Philip Falcone took his share of knocks playing hockey for Harvard and later as a pro in Sweden. Yet the athlete-turned-hedge fund billionaire has never faced a defensive line like the one standing in the way of his new telecom venture, LightSquared. Critics include the U.S. military, General Motors (GM), FedEx (FDX), major U.S. airlines, and some lawmakers.
Falcone wants to exploit airwaves used mainly by satellites to build a $14 billion nationwide mobile network to rival those ofAT&T (T) and Verizon Wireless (VZ). LightSquared would act as a wholesaler, allowing partners, including Best Buy (BBY), to sell smartphones and laptops under their own brands. The New York financier says LightSquared will revolutionize communications—not to mention further the Obama Administration’s goal of finding more spectrum for data-hungry devices straining the nation’s wireless ecosystem.
There’s just one hitch. LightSquared’s more powerful signal may drown out the faint beams of satellites that support the global-positioning system, critics contend. “Sort of like running a lawnmower in a library where people whisper,” is how Philip Straub, a vice-president for navigation gear maker Garmin (GRMN), described it in congressional testimony in June. Opponents, including companies that have banded together into the Coalition to Save our GPS, say Falcone’s network could hinder hurricane tracking, lead customers of GM’s OnStar service astray, and cause 794 additional deaths in plane crashes over a decade. Anyone who uses a GPS-connected device, such as an iPhone, may also be affected.
Before he can proceed with plans to field as many as 40,000 ground-based antennae, Falcone needs the blessing of the Federal Communications Commission in Washington. While the FCC faces no deadline to act, Reston (Va.)-based LightSquared told the agency on June 30 it “must begin to deploy its network immediately or it may not survive.” Without a green light from regulators, LightSquared’s $9 billion, 15-year agreement to share network expansion costs and equipment with Sprint Nextel may collapse. “We will not turn on the network until this issue is resolved,” said Sprint (S) Chief Executive Officer Dan Hesse in a July 28 call with analysts.
Falcone has gambled about $3 billion of his hedge fund’s capital on LightSquared. The founder of Harbinger Capital Partners scored an $11 billion profit in 2007 while betting that securities linked to subprime mortgages would sour. He is ranked No. 188 on the latest edition of the Forbes U.S. billionaires list, with an estimated worth of $2.2 billion.
Some on Capitol Hill are questioning whether the FCC already went too far in granting the company a temporary, limited approval in January. In a May letter addressed to FCC Chairman Julius Genachowski, 33 U.S. senators from both parties said LightSquared may pose “an unacceptable risk to public safety.” Jeffrey Carlisle, executive vice-president of LightSquared, told Congress on Sept. 8 that the interference problem “can be addressed through proper design,” including new filters on GPS gear. The company has also pledged to control its signal strength.
Stoked by the collapse of Solyndra, the solar-panel maker that received federal loan guarantees, a group of seven Republican congressmen have asked for records of White House contacts with Falcone. The lawmakers say they’re worried “about this Administration’s perceived preferential treatment toward donors,” noting that Falcone, his wife, and LightSquared’s chief executive officer, Sanjiv Ahuja, have channeled more than $90,000 in contributions to Democrats. Ahuja in a statement called it “ludicrous” to suggest the company’s success depends on political connections.
Genachowski, in a June 16 interview, said “this FCC will look under every rock for ways to put more spectrum on the market.” He may wish he had never peeked under this boulder.