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LightSquared Bankrupt, But Spectrum Void Still Beckons

May 15, 2012  - By
Image: GPS World

By Alan Cameron.

LightSquared, the company that mounted a powerful threat to GPS signals, declared bankruptcy on May 14, after losing a lengthy struggle in the court of the Federal Communications Commission (FCC) with the GPS industry, the U.S. military (behind the scenes), the Federal Aviation Administration, and many other GPS users. However, the vacuum into which Lightsquared sought to step — a dearth of spectrum for exploding mobile data use, up 123 percent last year — remains a gaping hole that will likely attract other entrants.

The Lightsquared bankruptcy move followed collapse of negotiations with lenders to the company, and will likely give CEO Philip Falcone several further months of control. It is not known whether his efforts will seek to salvage the business plan to provide wholesale broadband capacity to wireless carriers, who need more capacity to feed a ravenous market. In her May Wireless Pulse column, GPS World contributing editor Janice Partyka writes, “Carriers [at the CTIA industry show] sounded alarms about running out of spectrum to support ballooning mobile data consumption.”

As a result of the February FCC decision to revoke LightSquared’s conditional waiver to broadcast a powerful terrestrial signal immediately adjacent to a band reserved for satellite services, the company’s main asset, its spectrum license, lost most of its potential value, unless significantly repackaged and redirected, or traded for another spectrum band..

In late 2010, when the LightSquared threat first surfaced, Falcone maintained that LightSquared’s interference issues were not his to solve, because GPS users were encroaching on his spectrum. “People who are in adjacent bands have to understand that there is now a new driver in town driving on that highway,” he said. “And they can’t be weaving in and out of that highway.”

Falcone now has to deal with creditors who include Carl Icahn, the near-legendary corporate raider. Icahn and other investors have bought about $300 million of LightSquared debt. “Icahn is a take-control, alpha-male investor,” said Brad Balter, head of Balter Capital Management, as quoted in a May 3 Business Week story. “Falcone is both desperate and naive if he thinks of Icahn as anything other than an adversary who would wrest control of the spectrum if LightSquared went into bankruptcy.” What Icahn might venture if he gained control of LightSquared spectrum represents another unknown on the GPS horizon.

Spectrum Shortage. Meanwhile, writes GPS World editor Partyka, “Verizon Wireless and T-Mobile executives complained that the future of data use is at risk if more spectrum isn’t put to use. FCC Chairman Julius Genachowski defended the agency’s decision to block the AT&T T-Mobile deal with a rejoinder about spectrum shortage. ‘Some have argued that transactions — let’s be frank, one transaction — is somehow causing a shortage,’ said Genachowski. ‘But the overall amount of spectrum hasn’t changed.’  While this is true, spectrum is a concern. CTIA reports that U.S mobile data traffic surged 123 percent in 2011.”

In a statement regarding the company’s bankruptcy filing, Marc Montagner, interim co-chief operating officer and chief financial officer, stated “All LightSquared distribution partners and customers, including public safety, emergency response, government, and military users of LightSquared’s satellite-based communications services can continue to rely on LightSquared to provide them with mission critical communications services. The filing was necessary to preserve the value of our business and to ensure continued operations. The voluntary Chapter 11 filing is intended to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network.”

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