If, as Brit Hume has said, "Fast and Furious has the smell of Watergate all over it" Light Squared has the smell of Teapot Dome all over it. To get to the nitty gritty, the White House and the FCC have contrived to make a wealthy donor an extremely wealthy donor. Somehow in the muddled thinking of the left the heretofore private sector of telecommunications has become "infrastructure" and the newest deprived minority are the women, children, and minorities who are forced to use dial up Internet service. To remedy this perceived deprivation "government must partner with the private sector" to bring forth a new nation were every child has access to the "affordable" broadband service he deserves. Not surprisingly these government-private joint ventures look more like crime syndicates than benevolent agents of the commonweal.
LightSquared was formed in July 2010 to build a new nationwide wireless broadband network using the "4G" wireless technology called LTE. Its primary investor, billionaire hedge fund investor Philip Falcone's Harbinger Capital Partners, saw big potential in building a new nationwide 4G wireless network as demand for wireless data services explodes. Rather than compete with ATT and Verizon directly, Light Squared envisions a wholesale marketing scheme through retailers. Using spectrum acquired from the satellite provider SkyTerra, LightSquared now has a nationwide license for about 59MHz of spectrum mostly in the 1.6GHz band. In January, the company received a waiver from the Federal Communications Commission that will allow the spectrum, which had been limited for use for devices that offer both satellite- and land-based communication, to be used for land-based-only LTE communication. Here is where the the aroma of Teapot Dome begins to waft in the air. Former FCC Commissioner Harold Furchtgott-Roth questioned the process by which the FCC granted the waiver. “That decision from January was an unprecedented and surprising development. That they would make this decision at the bureau level and not at the full commission level is just stunning.”
More stunning than the lack of propriety of the waiver are the results of that waiver which firstly, create a real potential to disrupt GPS service and secondly, add an astounding $10 billion to Light Squared balance sheet. Here is how it worked. Light Squared acquired the spectrum band from SkyTerra for satellite use. The FCC waiver allowed it to use the spectrum band for terrestrial use. Light Squared purchased spectrum of limited value but thanks to the FCC it now has sufficient spectrum to build out and be a full fledged competitor to ATT and Verizon while disrupting GPS service in the process. Light Squared commissioned a study by the Brattle Group and in footnote 2 it reads;
"This implies that the economic value for LightSquared’s 40 MHz of nationwide L band spectrum dedicated to terrestrial broadband is
approximately $12 billion. Furthermore, wireless broadband spectrum is typically thought to generate consumer surplus equal to at least 10 times the original value of the original spectrum."
It is noteworthy that Falcone and Harbinger Capital Partners purchased bankrupted SkyTerra for under $2 billion. TFM Associates MSS Blog writes;
"Once this $10B windfall is more widely recognized, I think it is going to represent an enormous political problem for both LightSquared and the FCC Chairman during the upcoming Congressional hearings, making Solyndra’s $535M loan look like small beer."
Right, and the witness tampering by the White House when it tried to persuade an Air Force general to change his Congressional testimony won't go far in solving that enormous political problem.
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