Nobody expects…the Spanish Inquisition

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 8:23 am by timfarrar

In recent days, the LightSquared PR machine has moved into ever higher gear, in an attempt to persuade Sprint that it should choose LightSquared over Clearwire. Given the frantic pace of announcements, I think that Sprint’s decision may come as soon as the next few weeks, in an attempt to disrupt the AT&T/T-Mobile merger, which was partly justified by citing the competition from Clearwire and LightSquared. However, it does feel a bit like something out of Monty Python, when LightSquared claim that the disappearance of their supposed deals with Sprint and MetroPCS is just a flesh wound.

Now we have another Monty Python scene coming into view, as the House of Representative’s Committee on Energy and Commerce moves ahead with an investigation into the FCC and their “management of commercial spectrum”. As Dave Burstein reports, there are clearly some senior staff at the FCC who share my concern about whether a “spectrum crisis” is being “manufactured”.

However, with not only the FCC Chairman’s reputation, but also the fate of the AT&T/T-Mobile merger, riding on the perpetuation of a “spectrum crisis” (not to mention billions of dollars of projected future budget revenues), it seems likely that the investigation will be more focused on political point scoring than on a serious debate about future spectrum demand.

Nevertheless, if Sprint’s upcoming decision leads to the failure of either LightSquared or Clearwire, then that really ought to prompt some hard questions about whether there actually is a spectrum crisis. Let’s hope that Congress’s investigators have more analytical resources at their disposal than “fear, surprise, ruthless efficiency…and nice red uniforms”.


A time to choose, a time to kill

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 9:30 am by timfarrar

It looks to me ever more likely in the wake of the AT&T/T-Mobile deal that Sprint will soon have to choose to back either Clearwire or LightSquared, but not both. LightSquared is doing its best to talk up the idea that Clearwire’s customers are going to jump ship, having announced a deal with Best Buy with a “trial” of its LTE service starting in the first quarter of 2012, and now suggesting that it is “in discussions” with Time Warner Cable for a major deal, despite that company’s “not very impressive” results with Clearwire and TWC stating that it is “trying to spend not too much money while we are [exploring whether packaging wireless data with our wireline offerings is something that consumers want]“.

Neither of the deals that LightSquared has announced this week will generate very much revenue (I estimate a few tens of millions of dollars per year at best from Leap and rather less than that from Best Buy) and so most people are looking towards a LightSquared network sharing agreement with Sprint to show how LightSquared will move forward. This is hardly surprising given that the previous MoU with Nokia Siemens Networks appears to have fallen apart, and there is still no news about a partnership with MetroPCS on the 2GHz MSS spectrum.

Before the AT&T/T-Mobile deal it seemed that Sprint would try and have it both ways, continuing to work with Clearwire, and hoping that a spectrum sale or investment from T-Mobile would solve Clearwire’s funding challenges, while signing a network sharing agreement with LightSquared to offset some of its network upgrade costs and allow it to play Clearwire off against LightSquared when it came to negotiating wholesale bandwidth pricing.

However, it now looks more likely that Sprint will have to choose between Clearwire and LightSquared, because the two companies are competing for the same diminished pool of potential deals, and as Strategy Analytics asserts “there are probably too many 4G wholesale networks going after too few large wholesale customers”.

Despite the problems that Clearwire is facing, it has spent at least $5B so far on rolling out a network, mostly using other people’s money, and has a commercial network covering 120M people with capacity that can be sold today. From that perspective alone, it would be much less of a risk for Sprint to choose Clearwire over LightSquared. As Walter Piecyk of BTIG put it with regard to the “talks” between LightSquared and TWC: “Signing a roaming deal with LightSquared is kind of like planning a trip that goes over the bridge to nowhere. There is currently no network to use, there are material interference issues to resolve and then there is the small detail of coming up with $14 billion of cash. Good luck.”

Given these challenges, a decision by Sprint that provided LightSquared with a path to move forward would cast its already difficult relationship with Clearwire in an even more negative light. Similarly, if Sprint decides to back Clearwire as its primary provider of 4G service, it is hard to see why Sprint would expose itself to having to put up even more investment if Clearwire’s future revenue growth is impacted by competition from LightSquared. Given that AT&T has used the availability of both Clearwire and LightSquared’s networks to support its assertion that the mobile broadband market is highly competitive, the AT&T/T-Mobile merger might also be less likely to be approved, if one or other of Clearwire and LightSquared was to fail in the near term. As a result, I think that whichever choice Sprint makes could be fatal for the company it leaves on the sidelines, and ironically Sprint might even benefit from that outcome.


The good, the bad and the ugly

Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 8:48 am by timfarrar

As I noted last month, I found it very surprising that LightSquared chose to announce that it had “five customers” for wholesale fourth-generation service, consisting of “a national retailer, a device manufacturer, one Web site, and two carriers”, but declined to name any of them. Over the last five weeks, two of these names have emerged – Open Range Communications and today Leap Wireless. However, LightSquared is still to reveal the “major retailer that it will name before the end of March”.

Just like the deal with Open Range ten days ago, when everyone thought LightSquared would announce a major deal with MetroPCS, today’s release also seems to be a major let down. LightSquared had promised everyone that it had a network sharing agreement with Sprint to announce at CTIA. Perhaps this will still be announced tomorrow, but that would be a rather peculiar PR strategy, and PR is one thing that LightSquared has been very effective at. Given the complex array of choices now facing Sprint, as it decides how to respond to the AT&T/T-Mobile deal, it seems more likely that Sprint has taken a step back to reconsider what happens next.

As I understand it, the Leap Wireless roaming deal was agreed six months ago, leading LightSquared to claim at the SATCON conference in New York in October that it had already secured a 3G roaming partner to “augment” its network coverage. It also hardly seems likely to generate a meaningful amount of revenue for LightSquared, especially if it is a reciprocal roaming agreement. If 30% of Leap’s 5.5M customers opted for 4G roaming, and the net revenue flow to LightSquared was $2 per sub per month, then this would only generate about $40M of revenues per year for LightSquared, a drop in the bucket compared to its planned $14B investment.

The second major LightSquared announcement that was expected at CTIA was a network infrastructure deal with Ericsson. Its therefore surprising that an interview with a LightSquared executive has been published today on Telecoms.com, once again talking about LightSquared’s “deal” with Nokia Siemens Networks. As an aside, I’m told that the reason it is always referred to as a “deal” or an “agreement” with NSN, is because the original MoU, signed last July, has never been converted into a formal contract.

In my previous post, I wondered “which of DBSD/TerreStar, Clearwire and LightSquared will ultimately turn out to be the good, the bad and the ugly”. Given the results of the DBSD bankruptcy auction, DBSD certainly turned out to be good for its investors. Now we just have to wait and see what happens with TerreStar, Clearwire and LightSquared.


Known unknowns and unknown unknowns

Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 4:39 pm by timfarrar

There are known knowns; there are things we know we know.
We also know there are known unknowns;
that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don’t know we don’t know.

As Donald Rumsfeld’s famous speech pointed out, often the most important issues are not the known unknowns, but the unknown unknowns. There are many known unknowns in LightSquared’s plan, such as the eventual impact of GPS interference, and where they will find funding for the network buildout.

However, the ultimate outcome may in fact be dictated by things we didn’t know we didn’t know, like the negotiations that resulted in today’s deal for AT&T to buy T-Mobile. Although some observers are suggesting this would be bad for LightSquared, in fact I think its much better for them than the alternative, of Sprint buying T-Mobile, which would hardly have left much room for a new entrant 4G network. In addition, my understanding is that discussions between LightSquared and T-Mobile have not been particularly active for quite a long time.

Although the AT&T/T-Mobile deal will undoubtedly overshadow this week’s CTIA conference, it will force Sprint to respond in some way fairly soon. Sprint obviously will be in a better negotiating position vs both Clearwire and LightSquared, but if those negotiations are already at an advanced stage, as most people assume, the outcome may not change too much.

From my point of view, one of the most interesting facts to come out of the AT&T announcement is that AT&T’s expectations are for mobile data growth of 8 to 10 times between 2010 and 2015, very similar to (though slightly lower than) T-Mobile’s January 2011 projection of 60% data growth per year from 2010 to 2014. Though AT&T trumpets this statistic as evidence of the growing demand for spectrum, when two of the biggest carriers agree that growth will be far slower than the FCC’s October 2010 spectrum demand model (which was already subject to significant errors), it certainly demonstrates how out of touch the FCC Chairman was this week, when he highlighted Cisco’s projection of “a nearly 60X increase [in data traffic] between 2009 and 2015″ as evidence that “the looming spectrum shortage is real”.

In the end, as Secretary Rumsfeld acknowledged, political decisions are made on the basis of incomplete and sometimes even incorrect evidence. To date, the FCC Chairman’s firm belief in a “spectrum crunch” has benefited LightSquared substantially, even if the reality is more likely something very different. However, as Secretary Rumsfeld found out, if momentous decisions are based on a faulty hypothesis, there will usually be a pretty significant backlash once the truth is revealed.


Order and confusion, again

Posted in ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 12:58 pm by timfarrar

On Wednesday, the FCC Chairman gave a speech at the Mobile Future Forum promoting his plan to hold incentive auctions of spectrum “voluntarily contributed by current licensees like TV broadcasters or mobile satellite operators, who would in return receive a portion of the proceeds of the auction”. This comes at an awkward time in the debate over MSS spectrum, given that DBSD has just been sold and a resolution of the TerreStar bankruptcy is still to come.

With Harbinger’s bid for DBSD, many observers had assumed that 2GHz spectrum holders would be able to secure waivers of the ATC obligations just as LightSquared did, despite the FCC expressing its intention in last July’s NPRM to secure “appropriate compensation for the step up in value” generated by converting the 2GHz band to terrestrial spectrum. As a result, this injection of additional uncertainty can’t be good news for TerreStar’s investors as they seek bids for the company’s assets.

The FCC Chairman’s intention to treat 2GHz differently from L-band (apparently on the basis that L-band spectrum is “worse” than 2GHz because it will take a substantial amount of time and money to resolve the interleaving and interference issues) also draws more attention to the ongoing debate over the LightSquared waiver.

Earlier this week it was suggested to me by an Obama Administration official that the FCC’s actions in granting the waiver may have contravened the intent of the President’s spectrum policy, as laid out in a June 2010 memorandum. This Memorandum states the following:

Section 1. The Secretary of Commerce, working through the National Telecommunications and Information Administration (NTIA), shall:

(a) collaborate with the Federal Communications Commission (FCC) to make available a total of 500 MHz of Federal and nonfederal spectrum over the next 10 years, suitable for both mobile and fixed wireless broadband use. The spectrum must be available to be licensed by the FCC for exclusive use or made available for shared access by commercial and Government users in order to enable licensed or unlicensed wireless broadband technologies to be deployed;

(b) collaborate with the FCC to complete by October 1, 2010, a specific Plan and Timetable for identifying and making available 500 MHz of spectrum as described in subsection (a) of this section. For purposes of successfully implementing any repurposing of existing spectrum in accordance with subsection (a) of this section, the Plan and Timetable must take into account the need to ensure no loss of critical existing and planned Federal, State, local, and tribal government capabilities, the international implications, and the need for appropriate enforcement mechanisms and authorities;

Specifically, it was suggested to me that the FCC did not “take into account the need to ensure no loss of critical existing and planned Federal, State, local, and tribal government capabilities” with respect to GPS interference, because the waiver was granted before the issue had been fully addressed. This dispute appears to highlight an ongoing debate within the US government about how to balance the conflicting objectives of protecting GPS while increasing the availability of broadband spectrum, which has seen at least one senior officer speaking out against LightSquared. As a result, it will be interesting to see how the political debate evolves, in light of the ever-intensifying lobbying campaign from the GPS industry.


Field of dreams

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum at 7:20 pm by timfarrar

Back in the 1990s, the oft-repeated mantra from proponents of the Iridium, Globalstar and ICO projects, when asked where they would find subscribers and investors, was “build it and they will come“. Unfortunately, this Field of Dreams approach didn’t quite work out, when between them these projects lost over $12B of investors’ money.

It now looks like Phil Falcone may end up playing the role of another character from the film, and an even better known resident of Chisholm, Minnesota, Archibald “Moonlight” Graham, whose claim to fame is that he never managed to get a chance to bat in his only appearance in Major League Baseball.

At Satellite 2011 today, the consensus of industry observers and regulatory advisers alike was that GPS interference issues are likely to render much of LightSquared’s L-band spectrum unusable for years to come, as I noted last night. As a result, it is very hard to see where we go from here in terms of LightSquared’s network buildout, even if the plan was fundable.

UPDATE: LightSquared appears to be hinting that it plans to announce a network sharing deal with Sprint next week at CTIA. Though this would be an interesting development, it is a far cry from the planned deal with MetroPCS, which could have potentially ensured an ATC buildout in the 2GHz band. LightSquared would still have to raise the money to fund the buildout, and this will still cost billions of dollars, not least because Sprint only has the right to deploy majority owned spectrum (such as from Clearwire) on its leased towers (unless new agreements are struck with the tower owners). If GPS interference issues render much of LightSquared’s spectrum unusable, it will also be much harder to offer adequate security for any new fundraising.

After Harbinger’s unsuccessful attempt to gain control of DBSD, it may now prove difficult if not impossible to access the 2GHz spectrum. With MetroPCS apparently also unwilling to publicly announce its partnership with Harbinger, it appears more plausible that MetroPCS would decide to team up with DISH than to continue the pursuit of TerreStar in conjunction with Harbinger. As a result, it seems ever more probable that there may never be a LightSquared terrestrial network, and Mr. Falcone may have lost his chance to bat in the major league of mobile operators.


The loan arranger

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 8:24 pm by timfarrar

Yesterday at Satellite 2011, Harbinger’s bankers at UBS expressed enormous confidence that LightSquared was “ahead of the pack” in securing partners and in its future prospects. Given the ongoing auction for DBSD, I was not alone in finding that confidence somewhat surprising. However, the document filed by DBSD this morning summarizing the status and results of the marketing process helps to explain why that was the case. MetroPCS (referred to as the Alternative Bidder) had filed a tentative bid last Thursday which was “contingent on the completion of additional due diligence and securing sufficient financing” (because it had been unable to reach an agreement with Harbinger and Solus). This was the point at which LightSquared were forced to announce their deal with Open Range instead of the intended partnership with MetroPCS. However, on Sunday March 13, MetroPCS reached an agreement with Harbinger and Solus to jointly fund the bid, allowing the three companies to make a definitive offer ultimately amounting to $1.475B. This supposed “knock-out” bid was a major factor in allowing UBS to travel to Washington DC on Monday and advertise their confidence in LightSquared.

Unfortunately for Harbinger, late last night DISH made a higher bid of $1.485B for DBSD and secured the support of parent company ICO Global, knocking Harbinger out of the running (although there remains the remote possibility of a further bid). As a result, the plans of LightSquared are now subject to considerable confusion – will it focus on the L-band or will it instead bid for TerreStar?

As I noted last week, there are acknowledged problems with GPS interference in the L-band, which is apparently what forced Harbinger to bid for DBSD. I’m now told that this interference issue may well render LightSquared’s current L-band spectrum (as available under the Phase 1 agreement with Inmarsat) largely unusable in a terrestrial network for many years to come, until filters are fitted as a matter of course to GPS devices (assuming the FCC decides to mandate this). In addition, LightSquared’s Phase 2 L-band spectrum (leased from Inmarsat), which may have less interference problems, will not be available until July 2013. However, TerreStar’s spectrum also has its problems, not least the potential need to negotiate an agreement with DISH as the owner of DBSD for a joint approach to utilize the 2GHz spectrum.

UPDATE: As part of its March 15 GPS Working Group documentation, LightSquared has published full details of its terrestrial spectrum band plans. The Phase 0 spectrum (1 paired 5MHz channel) has its downlink at 1550.2-1555.2MHz. The Phase 1A plan adds another channel with a downlink at 1526.3-1531.2MHz and the Phase 2 plan extends both channels to 2x10MHz, with downlinks at 1526-1536MHz and 1545.2-1555.2MHz. As such, though LightSquared is likely unable to use the Phase 0 spectrum, it might be able to use the second (lower) channel under the Phase 1A plan without causing substantial interference to GPS. The Phase 1A spectrum is expected to be available in February 2012, although under the original Cooperation Agreement a “reasonable delay” of up to 9 months could be added to this date. Whether this timeline for availability is sufficient to support a buildout is unclear.

In the near term, what may overshadow these issues is the status of the $586M loan that LightSquared secured from UBS and JP Morgan in mid February. At the time it was indicated that this loan would bring LightSquared’s available cash up to “about $1 billion”, something that is very important in enabling LightSquared not just to go forward with its planned network buildout, but also to keep paying Inmarsat for rebanding of the L-band spectrum. I had assumed that much of this loan would be spent on the DBSD bid, otherwise it is hard to see why LightSquared would access money at this stage when only a few days before LightSquared had indicated that it was “not going to raise more [money] in the short term”).

The question now is whether this loan has been drawn down and whether LightSquared will be able to continue to spend the money on the L-band rebanding and future network buildout, in view of the challenges the company may face in utilizing its L-band spectrum in the near term. If there are any conditions under which the loan could be recalled, then UBS will have to decide whether its confidence in LightSquared still remains as high as on Monday, or if its exposure is now of more concern. With LightSquared’s current cash burn rate somewhere in excess of $100M per quarter (excluding any terrestrial network buildout costs), this could significantly impact how much time LightSquared has available to secure a partnership.

Next week, LightSquared has indicated it plans to announce “significant news” at CTIA. Will this give some indication of where the company goes from here? Is there a deal with Sprint, T-Mobile or some other partner to announce? Will further disclosure of a partnership with MetroPCS take place, or was that deal limited to a potential 2GHz venture? Many questions remain unanswered, but LightSquared will need to start providing some answers very soon, if it is to move forward with its plans, and meet its promises to the FCC.


The virtual network operator?

Posted in ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:31 am by timfarrar

Could LightSquared meet its buildout obligations to the FCC without doing any buildout?

Amazingly enough, that could be one potential interpretation of the way in which LightSquared’s March 2010 agreement with the FCC is written.

Condition 2. Without regard to satellite service, SkyTerra shall construct a terrestrial network to provide coverage to at least 100 million people in the United States by December 31, 2012; to at least 145 million people in the United States by December 31, 2013; and to at least 260 million people in the United States by December 31, 2015. For purposes of this Condition 2, “terrestrial network” shall mean the network comprised of: (a) SkyTerra’s L-band spectrum used by its terrestrial network; (b) other terrestrial spectrum that Skyterra is the licensee of or has access to under a spectrum manager lease or de facto transfer lease and deploys to provide the coverage and level of service requirements described in the paragraph 6; and (c) any other terrestrial spectrum that is used by SkyTerra’s terrestrial network or is made available to SkyTerra for pooling with its spectrum and that SkyTerra deploys to provide the Coverage and level of service requirements defined in paragraph 6. “Spectrum that is used by SkyTerra’s terrestrial network” means spectrum that is licensed to or controlled by a party other than SkyTerra that has been incorporated into the infrastructure of SkyTerra’s terrestrial network.

The only additional requirement is that this buildout “must be capable throughout the coverage area of providing speeds to end users at least at a level commensurate with deployments of terrestrial networks using “fourth-generation” (“4G”) technologies, such as the 3GPP Long Term Evolution (LTE) or Worldwide Interoperability for Microwave Access (“WiMAX”) standards”. Thus LightSquared is entitled to count towards its obligations any buildout by Airspan in the 1.4GHz spectrum (under their agreement last August) or by Open Range (as announced yesterday) in what is most likely the 1670-75MHz terrestrial spectrum block that LightSquared also controls.

Most significantly, if Harbinger can strike a deal with MetroPCS this weekend, to make a joint bid for the TerreStar and DBSD spectrum, then any LTE buildout in the 2GHz band (presumably under a “spectrum pooling” agreement) could also be counted towards these obligations. Even if a buildout in the 2GHz MSS spectrum did not take place, then MetroPCS has its own LTE buildout in the AWS band and has expressed an interest in entering into a roaming agreement with LightSquared, which could potentially be counted as “other terrestrial spectrum that is used by LightSquared’s terrestrial network” depending on how the agreement was structured.

Once you realize that MetroPCS already has about 97M covered POPs (although not all of them yet have LTE) and that OpenRange was intending to cover 6M POPs (with an option to grow to 12M POPs) under its original agreement with Globalstar, it becomes pretty clear that LightSquared might be able to meet its December 31, 2012 deadline for covering 100M POPs without building out any of its own network coverage. Though that would probably not be the case for the buildout requirements in subsequent years, this highlights that Harbinger might well be able to find a way around LightSquared’s looming deadline next year, even if it isn’t able to fund a large scale deployment in the near future.

As a result, I’ll be very interested to see what happens with MetroPCS, Harbinger and Solus this weekend. DBSD stated on Friday evening that it expects to receive a bid “later today or over the weekend” and will file a report on Monday “to designate the leading bidder”. It seems the exact details of how any agreement with MetroPCS is structured could prove critical to where we go from here.


Is that it?

Posted in Financials, Globalstar, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 11:48 am by timfarrar

He came from a hardscrabble background, rising to prominence along with his flamboyant wife, who became a favorite of the tabloids. After raising hundreds of millions of dollars, his unstinting efforts to bring essential resources to millions of people in remote areas attracted the interest and favor of political leaders and government agencies alike.

No, its not the story of Phil Falcone, but the autobiography of Bob Geldof. After today’s announcement of a deal with Open Range, something that other MSS-ATC proponents openly scoffed at when Open Range signed its original deal with Globalstar, I’m also left asking “Is that it?”.

Its worth recalling that the prior spectrum lease contract between Open Range and Globalstar called for annual spectrum lease payments which in the first six years were projected to range from $0.6M to $10.3M, something that is little more than a Band Aid in the context of Harbinger’s $2.9B investment in LightSquared. I’m therefore left with the distinct impression that LightSquared intended to announce a much bigger deal with MetroPCS, as I suggested yesterday, but it has not yet been possible to reach agreement over a joint bid on the 2GHz MSS spectrum.

Given the pressure to reach a deal on any bid for the DBSD spectrum before the next hearing on Tuesday March 15, and DBSD’s intention to announce its preferred bidder the day before, we will have to wait and see if a MetroPCS deal can be struck over the next three days, or if Mr. Falcone will be the one left singing “I Don’t Like Mondays“.


Harbinger’s new plan: 2GHz first?

Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 1:24 pm by timfarrar

It now appears that Harbinger may very shortly announce a change to the LightSquared business plan to focus first on development of its ATC network in the 2GHz band, through a joint $2.6B bid with MetroPCS and Solus for the DBSD and TerreStar spectrum. This could allow it to mitigate the growing chorus of opposition to its plans for deployment of an L-band network, including planned testimony by Trimble to Congress tomorrow (Friday).

Over the last month, LightSquared has been gradually changing its tune, from initially suggesting that Garmin’s tests were simply flawed, to admitting that there “may be some interference to GPS signals which…may require modification to some existing GPS units” to now conceding that some GPS receivers may need to be replaced.

As I’ve also noted over the last week, a partnership with MetroPCS has become increasingly likely, with a deadline for bids in the DBSD case of Tuesday March 15. On a very similar timeline, on Monday March 14 LightSquared will provide its response to the numerous Petitions for Reconsideration of its L-band ATC waiver that have been filed with the FCC.

UPDATE: I understand that LightSquared has not yet sealed the deal with MetroPCS. Given the upcoming deadlines, it may be a very busy weekend in Reston.

Assuming that Harbinger is able to pull together a bid for the 2GHz spectrum, I would expect LightSquared to propose that if it is given permission to build out its terrestrial network initially in the 2GHz band (with an associated waiver of the ATC gating requirements), it will take more time to resolve the GPS interference issues in the L-band. Because the key issue for GPS interference is that many existing GPS devices will be overloaded by the LightSquared signals within its own licensed spectrum (as opposed to LightSquared’s signal spilling over into the GPS band), a logical compromise would ultimately involve an order from the FCC that GPS devices sold after a certain date (say the end of 2012) will need to include filters that can prevent overload interference, while LightSquared will not operate at the upper end of the L-band spectrum until some time after this (perhaps 2014 or beyond), so that existing GPS devices can be replaced.

If MetroPCS funds the buildout of a 2GHz LTE network in its own coverage areas, then this may be largely sufficient to meet LightSquared’s initial buildout milestone of 100M POPs covered (although perhaps with a modest delay to the current objective of the end of 2012). Though there has been much talk about a deal between LightSquared and Sprint, it seems that the initial 2GHz buildout may not rely on that possibility. LightSquared and Harbinger would then presumably hope that something turns up, whether in the shape of a deal with Sprint, or something else, to fund the rest of the nationwide buildout in 2013 and beyond. Although details may not emerge for some time, it also seems plausible that LightSquared could eventually seek to renegotiate its Cooperation Agreement with Inmarsat, on the basis that Regulatory Changes have made it impossible for LightSquared to secure the originally planned benefits of the deal in the L-band.

Of course, if Harbinger only ends up with a minority stake in a 2GHz spectrum venture, and is unable to exploit the L-band spectrum to any significant degree in the next few years, then this would be a significant come down from its original plans. However, with MetroPCS potentially funding the initial rollout, this would push the problem of where LightSquared is going to get the cash to pay for a multi-billion dollar national network down the road by at least two years, allowing Harbinger to hope that spectrum values and data demand will grow enough for it to recover its $2.9B investment in the L-band and fund the rest of the nationwide buildout at that point.

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