LightSquared declares bankruptcy after GPS worries sank its mobile dream

The carrier is moving toward restructuring, but its existing satellite service continues

LightSquared, the startup that planned a nationwide wholesale mobile network only to be shot down by regulators because of GPS interference concerns, is declaring bankruptcy.

The move came after lengthy negotiations with lenders and does not shut down the company's only commercial operation, a satellite-based mobile service. The bankruptcy is expected to give Philip Falcone, the hedge-fund chief who built LightSquared out of two satellite acquisitions, several months of control over how the company addresses its troubles.

LightSquared wanted to run an LTE mobile broadband network using frequencies next to those used by GPS, which historically had been reserved for satellite service. Part of the promise of LightSquared was the prospect of a wholesale-only provider of LTE capacity to both large and small mobile operators, potentially making the high-speed mobile business in the U.S. more competitive. It also would allow carriers to offer services over both LTE and satellite, reaching both densely populated and remote parts of the U.S.

However, in February, the FCC said it would kill LightSquared's planned network because it would interfere with GPS receivers. As a result, LightSquared's main asset, its spectrum, has little value unless the company can reach another deal with the agency that would give it other spectrum to work with.

"We remain committed to our original mission, and I remain steadfast in my belief that a path forward exists that will satisfy and benefit all constituencies," Falcone said in a prepared statement.

Declaring bankruptcy will give the company more time to resolve the regulatory issues that have kept it from building a terrestrial network, Falcone said. Others are not so committed to that effort, Falcone charged.

"Today's filing was not an option the company embraced quickly or easily, but it was necessary to protect LightSquared against creditors who were looking for a quick profit, as opposed to our goal to create long-term market competition, job creation, and the promise of wireless connectivity for every American," he said in the statement.

By itself, the bankruptcy filing doesn't bring any mobile service closer to reality for business or consumer users. It's primarily a way to resolve LightSquared's roughly US$2 billion of debts in the wake of its FCC rejection, which kept the company from bringing in enough revenue to pay off those debts. Any solution to the dispute that would result in a new network of any kind would take months or years to come about, according to industry observers.

In response to the FCC's proposal to kill its LTE plan, LightSquared called on the agency to swap the controversial spectrum with another block where it would be allowed to operate the network. Even if the FCC agreed to such a deal, it wouldn't do so until after the November U.S. presidential election, said TMF Associates analyst Tim Farrar.

Another way to derive some value from LightSquared's spectrum might involve an LTE network proposal by satellite TV operator Dish Network. Dish is seeking FCC permission to operate an LTE network in another piece of satellite spectrum that has not been pegged as causing interference with GPS. If the agency combined the two proposals, LightSquared's band might be included as an uplink band, which phones, tablets and other devices would use for sending data to the network. Because mobile clients use only a fraction of the transmission power of cell towers, GPS might still be safe in that band, Farrar said in a recent blog entry.

The second option would be likely to take much longer than a spectrum swap, and approval is far from certain on both proposals, Farrar said. If the company can't make either plan work, it's likely to sue the FCC for improperly rejecting its LTE plan, he said. But that, too, would be a risky way to try to make investments in LightSquared pay off, Farrar said.

Documents detailing the bankruptcy are expected to be released later Monday.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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