LightSquared Pushing Deadlines, Asking FCC To Ease Rules

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PARIS — The hedge fund-backed company planning a multibillion-dollar U.S. mobile broadband network using satellite and terrestrial links appears at risk of falling behind the already tight schedule that it guaranteed to U.S. regulators.

Reston, Va.-based LightSquared, whose announced financial backing remains almost exclusively in the hands of Harbinger Capital Partners of New York, has missed a self-imposed deadline of late 2010 to begin reorganizing the satellite L-band spectrum over North America. Spectrum reorganization is necessary for LightSquared’s wireless broadband network to perform as planned.

To effect a repurposing of L-band, LightSquared had agreed to a two-step procedure with mobile satellite services operator Inmarsat to take over some of Inmarsat’s L-band in North America.

The cost to Inmarsat in terms of lost customers would be marginal, Inmarsat officials said, and far outweighed by LightSquared’s promise of $115 million in annual payments, rising at 3 percent per year, in return for the use of the spectrum. The payments have no end date.

Inmarsat and LightSquared already are operating under a separate agreement that obliges LightSquared to pay Inmarsat $337.5 million through early 2012.

The fact that LightSquared has not triggered this second of two Inmarsat-related spectrum deals takes on importance because Inmarsat has said it will need up to two-and-a-half years to install new equipment at its customers’ premises, or on their mobile assets, once the LightSquared agreement goes into force.

Whether LightSquared needs the Inmarsat L-band cleanup to be completed before it offers its service is unclear. But the company has guaranteed U.S. regulators that its network, using a large satellite already on orbit and some 36,000 base stations to relay signals where satellites cannot reach, will serve at least 100 million customers by December 2012. The system will reach 260 million customers by December 2016, the company promised the U.S. Federal Communications Commission (FCC).

LightSquared spokesman Tom Surface said Jan. 21 the company would have no comment on the implementation of what it calls its Phase 2 agreement with Inmarsat.

The Inmarsat L-band agreement is just one of several issues confronting LightSquared. The company has asked the FCC to modify the rules on companies using mobile satellites and terrestrial links to make it easier to deploy the networks.

LightSquared is specifically asking the FCC to permit its wholesale customers, who in turn sell to end users, to be able to sell terrestrial-link handsets in addition to dual-mode handsets designed to capture both satellite and terrestrial signals.

Satellite handsets have become much lighter, smaller and more attractive in the past decade, but they still require an antenna that keeps them from shrinking to conventional smartphone size.

Being able to offer a terrestrial-only phone, using radio spectrum reserved for satellite use, would broaden LightSquared’s prospective customer base. But it also would take the company further away from the FCC’s original intention of tethering the satellite service to the terrestrial service to ensure that companies do not use satellites as window dressing to hide their terrestrial networks.

The original FCC license for LightSquared and other companies planning similar satellite-terrestrial services stipulated that all the user handsets be dual-mode.

U.S. regulators’ review of the LightSquared’s request to modify its license to permit the terrestrial-link handsets has been slowed by requests from several government agencies that the FCC withhold approval pending studies looking at signal interference from LightSquared’s service.

Backed by the U.S. Department of Defense, the U.S. National Telecommunications and Information Administration (NTIA) on Jan. 12 said LightSquared’s change in business model would mean much more use of its terrestrial links. The volume of likely traffic, NTIA said, “creates a new and more challenging interference environment that must be addressed satisfactorily.”

NTIA and the U.S. Defense Department are especially worried that satellite navigation signals might suffer interference in areas of high use of LightSquared’s terrestrial-only signal.

How long these interference studies would take to complete is unclear. Also unknown is whether LightSquared is waiting for their completion, and the resulting response from the FCC to the license modification, before triggering the Inmarsat agreement.

LightSquared Chief Executive Sanjav Ahuja told the FCC on Jan. 6, before the NTIA had delivered its opinion, that the company would be willing to organize a six-month review of its license modification to examine the signal interference issue. The company, he said, would go so far as to finance the work, up to $20 million.