FCC Chairman Julius Genachowski, who was a major fundraiser for Obama’s 2008 campaign, called the venture a public service. In January 2011, the FCC’s staff granted a further approval for the project, with conditions, while circumventing the agency’s five-member commission, lawmakers say. At the time, the agency called LightSquared “a new kind of business model that consumers find appealing.”
That’s when the GPS industry, as well as the military and government agencies, began to protest the plans. Air-safety officials said LightSquared’s network could lead to plane crashes. GPS makers and companies such as John Deere, which relies on such equipment, asked agency officials and lawmakers to oppose the project.
Republican lawmakers, led by Sen. Charles E. Grassley (R-Iowa), called for hearings on why the FCC had fast-tracked LightSquared without vetting the technical-interfence issues. He has asked for private e-mails and documents between the agency and the company, a request the FCC has so far denied.
In February, Tammy Sun, a spokesperson for the agency, said that because other agencies “concluded that there is no practical way to mitigate potential interference at this time,” the FCC would not move forward on the project.
Falcone was left holding the bag. He said on Thursday that LightSquared may soon file for bankruptcy.
Falcone said he is committed to saving LightSquared. He is facing pressure from Carl Icahn, who invested in LightSquared bonds, as well as other creditors who have called for LightSquared to go into Chapter 11.
“For the Commission to proceed on its current course would send an ominous signal to future sources of capital considering investments in United States telecommunications infrastructure,” LightSquared investors wrote to the FCC.
Other businesses have closely watched the project’s unraveling.
Leap Wireless wrote to the FCC last month that its proposal to abandon LightSquared would “have an unintended chilling effect” on buying airwaves in the future. The Rural Carrier Association, a trade group, said the FCC decision would “only empower the duopolistic” AT&T and Verizon Wireless.
For all of Falcone’s success on Wall Street, some analysts say Falcone and LightSquared made a misplaced bet on an unproven business and underestimated the task of swaying Washington.
“This is capital I raised and put into LightSquared based on a license we got and based on rules and regulations,” he said. “I did everything I was supposed to do.”