This story was written by Keith Dawson for UBM DeusM’s community Web site Business Agility, sponsored by IBM. It is archived here for informational purposes only because the Business Agility site is no more. This material is Copyright 2012 by UBM DeusM.

LightSquared: the Wrong Kind of Agile

The company masterfully worked the government and investment markets -- for a time. Its show is about to fold.

LightSquared proposed building a wireless broadband network in spectrum adjacent to GPS, with which it irredeemably interfered. With the wrong kind of agility it tried to keep this bad idea alive.

On the evening of Valentine's Day the FCC drove what may prove to be the final stake through the heart of a proposed hybrid satellite-terrestrial LTE wireless network. The equipment developed and deployed by LightSquared in service of this dream network turned out to interfere fatally with receivers listening for signals from Global Positioning System satellites. The FCC was acting on a letter from the National Telecommunication and Information Administration, which pulled no punches: "We conclude that LightSquared's proposed mobile broadband network will impact GPS services and that there is no practical way to mitigate the potential interference at this time."

The LightSquared saga is a rich one, featuring a hedge-fund billionaire, political maneuverings, accusations of pay-for-play political contributions, and high-stakes battles between industry groups over technical questions. LightSquared has negotiated this treacherous terrain for over a year, managing to keep its plans alive. The endgame is underway, however. The company has now been "forced to borrow operating funds at interest rates... closer to those charged by payday lenders than even junk bonds," according to Wayne Rash, writing for eWeek.

The battle lines were drawn when in January 2011 the FCC allowed LightSquared to proceed in building out its terrestrial network, subject to proof to be supplied later that it did not interfere with adjacent frequencies, GPS in particular. The industries dependent on GPS were blindsided -- the FCC had allowed little time for comment, and that over the holidays in 2010. Over the next few months the chair of the NTIA, a coalition of GPS manufacturers, a former deputy secretary of defense, and the head of the USAF Space Command all weighed in to oppose LightSquared's plans.

One of LightSquared's backers is the hedge-fund billionaire Philip Falcone. His Harbinger Capital Partners has invested about $3 billion in the company, and Falcone's wife Sanjiv Ahuja is its CEO. (Falcone's company made $11 billion in 2007 by betting that the market for subprime-backed securities would collapse.) Opponents of the LightSquared's plans were probably behind hearings before the US House Oversight and Government Committee, investigating the accusation that the FCC waived a rule for LightSquared because Falcone had donated money to President Obama. The hearings didn't produce evidence to support that charge.

Those are strong headwinds for any company to attempt to buck. The company maneuvered for a year with notable agility, issuing press releases about its progress toward a solution, sponsoring technical tests that it said proved that the GPS interference wasn't its fault. LightSquared signed up more than 30 wholesale customers for its promised nationwide broadband, including Sprint and Best Buy.

But agility in service of a disastrously bad idea is not to be emulated. GPS has become too big to fail, and no technical solution that puts it as risk stands a chance.