Home A Requiem for LightSquared

A Requiem for LightSquared

Disruption scares the hell out of established organizations. The more entrenched the organization, the harder it will fight off the potential disruptor. In terms of the mobile infrastructure in the United States, there has been no bigger potential disruptor than spectrum wholesaler LightSquared. Earlier this week, the Federal Communications Commission suspended LightSquared’s waiver, effectively ending the company’s business plan and dreams of disruption.

LightSquared’s vision was to build a national 4G LTE network with satellite spectrum and provide wholesale. In this goal it came up with two very potent adversaries: the GPS community along with established cellular carriers AT&T and Verizon. After the FCC’s ruling, LightSquared is now a company with valuable assets but nowhere to deploy them, dead in the water. What happened?

GPS Community Fights Back

This story has been years in the making. Since LightSquared uses satellite spectrum, there was concerns that it would disrupt GPS connectivity for important entities such as farmers, air travel and government agencies. The GPS spectrum “bled” into LightSquared’s spectrum and made it so it would not work. This could be solved with filters designed to stop the bleeding, but the opponents of LightSquared did not institute them and the FCC cannot mandate that they do. Throughout 2011, LightSquared and other organizations tested whether the GPS signals were affected and found that while, yes, GPS was affected, it could be fixed. The GPS lobby though proved to be too savvy for LightSquared and held the FCC’s ear long enough that LightSquared went from favored status to have its waiver suspended.

Picture right: LightSquared CEO Sanjiv Ahuja

In a blog post on Monday Jeff Carlisle, LightSquared’s EVP for regulatory affairs and public policy mockingly called the GPS industry, “too big to fail.”

“The GPS industry has leveraged years of insider relationships and massive lobbying dollars to make sure that they don’t have to fix the problem they created,” Carlisle wrote.

The FCC suspended LightSquared’s waiver based on recommendation from the National Telecommunications and Information Administration (NTIA). The NTIA coordinates spectrum the spectrum use of the federal government, including the military.

“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,” FCC spokesperson Tammy Sun said in a statement. “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.”

While the NTIA has valid concerns, it is hard to ignore the fact that there is a remedy to the GPS problems pertaining to LightSquared’s spectrum. Yet, for the NTIA to fix the issue, a significant amount of money would need to be spent, money the agency is not likely authorized to spend in this time of perpetual budget crunch. It is easier to make LightSquared go away than to fix what is wrong with the system.

LightSquared just became a victim of the federal bureaucracy and the lobbying industry. Be damned the $4 billion dollars the company, its partners and hedge fund backers have spent to build out the spectrum infrastructure. From both the LightSquared and FCC perspective, the entire regulatory approval process for the company was bungled. The FCC spends a significant portion of its time these days trying to figure out the answer to the spectrum crunch facing the U.S. carriers and had approved LightSquared before the GPS issues came to light. The FCC is desperate to create more competition in the wireless industry and a disruptor like LightSquared looked great on paper. Ultimately though the FCC has been forced to eat its words and LightSquared becomes the victim.

Carrier Benefits, Disruptions

On the other end of the line were AT&T and Verizon. While both of the companies have denied that they were against LightSquared, it became apparent at mobile industry events over the course of 2011 that the startups’ business model scared the two U.S. cellular giants. By providing wholesale spectrum to anyone, the barrier to entry into the operators’ world was significantly lowered. Between AT&T and Verizon, the two companies hold a de facto monopoly on the U.S. cellular industry while Sprint and T-Mobile play creative games to try and close the gap. It also should be noted that both AT&T and Verizon act as spectrum wholesalers to smaller and regional local operators.

It is no wonder that Sprint tried to align itself with LightSquared to help build a 4G LTE network (more on that in a later article). By aligning itself with an entity that had spectrum to spare, Sprint had a chance to have an easier road to deployment instead of starting from basically scratch. Sprint and LightSquared had signed a 15-year agreement that would enable LightSquared to build outs its spectrum on top of Sprint’s existing infrastructure, saving the startup a massive amount of money creating its own base stations and other elements necessary to deploy its network.

The fight is not yet over for LightSquared. It still owns spectrum bands that can be very valuable to the right entity. The Wall Street Journal pointed out yesterday that LightSquared could swap some of its spectrum with the Department of Defense, away from the interfering GPS band. Spectrum swaps are not as simple as they sound and would require lengthy negotiations.

For now, LightSquared must fight on. Fight to prove that the GPS industry can fix the interference issue, fight the federal bureaucracy, fight to keep its disruptive business alive. Yet, with a moratorium placed on it by the FCC, the end may be closer than it appears.

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