Money manager Philip Falcone, the major financer of LightSquared, has hired lawyers to investigate the merits of a potential suit against the Federal Communications Commission for rejecting LightSquared's plan for a broadband network. The network would run alongside the frequency of Global Positioning Systems and has caused concern that it could interfere with GPS. The FCC announced earlier this week that permission to build the network would be denied. Other investors have also sought legal advice on possible litigation. The primary objective of any lawsuit would likely be to force a technical fix to the GPS interference, either by allowing LightSquared to swap its wireless airwave license for a different bandwidth or by forcing GPS operators to use filters to block LightSquared's signals
Swapping Airwaves with Dept. of Defense?
Following the FCC refusing to allow LightSquared to build its proposed broadband network this week, the company is trying to convince the Department of Defense to switch airwaves with them. DOD are farther away from GPS signals and shouldn't cause interference. Of course this move depends on the willingness of the DOD to switch. There is also the problem that then the DOD airwaves would interfere with GPS, so it seems that it is unlikely that such a swap will occur. Even if it did, it would require LightSquared to raise substantial additional funds, which considering that the $1.6 billion in loans' interest payments are coming due and the company is several hundred million in debt, would be a very difficult task.
Spectrum Swap Unlikely to Save LightSquared
"A swap of spectrum isn't a realistic option," said Walt Piecyk, an analyst with BTIG LLC. "First, there's nothing readily available and second, if there was, that's spectrum that could be auctioned off for billions in proceeds."
Even as recent spectrum sales have reached price tags of billions of dollars, the high costs and potential difficulties in making LightSquared airwaves usable bring their value down.
"I don't know how you even begin to put a value on it now," said Will Power, an analyst at Robert W. Baird & Co. in Houston. "There've been no clear parallels to this before that would give you the right benchmarks."