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LightSquared's bankruptcy is a cautionary tale

Stephen Lawson | May 16, 2012
After more than a year of active testing and debate over LightSquared's plan for a nationwide, wholesale 4G network, the now bankrupt company may end up as no more than a cautionary tale for mobile investors.

"If the FCC were to do a spectrum swap, they would basically be saying, 'Yeah, we made a mistake,'" Marshall said. In addition, that would set a precedent that the FCC doesn't want, giving a company spectrum in return for frequencies that it never unconditionally controlled, he said.

With a U.S. presidential election coming up in November, political considerations will at least delay a resolution of the regulatory tangle, said TMF Associates analyst Tim Farrar.

"If it was going to happen, [a spectrum swap] obviously wouldn't happen until after the election," Farrar said. Partly as a result of that concern, Falcone will try to maintain control of the bankruptcy restructuring process for as long as possible, he said. After a defined period, he would have to cede some control of that process to creditors. "His focus would be on preserving control though to the end of the year," Farrar said.

Rather than a pure swap of its troubled spectrum for a cleaner band, LightSquared may pursue a deal to repurpose the L-Band for a portion of someone else's service, Farrar believes. A plan by Dish Network to launch an LTE network on another piece of satellite spectrum, which doesn't have the interference concerns of the L-Band, is now pending before the FCC. If the agency combined its proceedings about Dish's and LightSquared's satellite bands, it might be able to assign the L-Band frequencies as part of Dish's service, specifically for upstream transmissions from client devices, Farrar said.

Limiting that band to upstream use by radios in phones and tablets, rather than the much more powerful ones in base stations, might make the spectrum useful without running a major risk of interference, Farrar said. That would give it value to Dish, which would then buy the spectrum to beef up its cellular performance.

However, testing that solution for interference would take time that Dish might not want to spend, considering it already has an LTE plan just using the spectrum it already knows about.

"At least it's a technically reasonably logical possibility. Whether it's desirable from a financial and a regulatory point of view is the question," Farrar said.

Marshall doubts that Dish wants to take on the risk of that interference testing.

"I would be surprised if Dish got themselves ... financially incumbent on that," he said.

If it can't get satisfaction from the FCC through either of those arrangements, LightSquared may well sue the government, observers say. The company has used increasingly hawkish language in referring to what it sees as its rights to use the spectrum, while simultaneously hiring top-notch legal talent. LightSquared says any interference is caused by GPS receivers instead of its base stations and that the FCC needs to secure the L-Band frequencies for its use.


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