LightSquared’s Long and Winding Road Takes New Twist

   The news came just weeks after the FCC granted a waiver to allow LightSquared to launch its hybrid broadband service and to circumvent a federal rule by offering wireless broadband service without forcing clients to also lease satellite connections. As a condition of the decision, LightSquared said it would establish a cooperative process to work with the FCC and other federal agencies to address and resolve issues relative to its network deployment. Simultaneously, the 4G LTE network operator entered the second phase of its $337.5 million cooperation agreement with MSS operator Inmarsat to increase the amount of contiguous spectrum available to both companies.

   Throughout the interference testing phase, LightSquared blamed GPS equipment manufacturers for being sloppy in their designs and, indirectly, the FCC for allowing such products to reach the market. One year later, after a series of heated battles with the FCC and GPS manufacturers regarding unfavorable test results, LightSquared ambitions were dealt a severe blow when the National Telecommunications and Information Administration (NTIA) issued a letter to the FCC in which it concluded “LightSquared’s proposed mobile broadband network will impact GPS services and there is no practical way to mitigate the potential interference at this time.”

   In a Feb. 15 statement, FCC Spokeswoman Tammy Sun said the development did not bode well for the company. “The NTIA, the federal agency that coordinates spectrum uses for the military and other federal government entities, has now concluded that there is no practical way to mitigate potential interference at this time. Consequently, the Commission will not lift the prohibition on LightSquared. The International Bureau of the Commission is proposing to (1) vacate the Conditional Waiver Order, and (2) suspend indefinitely LightSquared’s Ancillary Terrestrial Component authority to an extent consistent with the NTIA letter.”

   LightSquared adamantly rejected the NTIA findings, stating that the agency’s testing relied on interference standards that have never been used in this context. The company also alleged that the NTIA’s hand was, “forced by the GPS community in order to reach the conclusions presented today. This, together with a severely flawed testing process that relied on obsolete and niche devices, shows that the FCC should take the NTIA’s recommendation with a generous helping of salt,” the company said in a response statement.

   LightSquared’s troubles, however, continued to mount as its spectrum ally Inmarsat issued a notice Feb. 20 to the 4G LTE company that it defaulted on a $56.25 million payment due upon the completion of a Phase 1 transition under its cooperative spectrum agreement to support a national wholesale mobile broadband network.

   LightSquared commenced the first phase of the agreement in August 2010. The first phase of the companies’ 2007 multi-phase agreement to reallocate spectrum resources required Inmarsat to fulfill certain obligations important to the deployment of LightSquared’s 4G-LTE integrated terrestrial and satellite network and protection of their respective customers. The second phase focuses on Inmarsat providing LightSquared with enhanced operational flexibility for the deployment of its 4G-LTE integrated terrestrial and satellite network. Inmarsat would have then made additional spectrum available to LightSquared at an annual cost of $115 million at an annual rate increase of 3 percent.

   When the second phase of the deal was fully executed, LightSquared would have obtained the use of up to 59 MHz of terrestrial and L-band ATC spectrum over the continental United States and Canada.  

   “This notice triggers a period of 60 calendar days during which LightSquared can remedy the payment before Inmarsat is entitled to enforce its rights and remedies under the agreement for payment default, including pre-agreed spectrum arrangements and termination of certain LightSquared rights under the Cooperation Agreement,” Inmarsat said in the default notice.

   LightSquared responded with its own statement published Feb. 21, which claimed that the payment had not yet been triggered under the terms of the original agreement.

“The terms of the agreement allow for additional time to resolve pending questions before phase one is complete and the final payment is due. LightSquared is committed to fulfilling its business plan to bring world-class wireless broadband connectivity to millions of Americans and believes that Inmarsat will remain an important partner in the company’s future endeavors,” the 4G LTE network operator said in its response.

   LightSquared, financed by Harbinger Capital, was designed to build a wholesale-only nationwide 4G-LTE network complemented by satellite coverage to compete in the mobile broadband space with market leaders AT&T and Verizon Wireless. In July, Sprint Nextel confirmed moving forward with its long-awaited partnership with LightSquared and signed a 15-year spectrum hosting deal to provide LTE to its customers. The deal also included a 3G nationwide roaming agreement with Sprint, which would have allowed LightSquared wholesalers to offer combined 4G/3G data services after the LTE network was deployed in major U.S. markets between the second half of 2012 and early 2013. LightSquared was to issue $4.5 billion in 4G-LTE and satellite purchase credits to Sprint with the option for future LTE credits.

   Satellite Industry and Telecom Industry Analyst and Via Satellite Columnist Max Engel suggested that LightSquared’s interference problems may have come from a different source — the path by which ATC spectrum and LightSquared followed to reach this point. “For LightSquared, the very same magic that turned relatively uninteresting satellite spectrum into valuable wireless spectrum also poisoned that spectrum,” said Engel. “If LightSquared had used TerreStar’s S-band spectrum, rather than its sister company SkyTerra’s L-Band spectrum, the attempt to increase available wireless spectrum might have worked.”

   But Engel added that nobody is exactly sure what could have saved LightSquared from its current dilemma. “The problem remains the tortured path by which spectrum that was allocated for one purpose was incrementally shifted to another without a full examination of the implications of that shift. The same incremental set of rule changes and waivers that made it possible for the FCC to introduce new wireless spectrum and support competition also prevented the structured analysis that would have shown what a potentially bad idea the repurposing was.”

   LightSquared also had significant political opposition to its arguments in both the U.S. policy and military sectors. Following the NTIA and FCC decision regarding LightSquared’s interference problem, Rep. Mike Turner (R–Ohio), Chairman of the House Armed Services Subcommittee on Strategic Forces, said he was pleased with the outcome.

   “The FCC has realized what our military leaders and Congress have been saying all along — LightSquared’s proposed network will dangerously impair GPS receivers and our military’s ability to train and operate. This responsible step by the FCC, albeit months late, is encouraging. I hope that they will continue this course and will not allow any harmful interference to our national security GPS network. Congress will have to safeguard this spectrum, whether it is held by LightSquared or any successor,” Turner said in a statement.

   As for now, LightSquared Spokesman Terry Neal said the company would continue to fight the FCC/NTIA ruling and work to amend its situation with Inmarsat. “LightSquared has raised several matters that require resolution before the first phase comes to a close. The terms of the agreement allow for additional time to resolve pending questions before phase one is complete and the final payment is due,” said Neal. “LightSquared is committed to fulfilling its business plan to bring world-class wireless broadband connectivity to millions of Americans and believes that Inmarsat will remain an important partner in the company’s future endeavors.”