LightSquared says it's not yet giving up its fight to build a nationwide 4G LTE network.
The company, which is backed by Philip Falcone's Harbinger Capital, has invested more than $4 billion into the network, which it hoped would be a wholesale alternative to wireless broadband networks run by AT&T and Verizon wireless. For the past year, the company has been fighting an uphill battle in Washington, D.C., where the GPS industry has rallied political support around its claims that LightSquared's network interferes with its receivers and therefore cannot be built.
So far, the GPS industry has out-gunned LightSquared, and they're winning the battle. The Federal Communications Commission put a big nail in the coffin of the proposed network last month when it released a Public Notice proposing to pull the company's temporary wireless license that allows it to use its spectrum to deliver a terrestrial-only based wireless broadband service.
But now LightSquared is fighting back. Today, the company said it would file a 150-page document with the FCC outlining several reasons why the FCC should abandon its plan to revoke the spectrum license waiver. Instead, LightSquared said that the FCC should work with LightSquared to find suitable spectrum that the company can use to build its network.
"The LightSquared network promises to bring broadband to underserved areas, drive wireless competition, create new businesses, invigorate existing ones, and create tens of thousands of new jobs," the company said in an eight-page executive summary of the filing released earlier today. "The proposed actions would eviscerate these benefits and represent an astounding, unsupported, and unprecedented reversal of Commission policy."
It went onto to say in the executive summary: "The Commission should terminate this inquiry and focus instead on finding a solution that truly advances the public interest and helps bring LightSquared's network to fruition."
LightSquared argues that the FCC is on shaky legal ground by suggesting that it can simply suspend LightSquared's wireless licenses without recommending a solution. The main beef that the GPS community has with LightSquared's network is the fact that GPS receivers would be able to "listen" to signals in LightSquared's transmission band. But LightSquared argues that the law does not stipulate that this is LightSquared's problem.
Under the Communications Act and the Commission's implementing rules, regulations and policies, no legal protection exists for GPS receivers that are incompatible with LightSquared's network because they "listen" for GPS signals in the portion of radio spectrum that is licensed to LightSquared.
LightSquared also argues that the testing of its network, which the National Telecommunications and Information Administration (NTIA) used to make its own determination, is "deeply flawed and fatally biased." And the company says that the FCC must critically evaluate NTIA's conclusions.
"The lack of analysis in the Public Notice, and the speed with which the Commission released it (the day after receiving the NTIA Letter), are powerful evidence of an arbitrary and capricious process," LightSquared said in its executive summary.
LightSquared also argues that even if the FCC determines for itself that there are legitimate interference issues, it said that it's up to the Commission to find a solution that will allow LightSquared to complete its network.
LightSquared says it's been more than willing to help find a solution. In fact, it's already promised to not use a portion of its spectrum to avoid interference.
The company says that if the FCC doesn't abandon its proposal and get back to the table to find a solution then it will create uncertainty throughout the market and discourage investment in wireless broadband, which is contrary to what the FCC and Chairman Julius Genachowski have been preaching for the past few years.
Just a few weeks ago, Chairman Genachowski explained how the Commission is focused on "strengthening incentives for investment in mobile infrastructure," and recognized that "[w]ireless infrastructure doesn't build by itself. It requires many billions of dollars in investment" overwhelmingly by private companies. The Chairman declared: [W]e've recognized that regulatory certainty and predictability promote investment.
The Public Notice is diametrically opposed to the Chairman's observations, as service providers and their financing sources will recognize when they weigh the lesson of what would be one of the most disastrous "bait-and-switch" episodes in the history of telecommunications regulation.
The FCC did not provide an immediate response to LightSquared's filing.
Rough road aheadEven if the FCC changes its mind about LightSquared or swaps spectrum to mitigate GPS interference concerns, LightSquared still faces big troubles. The company's high-profile CEO Sanjiv Ahuja has resigned. And today, Sprint Nextel, its largest wholesale partner that also planned a network sharing deal with LightSquared, said it is terminating its contract.
Sprint says in a statement that it would consider a similar arrangement if LightSquared is able to work out its regulatory issues. But the dissolution of the agreement is still a blow. LightSquared does have other wholesale customers signed up as partners. But the Sprint deal also included the opportunity for LightSquared to share Sprint's network, which could have saved the company $13 million in capital costs and would have helped the company achieve its goals of reaching 250 million customers a year earlier than it had promised the FCC.
Jeff Carlisle, executive vice president for regulatory affairs and public policy for LightSquared, addressed the issue today on a call with reporters.
"Before we signed the Sprint deal we were going to go it alone," he said. "That was the plan. And we are ready to do it now."
The company has about 30 customers that have committed to using its wholesale network. But recently some of these partners, such as Leap Wireless's Cricket service, have also announced they're going to wholesale LTE capacity from Clearwire. Carlisle said that to his knowledge neither Leap nor any of LightSquared's other signed customers have pulled out of a deal.
"None of our current customers have canceled contracts with us," he said. "So when we move forward with the network, it will be ready for them whenever we are ready. And we hope they will hang with us as we resolve this issue."