Is the FCC's LightSquared waiver one-of-a-kind?


With speculation swirling over which companies might snag the spectrum assets of bankrupt DBSD North America and TerreStar Networks, I think it's worth pondering the case of LightSquared. LightSquared, which was originally conceived of as a venture that would provide satellite, terrestrial or dual-mode LTE service on a wholesale basis, received a critical waiver from the FCC in late January that allowed its customers to launch devices that had only terrestrial capabilities, removing a key hurdle to its business plan. If the winner of DBSD and TerreStar's spectrum were to form a wireless venture--a big if, at least right now--would they be able to get a similar waiver from the FCC?

It's an interesting question for a number of reasons. First, what is it about LightSquared's (still-somewhat-nebulous) plans that allowed it to get the waiver? Secondly, the wireless industry has been clamoring for more spectrum to be freed up for mobile broadband, and the spectrum DBSD and TerreStar each hold--20 MHz of S-Band (2 GHz) spectrum--could be ripe for wireless use, especially because they are large, contiguous blocks. And finally, a federal bankruptcy court judge is set to rule March 15 on whether to approve Dish Network's $1 billion purchase of DBSD or consider alternative bids, including one put together that values DBSD and TerreStar as a combined entity at $2.6 billion. That offer was made by Solus Alternative Asset Management and Harbinger Capital Partners, the same hedge fund backing LightSquared.   

So what was it about LightSquared that tipped the scales in its favor? The official line from the commission, according to an FCC spokesman, is that the waiver was granted on its merits, and that LightSquared's service will result in billions of dollars in investment, introduce a new wireless competitor and create tens of thousands of jobs.

However, if you read the actual waiver (PDF) it becomes clear what the FCC's reasoning was in this case. The waiver states that there are five main facts which were weighed: LightSquared will provide substantial MSS (satellite) service; the company will make investments to rationalize the fragmented MSS L-band of spectrum (via a $337.5 million deal with Inmarsat) to provide improved MSS and MSS/ATC (satellite/terrestrial) use; it will invest in the creation of a dual-mode service offering; it has unique terrestrial buildout requirements; and it has made specific commitments to achieve the FCC's MSS and MSS/ATC goals.

Read a little further down, and things become clearer still. A key section of the waiver talks about how LightSquared's planned service will make terrestrial mobile wireless broadband available to a wider variety of users, including in rural areas. Additionally, the waiver said that the public safety and homeland security communities will benefit from having a broadband service when they are operating in or transitioning between urban, suburban or rural areas.

"My sense is the FCC felt if LightSquared could get off the ground, literally and figuratively, it had the potential to advance some of its major policy goals," said Jeffrey Silva, an analyst at Medley Global Advisors.

What would it take for the FCC to grant a similar waiver to another spectrum-based venture? The S-Band spectrum has the same so-called ACT "gating" requirements on it that the L-band had, meaning dual-mode devices need to be provided, which is costly. However, as the FCC made clear in its National Broadband Plan, the commission treats the S-band differently from the L-band. While the plan recommends the FCC work with L-band licensees to defragment it, the plan says the S-band should be given a primary mobile allocation and that there should be flexibility to provide standalone terrestrial services, conditioned on buildout benchmarks, participation in an incentive auction or other conditions designed to speed up the use of the spectrum. In other words, S-band spectrum holders can't just sit on those airwaves; they need to come to the FCC with a concrete plan for how they're going to use the spectrum. The FCC wouldn't rubber-stamp a waiver on prime S-band spectrum just for laughs. 

In the end though, would the FCC grant a waiver? These decisions are made on a case-by-case basis, but analysts I spoke with seem to think so, especially since the FCC gave LightSquared a waiver. "It's pretty traditional at the FCC that if you come in asking for a waiver because you're promising to do something in a way that major goals of the commission are going to be accomplished, the chances are pretty good you're going to get it," said Harold Feld, the legal director of Public Knowledge, a digital rights advocacy think tank.

Tim Farrar, a satellite analyst and the principal of TMF Associates who has been following LightSquared from the start, was even blunter. "They [the FCC] have backed themselves into a corner, where if someone promises to fulfill the same set of conditions [as LightSquared], it's very, very hard for them to say no," he said.

Which brings us back to LightSquared. Like many wireless industry observers, I still have a host of questions about LightSquared. However, it looks like an S-band competitor could soon be following the same path as LightSquared. --Phil

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