LightSquared to Be Blocked by U.S. on Interference Report

The U.S. Federal Communications Commission vowed to block LightSquared Inc. after the Obama administration found the wireless venture backed by hedge-fund billionaire Philip Falcone would disrupt navigation gear.

Federal agencies determined that LightSquared’s signals interfere with global-positioning system devices, Tammy Sun, an FCC spokeswoman, said yesterday in an e-mailed statement. The agency is preparing to withdraw the preliminary approval it granted last year for the company to build a high-speed network serving as many as 260 million people, Sun said.

“The commission clearly stated from the outset that harmful interference to GPS would not be permitted,” Sun said. “The commission will not lift the prohibition on LightSquared.”

The FCC’s action marks a blow to LightSquared and a setback for Falcone’s Harbinger Capital Partners (SKYT) hedge fund, which has invested $3 billion in the venture. It follows a yearlong lobbying fight between LightSquared and opposing GPS companies that featured a series of government tests denounced by LightSquared as flawed.

“We remain committed to finding a solution,” LightSquared Chief Executive Officer Sanjiv Ahuja said in an e-mailed statement today. The company received approval for its ground- based network from the FCC in 2005, Ahuja said.

“Yesterday, after LightSquared had already spent nearly $4 billion, the FCC changed its mind,” LightSquared Inc. Chief Executive Officer Sanjiv Ahuja said. “There can be no more devastating blow to private industry and confidence in the consistency of the FCC’s decision-making process.” Andrew Harrer/Bloomberg Close

“Yesterday, after LightSquared had already spent nearly $4 billion, the FCC changed its... Read More

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“Yesterday, after LightSquared had already spent nearly $4 billion, the FCC changed its mind,” LightSquared Inc. Chief Executive Officer Sanjiv Ahuja said. “There can be no more devastating blow to private industry and confidence in the consistency of the FCC’s decision-making process.” Andrew Harrer/Bloomberg

‘Devastating Blow’

“Yesterday, after LightSquared had already spent nearly $4 billion, the FCC changed its mind,” Ahuja said. “There can be no more devastating blow to private industry and confidence in the consistency of the FCC’s decision-making process.”

Sun didn’t immediately return a telephone call and e-mail seeking a response to Ahuja’s statement.

FCC Chairman Julius Genachowski said at a news conference today that “all parties will have a chance to make their case” as the agency moves forward.

Tests and analyses conducted by the government and LightSquared found that the company’s proposed ground-based network would interfere with navigation equipment including gear used by aircraft, Lawrence Strickling, administrator of the National Telecommunications and Information Administration, said in a letter yesterday to Genachowski.

“There are no mitigation strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment,” Strickling said. He is President Barack Obama’s top adviser on telecommunications, and his agency is a branch of the Commerce Department.

‘Acted Appropriately’

LightSquared (SKYT) said yesterday it disagreed with Strickling’s findings. The NTIA and the advisory board that informed its decision “disregard more than a decade of regulatory orders, and in doing so, jeopardize private enterprise, jobs and investment,” the company said in an e-mailed statement.

GPS makers say LightSquared improperly plans to send powerful data signals on airwaves reserved mainly for faint emissions from satellites. The company has proposed building a network supported by as many as 40,000 ground-based towers,

“The FCC has acted appropriately,” Jim Kirkland, general counsel of GPS gear maker Trimble (TRMB) Navigation Ltd., said in an e- mailed statement yesterday. Trimble is part of the Coalition to Save Our GPS, a group formed to oppose LightSquared that includes package shippers FedEx Corp. (FDX) and United Parcel Service Inc., GPS-unit maker Garmin Ltd. (GRMN), Delta Air Lines Inc. and Southwest Airlines Co. (LUV), and farm-equipment maker Deere & Co. (DE)

Spectrum Crunch

LightSquared said GPS makers should have planned to accommodate its use of airwaves near those used by navigation devices, and that technical solutions are available.

The Obama administration has made it a priority for more airwaves to be available for mobile use. LightSquared has said its service would help ease an airwaves shortage that Genachowski has called a “spectrum crunch” gathering force as people turn increasingly to wireless devices such as Apple Inc.’s iPhone and iPad.

LightSquared, a wholesaler, has announced deals with more than 30 partners including Best Buy Co., and $586 million in funding led by UBS AG and JPMorgan Chase & Co. The service will let retail partners cut customers’ mobile-data costs in half, Ahuja said in an interview Dec. 9.

The company’s travails in Washington have weighed on Falcone’s hedge fund, which in 2005 began investing in LightSquared’s predecessor, SkyTerra Communications Inc.

Falcone’s Fund

Harbinger managed $4 billion at the end of last year, down from a peak of $26 billion in mid-2008. It wrote down its LightSquared position by 59 percent last year because of the uncertainty over LightSquared approval.

Harbinger is paying a 15 percent interest rate for a $190 million loan, almost triple what the riskiest corporate borrowers pay, said two people with knowledge of the loan.

LightSquared has pursued FCC approval since November 2010, and cited previous agency decisions that it says granted permission to build towers for its network.

The Washington fight has featured at least four House hearings, and questions from Republican lawmakers who said the Obama administration may have pressured agencies on behalf of LightSquared after receiving campaign donations from Falcone. The company said it isn’t seeking government funding, and the White House said it has respected the FCC’s independence. Falcone has contributed to Democratic and Republican causes alike, campaign finance records show.

Further Investigation

“Now that the interference issue is settled, we need to find out more than ever why the FCC did what it did,” Senator Charles Grassley, an Iowa Republican who has been investigating the FCC’s interactions with LightSquared, said in an e-mailed statement today. “The agency put this project on a fast track for approval with what appears to have been completely inadequate technical research.”

Grassley is blocking two FCC nominees until he gets more documents from the FCC, and the Democrat-led agency is operating with three members compared with its normal five.

Representative Greg Walden, an Oregon Republican who chairs the Subcommittee on Communications and Technology, has said he plans a hearing on how the agency’s handling of LightSquared led to a year of dispute.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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