In a recent Vanity Fair profile, Phil Falcone was summed up by a rival fund manager as “A roll-the-dice, put-everything-on-red kind of guy”. However, with the report on GPS interference coming up tomorrow, it also appears that the GPS industry is united in putting all their efforts into pushing the emergency stop button on LightSquared. Particularly significant is the decision of the PNT Advisory Board last week to file comments with the FCC:
The formal recommendation reads: “The PNT Advisory Board recommends the PNT Executive Committee (EXCOM) should file formal comments with the Federal Communications Commission (FCC) regarding the interference issues.
“1. Based upon information and test results provided to the PNT Advisory Board at the meeting of June 8-10, 2011, the provision of GPS services cannot be assured if the LightSquared proposal for satellite and terrestrial broadband provision using the MSS L-Band receives final approval.
“2. The only reasonable and viable option to continue ubiquitous availability of GPS and the provision of a new 4G wireless broadband capability would be for the FCC to assign an alternate frequency spectrum to LightSquared that has little or no probability of affecting the delivery or utilization of GPS/GNSS services.”
The recently passed House version of the National Defense Authorization Act (NDAA) would block the FCC from authorizing LightSquared operations until GPS interference concerns have been resolved. Thus, if the GPS community continues to receive strong Congressional backing, it may become impossible for the FCC to authorize commercial operation of LightSquared’s planned terrestrial network, whatever LightSquared decides to recommend in its June 15 report (note that this report will undoubtedly not have any meaningful consensus recommendations about how to proceed). Of course it is implausible that the FCC would simply assign “alternate frequency spectrum” to LightSquared, and the other spectrum controlled by LightSquared (8MHz in the 1.4GHz band, leased from TerreStar Corporation, and 5MHz in the 1670-75MHz band) is unlikely to be usable for a large scale mobile LTE buildout.
As a result, LightSquared and the FCC both face a dilemma about how to move forward. Perhaps Harbinger could partner with the first lien debt holders (other than Echostar) (or even partner once again with MetroPCS and Solus) to make a run at TerreStar Networks, similar to its efforts in the DBSD bankruptcy auction back in March. Although providing LightSquared with a waiver of the ATC rules in the 2GHz band might be one option for the FCC, that would not solve LightSquared’s funding problem, and more likely would exacerbate it, because LightSquared would potentially then have to lease TerreStar’s 2GHz MSS spectrum from the consortium buying the assets out of bankruptcy. Granting TerreStar a waiver of the ATC gating criteria would also potentially disrupt the FCC’s current consultation process, which seeks to persuade DBSD and TerreStar to give up their spectrum for incentive auctions. Even more problematically, a decision to use TerreStar’s spectrum initially might give the Congress the excuse they are looking for to completely prohibit LightSquared from using the L-band for future terrestrial operations, as the GPS industry is requesting.
As I noted a few days ago, Harbinger therefore needs to announce something big to turn around perceptions of LightSquared. At this point, some sort of deal with Sprint (with Sprint expressing confidence that the interference issues are manageable) appears to be the best option with a chance of achieving that, with a potential partnership with MetroPCS and Solus to bid for TerreStar a rather less attractive backup choice.