Lately, it seems as if my inbox has been abuzz with press releases, statements, and observations about LightSquared and its potential impact on the Global Positioning System (GPS). LightSquared has a unique business model because it is a wholesale-only, integrated, fourth-generation (4G) Long Term Evolution (LTE wireless broadband and satellite network. According to some, its chance of financial success is rather diceyespecially given previous gambles gone wrong over the history of the satellite industry.
Over the July 4th weekend, I happened to come upon an article titled "Falcone Quest" in the July issue of Vanity Fair (authored by Bethany McLean). Philip Falcone, who runs the hedge fund Harbinger Capital Partners, became very rich when he bet that subprime mortgages would fail in 2006. Last year, however, he was named one of the worst hedge-fund managers of the year. From a peak of $26 billion, Harbinger now manages roughly $7 billion. With much of it invested in LightSquared, investors cannot easily get their money backnor can Falcone easily sell. also worth mentioning is the $113-million loancontroversial even if it is allegedly legitimatethat Falcone took from the funds in the fall of 2009 to pay his taxes. Given all of these elements, there is a major risk that investors will pull their money out of Harbinger as soon as they can.
In the meantime, the "Coalition to Save Our GPS" was specifically spawned to tackle the LightSquared "threat." in addition, a working group was established pursuant to the FCC's International Bureau in Study Overload/Desensitization Interference on GPS Receivers and GPS Dependent Applications from LightSquared Terrestrial Broadband Operations. On June 30, the working group announced the following conclusions: "LightSquared should not be permitted to use the L-Band spectrum for a densely deployed, non-integrated, terrestrial-only network. Such a network would cause unacceptable interference to GPS operations, wiping out an installed base of over 500 million units used in a wide array of public-safety, aviation, industrial, and consumer applications." Citing the lack of prototypes, the working group also dismissed any workarounds proposed by LightSquared, such as mitigation techniques using filters.
If LightSquared services truly threaten GPS, they obviously cannot be launched as planned. Yet some speculate that LightSquared is being targeted unfairlylargely because of the profit loss it poses for bigger carriers. According to the Vanity Fair article, "LightSquared isn't going to sell its own phones, or have its own stores, but is rather going to offer its network on a wholesale basis to customers like Apple or Best Buy, such that if you bought an iPad, or a phone from Best Buy, you could use your device with what would look to you like Apple or Best Buy's own network." LightSquared has launched its first satellite and signed five customers including Best Buy. such a partnershipif it gets off the groundcould change the current telecommunications landscape by making it possible for smaller companies to "get in the game." If he survives the politics, Falcone may just prove his brilliance once again.