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Death of satellite LTE project essentially sealed the firm's fate

Philip Falcone, Harvard University economics grad and billionaire venture capitalist, has seen his hopes to deliver 4G satellite LTE crash and burn.  Despite his fortune, Mr. Falcone had to dig deep to scrounge up $5B USD in extra venture capital to pay for the world's largest communications satellite in history -- the 5.4 ton SkyTerra 1.

Launched in 2010, all was going glorious for Mr. Falcone and his new venture LightSquared.  Soon they had worked out a $9B USD deal with Sprint Nextel Corp. (S) to deploy a terrestrial LTE network to complement the satellite offerings.  Together the terrestrial + satellite solution was expected to dominate the LTE market when it launched sometime around 2013.

But optimism surrounding the U.S. Federal Communications Commission's conditional approval of LightSquared's satellite LTE turned to dismay when the U.S. Air Force revealed that it would interfere with an estimated 75 percent of commercial and government GPS units.

SkyTerra 1
LightSquared's doomed LTE bid involved a record-setting 5.4 ton satellite. [Image Source: Boeing Comp.]

And just in case rendering navigation useless across the continental U.S. wasn't enough of a death sentence, the SkyTerra 1 bid became an intensely politicized issue when it was revealed that LightSquared's legal team had pressured the White House chief of staff, reminding him of the millions Mr. Falcone had raised for President Barack Obama's election bid.  Many believe those donations led to a hasty conditional approval by the FCC, overlooking interference concerns.

But in the end those contributions were for naught because even the friendly Obama administration was forced to kill LightSquared's proposal.  Sprint, upset at losing a key part of the service, also terminated its contract with LightSquared.

With no terrestrial deployer, billions in debt, and a defunct multi-ton hunk of metal floating in orbit, the latest entry in this story is perhaps a predictable one -- LightSquared has filed for Chapter 11 protection in New York's Southern District Court in New York.

The bankruptcy spells dire news for hedge fund Harbinger Capital Management, as well as Mr. Falcone.  The perhaps ironically named hedge fund was a deep investor in LightSquared and joined Mr. Falcone in trying to propose stop-gap deals to placate creditors who grew increasingly unsettled in the wake of the satellite deal collapse.

Philip Falcone
The LightSquared failure is the first major defeat for venture capital whiz Phillip Falcone.
[Image Source: Jacob Kepler/Bloomberg/Getty Images]

Most of LightSquared's staff has already jumped ship, so at this point creditors may be left picking at a carcass.

LightSquared's marketing chief Frank Boulben has gone from one bankruptcy candidate to another, becoming the new chief marketing officer (CMO) for money-losing Canadian phonemaker Research in Motion, Ltd. (TSE:RIM).  CEO Sanjiv Ahuja, stepped down in February.

With the bankruptcy filing LightSquared and its ambition to become a fifth major American wireless service provider are -- for all intents and purposes -- dead.  The company's meteoric rise and bizarre fall stand as a cautionary tale to those who might wish to cut corners to establish themselves as a competitive service provider.

Source: LightSquared



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RE: Not Surprising
By lightfoot on 5/15/2012 12:23:28 PM , Rating: 3
Name calling. With an argument that strong I shouldn't even debate you.

quote:
...when the U.S. Air Force revealed that it would interfere with an estimated 75 percent of commercial and government GPS units.


Why was it the US Air Force doing this?? Isn't that precisely what the FCC should have been doing? It was the government that failed here. Specifically the FCC, but GPS as a government technology should also have any needed restrictions on frequencies and power levels already in place.

Did Lightsquared try to pull a fast one? Yeah, and they have been punished. But the underlying issues at the FCC and government corruption are still there.

The FCC broke their own rules. If GPS can not operate when neighboring frequencies are used then those frequencies should be reserved and licenced to the GPS system. The FCC should NOT license those frequencies to other companies.

You are right, Lightsquared was in the wrong. But so too was the FCC and to a lesser extent the GPS technology its self.


RE: Not Surprising
By Solandri on 5/15/2012 3:57:53 PM , Rating: 3
quote:
The FCC broke their own rules. If GPS can not operate when neighboring frequencies are used then those frequencies should be reserved and licenced to the GPS system. The FCC should NOT license those frequencies to other companies.

You're completely forgetting about signal strength. This isn't like a digital TV where you tune into one channel and that's all you get. The greater the neighboring signal strength, the greater the inteference.

The FCC actually did a really good job on this one. Lightsquared's frequencies were originally licensed as satellite communications. Transmissions are highly directional and aimed upwards, with big dishes on the ground to pick up a weak signal coming from the sky. Low signal strength on the ground so little chance of interfering with GPS. The FCC licensed it for satellite comms because they knew anything stronger could potentially interfere with GPS. (If you don't understand this, I suggest you google for "signal to noise ratio".)

When Lightsquared requested they be allowed to use that band for terrestrial transmissions, I probably would've told them to take a hike. But the FCC did the pragmatic thing and said, "Well, we think it'll intefere with GPS - that's why we designated it for satellite communications in the first place. But we haven't actually tested it ourselves. So why don't we have the RF geeks at the Air Force set up a test, you bring your transmitter, and we'll see what happens?"

So they tested it, found that it interfered with GPS, and denied Lightsquared's application to use the band for terrestrial transmissions. End of story.


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