10.28.11
Posted in LightSquared, Operators, Regulatory, Spectrum at 4:32 pm by timfarrar
Over the last few months, LightSquared’s CEO has repeatedly asserted that he is “absolutely confident” that LightSquared will “build a system that works with” GPS and that “we will get the proper approvals from the FCC and other government agencies” when the decision comes out in September. Most recently, at the end of September, he told the New York Post that he is “absolutely confident the FCC will approve” LightSquared’s revised business plan later this year. I’m also told that earlier this year he personally “guaranteed” to investors there was no interference problem with GPS, which was how LightSquared was able to raise a further $586M in February.
News has emerged today which yet again proves Mr Ahuja’s confidence was completely misplaced, with Aviation News reporting that the next round of government tests of LightSquared’s “lower 10″ plan are getting underway this week and will run into the first part of November. Notably, as I indicated earlier, high precision receivers are not part of this testing and so the testing needed for the FCC to reach a decision will certainly not be completed this year (not to mention the fact that the NPEF doubts it will be possible even to complete its analysis of the current testing by November 30).
High-precision GPS receivers, which original tests showed would suffer unacceptable interference even from lower-band transmissions, are not being tested as LightSquared is still working with suppliers on development of antennas and filters to protect these devices, used in agriculture, construction and scientific sectors.
Indeed a new ex parte submission, documenting a meeting between the GPS industry, LightSquared and the FCC on October 25, brokered by a member of Congress, confirms that “LightSquared has proposed to develop new filters that could be employed in new high precision GPS receivers that would protect against interference from Low 10 MHz transmissions. Such filters have not yet been made available”. This is despite LightSquared’s assertions on September 21 that “Javad GNSS has completed the design, made prototypes and tested those prototypes. Preproduction units will be released for public tests in October, followed by mass production.”
Perhaps that is why LightSquared apparently now plans to commission its own “independent” tests by Alcatel-Lucent Bell Labs, though of course those will not carry any weight in the testing process mandated by the NTIA and FCC. However, it is hard to see how LightSquared can claim that “These solutions will undergo extensive National Telecommunications and Information Administration (NTIA) and Federal Communications Commission (FCC) testing in the coming weeks” unless “in the coming weeks” is re-defined as “sometime next year (if we’re still in business then)”.
Over the last month, we haven’t seen as many high profile appearances from Mr Ahuja, and apparently he has been visiting India to promote his Augere venture in Asia and Africa. However, he is scheduled to speak on Wed Nov 2 at the Open Mobile Summit in San Francisco, and it will be interesting to hear how “absolutely confident” he is in whatever LightSquared’s story changes to next week.
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10.26.11
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum at 11:03 am by timfarrar
Last week we saw various filings from wireless companies and the CTIA on DISH’s transfer application/ATC waiver request for DBSD and TerreStar, which mostly just served to highlight the interests of the different wireless operators. MetroPCS asked the FCC to force DISH to provide a detailed business plan before considering the transfer application (in other words to do a deal with them rather than wait for a decision on the AT&T/TMO merger). Sprint asked the FCC to condition the transfer on reimbursement of Sprint’s relocation expenses, and to impose the same buildout conditions on DISH as the FCC imposed on LightSquared in exchange for the waiver (thereby potentially forcing DISH to pay Sprint to host their buildout). Meanwhile the CTIA asked the FCC to defer any decision on a waiver until a more general rulemaking proceeding has been completed (thus allowing the wireless operators to find out what will happen to the AWS-3 spectrum and whether the 1755-1780MHz block will be available for pairing). Ironically the CTIA cited potential interference with the G-block PCS spectrum as a reason for delay, when Sprint (who owns this spectrum) didn’t even mention it in their submission.
DISH’s formal response is due tomorrow (Oct 27), but an ex parte submission and an interview with Charlie Ergen both highlight that DISH is going to make sure that the FCC is under more pressure to conclude this proceeding (and finally take the first step towards its goal of making more spectrum available) than DISH is. Indeed DISH would clearly prefer to wait until a decision is reached on the AT&T/TMO merger, because if the proposed merger is blocked then more potential partnerships would open up. In my view, the most likely partnership would then be with AT&T, which has come close to a deal to buy DISH in the past, and would be able to use both DISH’s 2GHz MSS-ATC spectrum and its 700MHz E-block spectrum (in conjunction with the MediaFLO spectrum that AT&T plans to buy from Qualcomm).
However, the FCC still has to avoid giving DISH a similar spectrum windfall to LightSquared and if DISH is to avoid having to give up part of the spectrum for reauction, it will have to come up with some creative way to reimburse the Treasury financially for any windfall (e.g. offering to pay the difference between what it paid for DBSD and TerreStar and the amount the adjacent J-block 2020-25/2175-80MHz spectrum sells for in any future auction).
Today, it seems that Sprint has rowed back somewhat on its implied threat on October 7 to force Clearwire into bankruptcy, announcing a “non-binding memorandum of understanding to work together” on ensuring that the two companies’ LTE networks will be interoperable. While this is only a limited first step towards Sprint providing concrete backing to Clearwire in 2013 and beyond, it appears designed to allow Clearwire to go out and attempt both to raise new funding and to secure other partnerships ahead of the early December deadline for Clearwire’s next interest payment on its debt. In the short term the most plausible new partnership would be with MetroPCS, which recently said it is “uniquely positioned” to do something with Clearwire, though it is unclear how much of a financial commitment this would actually involve on MetroPCS’s part.
Yesterday Sprint also indicated that it plans to deploy a 2x10MHz LTE Advanced network in its 800MHz iDEN spectrum, which is the subject of today’s MoU on interoperability. By using this additional spectrum for LTE (rather than CDMA as had been previously stated), Sprint would be able to deliver LTE across a mix of low (800), medium (1900) and higher (2500) frequency spectrum bands depending on the population density in a given area, with the Clearwire network providing supplementary capacity in the densest urban areas. If other wireless operators adopt a similar model, then Clearwire could become a wholesaler to multiple major carriers (e.g. Verizon as a supplement to its LTE deployment which is currently at 700MHz and will later extend to AWS), as would be needed if Clearwire is to build a wholesale business on the back of covering at most 100M-150M POPs. Nevertheless, it will take a minimum of several years before a company like Verizon or AT&T would realistically need that additional capacity and so Clearwire still has a lot of work to do (and a lot more money to raise, now that its WiMAX cashflows are likely to diminish) to pull off its transition to a multi-network wholesale provider of urban capacity, not least in creating an ecosystem around TD-LTE in the 2.5GHz band.
However, at least Clearwire appears to have a plausible plan for how to move forward, unlike LightSquared, which has now basically been written off by MetroPCS and (after today’s announcement) implicitly by Sprint as well. On that basis, it looks like Harbinger’s write-down of its LightSquared investment at the end of September will end up being only the first of several such actions. Its also very hard to see how investors in LightSquared’s first lien debt believe that they will be able to realize even 50 cents on the dollar in bankruptcy, when the most likely outcome is that there will be no purchasers for LightSquared’s spectrum at any price, because the regulatory risks will not be resolved and the ongoing Inmarsat lease obligation potentially outweighes the residual value of LightSquared’s spectrum assets.
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10.17.11
Posted in LightSquared, Operators, Regulatory, Spectrum at 8:38 am by timfarrar
‘If seven maids with seven mops
Swept it for half a year,
Do you suppose,’ the Walrus said,
‘That they could get it clear?’
‘l doubt it,’ said the Carpenter,
And shed a bitter tear.
In what seems like a reprise of LightSquared’s assertions in July that the FCC would reach a favorable decision in September (and indeed that they weren’t even “planning for the possibility that the FCC denies LightSquared the waiver when the decision comes out in September”), LightSquared is now asserting that the company “expects guidance from U.S. regulators by year’s end”. However, last week I spoke to several knowledgeable people about the testing and regulatory process and all were unanimous in their view that an FCC decision by December was utterly implausible.
The reasons for this become very clear once the current testing process is better understood. Those tests are being conducted by government personnel at an Air Force base (most likely White Sands or Holloman, where the previous round of government live sky testing was undertaken), beginning late next week and running through November 4. That testing is confined to “cellular and personal/general navigation” receivers as specified in the NTIA letter of September 9. As of last week, I understand that there was no intention to test the Javad precision receiver with the new prototype filter, and although LightSquared is trying hard to have that included in the testing process, it is certainly not part of the cellular test plan.
However, even if LightSquared succeeds in its efforts to get some testing done in the next three weeks, it would be essentially irrelevant, because the TWG tested 33 high precision and network GPS receivers in live sky conditions (and a total of 44 high precision and 13 timing receivers in an anechoic chamber) and these would all need to be retested before conclusions can be drawn about how to move forward. Indeed it is extraordinarily difficult just to come up with a test plan on this issue, given that circuit board level integration would likely be needed to incorporate the proposed filter into quite a number of these devices, which will take months of work.
After the current round of tests completes on November 4, it will take some time for the NPEF to write-up the results of that work, and I understand that no further testing is planned by the government in the rest of November. Indeed, it may only be possible to complete a summary of the cellular and personal/general navigation testing by November 30, and a complete report may be delayed into December. Once this is understood, LightSquared’s assertions simply become unsustainable.
Another, more worrying conclusion that emerged from my discussions last week is that the effects of the LightSquared debacle may now range much wider in terms of regulatory impact for the satellite industry. Comparisons were drawn with the ITAR backlash in the late 1990s, which has scarred the satellite industry for more than a decade, as another example of Congress running amok with a technical issue that has evolved into a political soundbite. In this context, DBSD and TerreStar may find it hard to gain a waiver without giving up something significant (such as half their spectrum) and the eagerness of the FCC to defend other satellite spectrum rights may also come under question.
The MSS industry in particular looks relatively vulnerable, as it has seen a significant decline in underlying service revenue growth this year, from an average of 7% growth in 2007-10 to less than 3% growth in 2011. As a result, this cannot be good news for a sector which has seen far more capex than can be justified by future MSS revenue prospects, and may now be faced with an even more challenging path to exploit the spectrum assets which have supported several of those investments.
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10.11.11
Posted in Financials, Regulatory, Spectrum at 2:14 pm by timfarrar
In October last year I wrote about the supposed spectrum “crisis” and how the FCC’s Spectrum Summit likely marked the point at which the spectrum bubble began to unwind. A year later, many of those predictions appear to be coming true, with most people now writing off LightSquared (and ridiculing Sprint for selecting them as their “preferred” provider of additional capacity).
Indeed I’ve been surprised how investors’ focus is now much more on Clearwire and DISH, whose spectrum holdings are perceived to have some long term value, and its almost become received wisdom that LightSquared’s spectrum holdings may not provide any recovery in bankruptcy, because the FCC is unlikely to grant approval for terrestrial use of the L-band spectrum (at least ahead of the election, and even then, at best, with a long transition period to update or replace precision devices).
Clearwire’s bonds are also trading at levels that assume they will have to file for bankruptcy, and that their spectrum assets will be sold at a significant discount. I was told that the $2.95B of senior secured notes were trading as low as 50 cents on the dollar, with the $500M second lien at around 30 cents and the $730M of exchangeable notes at around 20 cents, which would put the implied value of Clearwire at $1.5B-$1.8B, despite holding more than 40B MHzPOPs of spectrum.
UPDATE: Prices for Clearwire’s first lien debt are now in the mid-70s, putting a value on the company of closer to $2.5B. While the first billion dollars or so of spectrum sales in a liquidation seems fairly assured, the second billion would be less straightfoward and a third billion even more challenging. Clearwire also faces a large upcoming interest payment in December which will likely represent a key decision point for how it should move forward.
Of course, about 60% of Clearwire’s spectrum is leased, and so may not be in much demand from potential purchasers, while the 17.5B MHzPOPs of owned spectrum is not all contiguous. More importantly, the majority of Clearwire’s owned spectrum comes within the FCC’s spectrum screen, and so it is hard to see why a carrier like Verizon would choose to buy Clearwire’s spectrum and thereby potentially impair its ability to acquire more lower frequency spectrum like SpectrumCo’s AWS-1 block in the future.
However, other than Sprint, virtually the only obvious alternative buyer for Clearwire’s spectrum is MetroPCS, which would probably not want to buy more than 2-4B MHzPOPs of spectrum (i.e. 20-40MHz across its existing 100M POP footprint) and would therefore potentially spend no more than about $1B in total. This puts the pressure on Clearwire to adopt the @Home strategy, which would mean filing for bankruptcy well before Sprint has a credible alternative network in place and threatening to cut off Sprint’s customers unless Sprint pays them a great deal more for capacity in the near term. Sprint would then either have to make a much better offer for Clearwire’s spectrum, or pay for transition services until it could transfer the EVO 4G customers to its own LTE network (allowing Clearwire to make money for its debtholders both from offering service to Sprint and from later selling at least part of its spectrum holdings to another player like MetroPCS).
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10.06.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 12:02 pm by timfarrar
Despite the ever louder assertions from LightSquared’s CEO that he is “absolutely confident” that the company “can raise the capital that’s needed” and that the FCC “will approve” its buildout later this year, the end game for LightSquared has now become pretty clear. The company is down to its last “several hundred million dollars” and “isn’t actively raising funds”, because as LightSquared admitted at the Goldman Sachs conference last week, they need an FCC approval before any more money can be raised (and even then would need to raise a staggering $3.5B within the next 2 years!).
With payments to Inmarsat totaling $155M due between now and February and $9M of lease payments each quarter for its other spectrum, not to mention interest on its $1.6B of first lien debt and other costs of operating the company, that money will be gone within the next six months, and given the timeline set out by the NTIA, its all but inconceivable that the FCC will be able to give the approval by the end of the year, as LightSquared asserts (and would require in order to have any chance of raising more money before they have to file for bankruptcy).
As I’ve expected for several months, it appears that LightSquared are therefore planning to sue the FCC for what the company will presumably assert is the unconstitutional “taking” of its property rights, as granted in previous FCC rulings dating back to 2005. However, as one regulatory lawyer put it to me, suing the FCC is not like shooting yourself in the foot, its more like shooting yourself in the head. This is especially true in a situation where there are all sorts of references in the various FCC rulings to LightSquared’s obligations to avoid interference, and the problems could easily have been uncovered if LightSquared had decided to test their system back in 2005, rather than waiting until 2011. Indeed the FCC now seems very likely to simply wait this one out, and point to the need for further tests to justify holding off on any decision, which would potentially deprive LightSquared of any cause of action.
Today we’ve also seen further Congressional pressure building on LightSquared, which will be amplified by the GPS industry’s decision to focus attention on LightSquared’s $10B spectrum windfall that I noted two weeks ago. This letter from Trimble even points out that President Obama’s jobs bill “would require the FCC to recover a significant portion of the value of new terrestrial broadband deployment rights in certain spectrum frequencies that were originally set aside for satellite services either through competitive bidding procedures or spectrum fee authority”:
SECTION 274. REQUIREMENTS WHEN REPURPOSING CERTAIN MOBILE SATELLITE SERVICES SPECTRUM FOR TERRESTRIAL BROADBAND USE.
To the extent that the Commission makes available terrestrial broadband rights on spectrum primarily licensed for mobile satellite services, the Commission shall recover a significant portion of the value of such right either through the [auction] authority provided in section 309(j) of the Communications Act of 1934 (47 U.S.C. 309(j)) or by section 278 of this subtitle.
SECTION 278. AUTHORITY TO ESTABLISH SPECTRUM LICENSE USER FEES.
…
(B) In addition, the Commission shall, by regulation, establish a methodology for assessing annual user fees and a schedule for collection of such fees on entities holding Ancillary Terrestrial Component authority in conjunction with Mobile Satellite Service spectrum licenses, where the Ancillary Terrestrial Component authority was not assigned through use of competitive bidding. The Commission shall not collect less from the holders of such authority than a reasonable estimate of the value of such authority over its term, regardless of whether terrestrial services is actually provided during this term…
As a result, its now going to be much harder for the White House to defend the FCC’s waiver, which provides even more of a reason for the FCC to simply defer any decision authorizing LightSquared’s network and giving rise to such a windfall. Thus I suspect a lot more of LightSquared’s future will be dictated by what happens at 1 Bowling Green, rather than in any DC Circuit Court litigation against the FCC. More importantly, I strongly doubt that buyers will be lining up to take over LightSquared’s spectrum rights and keep paying Inmarsat’s spectrum lease contract, while the GPS interference situation remains unresolved.
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09.30.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 10:06 am by timfarrar
According to the terms of LightSquared’s January 2011 FCC waiver, today is the deadline for LightSquared to “ensure that integrated, dual-mode MSS/ATC-capable L-Band devices are readily available in the marketplace…for datacards”. However, LightSquared hasn’t even mentioned these datacards for months, let alone ensured that they are “readily available in the marketplace” and the FCC’s Public Notice on September 13 did not indicate that any provisions of the January 2011 order have been waived.
Of course LightSquared will presumably argue that while there is a lack of clarity on what spectrum it will be permitted to use, it is not possible to manufacture commercial dual mode devices, and I don’t think it is likely that the FCC would take enforcement action when it is not permitting LightSquared to operate a terrestrial network (though that might not be the case if LightSquared ultimately decides to sue). Nevertheless, it will give more ammunition to the GPS community, who have been protesting about the short timelines imposed by the FCC for testing, and want to test the interference from LightSquared devices, but can now point to LightSquared missing its own deadlines for provision of these devices.
However, of much greater concern must be the fact that vulture investors are circling LightSquared (now that its first lien debt is priced at roughly 50 cents on the dollar) and may be looking for any opportunity to assert that an event of default has occurred under the first lien indentures, before all of LightSquared’s current cash has been spent. That explains why LightSquared is making such convoluted statements about its intentions for the upper L-band spectrum (proposing a filter that is completely incompatible with any terrestrial upper band operation), because admitting that it has given up on any prospects of operating there (either through a withdrawal of its original proposal or an FCC ruling that it could not operate in that band) would very likely cause a default on its debt. Thus it will be interesting to see how LightSquared addresses the datacard issue, presumably via an FCC filing to request an amended timeframe for commercial terminal availability, and how the FCC responds to this request.
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09.23.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 11:17 am by timfarrar
While physicists may now have shown experimentally that if you have almost no substance then the speed of light squared is no longer a constant, LightSquared itself has demonstrated that repeatedly in recent months, as it has shifted from one deadline and plan to another.
Yesterday, at the Goldman Sachs Communacopia Conference, LightSquared’s CFO and CMO presented yet another version of their plan to potential investors, suggesting that after they have produced a prototype filter and have completed the general navigation retest by November 30, they would then get the go ahead from the FCC which would allow them to raise additional funding at the end of this year or early next. LightSquared also stated that it has committed “up to $50M” for federal precision devices to be replaced or retrofitted (though it does not intend pay to fix commercial devices, which LightSquared suggests will cost $50-$300 to fix, though Javad indicates the actual cost will be $300-$800 for their own devices). LightSquared would then go to market with a single 10x10MHz channel, which would provide sufficient capacity through 2015, and would give plenty of time “to engage” over using the rest of their spectrum. Of course, the implication from LightSquared’s statement that it is funded “into 2012″, is that they will run out of money in the first quarter of 2012, as I indicated in my recent assessment, and that (as LightSquared also indicated) they cannot raise funding until the GPS issue is resolved.
The testing and deployment plans stated above will cause further heartburn in the GPS community and at the DoD in particular (and it is notable that the Air Force Chief of Staff and other colleagues are standing firmly behind Gen. Shelton, who was pretty much accused of lying by Mr. Falcone in his recent Fox News interview). LightSquared still seems to be insisting that production of a prototype filter is sufficient, and that this can be tested before November 30 (although 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 it intends to use the upper part of the L-band in less than 5 years time, which would render the filters they are proposing worthless, and of course until this issue is resolved, it is not even clear that there is any point in testing the new filter.
One under-appreciated point in the debate over “precision GPS” devices is that there appears to be a complete mismatch between LightSquared’s definition of a precision device (repeated in the Goldman Sachs presentation) as one that receives a satellite augmentation signal (such as the survey equipment used by the Army Corps of Engineers) and the DoD and PNT’s definition (as used in the TWG) which includes other non-augmented wideband GPS receivers, such as those used in “advanced scientific and research applications” and “precise location and targeting” by the DoD (which certainly doesn’t rely on augmentation by a commercial service). Of course that is a dramatically different scope both for future testing and for the need to develop a filter in a huge range of different form factors, and helps to explain both the Save Our GPS Coalition’s assertion that “this is not a one-size-fits-all situation” and Gen. Shelton’s assessment that the cost of fixing the problem would be in the “billions of dollars” and would take “a decade or more”.
UPDATE: Michael Marcus remarks in his blog that he believes Gen. Shelton’s concerns are exaggerated, noting that if LightSquared is a major threat to national security then there is a serious problem with the “extreme fragility of military GPS systems” and suggesting that “More likely, however, is that the proposed system will have no impact on military users…”. Of course the debate has moved on from a purely technical one to become a major political issue (not least because President Obama used to own stock in SkyTerra) and its likely that these technical subtleties will be largely lost in the noise at this point in time.
At this point in time, confidence in LightSquared appears to be ebbing by the day (at least as evidenced by their first lien debt, which I’m told is now trading at 60 cents on the dollar, down from near par in June and is “worth keeping an eye on…as a proxy for gauging investor confidence in Falcone and his telecom dream”). However, that’s hardly surprising when their story on the GPS interference issues doesn’t come anywhere close to holding together under scrutiny, and it is far from clear whether their spectrum assets will ultimately have any value at all.
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09.20.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 12:55 pm by timfarrar
Despite, Mr Falcone’s attempts yesterday to dismiss the January 2011 FCC waiver as “irrelevant” to the question of GPS interference, it seems very likely to become a central feature in the Congressional investigations that the House Oversight Committee is now initiating.
A former FCC Commissioner has now told The Daily Beast that the “decision from January was an unprecedented and surprising development. That they would make this decision at the bureau level and not at the full commission level is just stunning.” However, even though LightSquared told the FCC just before the waiver was granted that “grant of this application is an essential building block for our network and requires quick, favorable action so that we may
continue to roll out our network” it appears there is very little understanding of why the waiver was so important for LightSquared.
Fundamentally, as Commissioner Furchtgott-Roth pointed out, “the Commission said LightSquared could use its license for exclusive terrestrial purposes”, which meant that the spectrum rights would be considered (and valued) as equivalent to terrestrial spectrum, allowing LightSquared to raise additional funds to build out its network. In fact that is exactly what LightSquared then proceeded to do, by raising $586M, secured against its spectrum assets, in February 2011.
So how much did the January 2011 waiver potentially increase the value of LightSquared’s spectrum assets by (assuming, as both LightSquared and the FCC did, that the GPS interference issues would be overcome)? Well LightSquared itself provided the answer to that question, in a report it commissioned from Brattle Group in June 2011. The report states specifically (in footnote 2) that “the economic value for LightSquared’s 40 MHz of nationwide L band spectrum dedicated to terrestrial broadband is approximately $12 billion”. This stands in stark contrast to Brattle’s assessment (on page 8-9) that “satellite licenses [would be] worth about $2 billion [for] approximately 50 MHz of commercial satellite spectrum” which “is consistent with other satellite spectrum transactions”. In particular:
“the bankrupt MSS provider TerreStar Networks Inc. is expected to be bought at auction for $1.37 billion. Assets of a similar bankrupt MSS operator, DBSD North America, were purchased for $1.4 billion in March. The major assets of both companies are licenses for 20 MHz of S-Band spectrum.”
Thus Brattle Group’s analysis implies directly that after the January 2011 waiver, which allowed it to be “dedicated to terrestrial broadband”, LightSquared’s 40MHz of L-band spectrum was worth $12B compared to the (just over) $2B that DBSD and TerreStar’s combined 40MHz of spectrum (which is similarly situated, but is still subject to the FCC’s ATC regulations) was worth.
Once this $10B windfall is more widely recognized, I think it is going to represent an enormous political problem for both LightSquared and the FCC Chairman during the upcoming Congressional hearings, making Solyndra’s $535M loan look like small beer. After all in July 2010 current FCC Commissioner Copps noted in conjunction with the MSS NPRM/NOI that he “appreciate[d] the willingness of my colleagues to raise questions regarding the need for any mechanisms—such as spectrum fees—to compensate the American people for the terrestrial use of the public spectrum resource”, which is exactly why January’s action (which was not even brought before the full Commission) was such “an unprecedented and surprising development”.
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09.15.11
Posted in LightSquared, Operators, Regulatory, Spectrum at 10:57 am by timfarrar
Today’s hearing of the House Armed Services Committee confirmed that LightSquared is likely to become a major scandal for the Obama administration in the run up to next year’s Presidential election and it won’t be long before people are chewing their own arm off to escape from this looming debacle (didn’t someone make a film about that?). In particular, the FCC Chairman refused to attend the hearing, in what was described as an “affront to the Committee” by the Republican congressman running the hearing. Rep. Turner also stated that he would be taking up LightSquared matter through the House Oversight Committee, of which he is also a member.
UPDATE: The Republicans are going to make even more of this when they realize that (as the Wall St Journal reported last November) Soros Fund Management is also a “significant investor” in Harbinger/LightSquared. In the meantime, LightSquared’s CEO is defending the company by stating that it “has never taken one dollar in taxpayer money”, apparently forgetting Mr Carlisle’s testimony to Congress that LightSquared has received over $2M from the FBI for providing satellite services and equipment in the current fiscal year, not to mention its own estimate that the January 2011 FCC waiver was worth over $10 billion in incremental spectrum value to the company. And did he really just say that they will only be investing $8B rather than the $14B number they have used previously?
The FCC Chairman’s refusal to attend the hearing comes in the wake of allegations that the White House pressured Gen. Shelton to change his testimony to the Committee, and while Sen. Grassley is still pursuing the FCC Chairman for details of FCC communications with and about LightSquared in the run up to approval of the January 2011 waiver. My guess is that there must have been some reason for LightSquared to submit its waiver request on the Thursday before Thanksgiving and it would be reasonable to assume that they must therefore have been told by the FCC that the application would be placed immediately on public notice with an accelerated (10 day) comment period over the holiday, in the hope that no-one would notice. If that was the case then it would be quite surprising if there was no email evidence of such communications.
In the hearing itself, Gen. Shelton could not have been more explicit in his statements that there was no way to solve the LightSquared interference issues, even with LightSquared’s new filter proposal. He noted the enormous costs and the time needed for integration testing of any potential solution across the full range of military devices (he estimated there are at least a million devices deployed and it would take billions of dollars and a decade or more to fix the problem), and stated that even then he believed the precision of these devices would be affected.
LightSquared has now said that, in conjunction with an unnamed GPS manufacturer, it has developed a prototype device that will be announced next week and can “help prove that GPS and LightSquared can coexist”. Ironically of course, GPS manufacturers have been the target of a vitriolic assault by LightSquared for their supposed lack of cooperation in trying to find a solution to the interference problems.
UPDATE (9/21): LightSquared has now announced that its prototype has been developed by JavadGNSS, who claim that they will produce a “LightSquared-protected” solution by November 2011, a “LightSquared-compensated” solution by March 2012 and a “LightSquared-integrated” solution by June 2012. It remains unclear when it will be possible to conduct tests using these devices.
However, given that Trimble owns Omnistar, which provides GPS augmentation via LightSquared’s satellites, one might think that Trimble VP Jim Kirkland would know what he is talking about when he states that “a single prototype has very limited relevance to the substantial interference issues affecting this whole range of devices…[and] doesn’t help existing devices that will experience interference”. In fact LightSquared’s new prototype may end up being totally irrelevant to the testing process that has been laid out by the NTIA, under which LightSquared must come up with a filter to protect existing precision GPS devices, including those used in military applications.
Despite the presence of representatives from both the NTIA and the FCC, the hearing shed rather less light on the timeline for testing, although even the November 30 deadline for resolution of cellphone and general navigation interference came under fire from Republican members. However, it was certainly clear that as I noted yesterday, additional testing of filters for precision devices will not happen before November 30. Interestingly, one Democrat member of the committee also asked the witnesses to estimate in writing what the cost of testing would be, with a view to ensuring that LightSquared pays for all these tests, as well as any retrofitting of existing equipment that would be necessary.
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09.14.11
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 1:54 pm by timfarrar
In the wake of yesterday’s FCC Public Notice, it seems that LightSquared remains at least outwardly confident that it will receive an answer from the FCC about whether it can turn on its proposed network in “late December or early next year”, as it apparently suggested to the Wall St Journal yesterday. The reason for this timetable is that as I’ve previously noted, LightSquared needs to raise significant additional funding by the first quarter of 2012 at the latest.
However, the NTIA has indicated that it will only attempt to complete work on the cellular and personal/general navigation receivers by November 30, and that “given the open issues that remain with respect to precision and timing receivers, [other] work need not be completed by November 30″. The NTIA letter is also quite explicit that “there will later need to be a second phase of testing to evaluate proposed mitigation plans for high-precision and timing receivers”, so in other words the NTIA will not even begin to test these receivers until after November 30, assuming LightSquared can even manufacture a (non-prototype) filter by that time. I understand that the NTIA has set out this planned timetable because it does not expect to have sufficient resources to test both the cellular/general navigation receivers and the high-precision/timing receivers in parallel, regardless of when LightSquared provides the filter. Also its worth noting that it is far from a trivial matter to actually test the filter with the relevant precision equipment, because even if LightSquared could (in theory) produce some sort of in-line filter to attach to the antenna port of a device, there are many different devices to be addressed, and these will require a range of filtering approaches.
As a result, it looks like LightSquared’s newly mooted timetable for approval is about as plausible as their expectation on Monday that there will be “a resolution in the next month”. Thus I think we are really now in the final countdown before LightSquared will be “heading for Venus” (where presumably no-one needs GPS).
Meanwhile, I’m told Sprint is planning to be quite explicit about its Network Vision plans at the October 7 event, including which spectrum it plans to use for its LTE rollout, which clearly implies it is now focused on solutions other than LightSquared (or DISH for that matter). With Clearwire only being a useful solution for dense urban deployments, as I noted a couple of weeks ago, it appears that use of the SpectrumCo AWS-1 spectrum is the most plausible source of additional spectrum for Sprint’s wide area coverage plans, though it is by no means certain that Sprint will have a deal with the cable companies to announce by October 7.
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