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LightSquared today fired back at the Federal Communications Commission, saying the agency’s decision to squash the company’s planned wireless network would harm the American public. But it appears to be too little, too late for the embattled company.
The start-up wireless provider was dealt a fatal blow yesterday when the FCC suspended a key waiver that would have allowed it to build its 4G network, citing concerns over potential interference with critical GPS equipment. The denial of the waiver effectively turned the company into the walking dead.
While the FCC may have officially stamped out LightSquared’s hopes yesterday, the company’s fate was sealed a long time ago. The company failed to play the political game well and let its opponents control the debate. By the time LightSquared got proactive in defending itself, much of the concerns had sunk in.
“Politicians, rather than engineers and scientists, dictated the solution to the problem from Washington,” CEO Sanjiv Ahuja said in a statement issued today.
LightSquared had also lashed out at opponents with claims of conspiracy theories, which didn’t endear itself to its allies. LightSquared wasn’t entirely at fault either. The FCC, eager to create a competitor, hurriedly slapped approval on the spectrum for use without dealing with the interference issues.
“They were very astute in working with the FCC in the beginning, which was a stroke of genius,” said Roger Entner, an analyst for Recon Analytics. “Then the technical problems popped up, and the game fell apart.”
Why should you care about this startup only known in wireless circles? LightSquared’s planned 4G LTE network actually had the potential to threaten the way wireless business is conducted. LightSquared planned to act as a neutral wholesaler of wireless service. Any company looking to offer wireless service, or connect its gadget to a wireless network, could go to LightSquared.
Carriers such as AT&T and Verizon Wireless have also worked to connect other non-traditional products–medicine pill bottles and dog collars, for example–but the approval process is arduous because of quality control. LightSquared could have offered an easier alternative to the major carriers. Over the past few months, LightSquared still continued to tout new customers signing up for its future network.
The network, meanwhile, could have been the answer to the industry’s call for spectrum, having already signed a deal to potential augment Sprint Nextel’s own spectrum position. Consumers would have benefited from the wave of new companies that could have offered their service through LightSquared’s wholesale network.
But that’s no longer the case.
Losing the debate
The opportunities that came from a brand new network, however, were overshadowed by the concerns brought up by the GPS industry. While most GPS equipment was shielded against interference, critical ones such as farming equipment, some aviation GPS equipment, and GPS devices used by the government were affected.
But it’s the GPS equipment that bleeds into LightSquared’s proposed network, and not the other way around. LightSquared paid for this spectrum and had a legal right to use it, but were stopped by these interference concerns. The GPS industry actually had years to patch up its equipment to avoid these issues, but largely chose to ignore it.
LightSquared may have been too docile in working with the GPS industry early on. The company let its opposition, in the form of the well-named Coalition To Save Our GPS, dictate the terms of the argument.
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LightSquared let the debate get out of hand and didn’t do enough to win the political battle in Washington D.C., industry observers and members of the CTIA Wireless trade group told CNET.
It wasn’t until this summer that LightSquared began explicitly focusing on the argument that it had a legal right to use the spectrum, which could have helped the company months before the interference issue ballooned.
In general, the company poorly handled its battle against the GPS industry. In August, Philip Falcone, whose Harbinger Capital hedge fund owns LightSquared, accused AT&T and Verizon of “working behind the scenes” to undermine the company’s attempts to build a network, something the carriers denied. In December, following the leak of a government report that highlighted the interference issues, executives took to the public to blast it as selective and skewed.
“They aggravated the scenario by launching these conspiracy theories that everybody is out to get them,” Entner said.
LightSquared is attempting to rally political support, but the effort appears futile.
FCC at fault too
The FCC can’t go blameless in LightSquared losing its waiver. And it’s also getting its share of criticism.
“LightSquared is the FCC’s biggest debacle since the C-Block PCS auctions of 1996,” said Walter Piecyk, an analyst at BTIG Research. “Both of these train wrecks were a result of the government’s failed attempt to inject a new competitor into the wireless market.”
The FCC badly wanted a competitor to the major wireless providers and granted a waiver on this spectrum, which had been reserved for satellite equipment. The waiver allowed any equipment using LightSquared’s spectrum to forgo satellite capabilities, which would have allowed for more cost-effective connected devices.
In rushing to grant the waiver, the FCC never really cleared the interference issue with the GPS industry. Instead, it told GPS manufacturers to add filters that would have shielded their equipment from the planned wireless network. While most commercial businesses complied, a minority didn’t follow the FCC’s directions. That includes government entities which don’t fall under the FCC’s jurisdiction.
“The FCC tried really hard to create a competitor out of thin air, and it badly backfired,” Entner said.
LightSquared, meanwhile, already spent $4 billion on its planned network deployment and spectrum, and is left with what is essentially a toxic asset.
Ahuja, unsurprisingly, laid into the FCC today.
“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,” he said. “There can be no more devastating blow to private industry and confidence in the consistency of the FCC’s decision-making process.”
Ahuja was a bit conciliatory at the end, reiterating his commitment to finding a solution for everyone.
But he may be the only one interested in a solution at this point.
