Hedge fund billionaire Philip Falcone is probably used to getting his way, which is why it must come as such a shock that LightSquared — the next-generation satellite wireless broadband provider of which Falcone’s Harbinger Capital owns a majority stake, and which he sits on the board — is having such a rough go of it. We reported last month that long-time CEO and co-founder Sanjiv Ahuja had abruptly stepped down from his leadership position with the company, offering little in the way of explanation, and we conjectured that the hasty departure spelled deeper trouble for the embattled would-be broadband provider.
Well, LightSquared’s Shakespearian tragedy may be soon approaching its final act: After news broke earlier today that Sprint would terminate its $9 billion contract to help build out the terrestrial portion of LightSquared’s planned LTE network, the embattled company has gone on the offensive.
Just after 4PM EST LightSquared filed its opposition to the FCC’s proposal to relinquish the LTE provider of its operating license. In the past months, a multitude of interest groups, ranging from GPS device makers to the Department of Defense, have criticized the FCC for allowing LightSquared to continue to build out its wireless network, due to alleged GPS interference concerns. LightSquared’s proposed network would operate on wireless spectrum adjacent to that of current GPS services, and although the company has acknowledged issues and offered potential solutions, the FCC moved ahead last month to shut down the provider — giving LightSquared until the middle of March to come up with a fix or halt work altogether.
Well, that deadline is nearly upon us, which explains the sudden urgency of LightSquared’s appeal. If the company’s operating license is indeed revoked, it would mean almost certain death, not to mention the loss of billions of dollars already invested in the network build-out (mostly by Harbinger), which included the launching of a satellite. In a coincidence that was particularly ill timed, LightSquared’s satellite was actually taken out of service this past Wednesday due to an unanticipated solar flare.
In a statement released today, LightSquared claimed “The FCC and other parties have been well aware for more than seven years that LightSquared plans to build a nationwide terrestrial network. In 2004, the GPS industry told the FCC that LightSquared ‘is to be commended for its proposal to use its spectrum in a responsible manner that ensures the continued utility of GPS receivers operating in the vicinity of [its base] stations.’ Now, certain federal agencies and a small group of GPS manufacturers are standing in the way innovation, lower prices and greater competition for millions of Americans.”
Bait and switch
LightSquared’s business model was never to compete directly with established wireless broadband providers such as AT&T and Verizon Wireless — rather, it would sell wholesale its 4G LTE broadband service, which is based on a unique alchemy of satellite assisted ground-based transmission towers. In theory, any wireless provider, including currently non-existent regional startups, could have purchased wireless bandwidth. The agreement that Sprint pulled out of this morning had granted that wireless carrier access to 50 percent of LightSquared planned bandwidth, in exchange for Sprint’s nearly $9 billion investment in helping to build-out the network. Instead, Sprint returned $65 million to LightSquared after the deal collapsed.
Although the actual opposition filing is not yet available to the public (it will be posted here once it is made available), LightSquared is clearly putting it all on the line with this move, and it made that clear in no uncertain terms in its announcement this afternoon, stating, “If the FCC reverses its decision to permit LightSquared to move forward, it will be a bait and switch by the federal government of historic scale. Based on a build-out requirement imposed by the FCC, LightSquared invested more than $4 billion to prepare for the construction of its network.” The company continued, “If the FCC now changes its mind, it will strand billions of dollars of investment capital and cast a shadow of uncertainty over the future of wireless innovation. Its proposed action violates LightSquared’s contractual and constitutional rights.”
We’ll be watching the FCC’s reaction to the filing closely, and will update you when more information becomes available.
Image Credit: Market Folly