LightSquared, Harbinger Capital, Phillip Falcone Under Fire

Carl Weinschenk

The LightSquared project has taken what seems to be twin hits with the leak of a report suggesting that its service will destabilize the GPS industry and the legal troubles of its founder, hedge fund manager Phillip Falcone.

LightSquared is an LTE service that leased capacity to carriers and big businesses. It already has a number of these companies on board. The obstacle is that the technology it uses can interfere with GPS operations. The back and forth during the past few months has been on whether LightSquared can come up with an approach that serves its customers' needs without rerouting GPS users into the nearest river or otherwise destabilizing their service.

The answer may be that LightSquared's approach just doesn't work. A report on a test done by the National Telecommunications & Information Administration (NTIA), part of the Commerce Department, says that as many as 75 percent of GPS devices may be interfered with. The conclusions were leaked to Bloomberg:

The results from testing conducted Oct. 31 to Nov. 4 show that 'millions of fielded GPS units are not compatible' with the planned nationwide wholesale service, according to the draft seen by Bloomberg News.

The LightSquared spin machine immediately went into damage control mode. CEO Sanjiv Ahuja slammed the tests, the interpretation of the results and the agenda of the leakers. Here is a representative quote from Ahuja in The Hill:

Based on Bloomberg News' reporting, it is apparent that this leak was intended to damage LightSquared's reputation, spread false information in the marketplace, and prejudice public opinion against LightSquared.

He wasn't the only angry LightSquared executive. The company released a statement from Martin Harriman, the company's executive vice president of Ecosystem Development and Satellite Business:

The statement that testing shows that most GPS devices would be disrupted by LightSquared's operation is patently false. There is no way that such a conclusion could be drawn without deliberately ignoring a critical element in LightSquared's mitigation proposal to manage the power from its network that GPS devices will be able to receive. By ignoring this commitment by LightSquared, this conclusion is erroneously based on estimated power levels that are up to 15 times the levels guaranteed by LightSquared. It is important for the public to understand the purposeful manipulation at hand here: The NTIA, not the leakers of this raw data, will make the final determination about how many devices passed or failed. And that assessment has not yet been made.

It is interesting to note that Ahuja is quoted in The Hill piece as saying 'the testing assumed LightSquared will operate its network at power levels 32 times greater than it really will,' while Harriman's statement suggests the exaggeration only is up to 15 times greater.

It remains to be seen, of course, if Harriman's and Ahuja's outrage is justified. That only will come when the final report is released and experts have the opportunity to assess the methodology and results.

At the same time, The Wall Street Journal on Dec. 9 reported that Falcone's hedge fund, Harbinger Capital Partners, also is under the microscope in the form of an official alert that it is under investigation:

On Friday, Republican Sen. Chuck Grassley of Iowa said the disclosure of the SEC's Wells Notice underscores the need for more information about relationships between LightSquared and telecom regulators. A representative for Harbinger didn't immediately respond to a request for comment.

At least there is something here that Falcone can find amusing. If Harbinger indeed does have inappropriate relationships with regulators, they certainly don't seem to be paying off.

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Add Comment      Leave a comment on this blog post
Dec 27, 2011 9:26 AM TechGuy TechGuy  says:

15dB is 32 times, that is probably the cause of the different numbers. Any technical documents will use dB since that is the more logical unit but when making PR statements lightsquared normally use the non-dB number because it sounds better.

Dec 27, 2011 1:18 PM Dan Dan  says:

A key (and undisputed) statement from the report, which has been officially delivered to the committee, is that "no further testing is necessary to determine Lightsquared's service will disrupt GPS receivers."

Referring to Lightsquared's prolific press campaign to railroad the FCC into granting their waiver request as spin is not going far enough.  For those educated in the history of FCC bandwidth allocation and licensing methods as well as electromagnetic transmission, propogation and reception technology, the statements coming from Lightsquared are intentially deceptive.  Lightsquared (and their owner, Harbinger Capital), out of desparation to survive, are willing to sacrifice consumers and users of GPS services in order to make the $10-$20 billion windfall that would come from an approval of the waiver they are requesting from the FCC.  They claim to have a right to the spectrum for which they have been granted a license to use, while simultaneously ignoring the fact that they have never been given license to use it in the incompatible way that they want to.  Lightsquared is seeking to have FCC license restrictions removed, that were put in place exactly for the reason of preventing harmful interference to neighboring satellite services, such as GPS.  Repurposing their spectrum in this way would be a windfall for them, but at a cost of billions of dollars to the federal treasury in lost auction revenues and to consumers of GPS devices that will no longer work reliably.

The FCC should never have led Lightsquared on for so long, it's a pity.  Disproval of the waiver request, highly likely, will likely bankrupt Lightsquared.


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