Telecommunications companies, however, aren’t so lucky. The FCC and other agencies control the public airwaves, meaning that companies hoping to break into the wireless-service market face both regulatory hurdles and political fights right from the start. If LightSquared hadn’t needed a slice of the spectrum, smart ideas and access to capital alone might have sufficed.
But they haven’t. The fracas quickly degenerated into a debate in which each side has accused the other—accurately, no doubt—of trying to use Washington to protect its business interests. LightSquared’s critics say that it manipulated the FCC into fast-tracking the approval process, while the start-up maintains that its woes are the fault of big corporations that can’t stand competition.
“We’re breaking up the business model, which is uncomfortable for the incumbents,” Ahuja told NJ. And in an August interview on CNBC, Falcone charged that AT&T and Verizon conspired with GPS manufacturers to block the new wireless network. “They are doing a lot of things behind the scenes,” he said. “They are trying to stamp out innovation.”
Federal bureaucrats have joined the fray. Pentagon and Transportation Department officials wrote to Genachowski in March rebuking the FCC for easing its procedures and complaining that their agencies “were not sufficiently included” in considering LightSquared’s plans. Lawmakers have also leapt into the mix. “I would suggest that it is LightSquared using a part of the spectrum for inappropriate purposes that has led to this dilemma,” Rep. Tom Petri, R-Wis., chairman of the House Transportation Committee’s Aviation panel, wrote in a letter to the company last month. “Don’t blame GPS.”
Whether LightSquared can overcome this opposition isn’t clear. But it’s trying. The company has revised its plans to avoid utilizing—at least for a while—the part of its allotted spectrum closest to what GPS devices use. LightSquared has also developed a prototype GPS device designed to be compatible with its network and has promised to kick in $50 million to find ways to overcome interference with government systems. So far, however, these moves haven’t won over many critics.
Republicans have been trashing LightSquared’s efforts to curry favor with the Obama administration. No surprise, given Obama’s past personal interest. He invested $50,000 in LightSquared’s predecessor, SkyTerra, in February 2005—reportedly the decision of a blind-trust broker—using money that the then-senator had earned from his books. Around the same time, a Republican-led FCC gave the company approval for its network. (Obama sold his stock in fall 2005 at a loss.) A recent report by the Center for Public Integrity revealed that Obama’s former White House personnel chief Donald Gips, now the U.S. ambassador to South Africa, had as much as $500,000 invested in LightSquared while the FCC was considering a regulatory waiver.
Such connections have become fodder for congressional Republican attacks. Rep. Mike Turner, R-Ohio, who heads the House Armed Services Strategic Forces Subcommittee, cited the CPI report in publicizing e-mails from LightSquared representatives to White House officials that pressed for meetings and mentioned contributions to Democratic campaigns.
LightSquared officials noted in their defense that the company won conditional approval for its land-based network in 2005, while Republicans controlled the White House and the FCC. And Falcone describes himself as a registered Republican who has never met the president. “Any suggestion that LightSquared has run roughshod over the regulatory process,” Ahuja told NJ, “is contradicted by the reality of eight long years spent gaining approvals.”
Nor did the FCC do anything extraordinary in issuing its regulatory waiver, commission officials assert. The agency tries to be “as responsive as we can in facilitating the introduction of new services,” said Julie Knapp, chief of the FCC’s Office of Engineering and Technology.
HOPES OF SURVIVAL
For the companies involved, billions of dollars are at stake—either LightSquared’s loss of investment or the GPS industry’s bill to fix its devices. But which side will end up the winner may hinge on whether Washington decision-makers choose to favor an innovative entrant into a concentrated market or the entrenched incumbents that have a history of providing vital service and working with government agencies.
Can LightSquared persuade a panoply of lawmakers and regulators to shove GPS aside and let a new guy in? Possibly, but no time soon, judged Paul Glenchur, a senior telecom analyst at Potomac Research Group in Washington. “I think the history of regulatory battles shows that regulators are extremely reluctant to disrupt incumbent users,” he said. “Eventually, it happens. But it never happens quickly.”