LightSquared and Another FCC Issue You Should Be Aware of

June 29, 2012  - By 0 Comments

Although the LightSquared issue seems to have waned, it’s like a virus in that it’s really difficult to erradicate it completely. However, Harbinger Capital Partners (LightSquared’s primary financial backer) and LightSquared are facing tougher problems than they have since they’ve started this adventure, not only from their technical foes but now from the U.S. Securities and Exchange Commission (SEC).

Earlier this week, the SEC filed fraud charges against Phil Falcone and Harbinger. In particular, the SEC alleges that:

  • Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes;
  • Falcone and two Harbinger investment managers through which Falcone operated manipulated the price and availability of a series of distressed high-yield bonds by engaging in an illegal “short squeeze;”
  • Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors’ consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund’s directors and investors; and
  • Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period.

“Not only are hedge fund managers expected to be savvy investors, they are supposed to serve the interests of their clients. Here, in addition to raiding a fund for personal benefit and cutting secret deals with favored investors, Falcone then lied to investors about what he had done,” said Bruce Karpati, Chief of the Asset Management Unit in the SEC’s Division of Enforcement.

This follows a civil lawsuit filed on February 17, 2012 by Harbinger investors, claiming Breach of Fudiciary Duty, Gross Negligence, Breach of Contract, and Fraud.

It also follows LightSquared filing Chapter 11 bankruptcy on May 14, 2012.

Yes, it’s getting ugly. However, they aren’t giving up. I wouldn’t expect so after spending ~$4 billion on this project.

LightSquared’s latest proposal to the Federal Communications Commission (FCC) is a spectrum swap. Read the details of their proposal here. In fact, LightSquared was able to convince a group of your legislators to lobby the FCC in support of the spectrum swap.

“In the absence of a viable technical solution that would allow LightSquared to use its own licensed spectrum, we believe a spectrum swap is the most resourceful and efficient way to quickly expand broadband access nationwide,” wrote Reps. Jim Moran (D-Va.), Maurice Hinchey (D-N.Y.), Steve Rothman (D-N.J.), Rodney Alexander (R-La.) and Ander Crenshaw (R-Fla.), who all serve on the Appropriations Committee.

Seriously? Our own U.S. legislators want to trade for spectrum worth almost nothing for spectrum worth billions of dollars? Who’s side are these people on? Clearly, not the taxpayer. However, there’s little or no chance a spectrum swap is going to happen. It’s a dream that they ran up the flagpole so see who would salute it. I doubt anyone did, at least anyone of significant influence, and now the legislators can say they fulfilled their obligations (in exchange for ??) and no harm done.

Serious Technical Issues Still Exist

Aside from the serious financial, legal, and political challenges LightSquared faces, they are no closer to solving the GPS interference problems disclosed a year ago.

If you recall, the National Telcommunications and Information Administration (NTIA), a U.S. government agency tasked by the FCC to study the LightSquared/GPS interference issue, concluded:

“The federal agencies and LightSquared have invested significant time and resources to identify and analyze proposed solutions to address the impact of LightSquared’s planmned network implementations. Based on the testing and analyses conducted to date, as well as numerous discussions with LightSquared, it is clear that LightSquared’s proposed implementation plans, including operations in the lower 10MHz would impact both general/personal navigation and certified aviation GPS receivers. We conclude at this time that there are no mitigation strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment.”

That pretty much says it all. While the “lower 10″ the NTIA is likely a technically solvable problem, the cost of redesigning and redeploying GPS receivers across commercial, military, aviation, etc. markets to accomodate the lower 10 MHz is huge. It’s likely in the high tens of billions or even into the hundreds of billions.

The upper 10 MHz of LightSquared’s spectrum, there is no practical technical solution that exists. If there was one, even one that was close, LightSquared would be talking about it all day long. You can bet that many engineers from many different companies and agencies have been working to solve this technical problem since early last year, but no one has come up with any reasonable solution yet. Also, remember that the upper 10 MHz hammered the vast majority of all GPS receivers in existence, not just high-precision receivers.

The Way Forward

Without a technical solution to their GPS interference problem, LightSquared is stuck trying to convince regulators that it deserves to be gifted alternative spectrum since they couldn’t make theirs work. As I wrote earlier, I think the possibility of a spectrum swap is low, but the conversation may linger.

From now on, it’s clear that the technical discussion has disappeared. It’s turning into a pure political discussion. Even though the FCC received the NTIA’s recommendation to not allow LightSquared to proceed back in February, the FCC still hasn’t declared a ruling on anything regarding this matter. Some speculate that they won’t make a ruling before the U.S. presidential election this coming November in order to fly under the radar. For this reason, it would not be surprising to me if this issue hung in limbo for the rest of the year; dormant, but it’s still lurking, like a virus.

Last Monday, June 25, 2012, I was a guest on America’s Web Radio’s ACSM Radio Hour discussing the current LightSquared situation. It’s a good discussion (60 minutes). The podcast is a standard audio recording you can play on your MP3 player or listen to on your computer. You can download it here.

FCC Narrowbanding Rule

While we’re on the subject of the FCC, you might have heard about the Narrowbanding rule the FCC established some years ago. It’s going to kick in January 1, 2013. If you’re an RTK user who uses UHF or VHF radios, you’re likely going to be affected and should be aware of it. Following is a summary statement from the FCC:

“On January 1, 2013, all public safety and business industrial land mobile radio systems operating in the 150-512 MHz radio bands must cease operating using 25 kHz efficiency technology, and begin operating using at least 12.5 kHz efficiency technology. This deadline is the result of an FCC effort that began almost two decades ago to ensure more efficient use of the spectrum and greater spectrum access for public safety and non-public safety users. Migration to 12.5 kHz efficiency technology (once referred to as Refarming, but now referred to as Narrowbanding) will allow the creation of additional channel capacity within the same radio spectrum, and support more users.

After January 1, 2013, licensees not operating at 12.5 KHz efficiency will be in violation of the Commission’s rules and could be subject to FCC enforcement action, which may include admonishment, monetary fines, or loss of license.”

Essentially, the FCC is trying to increase the efficiency of the UHF and VHF radio spectrum so it can accomodate more users.

If you use UHF or VHF radios for RTK, you’ll likely need to upgrade or replace your UHF/VHF radio hardware. Be aware that this could be quite expensive.

Following are some relevant FCC documents on the matter:

May 13, 2008 Fourth Memorandum Opinion and Order

January 5, 2012 Reminder from FCC Regarding Narrowbanding Transition

February 21, 2012 FCC Provides Supplemental Guidance For Licensees In The 150-174 MHz and 421-512 MHz Bands Seeking Waivers Of The Narrowbanding Deadline

Following is a link to a page on Pacific Crest’s website regarding narrowbanding transition:

The FCC’s Narrowbanding Regulations

April 30, 2012 Pacific Crest Letter “Applying for a 25kHz FCC License”

Look for more from me on this subject soon as the deadline is looming.

Thanks, and see you next time.

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