FCC denies LightSquared’s access to spectrum

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Updated: LightSquared’s attempts to become a wholesale provider of mobile broadband services appears to have come to an end as government regulators have declared that interference between LightSquared’s proposed spectrum and some GPS equipment was unavoidable. The decision comes just over a year after LightSquared gained FCC approval to move forward with its planned terrestrial-satellite network plans.

“The Commission clearly stated from the outset that harmful interference to GPS would not be permitted,” said an FCC spokeswoman in a statement following the filing of a report by the NTIA. “This is why the conditional waiver order issued by the commission’s International Bureau prohibited LightSquared from beginning commercial operations unless harmful interference issues were resolved. … 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.”

In its report, the NTIA noted that it did not see a way for LightSquared to operate its network using its 1.6 GHz spectrum without interfering in some way with GPS devices.

“Based on NTIA’s independent evaluation of the testing and analysis performed over the past several months, we conclude that LightSquared’s proposed mobile broadband network will impact GPS receivers and that there is no practical way to mitigate the potential interference at this time,” the NTIA noted in its FCC filing. “Furthermore, while GPS equipment developers may be able to mitigate these issues via new technology in the future, the time and money required for federal, commercial and private sector users to replace technology in the field and the marketplace, on aircraft and in integrated national security systems cannot support the scheduled deployment of terrestrial services proposed by LightSquared.”

LightSquared’s response to the news was as expected, as company Chairman and CEO Sanjiv Ahuja lashed out at the current system that saw LightSquared unable to tap into spectrum it had legal rights to access and in a service that it claims it has already spent $4 billion in trying to construct.

“There can be no more devastating blow to private industry and confidence in the consistency of the FCC’s decision-making process,” said Ahuja in a statement. “It is not surprising that, as with all innovative new technologies, scientific concerns became an issue. In this case, the government decided to choose winners and losers. Politicians, rather than engineers and scientists, dictated the solution to the problem from Washington. … To leave this problem unresolved is the height of bureaucratic irresponsibility and undermines the very principles that once made America the best place in the world to do business. We remain committed to finding a solution and believe that if all the parties have that same level of commitment, a solution can be found. The American people send their representatives to Washington to solve tough problems and make our country better – not to undermine and pull the rug from under private enterprise.”

In reaching its decision, the FCC did acknowledge the interference issues that in the end prevented LightSquared from being granted access to its spectrum, though that is likely little consolation for LightSquared.

“This proceeding has revealed challenges to maximizing the opportunities of mobile broadband for our
economy,” the FCC noted. “In particular, it has revealed challenges to removing regulatory barriers on spectrum that restrict use of that spectrum for mobile broadband. This includes receivers that pick up signals from spectrum uses in neighboring bands. There are very substantial costs to our economy and to consumers of preventing the use of this and other spectrum for mobile broadband. Congress, the FCC, other federal agencies, and private sector stakeholders must work together in a concerted effort to reduce regulatory barriers and free up spectrum for mobile broadband. Part of this effort should address receiver performance to help ensure the most efficient use of all spectrum to drive our economy and best serve American consumers.”

As recently as last week, LightSquared was pressuring the FCC to develop receiver standards for unlicensed GPS devices. This issue has plagued the company, which has yet to gain access to its 1.6 GHz spectrum assets due to interference issues from GPS devices broadcasting outside of their spectrum bands and into LightSquared’s holdings.

Another question for LightSquared is what to do with a satellite it currently has in orbit that was supposed to be a part of its planned nationwide coverage plans. That satellite was part of the genesis for LightSquared gaining access to the 1.6 GHz spectrum assets it attained through an agreement with satellite communications provider Inmarsat.

LightSquared earlier this year hired a new CFO with a history of merger and acquisition activities, that could spell the future for a company that is operating on finite financial resources and a distracted owner. LightSquared had mentioned last year that it could need up to $14 billion by the end of the decade to meet its operating requirements, and has more recently stated that it had enough financial resources to operate for “several quarters.”

Analysts noted that while there could still be hope for LightSquared, the decision seems to remove at least any short-term value in the company’s spectrum holdings. The decision could also place a greater value on the holdings of other players, or those operators that are looking to attract potential wholesale customers.

“While we would not commit to saying it is the ‘end of the road’ for LightSquared, we believe it is will be an extremely tough slog for the company to show value in the spectrum it holds,” noted Wells Fargo Securities in a research note. “We expect additional developments to unfold in the coming weeks which will shed light on Lightsquared’s plans. If the GPS issues can be resolved through technology, we believe the Lightsquared spectrum may be of interest to other industry player at some point in the future. With no other near term options for spectrum to make available to existing incumbents, we would view this news as a potential positive development for other spectrum players in the market. However, this said, we do not see this news presenting a solution for the near term needs of the largest players.”

One operator that looks to be the greatest beneficiary of the decision is Clearwire, which is in the process of overlaying LTE technology onto its current WiMAX deployment, with plans to expand coverage in hopes of attracting wholesale customers. Clearwire currently has access to significant spectrum capacity in the 2.5 GHz band, and has said in the past that it would be interested in perhaps selling off some of that excess capacity in order to fund its network initiatives.

The LightSquared decision also seems to put an end to the company’s plans to partner with Sprint Nextel on a spectrum hosting deal that would have helped LightSquared meet its build out plans as well as put up to $9 billion into Sprint Nextel’s pockets. Sprint Nextel late last month had granted LightSquared a 45-day extension to gain approval for use of its spectrum.

Another potential beneficiary is Dish Networks, which in recent months has said it would be open to a partnership with mobile operators in regards to using the approximately 40 megahertz of spectrum it controls across the 700 MHz band as well as those acquired when it purchased TerreStar Networks.

“The outcome was anticlimactic and profoundly ironic on several levels, clearing the way [for] FCC action on a Dish wireless proposal nearly identical to LightSquared’s with the exception of the GPS-interference problem by virtue of an S-band (2 GHz) play and likely giving rise to a commission re-examination of a receiver standard issue championed by LightSquared,” noted Jeffrey Silva, senior policy director of the telecommunications, media and technology group at Medley Global Advisors.

LightSquared’s inability to access its spectrum also could limit options for rural players, many of which were looking to partner with a nationwide provider in order to support LTE services. LightSquared has actively courted those operators over the past year, with many signing up to the potential offering.

This story was updated from its original post with new comments from LightSquared.

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