Open Range and Globalstar needed a special waiver from the FCC to partner on the project. Three of the agency’s commissioners approved the request, saying it wanted to support the USDA’s loan. Those who disagreed said it was inappropriate to give one company special favors.
One FCC official added: “It was bad all around. Open Range had bad technology, and Globalstar’s request was extraordinary. . . . We had no idea why the USDA approved this thing, and even staff at [the USDA] were telling us they were concerned about it.” The official spoke on the condition of anonymity because of the controversy surrounding the firms.
Problems at the companies quickly emerged. An equipment partner provided shoddy technology, according to Open Range’s bankruptcy filing. The USDA’s money was dispersed slowly and inefficiently, the filing said.
Globalstar also ran into delays in launching its satellites and failed to meet deadlines set by the FCC. On several occasions, Globalstar asked for more time.
In September 2010, as it looked increasingly clear that the FCC was not going to give the venture an extension, the USDA administrator of the loan, Jonathan Adelstein, sent a letter to Genachowski warning that its entire loan was at risk if more time was not granted.
“Such a result could severely curtail the program and would be contrary to the . . . shared goal of expanding broadband throughout the U.S., especially during the time of constricted private capital,” Adelstein wrote.
The FCC turned the request down a few days later. That led the USDA to slash its original loan commitment of $267 million to Open Range in half. Over the following year, the company fired the majority of its staff, including its chief executive Bill Beans. Although Globalstar has remained in business, Open Range filed for bankruptcy Oct. 6.
FCC promotes new venture
The FCC said it didn’t have a choice.
“Globalstar conceded failure to comply with its obligation to provide nationwide satellite service, which led to the agency’s decision to deny its extension request,” said Tammy Sun, a spokeswoman for the FCC.
Adelstein’s spokesperson declined to make him available for this report. In a prepared statement, Adelstein said that he was “disappointed” Open Range went bankrupt and that 99 percent of all USDA broadband loans are paid back.
Open Range did not respond to several requests for comment. Globalstar declined to comment.
The FCC’s handling of the matter has come under scrutiny by lawmakers partly because the agency promoted a similar venture called LightSquared about the same time it was turning its back on Open Range. Critics of the FCC have accused the agency of favoring LightSquared because it is backed by Democratically connected hedge fund financier Philip Falcone.
“There is clearly the perception of favoritism,” said Tim Farrar, an independent analyst at TMF Associates. Farrar said his consultancy has no financial interests in LightSquared or Open Range’s venture. A similar charge was levied by Globalstar in a recent letter to the FCC.
But unlike Open Range and Globalstar, LightSquared so far has followed through with its obligations, the FCC said.
“Comparing the two is like comparing apples and oranges,” Sun said.