Spectrum reallocation risk

On February 28, 2020, the FCC took 300 MHz of C-band spectrum, 3.7 to 4.0 GHz, away from satellite operators for 5G, against $9.7 billion in accelerated relocation payments. Spectrum reallocation risk is a satellite operator's exposure to a regulatory decision that withdraws the frequencies its business model depends on, or reassigns them to another use. No technical failure of its satellites is involved. Radio spectrum is a scarce resource shared between terrestrial and space uses, and its allocation shifts with the priorities of national regulators and international coordination bodies. An operator can see all or part of its frequencies repurposed for a use deemed a higher priority, typically terrestrial mobile networks. In exchange it receives compensation whose amount and timing may not match the present value of the cash flows it would otherwise have earned. This risk affects the value of the space asset without involving a physical loss: a perfectly functional satellite can lose most of its economic value if the frequencies it operates on are taken away. For space insurance and project finance, this regulatory peril is analyzed separately from technical risk. It is handled more through contractual negotiation with the regulator than through a conventional insurance policy.