FCC Handling of Harbinger’s LightSquared Under Question

Phil Falcone’s Harbinger Capital is famous for making unpopular investments and profiting wildly from them. The fund became famous in 2007 for betting against subprime mortgages, an investment that made the fund $11 billion, or a return of 116% in 2007. Now it appears his newest investment will have some hurdles to jump.

“A U.S. House panel plans to examine the Federal Communications Commission’s handling of LightSquared Inc.’s proposed wireless service, which has been stymied amid arguments about interference with navigation gear,” reports Bloomberg. “No date is set for the hearing planned by the House Subcommittee on Communications and Technology, Representative Greg Walden, the Oregon Republican who leads the panel.” LightSquared, the wireless venture backed by Phil Falcone’s Harbinger Capital that seeks to use the nation’s global positioning systems to eliminate dead zones for voice and data service across the country, had won preliminary approval from the FCC a year ago. Yet, the company is still “without final clearance as the agency and other federal regulators weigh test results that show LightSquared disrupts global-positioning system equipment used on autos, tractors, boats and aircraft.”

“How did that process fail?” Walden said in a briefing with reporters. “Because you’ve got a lot of people spending a lot of money trying to sort this out now, and it would seem to me somebody would have sorted it out before they made the licenses available.” Harbinger, for one, has spent millions in lobbying efforts trying to gain the much-needed approval, but to-date those efforts have been unsuccessful. Senators Grassley (R-Iowa) and Roberts (R-Kan.) have spoken out openly against LightSquared’s proposed network, saying that the technology would interfere with the nation’s defense systems. And, nine federal agencies refuse to recommend the LightSquared system.

“I don’t understand the process where someone buys the spectrum, put forth by the FCC to be used for a purpose, only to discover later on you can’t use what you just bought because of interference issues,” said Walden. “I’m trying to figure out how the cart got so far ahead of the horse.”

LightSquared has called the tests biased. It alleges, “that advisory board member Bradford Parkinson, the “Father of GPS,” is in violation of conflict of interest rules, given that he also serves on the board of directors at Trimble Navigation (TRMB), one of LightSquared’s largest competitors.” Jim Kirkland, general counsel of GPS gear maker TRMB said in an emailed statement that LightSquared hasn’t satisfied non-interference requirements set by the FCC. TRMB, which is based in Sunnyvale, California “is part of the Coalition to Save Our GPS that was formed to oppose LightSquared’s plan.” Coalition members include FedEx (FDX), United Parcel Service (UPS), Caterpillar (CAT), Garmin (GRMN), Delta Airlines (DAL), Southwest Airlines (LUV) and Deere & Co. (DE).

“Walden is right to ask how we got here,” Kirkland said. “The rules have been clear all along,” Terry Neal, a spokesman for the company. LightSquared “has cleared every regulatory hurdle going back more than a decade.”