An interesting direction
Truth be told, I have a reasonable sense of direction so I don’t own a GPS system aside from the one which comes with my smart phone. But I have had the pleasure of riding along with a number of people who are, shall we say, directionally challenged. For them, GPS is a necessary fuel- and time-saver, and it’s a key to this story.
It was last year that LightSquared, a new startup company which wanted to get into the broadband business, persuaded the FCC to give it the green light to conditionally develop a broadband network which would compete with AT&T and Verizon. But there was one big problem – the frequencies LightSquared wished to use were adjacent to those used by GPS systems, and LightSquared’s broadband would be far more powerful than the GPS signal. It’s a situation not unlike that of radio, where a weaker station signal can be drowned out by a more powerful one on an adjacent frequency. That’s why stations in the same market are set some distance apart on the dial; in the case of FM radio the spacing is generally 0.8 megahertz (i.e. 97.3, 98.1, 98.9, etc.)
Yet the LightSquared saga is also intriguing for its connection to President Obama and charges of crony capitalism.
Back in 2005, LightSquared’s predecessor SkyTerra received permission to begin work on setting up a satellite-based broadband system; however, the work was aided greatly in January of last year when the FCC allowed the company to use its broadband license for “exclusive terrestrial purposes” as part of Obama’s push to expand rural broadband services. That enabled the fledgling company to value this asset in the same manner as other terrestrial service providers, allowing them to quickly raise $586 million from a variety of sources. Estimates of the value of this spectrum ranged up to $12 billion, based on the value of other (failed) companies which possessed smaller frequency segments. LightSquared had no plans on being a broadband retailer, though; instead they would have been a wholesaler to a number of different companies, including Cricket and Best Buy.
The Obama connection is interesting. Back in 2005 he purchased around $90,000 of stock in SkyTerra, the company which originally received the FCC waiver. Considering Obama was reportedly a fairly cautious and conservative investor, the fact he invested such a large sum in a thinly traded startup probably raised eyebrows, particularly as he had barely warmed his seat in the U.S. Senate at the time. Several years later, SkyTerra was purchased by Harbinger Capital Partners, which folded the company into a new entity called LightSquared. While Obama claimed he sold the SkyTerra stock for a loss months after purchasing it, several of his key financial backers were also heavily invested in that company; meanwhile, Harbinger founder Phil Falcone has recently become a huge Democratic donor and Obama supporter. Interesting timing, since Harbinger’s portfolio had gone south until the 2011 FCC decision.
So to recap: a company which originally was allocated radio frequencies intended for low-power satellite-to-ground usage wanted to instead use a high-powered terrestrial system. Instead of having to bid on broadband frequency space like its competitors did, they essentially received the frequencies for free. Of course, the problem was that existing satellite-based GPS would be overwhelmed by ground-based broadband signals, putting pilots and drivers at risk.
The LightSquared scandal, though, didn’t receive much national attention until it was revealed that the White House may have pressured a four-star Air Force general to change his testimony in a House briefing to be more favorable to LightSquared and its bid to corner a section of the wireless market. That set the ongoing House investigation into motion.
But what got me to spend my afternoon delving a little bit into this whole issue was an e-mail I received the other day from Americans for Tax Reform (ATR), the group headed by Grover Norquist.
Once again, the Obama administration is holding jobs and private investment hostage with regulatory uncertainty. You’ve already heard about the Keystone Pipeline. This time, they’re stalling almost every attempt to expand mobile broadband in America.
The Obama administration has failed to put more spectrum for mobile broadband onto the market, which will help prevent dropped calls and improve service. They’ve stalled phone companies from purchasing more spectrum and demanded more regulatory power to handpick the companies that get it. Now, they’re using the regulatory process to stop a start-up company from building a brand new wireless network.
LightSquared has committed $14 billion in private investment to bring more broadband to America, create tens of thousands of jobs, and unleash new competition in the market. They’ve played by the federal government’s rules and were granted spectrum under the Bush administration. But now government agencies are working to kill this new network, and the Obama administration is sitting on the sidelines instead of allowing this spectrum to be put to use.
This sort of floored me, for I recalled the LightSquared scandal and the reason they were being restricted in a broad sense; the research I did today helped me understand a little bit more why this was such an issue on the fronts of both GPS interference and crony capitalism.
But it doesn’t sound like LightSquared has played by the federal government’s rules, as ATR seems to think – remember, the frequency spectrum was allotted for low-power satellite usage when the Bush administration gave LightSquared’s predecessor the go-ahead. If they could build a satellite-based 4G broadband system all would likely be hunky-dory. Nor does it sound like the Obama administration was “sitting on the sidelines” when they were trying to influence the testimony of a four-star general.
And it’s more interesting when you consider this Facebook entry from Digital Liberty, the ATR subsidiary for whom the e-mail was sent. This is from January 26:
In his State of the Union, President Obama acknowledged the spectrum crunch. One way to end this looming crisis is to have the government auction unused spectrum to private companies, thus freeing up more available spectrum and generating a new revenue stream that can go toward paying down the nation’s deficit.
But, again, LightSquared got its key asset for free, and a Wall Street Journal report (link, subscription required) speculated they may try to swap frequencies with the Department of Defense to rectify their situation. (Given Obama’s plans to cut back on the military, the DOD may not need them anytime soon.) That’s not making the government any money either.
The missing link I haven’t been able to track is why ATR is so interested in a company which has been accused of being a prime example of crony capitalism. Could it be their leadership or key donors have a financial stake in the company? Because ATR doesn’t have to disclose its contributors we can’t know for sure.
But it sure seems to me like ATR and LightSquared would be the strangest of political bedfellows, and this case bolsters the ‘ruling class’ vs. ‘country class’ narrative. Regardless of what side some of these advocacy groups may present themselves to be on, in most instances they prefer the status quo inside the Beltway. You scratch my back, I’ll scratch yours.