09.12.11

Testing, 1..2..3 testing…

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 8:37 am by timfarrar

On Friday Sept 9, a letter was sent by the NTIA Administrator Lawrence Strickling to the deputy secretaries at the DoD and DoT, setting out the proposed way forward on LightSquared testing. This letter proposed that a joint testing plan should be developed “as expediously as possible” in order “to validate data on the performance of cellular and personal/general navigation Global Positioning System (GPS) receivers in light of LightSquared’s modified proposal to confine its operations to the lower 10MHz signal (1526-1536MHz)”. The NTIA requests that “the program be designed to allow for completion of testing and analysis by November 30″.

While at first sight this seems positive for LightSquared, as it will allow conclusions to be drawn before the end of the year on whether interference concerns for hundreds of millions of consumer devices have been resolved, the killer blow is in the follow-up paragraphs, which note:

All parties, including LightSquared, have agreed that LightSquared’s operations in the lower 10MHz signal will cause unacceptable interference to the high precision receivers tested by the TWG. Accordingly LightSquared is undertaking to procure the design and manufacture of a filter to mitigate these unacceptable impacts. LightSquared has acknowledged in meetings with NTIA that it will not commence commercial operations unless and until the federal agencies test the filter and conclude it is effective at eliminating unacceptable overload without degrading the performance of the receivers. Given this commitment, we see no reason for any further testing of high-precision receivers until LightSquared presents its filtering solution to the Federal agencies for testing and evaluation.

Thus LightSquared has been forced to abandon its recent assertions that it can go ahead with its planned rollout, because only 500K-750K high precision receivers are likely to be affected and it can coordinate its rollout so that the impacts are minimal. Indeed LightSquared now has to actually manufacture a filter before testing can even begin. That certainly pushes a decision point until the summer or fall of 2012 at the very earliest, and more likely than not until after the 2012 presidential election and beyond the end of Chairman Genachowski’s term at the FCC. As I pointed out last week, LightSquared’s proposed filter characteristics also represent a complete abandonment of any prospects of ever using the upper 10MHz band.

Remember also that the timeline for a decision to be reached does not include the years that will be needed to actually implement any filter across the installed base of precision GPS equipment. At last week’s House Committee hearing, one of the witnesses stated that “Even if some new, as yet unforeseen, [filter] technology did appear, the industrial, commercial and public sector users of GPS equipment routinely take up to 15 years to complete a normal replacement cycle”. The FCC can impose a shorter timeframe for the transition, but this would impose a significant burden on precision GPS users unless LightSquared was required to pay for the necessary equipment and installation.

Thus, LightSquared is now faced with a major funding crisis, because it seems there is no way it can survive with its current resources until it receives final approval to move forward (assuming that even happens). It is also very hard to see why anyone would want to invest in the company at this stage, given that Sprint has a second lien on LightSquared’s spectrum assets and therefore (even if the spectrum is worth more than the first lien debt, which I doubt because LightSquared now has at most only 2x10MHz of potentially usable L-band spectrum) there are no hard assets to pledge for further fundraising and apparently no meaningful take-or-pay contracts from LightSquared’s growing list of partners either.

UPDATE: In what feels like something out of Alice in Wonderland (“Why, sometimes I’ve believed as many as six impossible things before breakfast”), LightSquared’s CEO is claiming that the letter from the NTIA is just what LightSquared needed at this point in time because it “will finally allow LightSquared to put concerns about the impact of its network on GPS to rest”, while another LightSquared executive says “there will be a resolution to the company’s GPS interference issues within a month”. In the meantime (as I noted back in May), LightSquared has admitted that it has abandoned its plans for initial network deployment in Denver and Phoenix, along with its commitment to the FCC to cover 100M people by the end of 2012.

4 Comments »

  1. Light Reading Mobile - 4G/LTE - LightSquared Claims GPS Solution Coming Soon - Telecom News Analysis said,

    September 13, 2011 at 7:13 am

    [...] to protect precision GPS receivers. TMF Associates Inc. analyst Tim Farrar, however, suggests in his blog that the cost and time it would take to actually implement any filter across the installed base of [...]

  2. TMF Associates MSS blog » Beware the Ides of September… said,

    September 13, 2011 at 4:20 pm

    [...] further tests for LightSquared. Though the need for further testing was hardly a surprise after yesterday’s NTIA letter, what comes as a huge shock is that the FCC has offered LightSquared absolutely nothing to indicate [...]

  3. TMF Associates MSS blog » E ≠ mc²? said,

    September 23, 2011 at 11:30 am

    [...] they did not even mention specifically that it would be tested), despite the statements in the NTIA letter of September 9 that testing “need not be complete” by November 30. LightSquared is also is saying that [...]

  4. TMF Associates MSS blog » LightSquared fading… said,

    January 6, 2012 at 11:13 am

    [...] device testing is complete.” This certainly appears to be a change in stance from the September 9 letter from the NTIA to the FCC, which stated “At that time [when LightSquared presents its filtering solution for testing [...]

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