01.20.12

Get your spectrum here…or not…

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 5:24 pm by timfarrar

This evening Reuters is reporting that Mr. Falcone is examining “the potential for selling [LightSquared's] right to certain spectrum leases” to “raise cash for his financially strapped telecom start-up”. Those leases are presumably the 8MHz of 1.4GHz spectrum that LightSquared leases from TerreStar Corp and the 5MHz of spectrum at 1670-75MHz that is leased from Crown Castle. However, its hard to see how LightSquared could raise any meaningful amount when any buyer would have to take over the underlying lease obligations ($24M per year for the TerreStar spectrum and $13M per year for the Crown Castle spectrum) and there is no clear buildout plan for either band. Indeed LightSquared had not even planned to include the 1.4GHz spectrum in its LTE network, instead entering into an agreement with Airspan Networks in August 2010 under which Airspan would “exclusively market LightSquared’s 1.4 GHz wireless spectrum” to the utilities industry as “a comprehensive solution for Smart Grid and Smart Utility applications” (though with no visible success to date).

Other news emerging today is that I’m told the NTIA plans to release its report on the November 2011 testing next week, presumably accompanied (concurrently or very shortly thereafter) by its recommendations to the FCC. It appears that the NTIA will back the PNT Excom recommendations (most likely including that there should be no further testing at this time and that there should instead be a consultation on GPS receiver standards), and it could hardly do otherwise, given that the test procedures criticized by LightSquared were specified by NTIA in the first place. Remember also that last August Mr. Strickling believed LightSquared was “in Wonderland” in thinking it could move forward after the initial test results came out.

I’m also told that LightSquared is trying very hard to pressure the FCC to overrule the NTIA, and order that the high precision testing should start within the next two weeks. However, that hardly seems plausible given the political firestorm that would be ignited by a public disagreement between the FCC and NTIA. Messrs. Genachowski and Strickling will be in Geneva this weekend for WRC-12 and it sounds like they will be very busy trying to avoid that situation. As a result, we might well see the same outcome as in September, when the release of the NTIA letter was followed very quickly by an FCC response (which in that case was to adopt the NTIA recommendation). It definitely looks like next week will be a very busy one, so follow me on Twitter @TMFAssociates for all the latest information.

UPDATE (1/22): It appears that the NTIA recommendations letter will have to wait for Mr. Strickling to return from Geneva, so we may not see it until the week of Jan 30. I also now expect the FCC to order a (pretty lengthy) GPS receiver standards rulemaking, which will allow for further testing and debate on when the lower band spectrum might be useable for terrestrial services (think 2020 or thereabouts, though we won’t have any definitive transition timeline until 2013 or even 2014) and conveniently put off any decision until after the November election. Of course, because LightSquared will be unable to operate its terrestrial network in the meantime (almost certainly a MAC for its loan covenants), that will likely set off a major battle amongst the debtholders about what to do next, with Mr. Icahn likely to try and force LightSquared into bankruptcy in the near future, while some other debtholders might be more supportive of Mr. Falcone if they still believe he can see this process through.

Assuming that the FCC did agree with the NTIA and stated that it was prohibiting LightSquared from commencing terrestrial operations for the foreseeable future, the most interesting question will be the grounds for its legal authority in doing so. LightSquared has indicated that it would withdraw the waiver request in these circumstances, and that it believes this would render the condition (requiring GPS interference concerns to be resolved) imposed in the January 2011 order null and void. In that case, the FCC would probably have to fall back on the authority that the GPS industry (plus others such as CTIA) have asserted all along (and LightSquared has challenged, most recently in its Dec 2011 Petition for Declaratory Ruling), that CFR 25.255 (“If harmful interference is caused to other services by ancillary MSS ATC operations, either from ATC base stations or mobile terminals, the MSS ATC operator must resolve any such interference”) provides absolute protection against LightSquared being permitted to cause harmful interference. In that case we could expect to see LightSquared launch legal action very quickly, in line with the position adopted in its December petition.

3 Comments »

  1. TMF Associates MSS blog » Who to sue? said,

    January 24, 2012 at 9:05 pm

    [...] into bankruptcy immediately after an unfavorable FCC ruling, assuming that comes in the next couple of weeks. The key reason for this would be that LightSquared is due to pay Inmarsat $56.25M on February 18 [...]

  2. TMF Associates MSS blog » Complicated legal arguments…and simple math said,

    January 27, 2012 at 2:24 pm

    [...] appear that the FCC is at least cognizant of LightSquared’s legal strategy, and is likely (as I predicted) to ultimately rule that the Interference-Resolution Process should be prolonged (and extended to [...]

  3. TMF Associates MSS blog » Did AT&T’s spectrum deep dive dump DISH deal? said,

    February 4, 2013 at 2:22 pm

    [...] early 2012 with a view to buying the 1670-75MHz spectrum block (when LightSquared indicated it was considering a sale of these spectrum leases), and its inconceivable that AT&T didn’t also discuss with DISH the possibility of [...]

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