FCC treading lightly after LightSquared debacle

February 15, 2012

The Federal Communications Commission’s decision to yank its support for satellite firm LightSquared all but ends that company’s effort to launch mobile services, analysts say.

Now comes the hangover.

FCC officials say they still have faith that satellite technology can be used to create wireless networks rivaling those of AT&T and Verizon Wireless. But analysts say the agency will step more carefully this time, after being burned by congressional investigations, feuds with other federal agencies and two years of work wasted on LightSquared.

And, the analysts said, the LightSquared controversy will bring extra scrutiny, especially from GOP lawmakers, to future efforts to use satellites to satiate America’s voracious appetite for smartphones and network-connected tablets.

Indeed, a Republican lawmaker vowed Wednesday to push forward with an investigation of FCC Chairman Julius Gena­chowski, who has been criticized for giving LightSquared special treatment.

“We need to find out more than ever why the FCC did what it did,” Sen. Charles E. Grassley (R-Iowa) said in a statement Wednesday. “The agency put this project on a fast track for approval with what appears to have been completely inadequate technical research.”

The agency is expected to move deliberately on its next pet project — helping Dish Network get a mobile network running using its satellites, analysts said.

“The LightSquared experience gives the FCC even more reason to do its due diligence . . . to make sure there won’t be any unwelcome surprises,” David Kaut, an analyst at Stifel Nicolaus, said of Dish Network’s plans.

The satellite television company recently bought more airwaves so it could build out a mobile phone network and, like LightSquared, asked for permission to quickly turn on a high-speed network.

The FCC in January 2011 gave LightSquared an unusual waiver that put the Reston company’s proposals on a fast track, lawmakers say. But multiple reports, including one this week, said the network would knock out Global Positioning System service for consumers and the military and could even lead to fatal airline accidents. Dish Network’s airwaves do not have this problem, analysts say.

LightSquared continues to disagree with the findings, saying the tests were flawed. The firm, financed by billionaire Philip Falcone’s Harbinger Capital, vowed to continue with its plans. But it will have to go back to the drawing board with regulators.

And the company is running out of money. Falcone has said bankruptcy is off the table for LightSquared, but experts doubt the firm will be able to regain the confidence of its investors.

Falcone criticized the FCC decision, saying the agency “contradicted itself.”

“On the one hand, it has ordered LightSquared to build a $14 billion wireless system, and on the other hand it has told the company that it cannot proceed,” Falcone said in a statement. “This was not a decision based on science or technology but was a politically motivated decision fueled by special interest groups in the GPS and telecom industry.”

The move by the FCC is a dramatic turn in its controversial relationship with LightSquared.

The company initially looked like an ideal partner for the goals of the FCC and the Obama administration, which hoped to bring high-speed services to the most isolated homes in the United States.

Genachowski advocated for converting little-used airwaves into mobile phone networks. He singled out satellite technology, saying that spectrum held by the Defense Department and commercial broadcasters are harder to come by.

LightSquared, backed by Falcone’s promise of $14 billion, wasn’t asking for government funds. Furthermore, it had a unique plan to use airwaves from space as the underlying technology to operate smartphones and tablets, creating more choice for consumers.

“We believe LightSquared has few viable options to recover,” said Jeff Silva, an analyst at Medley Global Advisors. “There’s still a possibility the start-up could rise from the ashes late. . . . But it appears to be a fanciful long shot.”

As it reversed its support of LightSquared, the FCC conceded that bringing mobile services to Americans using satellites has been difficult.

“This proceeding has revealed challenges to maximizing the opportunities of mobile broadband for our economy,” said FCC spokeswoman Tammy Sun. “In particular, it has revealed challenges to removing regulatory barriers on spectrum.”

Cecilia Kang is a staff writer covering the business of media and entertainment.
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