The FCC said that more tests are needed to sort out GPS interference concerns about LightSquared's planned network, dealing another blow to LightSquared's wholesale LTE ambitions and putting a timeline for resolving the interference issue in doubt.
In a public notice released yesterday, the FCC said that "additional targeted testing is needed to ensure that any potential commercial terrestrial services offered by LightSquared will not cause harmful interference to GPS operations." The FCC's notice came days after the National Telecommunications and Information Administration sent a letter to the Departments of Defense and Transportation, which said that the NTIA wants to have more tests, and that those tests be completed by Nov. 30. The FCC, however, gave no timetable in the public notice for when its requested tests will be completed. An FCC spokesman did not immediately respond to a request for comment.
A LightSquared executive told attendees at the Mobile Future Forward conference this week--before the FCC's announcement--that he expected that there will be a resolution to the company's GPS interference issues within a month.
LightSquared has revised its original network rollout plan several times to address concerns about possible GPS interference. Under the company's latest plan, released last week, LightSquared said it will lower the power of its base stations. The company also proposed a solution for satellite-augmented GPS, which is used for precision GPS devices from companies such as Trimble and John Deere. LightSquared suggested permanently using a 4 MHz chunk of spectrum for those services, which it said will provide them with a stable satellite signal. However, the GPS community and federal agencies have said more tests are needed.
"LightSquared is grateful that the FCC acknowledged...the significant improvement achieved by LightSquared's decision to move to new spectrum for the launch of its 4G LTE broadband network," the company said in a statement. The company said the FCC's call for more testing is consistent with that the NTIA said about new tests.
saying it was "grateful that the FCC acknowledged ... the significant improvement achieved by LightSquared's decision to move to new spectrum for the launch of its 4G LTE broadband network."
Analysts said that the FCC's call for more testing could be a major hurdle for LightSquared. "In this case, while it may take a couple more months before we finally see the end game emerge, its hard to see why anyone is going to fund the enormous costs necessary to keep the LightSquared plan on track, including the ongoing payments to Inmarsat (and perhaps to Sprint Nextel as well) for very long in the face of a completely undefined timetable for resolution of the outstanding issues," wrote Tim Farrar of research and consulting firm Telecom, Media and Finance Associates.
In July, Sprint Nextel (NYSE:S) inked a 15-year network-hosting deal with LightSquared valued at $9 billion. The deal includes spectrum hosting and network services, 4G wholesale and 3G roaming. However, the deal is contingent upon LightSquared getting FCC approval to deploy its terrestrial network, and if there is a material breach of the contract, or if LightSquared faces insolvency, Sprint holds a second lien on LightSquared's spectrum assets.
The ongoing regulatory uncertainty could be a boon to Clearwire (NASDAQ:CLWR), which resells mobile WiMAX service to Sprint and in which Sprint holds a majority stake. "As Sprint's access to alternative sources of spectrum gets pushed out, we believe they are increasingly reliant on Clearwire," wrote Credit Suisse analyst Jonathan Chaplin in a research note. "The same applies to other companies that have entered into wholesale deals with LightSquared. We believe Sprint will need additional spectrum by mid 2013. Sprint will likely want certainty around a future source of spectrum at least 12 months before they plan to use it. Apart from Clearwire, sources of spectrum that will be available in time appear to be dwindling fast."
- see this FCC public notice (PDF)
- see this WSJ article (sub. req.)
- see this Washington Post article
- see this TMF Associates post
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