Legal, Financial and Technical Minefield Threatens LightSquared’s Grand Plans

 - December 3, 2011, 12:45 AM
Opponents of LightSquared's proposed terrestrial broadband network contend that the system interferes with GPS signals and will require GPS manufacturers and users to shoulder the burden for avoiding interference.

LightSquared is coming under pressure from several separate directions, as opponents to its plans provide more specific support to their positions on legal, financial and technical issues. And in the background, a telecom industry heavyweight with whom LightSquared hopes to form an alliance wants clarity by year-end. Furthermore, an industry financial analyst has cast doubt on LightSquared’s appeal as an investment should it be unable to use its near-GPS upper L-band frequency after its disastrous GPS interference tests earlier this year, while the Coalition To Save Our GPS is calling on LightSquared to permanently abandon its upper band frequency.

LightSquared has contended that it has legal rights to the radio spectrum it intends to use. AIN asked the Coalition to Save Our GPS “What exactly are [LightSquared’s] present ‘legal rights’?” The coalition addressed that question and discussed the financial and technical issues LightSquared faces.

The Legal Question

“LightSquared did not pay for and does not have a ‘legal right’ to build a nationwide terrestrial network in the MSS Band,” according to an October 27 Coalition to Save Our GPS news release. “LightSquared repeatedly misstates and rewrites history to try to push through its ill-conceived plan to repurpose mobile satellite spectrum (MSS) to build a nationwide terrestrial network,” and “has time and again repeated its self-serving claim that it has been authorized for years to build its recently proposed nationwide terrestrial network, and that this alleged prior authorization shifts the burden of avoiding interference to GPS manufacturers and users,” the coalition maintains.

The coalition emphasized that LightSquared’s assertion “is flat-out wrong. It completely ignores clear statements in prior FCC decisions and rules. In fact: LightSquared has never had the legal right to build a nationwide terrestrial network in the MSS band.”

The coalition pointed out that in 2003 the FCC stated categorically that “we do not intend, nor will we permit, the terrestrial component to become a stand-alone service.” In addition, the coalition stated, “MSS licensees in the L-band, including LightSquared, have long been on full notice that the FCC would take further action to protect GPS if interference issues arose.”

The coalition continued, “In the 2005 order that LightSquared says approved its plans, the FCC committed to take actions necessary to ‘ensure that all FCC services provide adequate protection to GPS.’ Given this commitment and the clear language of the FCC’s rules, the coalition asserted, “LightSquared could not reasonably rely on these decisions as authorizing nationwide terrestrial use and a shift of the burden of interference to GPS users.”

The Financial Issue

According to the coalition, “LightSquared is using legal double speak to hide a $10 billion spectrum windfall–money that should be going to U.S. taxpayers. And it’s offering up just a pittance towards the billions it would cost federal, state and local governments, as well as consumers, if its plans are allowed to go forward.

The Coalition pointed out that the FCC’s National Broadband Plan recognized that granting terrestrial (broadband broadcast) authority would “step up” spectrum values, and noted that LightSquared’s own consultants estimated that the company’s mobile satellite spectrum would be worth $12 billion if it could be used for unrestricted terrestrial mobile broadband use, but only $2 billion if limited to satellite use. Because of these restrictions limiting terrestrial use, the value of the MSS spectrum held by LightSquared’s predecessor was much lower than the value of spectrum in other frequency bands.

LightSquared is reported to have paid some $2 billion for its MSS spectrum rights and, accordingly, all the major industry players understood that LightSquared was not authorized to use the MSS spectrum for terrestrial operations because of the FCC’s extensive restrictions on MSS usage. Had the FCC granted rights to use this spectrum for nationwide, terrestrial-only wireless services, the coalition stated, it would have been required by law to auction those rights to the highest bidder. If allowed to go forward under its current plan, “LightSquared gets to pocket the $10 billion increase in spectrum value that would result.”

The coalition added that “Misstatements hide a $10 billion spectrum windfall at the expense of taxpayers, and LightSquared shirks its responsibility for the billions its plans would cost governments and consumers.” Simply put, it stated, “LightSquared should not be allowed to use this legal double speak to enjoy massive unjust enrichment while harming GPS users.”

In response to AIN’s request for comment, Chris Stern, a LightSquared public relations rep, said, “How much has [the Coalition to Save Our] GPS paid for their spectrum? The answer is nothing. Yet they benefit from what is, in effect, an $18 billion subsidy because they use the U.S. GPS system which cost billions of dollars to build and they never paid a dime for it.”

The Technical Issue

In addition, the coalition noted that the FCC order that LightSquared claims approved its plans also includes, the FCC International Bureau’s (IB) commitment to take actions necessary to “ensure that all FCC services provide adequate protection to GPS.” Given this commitment and the clear language of the FCC’s rules, the coalition asserted that LightSquared could not reasonably rely on the FCC decision as authorizing nationwide terrestrial use and a shift of the burden of interference to GPS users.

Further, the coalition noted that when the FCC IB conditionally permitted LightSquared to provide stand-alone terrestrial services (formally known as ancillary terrestrial components [ATC], but also called ground transmitters) in January 2011, it rejected the company’s claim that it already had the authority to do so. Instead, the IB waived the earlier “integrate MSS and ATC services” rules to grant LightSquared’s conditional approval.

The coalition points out that the massive replacement costs for federal government GPS equipment and systems that would be caused by LightSquared’s plans would create a major drain on the U.S. Treasury. Further, it accused LightSquared of shirking its financial responsibilities, relying on its bogus claim of “legal rights” to terrestrial use to argue that GPS users and manufacturers should pay the bill for eliminating interference, while admitting that even under its latest revised plans, hundreds of thousands of high-precision GPS receivers used by government and private users would suffer interference. “But it has offered only a pittance, $50 million, to replace or retrofit affected equipment,” stated the coalition, adding that “it is yet to be proven that LightSquared will not also interfere with hundreds of millions of consumer GPS devices.” Representative samples of consumer units have been under test, and a report on the results was due late last month. 

The coalition statement concluded with the following. “Bottom Line: All in all, LightSquared’s proposal represents a new low in financial engineering at the expense of the U.S. taxpayer. Never before has a single company tried to gain so much from our national spectrum resources and pay so little for the collateral damage caused by its plans.”

(Read the complete statement, written in non-legal, non-technical language.)

In response, Terry Neal, LightSquared senior vice president of public relations, commented, “The GPS manufacturing industry has failed to invest in proper design of its devices so that it could continue to enjoy the free benefit of using spectrum that is allocated to LightSquared–as if having free use of government-owned GPS spectrum for the last three decades wasn’t enough. Now the industry is demanding that the government formally expropriate part of LightSquared’s spectrum–worth billions of dollars–and turn it over to the GPS industry in perpetuity.

“The industry has for months tried to argue that the interference issue was an unsolvable physics problem and that LightSquared should never be allowed to deploy at all. The industry’s assertion has been dramatically laid bare by the private marketplace, which has already produced three viable solutions to the high-precision interference problem in the ‘lower 10.’

“Yet despite the fact that LightSquared has already spent upward of $160 million on technology mitigating an interference problem that is not of its making, the prosperous GPS manufacturing industry is demanding that it never have to spend any money on innovation that will allow GPS to exist simultaneously with LightSquared as we seek to invest $14 billion in private [money] to accomplish the bipartisan public policy goal of bringing more choice, greater access to technology and lower prices to American consumers.

“Today’s filing by the coalition is little more than a land grab designed to reward spectrum squatters who have failed to innovate their technology,” he concluded.

Interested Parties Watch and Wait

Among those with an interest in the outcome of the LightSquared debate is Sprint, which has a 15-year, $9 billion agreement with LightSquared to host the latter’s transmitters on its existing nationwide infrastructure. Reportedly, LightSquared earlier paid Sprint some $400 million as an “earnest money” down payment to keep the agreement in place until the end of this year. However, it is also reported that one of the agreement’s terms requires LightSquared to have resolved its GPS interference issues by year-end, which appears unlikely. Whether Sprint extends its agreement or walks away with $400 million is yet unknown.

One consideration that Sprint may now find troubling is the comment by a satellite and communications financial analyst that LightSquared must have at least 20 mHz of radio spectrum to have a viable market offering to investors. Originally, LightSquared had the required 20 mHz, with 10 mHz in each of its two frequencies, one on the lower part of the L-band and the second in the upper part. But tests earlier this year in the upper part of the band created massive GPS interference, and LightSquared has retreated to its second, lower frequency for further tests, while stating that when all GPS units are properly filtered, it will return to reclaim it. This should occur sometime next year, according to LightSquared’s plans.

That might turn out to be wishful thinking, however, in view of two other developments. The actual performance of low-cost units recently tested under the lower-band LightSquared transmitter was not scheduled to be released until late last month (after this issue goes to press), and the results of the precision survey and timing receiver tests in the lower band will not be known until mid or late next year. Consequently, the question of whether the former require special filters–as the latter almost certainly will–is unknown, except that experts are said to feel that, in any event, filters optimized for the lower-band frequency will not be suitable for the upper-band frequency, and that dual-band filters are not feasible within the present state of the art. The implications of this are that, for corporate operators, it could first be necessary to have their GPS system(s) modified to reject lower-band interference and, at some unknown later date, further modified to accommodate LightSquared’s upper-band transmissions. In this case, “modified” doesn’t mean just having an avionics tech attach a new gadget to the GPS. Before that, the GPS manufacturer would have to meet revised TSO specifications and, following that, obtain FAA approvals. And all to your account, according to LightSquared’s philosophy, which will probably also necessitate your dumping your cellphone and related devices. On the other hand, you should then get better Internet service at East Podunk Airport.

Following presentations to the federal government’s Positioning, Navigation and Timing (PNT) Advisory Board, the coalition issued a release calling for LightSquared to be foreclosed from using the upper part of the mobile satellite spectrum, on the grounds that two consecutive owner-paid GPS upgrades–or worse, replacements–were totally unacceptable. The Board also heard a presentation from Dr. Javad Ashjaee, whose company plans to make available new equipment that might reduce interference from LightSquared’s proposed lower-band operations.

James Kirkland of the coalition stated, “We look forward to the further testing that could validate Dr. Ashjaee’s technical claims. Even if they are confirmed, however, Dr. Ashjaee’s presentation confirms that his company’s equipment does not provide a solution for use of the upper 10 MHz of LightSquared’s spectrum. It also confirms that the cost to retrofit existing equipment would be hundreds or even thousands of dollars per device.”

Will this latest handicap leave LightSquared stranded at the altar? Will it become a case of “two frequencies good, one frequency bad”? This fascinating saga promises to be long lived.