LightSquared Suffers Setbacks on Two Fronts

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PARIS — Hedge fund Harbinger Capital Partners’ attempt to deploy a multibillion-dollar satellite-terrestrial wireless broadband network in the United States suffered two setbacks the week of June 13 that are likely to be settled one way or another by July 1.

The first blow to Harbinger and its LightSquared venture came June 14 in the ostensibly unrelated Chapter 11 bankruptcy proceedings for TerreStar Networks of Reston, Va., which had been planning a satellite-terrestrial network similar to LightSquared’s, but using the 2-gigahertz, or S-band, section of the radio spectrum. TerreStar on June 14 agreed to be purchased by Dish Network of Englewood, Colo., subject to an auction to be held June 30.

New York-based Harbinger, in what was seen as an attempt to escape the signal-interference issues surrounding LightSquared’s use of L-band spectrum, had expressed interest in TerreStar before being outmaneuvered by Dish Network.

The second blow came June 15 from a public-safety group that had been testing the effect of terrestrial signal transmitters planned by Reston-based LightSquared, which has a license to use L-band spectrum for both its satellite and ground-to-ground communications. The group’s verdict: “interference to public safety operations will occur” if LightSquared deploys its network as planned.

The National Public Safety Telecommunications Council’s assessment is only one part of a working group created by LightSquared and government and industry representatives seeking to protect the integrity of the U.S. GPS positioning, navigation and timing service. GPS uses L-band spectrum located right next door to one of the two chunks of L-band spectrum that LightSquared plans to use.

At LightSquared’s request, the submission of the total working group report to the U.S. Federal Communications Commission (FCC), scheduled for June 15, was postponed to July 1. LightSquared told the FCC it would spend the additional two weeks reviewing “alternative frequency plans” for its network.

TerreStar filed for Chapter 11 bankruptcy in October and has spent the intervening months seeking a new owner that would pay off its nearly $1 billion in debt.

TerreStar struck pay dirt June 14, concluding an agreement with a subsidiary of Dish Network to sell TerreStar for $1.375 billion. The Dish bid will now set a floor to bidding for a planned auction of TerreStar scheduled for June 30 at the New York offices of law firm Akin, Gump.

Dish already agreed in February to pay $1 billion to purchase DBSD North America, also of Reston, which like TerreStar was in Chapter 11 bankruptcy proceedings and has a large S-band satellite in orbit and a license to use that spectrum for terrestrial communications as well.

To oust Dish, Harbinger or any new bidder for TerreStar will have to offer at least $55.5 million more than Dish is paying to account for payments that TerreStar would owe to Dish Network in return for its willingness to make a firm bid before the auction.

Harbinger’s interest in TerreStar has grown with the seriousness of concerns expressed by government and industry users of U.S. GPS signals.

With Dish Network now apparently in the driver’s seat in advance of the TerreStar auction, Harbinger will be hard-pressed to make a counter offer, especially given the nature of the Dish bid.

In a June 15 submission to the New York bankruptcy court handling the case, TerreStar said Dish’s offer is more than $150 million higher than TerreStar’s own December 2010 assessment of its value as part of the Chapter 11 proceedings. It is $90 million more than TerreStar’s entire debt load projected through next September.

The Dish offer is all cash and will arrive soon enough to permit TerreStar to pay off its $1 billion in secured debt straight away. The debt carries an interest rate that increases the total debt load by about $14 million per month.

Dish has agreed to pay 97 percent of the purchase price even before receiving U.S. and Canadian regulatory approval for the change in license ownership.

Dish owner Charlie Ergen, who also owns EchoStar Corp. of Englewood, which has just purchased satellite-broadband provider Hughes Communications for $2 billion, has left investors guessing about how he will position his satellite assets, saying, in effect, that the strategy may or may not become clear eventually.

LightSquared in January agreed to help finance a six-month study by what was called a Technical Working Group to separate fact from fiction with respect to LightSquared’s alleged interference with GPS signals.

LightSquared at the time said it was satisfied that the group would deliver an unbiased opinion that LightSquared and the GPS community would accept.

The FCC had said LightSquared’s license would depend on a satisfactory demonstration that it would not cause widespread interference with GPS. The company had said it would put filters on its ground transmitters — there are 40,000 of them needed to cover the United States — and incur other costs to assure that any interference was minimized.

That is why the National Public Safety Telecommunications Council’s June 15 release of its part of the working group’s report is so damaging. “The tests conducted confirmed that interference to public-safety operations will occur,” the group’s report said. Mitigating the interference would require replacement of roof- and tower-mounted antennas that public-safety organizations rely on to carry GPS signals.

LightSquared’s request for a two-week extension, to July 1, of the deadline the FCC had set for receipt of the working group’s report was signed by Jeffrey Carlisle, the company’s executive vice president for regulatory affairs.

“LightSquared determined that additional testing, beyond what had been planned initially, including alternative frequency plans to support its network roll-out, was necessary to permit a proper evaluation of various mitigation options for addressing the GPS receiver overload issue,” Carlisle’s letter said.

“That testing has been performed, and it has set back the timetable, particularly in some sub-teams in which data is still being processed and analyzed.”

That was not how the Coalition to Save GPS saw the development.

In a June 16 conference call with journalists, the coalition said all testing done so far shows that LightSquared cannot operate as planned without devastating GPS.

The group’s principal spokesman, Jim Kirkland, said LightSquared is likely using the two-week delay to climb down from its original position by offering to forego use of the upper bloc of L-band spectrum it is licensed to use, at least for a number of years. The service would limit itself to only the lower bloc of spectrum.

Kirkland, who is vice president and general counsel for GPS hardware provider Trimble of Sunnyvale, Calif., said too little testing has been done to determine how bad even this limited use of spectrum would be for GPS.

Kirkland said LightSquared focused on testing the lower L-band frequencies for interference only “at a very late stage” of the technical working group’s labors. While it is likely that the lower band will not cause as much interference, the limited evidence so far suggests it, too, will cause problems, especially for high-end GPS equipment used by construction crews and in agriculture. “There will be significant interference with a large number of GPS receivers,” Kirkland said, saying the difference between the two blocs of spectrum is “between really, really bad and a little less bad.”

Addressing Harbinger’s interest in TerreStar’s S-band spectrum, Kirkland said: “That’s what they should have done in the first place.”

 

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