Editorial: Assessing LightSquared’s Predicament

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Things look dicey these days for LightSquared, which after investing hundreds of millions of dollars in a hybrid mobile broadband network has run into fierce and unrelenting opposition from GPS equipment makers and users worried about potential signal interference from the planned system. The startup has managed to get a satellite built and launched, but the far more daunting challenge — raising the billions of dollars necessary to deploy a network of some 40,000 ground-based signal repeaters across the United States — now looks immeasurably tougher.

Of more immediate concern is winning operating approval from the U.S. Federal Communications Commission (FCC) in the wake of recent findings by a technical working group that LightSquared indeed poses a severe GPS interference threat. Indeed, one must wonder at this point why the FCC not only licensed the system in the first place but also approved proposed modifications to LightSquared’s operating plan that apparently exacerbated the issue.

LightSquared, owned by hedge fund Harbinger Capital Partners, was knocked on its defensive heels in June, when the technical working group, composed of government and industry experts, concluded that its planned L-band network would cause unacceptable interference to all manner of civil GPS applications including public safety, air traffic management, recreation and agriculture. Preserving these established applications obviously is important, but LightSquared’s proposed network, the satellite component in particular, also has an important public safety benefit: keeping emergency workers connected with broadband service even in areas where terrestrial infrastructure has been put out of commission.

Before the working group reported its findings, LightSquared said the interference issue could be dealt with relatively easily through measures such as adding low-cost filters to affected GPS receivers. As the findings started trickling in, however, LightSquared was forced to backpedal, eventually pledging to initially operate only in the lower portion of the spectrum allocated to it by the FCC. LightSquared says less than 1 percent of GPS receivers — those used for precision applications such as construction and crop management — would be affected under its revised plan. The company further argued that initial service would be limited to urban areas, thereby giving some of the affected GPS users time to modify or change their equipment. Even so, hundreds of thousands of users would be forced to change out their equipment even under the revised plan.

Moreover, it is far from clear what LightSquared would do in the longer term as it seeks to implement the full service, which will require it to use more of the contested spectrum. In congressional testimony in June, Jeffrey Carlisle, LightSquared’s executive vice president for regulatory affairs and public policy, said the company, if allowed to commence operations in the lower 10 megahertz portion of its allocated spectrum, would work with the government and other interested parties to “either find alternative spectrum to allow our complete build-out, or permit a long-term, phased approach to use the upper frequency band only in a manner that is widely acceptable, technologically compatible and financially cost effective.”

The GPS community, smelling blood in the working group’s report and LightSquared’s subsequent retreat, is having none of it. The Coalition to Save Our GPS, a broad collection of GPS industry stakeholders recently formed in response to the LightSquared threat, disputed LightSquared’s contention that its concessions would minimize the problem. James Kirkland, general counsel at GPS equipment maker Trimble Navigation and the principal spokesman for the coalition, maintains there is no way for LightSquared’s ground network to coexist with GPS, period.

Though it appears to have its back against the wall — even Europe has weighed in against LightSquared, citing the threat to its planned Galileo satellite navigation system — LightSquared is not going down without a fight. As Mr. Carlisle noted in his congressional testimony, LightSquared’s plan to use L-band spectrum for a terrestrial network — the source of the GPS industry’s opposition — became a matter of public record 10 years ago when the company applied for its FCC operating license. In response to interference concerns voiced then by the GPS industry, LightSquared agreed to lower the power output of its ground stations, and subsequently won FCC approval to proceed.

In its latest FCC filing, dated Aug. 15, LightSquared noted that the GPS community didn’t mobilize its opposition until it became apparent the company’s plans stood a chance of becoming reality. The filing also says GPS companies have simply ignored U.S. government technical guidance in producing equipment that was incompatible with LightSquared’s service. Having built and placed those systems into service, the GPS industry is now being intransigent, effectively claiming squatters’ rights to the spectrum in question in defiance of sound spectrum-management principles, LightSquared says.

The FCC, under the premise that having a disaster-resistant nationwide mobile broadband network is a good thing, all but bent over backwards to support LightSquared. It granted LightSquared a wide swath of spectrum free of charge — terrestrial operators have had to pay for spectrum at auction — based on the company’s pledge to make satellite connectivity an integral component of its network. Since then, the FCC has granted several waivers of LightSquared’s license requirements — to the point that the satellite is beginning to look like window dressing on what for all intents and purposes is a terrestrial network.

For its part, LightSquared appears to have underestimated the severity of the interference problem, or alternatively, just assumed that its backing within the FCC would force a rollback of the GPS coalition’s position. It could also be argued that Harbinger simply bet on the wrong horse, staying the course on L-band when there was a noncontroversial alternative available in a pair of bankrupt companies seeking to deploy hybrid networks in S-band frequencies.

But the FCC, as it attempts to sort out this mess, must examine whether it is at least partially responsible. One would think the agency, presumably well-stocked with spectrum management experts, would have seen this coming and, assuming it did, taken stronger steps to discourage the massive investments LightSquared and the GPS industry are now desperately trying to protect. As it now stands, one side or the other is going to lose a lot of money. There is no guarantee of return on investment in the business world, but companies are entitled to a stable and predictable regulatory environment. It is not clear that LightSquared or its GPS industry opponents got that in this case.