Thursday Jan 19th 2012
NEWS ANALYSIS: Beleaguered LightSquared suffers another hit as government testers find GPS interference and the company responds by claiming tests were rigged. Meanwhile, investor Carl Icahn closes in for the last big bite of the failing company.
know that a company is failing when the investment sharks start to circle. The
biggest shark of all, Carl Ichan, has purchased $300 million in LightSquared
debt. If LightSquared runs out of money, which could happen as early as April,
this would effectively give Ichan ownership of LightSquared's spectrum. Ichan,
appearing to have no interest in using the spectrum, would presumably resell it
to recover the value of the debt.
a looming cash crisis may be the least of LightSquared's troubles. The latest
round of tests by the National Space-based Positioning, Navigation and Timing
Executive Committee demonstrated that the LightSquared Long Term
Evolution (LTE system) would interfere with GPS to a significant level and
that the interference could not be corrected.
group said in a Jan. 13
letter to Lawrence Strickling at the Commerce Department that no further
testing was recommended because no practical solutions appear to be available.
The nine government agencies and departments that make up the committee were
unanimous in that recommendation.
is about to pull the plug on LightSquared in a different way. Sprint had agreed
to build LightSquared's terrestrial LTE network, provided the company got
regulatory approval by the end of 2011. As that deadline approached, Sprint
gave LightSquared another 30 days. This means that Sprint's deal with
LightSquared is off in less than two weeks. There's no indication that Sprint
will provide another extension.
charged that the government tests were rigged, and that one of the people
involved with testing had an interest in the outcome, creating a conflict of
interest. The company also said the tests were invalid because some of the GPS
receivers being tested were no longer in production.
is, of course, grasping at straws. Every test, including some run by the
company itself, showed interference with GPS, but LightSquared suggested that
this interference could be overcome by adding filters to GPS receivers that
were affected. What the company didn't say is how it planned to install such
filters on virtually every GPS device in existence or who was going to pay for
also performed no testing to show how those filters, if installed, might affect
the operation of existing GPS receivers. Normally, radio frequency (RF) filters
of the type suggested by LightSquared substantially attenuate the radio signals
they pass. Given the very weak signal levels from GPS satellites, it's highly
possible that the filters would render the GPS receivers as useless as the
interference they're intended to prevent.
that LightSquared seems to have lost the last technical battle, it's ramped up
the political battle. The company has launched a new round of ads touting its
would-be service, and it's ratcheted up its lobbying effort.
LightSquared is going to have to find a sugar daddy in someone who isn't
running for re-election. It's hard to believe that anyone in Congress is going
to anger millions of GPS owning voters in an election year, regardless of how
much money is stuffed into various PACs.
this point it would seem that LightSquared is running out of options. The panel
that tested its technology said it interferes with GPS. The Federal
Communications Commission granted LightSquared the right to use the spectrum
under an absolute requirement that it not interfere with GPS. The company,
meanwhile, is claiming that it owns the radio spectrum in question, but in
reality, the frequencies were originally allocated for satellite mobile
operations. When LightSquared found out that its technology needed ground-based
repeaters to work, it effectively tried to convert a satellite frequency to a
terrestrial frequency. In the process, it decided it needed approximately
40,000 high-power ground-based transmitters.
does not like the test results, so it is attacking the testers," said Jim
Kirkland, vice president of Trimble Navigation and a member of The Coalition to
Save Our GPS, a group opposed to the LightSquared plan. "Last Friday's
report reflects the unanimous view of nine different federal government
departments and agencies that LightSquared's proposals would interfere with
critical functions, including the Department of Defense, the FAA and the
Department of Homeland Security. The technical evidence speaks for itself."
in its statement challenging the test results, has asked the FCC to take over
the testing itself. This is something that the FCC has already said it won't do,
and the PNT executive committee was formed by the government for specifically
that Sprint has set a deadline that LightSquared can't meet, it would seem that
its days are numbered. The tests have shown that its technology doesn't work as
the company promised it would. It hasn't shown a realistic means of preventing
interference on a massive scale, and it's about to lose the support of Sprint,
which was originally planning to build the terrestrial portion of the network.
left? Not much. It's hard to imagine a sane investor pouring more money into
what appears to be a lost cause unless their goal is to gobble up the remaining
assets, such as the spectrum, for pennies on the dollar. Now that Ichan has
bought some of the LightSquared debt, it seems like he's taken what is probably
the fatal bite. The only remaining question is how long it will take
LightSquared to finish bleeding to death and expire.