The Federal Communications Commission yesterday approved a waiver that allows wholesale customers of LightSquared, which has aspirations to build a wholesale-only integrated wireless broadband and satellite network, to provide either dual-mode or terrestrial-only devices.
The waiver was necessary because of current rules the FCC has in place that prohibit satellite companies from offering terrestrial-only devices. Back in 2003, the FCC wanted to give satellite operators a chance to compete with spectrum they garnered for free through what is known as an ancillary terrestrial component (ATC), allowing satellite operators to offer simultaneous satellite and cellular services over the licensed spectrum. This was supposed to drive down the cost of the network, enable satellite providers to offer more competitive handsets and penetrate buildings. Instead, it has continued to be an expensive proposition for satellite operators.
The waiver was critical to LightSquared's ability to meet its aggressive buildout schedule as it allows LightSquared's wholesale customers to offer terrestrial-only cellular devices, which will be cheaper than devices that have both terrestrial and satellite functionality.
The company's network construction plans are aggressive. LightSquared, which is backed by at least $2.9 billion from hedge fund Harbinger Capital Partners, is conducting LTE trials in Baltimore, Denver, Las Vegas and Phoenix, with commercial launches planned by the third quarter of this year. LightSquared inked a $7 billion contract with Nokia Siemens Networks in July to design and build the network, and signed agreements in October with Nokia (NYSE:NOK), Qualcomm (NASDAQ:QCOM) and other companies for devices. LightSquared, which has access to 59 MHz of spectrum, has said its network will consist of around 40,000 cellular base stations covering 92 percent of the U.S. population by 2015. The company has yet to publicly name wholesale partners.
Mobile operators have long opposed the use of ATC for satellite providers, arguing that satellite operators should pay for their spectrum if they are going to compete on the terrestrial level. Jeff Carlisle, executive vice president for regulatory affairs with LightSquared, told FierceBroadbandWireless that opposition from commercial operators was minimal.
"While some of them did participate in the proceeding, they primarily raised procedural objections, which the FCC has addressed," Carlisle said in an email. "Verizon did raise some questions about whether our service met the definition of integrated service, but other than that no one attacked our plan or use of the spectrum. Cellular providers constitute a significant part of our potential customer base, so we believe there are any number who would agree with us that the grant today is a good thing."
Indeed, T-Mobile USA is rumored to be talking with both LightSquared and Clearwire (NASDAQ:CLWR) for some sort of 4G arrangement since the operator lacks its own 4G spectrum.
In addition, LightSquared and the government also have been wrangling over potential GPS interference concerns posed by the network. LightSquared has pledged to work with the FCC to address any interference concerns.
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