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LightSquared Prepares Legal Challenge to FCC Decision

Wireless broadband specialist says it will prove its high-speed system can operate without interfering with GPS devices


Last month, after the Federal Communications Commission blocked LightSquared’s plan to build a national mobile broadband service, the company vowed that it would not go away quietly. Now it looks as if LightSquared is about to make good on its promise.

One of LightSquared’s principal investors, Philip Falcone, founder of hedge fund Harbinger Capital Partners, has hired two legal heavyweights to find a remedy for the FCC’s decision, Bloomberg has reported. The legal team will be led by Theodore Olson, who was solicitor general for President George W. Bush and represented couples challenging California’s 2008 Proposition 8 same-sex marriage ban, and by Eugene Scalia, a partner at Gibson Dunn & Crutcher, in Washington, D.C. (Scalia is the son of Supreme Court Justice Antonin Scalia.)

A legal fight with the federal government can be a tall order for anyone, but Falcone clearly believes it’s his last best chance to resurrect LightSquared from the FCC’s decision to disallow part of the company’s plan to convert satellite-only spectrum for use in a high-speed wireless service. The agency in January 2011 had approved part of LightSquared’s plan but balked at full approval when tests conducted last fall indicated that the system interfered with many GPS devices, including those used by airlines and air freight companies for navigation and safety.

In addition to raising more than $10 billion in private equity for LightSquared, Falcone invested $3 billion from Harbinger. But the wireless startup, whose ambition is to bring lower mobile data rates to millions, is running out of money and may have to file bankruptcy. It recently missed a payment on a $56 million loan from a British bank and has laid off 45% of its employees.

Without Sprint, prepared to go it alone

LightSquared also lost out on a deal, which expired at the end of January, that would have given it access to Sprint’s (NYSE:S) spectrum to support its network for 11 years, in exchange for $9 billion in cash, $4.5 billion in service credits and first use of LightSquared’s 4G LTE network. Falcone, meanwhile, is being sued by an investor who is accusing him of inappropriately funneling money from the hedge fund into LightSquared.

LightSquared says the FCC is guilty of “bureaucratic irresponsibility,” bowing to some politicians, and protecting the global positioning system industry. The company even suggested that tests were rigged by GPS manufacturers to produce “bogus results.”

The FCC, meanwhile, is facing some heat of its own from Republican lawmakers because it approved LightSquared’s technology without taking public comments beforehand.

Based on comments made to Bloomberg by Jeff Carlisle, LightSquared’s executive vice president of regulatory affairs and public policy, it appears that LightSquared mainly wants to do more testing to prove that its system can function without compromising safety.

The hiring of lawyers “doesn’t preclude other options. But their decision to not allow us to go forward isn’t supported by the law or technical policy. We are confident about that and we are eager to prove our case,” Carlisle said.

Olson added, “We will do all we can to ensure that LightSquared does not lose billions of dollars in investments due to a precipitous, arbitrary reversal by the government.”

Article printed from InvestorPlace Media,

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