question, is that this is what a rulemaking process is there for. So the differences that are on the record now, with Sensus and others, we do not feel that it is an absolute requirement that these things are adjudicated outside of the FCC process between us. But that there's enough information on the record to now move forward independently, we believe, at least, to get through these issues. But of course, we want to continue to sit down and meet with all the parties, because it is that community that we expect, also, long-term, to be customers.

Okay. But David, let me make one other point, which I think is awfully important. These processes at the FCC are very useful in getting real definition of a position. And Sensus has now done a very good job of articulating a position. And it is that, by virtue of the deployments that they have made, they believe that they have now acquired something which is akin to adverse possession and real estate. That they have a reliance interest to be able to operate systems in an environment that essentially, according to them, is extraordinarily quiet. And the reason it is extraordinarily quiet, I would argue, is that the iDEN system, which was operating vigorously and aggressively on a lot of the spectrum, was shut down in June of 2013.

So the FCC, and the FCC staff, and only they, will have to decide, can a party, such as Sensus, create and have what they call a reliance interest, to operate on spectrum perpetually? Even if it means their neighbors can't operate their spectrum, even according to current rules. So we are saying, we think it is very helpful, but that issue is now absolutely teed up. We do not think the FCC could possibly support that argument. On the other hand, anything reasonable, in terms of accommodating adjacent channel operations, is absolutely consistent with the position we have been taking all along.

Right. And just lastly, just so I understand this, is it better for you to work with the oppositioning side of an NPRM, or towards the issuance of an NPRM? Is it better for those issues to be taken up, once the NPRM is issued? Or at this juncture, is it in no man's land now, ahead of the next step?

Right. It is kind of impossible to say, except maybe later, with the benefit of hindsight. But at this point, our position is that the FCC has everything they need to make a decision on the legal issue here. But that it is certainly always encouraged by the FCC for parties to discuss their differences, and try to get closer. So I think, as I just pointed out, this reliance interest, adverse possession principle that they want to stand on, it has to be adjudicated, and it could only be adjudicated in the NPRM.

So the negotiations don't necessarily help in setting the goalposts in -- ahead of time? Because the goalposts couldn't be moved around, I guess? Is that the way to think about it? That the -- a reasonable person (technical difficulty) work towards a position from there?

David, I'm afraid you blocked out, on my phone anyway, for just 30 seconds. So could you rephrase it?

Sure. So is the right way to think about this that negotiations, leading up to an NPRM, are probably not as useful, because the goalposts, using that analogy, can move around? Whereas inside of an NPRM, the goalposts perhaps are set?

Yes, I think that's a very good way of putting it. Or let's say what it is going on right now is probably not accurately described as negotiations. It is familiarization. It is each party not wanting to mischaracterize the position of the other party. But at the end of the day, the goalposts will be set by the FCC. You are right.

Right. Thanks very much.

Tracy Fu.

Hi, this is Tracy Fu from QVT. I have a question for Morgan. I just wanted to know if you could elaborate on the guard band issue? I know in March, in your presentation that was filed with the FCC, you have these two 150 kilohertz guard bands on either side. And then in May, you basically took those out. How do you see this issue working forward? And then maybe you could recap what happened in 800 megahertz with the guard bands? Because I understand there was a 1 megahertz guard band for a part of the nation, and then the Southeast had none. And maybe you could just tell us what happened.

Sure. Let me first clarify that, as to what we describe as the internal guard band, which is built into a 3 megahertz LTE channel, we relied on that earlier, and we still rely on it. There -- we have not changed that in any way. What we have said is, anybody deploying a 3 megahertz LTE channel will take advantage of the 150 kilohertz guard band on either side that's built in. So in essence, a 3 megahertz LTE channel (multiple speakers) doesn't -- exactly, it's like 2.8 megahertz, or whatever the math is. Yes, it is. So in fact, our argument is that, because of the 150 kilohertz internal guard band, no additional guard band is needed, based on current developments in filtering. And there are degrees of filtering that are state-of-the-art, and available commercially, which when deployed alongside of the [ENOB], or the base stations in an LTE configuration, very substantially reduce the out-of-band emissions, such that the out-of-band emissions on channels other than the 150 megahertz and the 150 megahertz, which are internal, that they reduce the signal below the effective noise floor for any adjacent channel operators.

So that is why we say, yes, historically, the FCC has used guard bands when they felt they were necessary. But they are what we describe as a luxury in today's world. For example, the argument is made, in this proceeding, by some parties, that 1 megahertz guard band is necessary. So if you look at that as paired, that is 2 megahertz, or 20% (multiple speakers) -- it's 20% of all the spectrum that's available at 900 megahertz. So you would be saying to the Commission, in order to promote efficient use of the spectrum by permitting broadband, let's start by knocking 20% of the effective spectrum out. It doesn't make any sense, unless it were absolutely necessary to avoid out-of-band emissions beyond a level that the Commission considers reasonable.

So we are saying, if you follow the logic of previous decisions, and you accept the advanced state-of-the-art in filtering, a guard band, in this context, is not needed. And as -- and we point to the analogy of the exact same process with SoCo, that we were talking about before, and Sprint, where at 800 megahertz, the FCC did not consider it necessary to insert additional guard bands. They used various other ways of approaching it. So if somebody is trying to look at this from a history lesson standpoint, history suggests guard bands. They were used all the time, including at 700 megahertz and whatever. But today, when you are talking about so much pressure to develop and re-farm spectrum that's already been assigned, and the technology allows you to filter out the out-of-band emissions, a guard band would be unnecessary and a luxury. So that's the position that we are taking.

Okay, I didn't understand there still is the 150 kilohertz internal guard band.

Yes, I'm glad you asked. Because if it confused you, as closely as you follow this -- I'm glad you asked. Because I want to make sure that, in our zeal to say, in our reply comments, that there is no guard band, that we did not make it really clear.

Okay. (laughter) I didn't understand that. Thank you.

And we are showing no questions in the queue at this time.

Okay. Then I would like to thank everyone for your time today, and we look forward to sharing more updates as we move forward. Thanks again. Have a great night.

Thank you, everybody.

Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.