I've posted a couple of times before on LightSquared's effort to usurp frequencies designated for GPS in order to offer a national broadband WiFi service (here
) and the debate over whether or not there was sufficient unused spectrum available to host such a service elsewhere (here
). Now, evidence is mounting that the FCC's actions were less concerned with promoting a viable alternative broadband service than with rewarding high Democratic officials with ownership stakes in LightSquared and heavy donors to political campaigns.
First, though, let me set the stage. The FCC, under Obama, has actively and forcefully promoted the diffusion of broadband telecommunications systems. One perceived roadblock to those efforts is the fact that in many rural areas, land-based broadband systems are not economically viable, and in other areas, the market can support only one land-based broadband service, which then is under no real pressure to keep their prices low. The idea of a national wireless broadband service could offer, at a minimum, added competition in the broadband marketplace, and potentially, a way to extend an economically viable broadband service to rural areas. Mobile services are rolling out a broadband data service as 4G and 4G LTE, but the data speeds are at the low end of what is considered "broadband".
The problem is that there is no specific frequency allocation set aside for a national high-speed broadband WiFi service. So the question became one of where could the FCC find spectrum that could be repurposed to deliver a national broadband WiFi service? One early proposal was in grabbing some of the broadcast TV spectrum freed up with the move to digital transmissions. There were problems with that idea - existing individual channel allocations were too small for broadband WiFi, and that those frequencies were scattered across the remaining spectrum allocated for broadcast services; that is, there was too little continuous spectrum available to offer the kind of service the FCC wanted. So the FCC proposed a more drastic solution: they would take back a larger block of spectrum, forcing hundreds of stations to move to other frequencies and forcing others off the air, as there would be no viable alternative frequencies left for them to use (see here
for details). And even with this proposal, there would be insufficient spectrum for a broad-based consumer broadband WiFi - so the FCC proposed using it for an emergency services broadband WiFi system.
The spectrum needed for a national consumer broadband WiFi was more likely to come from the higher frequencies reserved for satellite broadcasting. The FCC granted three companies licenses to explore the potential of a satellite-based national wireless broadband service, but it soon became apparent that the higher costs of a satellite-based service would limit demand to the point that it was not a viable alternative. One of those three licensees, which would later evolve into LightSquared, floated the idea of converting their satellite-based license to a ground-based license for broadband WiFi. (In the meantime, the company had leased their satellite and spectrum for use in the Global Positioning Satellite (GPS) system.)
It's at this point that things get interesting, and arguably political. The FCC decided to allow the satellite operators to petition to have their grant extended from satellite-only to satellite and ground-based allocation - but the application window was opened and closed before any formal notice of the option was published - and Lightsquared was the only firm that got their petition in, and the petition was approved without any public hearing or chance for public comment (all violations of standard FCC rules and guidelines). The other two firms with the experimental licenses also petitioned, but were told they had missed the deadline (that the FCC had not bothered to inform them of). Analysts estimated that the shift from satellite to ground-based uses increased the value of LightSquared's license by $10 billion.
There was a bigger potential problem, however. The ground-based broadband WiFi system LightSquared proposed could interfere with GPS systems. At first, LightSquared claimed there would be no interference, but early tests showed significant interference with both civilian and military GPS service. In testimony before Congress, military and civilian experts charged with overseeing GPS indicated that LightSquared's proposed system would create problems for 80-90% of the current GPS devices (despite efforts from the White House to have them change their testimony). LightSquared's response was that individuals could replace their GPS devices with ones less prone to interference, and then announcing they had a technical "fix". Testing of the fix showed it didn't fix anything. Even more troubling was that when the FCC's technical working groups finally got around to looking at LightSquared's proposal, they reported that there was conclusive evidence that "LightSquared's proposed operations defy the laws of physics, and therefore simply will not work," that going ahead with the various shifting variations of LightSquared plans "would cause such widespread harmful interference that it would severely cripple GPS," and that the only viable solution was to move the wireless broadband use "out of the MSS band altogether" (The MSS band includes both GPS and LightSquared's current frequency assignments).
After months of mounting evidence against the system, the FCC finally revoked it's approval, leaving LightSquared with few assets to offset $1.6 billion in loans. Monday, it defaulted on a $56.3 million payment to satellite operator Inmarsat, and last Friday a group of its investors filed suit, charging that LightSquared's managers had squandered billions in pursuing the broadband WiFi proposal.
Meanwhile, reporters at The Daily Caller have been investigating why LightSquared received the favorable treatment it did, and why the FCC appeared to actively seek to remove potential competitors from the wireless broadband marketplace. They've identified administration officials with investments in LightSquared, LightSquared's hiring of former officials, and patterns of political campaign donations following meetings with officials at the FCC and White House. They've also obtained documents outlining deals and commitments the FCC provided LightSqaured well in advance of official actions - and one interesting instance of the FCC responding to a letter from Congress before it says it received the letter. Will LightSquared become another instance of crony capitalism and poor judgement?
Sources - Documents: LightSquared shaping up as the FCC's Solyndra
, The Daily Caller
LightSquared Bad News Keeps Coming
, Wall Street Journal Deal Journal blog