LightSquared Inc.’s partnership with Sprint Nextel (NYSE:S) to build an innovative, wholesale 4G wireless network is running out of minutes.

Sprint had given its embattled LTE network partner — whose 40,000 high-power, earth-based transmitters, opponents say, will interfere with GPS signals — until the end of January to gain regulatory approval to move forward with the network.

But unless the laws of Beltway politics and electromagnetic interference change in the next 12 days, LightSquared is out of luck. Last week, a government panel unanimously concluded that new tests on the hybrid terrestrial-satellite network, which promises to slice wireless bills in half, show that it still interferes with GPS receivers and airline flight-safety systems.

The government’s EXCOM panel, which represents nine federal agencies, concluded that there are “no practical solutions or mitigations” that could enable LightSquared’s network and GPS devices to coexist over “the next few months or years.” Get up to speed on the LightSquared saga here. Even worse, the government has halted any new tests of LightSquared’s technology.

LightSquared is hardly taking the defeat lying down. In a conference call with the media on Wednesday, the company alleged that the government’s spectrum-interference tests were rigged by GPS manufacturers to give “bogus results” and that the presence of an employee of GPS manufacturer Trimble (NASDAQ:TRMB) on the advisory board amounts to a conflict of interest.

During the call, I asked Jeff Carlisle, Executive Vice President for regulatory affairs and public policy, about the impact on LightSquared’s partnership with Sprint. “We are advising Sprint of the events or the developments as we’re moving forward here, and we’re continuing to speak with them,” he said. “We’ll continue to look at alternatives with Sprint, assuming this goes past the end of January.”

Separately, Sprint spokesman Scott Sloat told me Wednesday morning that “nothing has changed in the [LightSquared] relationship since the testing. The relationship still runs through Jan. 31.”

Using Sprint’s infrastructure would save LightSquared an estimated $13 billion in new construction and operational costs over the next eight years. So if Sprint does walk away at the end of the month, the aspiring broadband wholesaler will have to build any new network from the ground up.

Although LightSquared says it has amassed $14 billion in private investment — including $3 billion from billionaire Phil Falcone’s investment firm, Harbinger Capital Partners — it likely would need to seek other alternatives, which Carlisle said LightSquared is prepared to do.

“When the opportunity with Sprint came along, in order to get some synergies with their network build, we took it and moved forward,” he explained. “We’re very excited about it and continue to want to achieve those savings and get our network out faster. But we still have alternatives. We started this  with the plan of being able to build out independently. If we ever have to go back to that, we can explore that. But for right now, our plan is to move forward with Sprint.”

If Sprint does call it quits with LightSquared, the clear winner will be mobile 4G WiMAX company Clearwire (NASDAQ:CLWR), which last month managed to bluff its way into a deeper relationship — and $1.6 billion to upgrade its network, to LTE — with Sprint. LightSquared has deals with Best Buy (NYSE:BBY), Airspan Networks (PINK:AIRO), Quantum Networks, EarthComm Solutions and others — all of which could lose if the network fails to launch.

Bottom line: LightSquared has vowed to keep fighting, and the next arena for what could be the company’s last stand likely will be the courts. But while LightSquared does have a legal right to use its own spectrum, it faces an uphill battle and needs to seek out options now.

“You can always look at alternatives,” Carlisle said when I asked about options such as swapping LightSquared’s spectrum for frequencies less likely to cause GPS interference. “But for right now, the question is, what is the evidence that we can’t operate in the lower 10 [MHz of spectrum] and is this a scientific decision based on a real study, or is this just a railroaded result based on a predetermined conclusion?” Translation: Fasten your seat belts — it’s going to be a bumpy ride.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.