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CEO exit leaves LightSquared in the dark
Departure followed regulatory setback
Question of the Day
The ambitious plans of Reston-based tech firm LightSquared, Inc. to build a $14 billion new nationwide mobile data and phone network are in limbo after the abrupt resignation this week of the company’s boss on the heels of a major regulatory setback.
CEO Sanjiv Ahuja quit Tuesday, after regulators at the Federal Communications Commission nixed LightSquared’s plan, saying it would interfere with GPS - the ubiquitous satellite-based navigation system upon which the U.S. military, commercial aviation and millions of drivers on unfamiliar roads all rely.
LightSquared’s creditors, who have lent the company $1.6 billion, “have a lot of leverage to force the company into bankruptcy” now that it cannot move ahead with the proposed network, said telecommunications business consultant Tim Farrar.
The FCC decision was the latest and seemingly final blow to the company’s plan to combine a new generation mobile phone system using ground-based radio towers with a satellite network, providing the first high-speed broadband data service that covers the entire country and directly challenging established carriers such as AT&T and Verizon Wireless.
The plan sparked a massive lobbying battle, with critics contending the FCC’s conditional approval in January 2011 for LightSquared’s proposal ignored concerns from government scientists about possible interference with GPS. The FCC on Feb. 14 announced it would withdraw its approval, effectively pulling the rug from under LightSquared.
Industry analysts say the FCC decision leaves the company owning what is, at least for the time being, a useless asset: the rights to spectrum space meant to support its network.
If the FCC decision stands, the ruling will mean that not only can LightSquared not use that spectrum, but no one else can use it either, except for a much more limited satellite-only service, according to Mr. Seybold.
“Nobody’s making any money in the satellite phone business these days, so the value of the spectrum they own has fallen to almost nothing,” he said.
The news website eWeek reported that Sprint last year signed a 15-year agreement with LightSquared that included giving Sprint the option to acquire up to 50 percent of LightSquared’s expected L-Band 4G capacity. That deal is also in limbo after the FCC decision.
Mr. Ahuja’s departure as CEO - he will remain LightSquared’s chairman - ends his 13-month struggle to persuade regulators LightSquared could address the interference problem. In September, he called the struggle to get regulatory clearance for his company “one of the most politicized [regulatory] processes” he had ever experienced, saying established networks were threatened by his company’s business model.
He said at the time that LightSquared would upend “an industry in which the United States has become a laggard, not a leader.” The United States ranks 17th in the world in terms of high-speed wireless penetration, “comparable to Malta or Bahrain,” he said.
He said the major fault for the concern over LightSquared’s signal was with the GPS industry, which built devices subject to interference from neighboring parts of the spectrum.
Doug Smith, chief network officer, and Marc Montagner, chief financial officer, will run the company while the search continues.
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