Bankruptcy all but Done, LightSquared Aims for Progress on GPS/LTE Coexistence Clash
Its bankruptcy practically behind it, LightSquared CEO Doug Smith told us Friday its priority now is finding common ground with the GPS industry on LightSquared's terrestrial broadband plans and resolving that long-standing clash. "We're thrilled to have the bankruptcy completed," Smith said after the FCC's ruling earlier that day on LightSquared's change of control application: "We can get back to work resolving the remaining issues around the spectrum itself. That's our primary focus -- coexistence with GPS. I think there's an opportunity for common ground here."
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The FCC approved, with conditions, transfer of licenses and Section 214 authorization from bankrupt LightSquared to its post-bankruptcy reorganized version. It also allowed foreign ownership of the controlling U.S. parent, New LightSquared, to exceed its 25 percent benchmark -- since entities deemed foreign would hold between 40 and 70 percent of LightSquared through the various major shareholders in the reorganized company and their entities, the FCC said Friday. With that FCC approval, Smith said getting approval from U.S. Bankruptcy Court in Manhattan for its final emergence plan "can happen within a couple of business days" and should easily happen before a Dec. 15 deadline (see 1507290009) set in a court order approved by U.S. Bankruptcy Judge Shelley Chapman in Manhattan for payment to Moelis & Co., the financial adviser and investment banker to the satellite company. The company filed for Chapter 11 bankruptcy 43 months ago; the Manhattan court confirmed its reorganization plan in March, though final approval has been awaiting transfer of the licenses.
The FCC order and ruling text indicates a major stumbling block erupted in July when JPMorgan Chase, a major investor in LightSquared, indicated to the agency it had signed a plea agreement with the Justice Department on antitrust allegations. In its order, the FCC said it usually doesn't look at applicant character issues in conduct unrelated to the FCC, but "we ... are confronted here with a unique situation" in the pending plea agreement, which could take some time to resolve even though JPMorgan entered a guilty plea. "We must also consider the potential impact of such a delay in our action on the financial viability of LightSquared and the pendency of the bankruptcy proceeding," the agency said. When asked if LightSquared knew in July that JPMorgan's felony record would become an issue in its bankruptcy, Smith said, "We can't forecast how the FCC will receive any part of the application. Obviously some issues arose in the process and they were addressed and we're happy we're through it."
The licenses handover is conditioned on JPMorgan's putting its stake into a proxy (see 1511090031) as an interim step "until the Commission can resolve that matter following the District Court's resolution of the charges" against the bank, the FCC said. The order "properly" fences off "those involved from LightSquared's decision-making process," FCC Commissioner Michael O'Rielly said in a statement. Commissioner Ajit Pai, in a statement, said the use of the proxy agreement -- and an FCC decision to defer consideration of character qualifications -- points to the fact the FCC in the order should also be deciding "whether every applicant has the requisite qualifications to hold an FCC license" and that he concurred with rather than approved that part of the order and ruling.
O'Rielly said JPMorgan also was a personal stumbling block because he has "a small investment" in the financial company. The commissioner said he brought the potential conflict of interest issue to ethics experts in the Office of General Counsel, which subsequently determined his stake "fall[s] far below the threshold to trigger any such issues."
Some see the end of LightSquared's bankruptcy as opening the door wider for its LTE plans. In a statement, Competitive Carriers Association CEO Steven Berry said, "Enabling LightSquared’s midband frequencies to be utilized for mobile broadband could be tremendously useful to our members and very beneficial to American consumers. Competitive carriers long for additional spectrum to support growing consumer demand and the next generation of wireless applications. Given the experience and expertise of the company’s new leadership team, LightSquared seems more than prepared to finally putting this spectrum to good use." LightSquared and the GPS industry have been battling over potential interference worries, and over dueling studies to gauge the likelihood of such interference, with LightSquared doing one now and the GPS industry backing a test plan put forth this summer by the Transportation Department (see 1510160022).
LightSquared's LTE matter might face a tough regulatory audience. In his statement, O'Rielly said, "I have no intent to revisit the process circus that encircled the previous version of LightSquared. In particular I will not be party to any effort to undermine any legitimate protections afforded to the Global Positioning System and its commercial users." The GPS Innovation Alliance didn't comment.
When asked about O'Rielly's statement, LightSquared's Smith said, "Certainly there have been issues raised about the use of spectrum and GPS. Industry typically works out these types of issues. What I take seriously is it's my responsibility to work with the GPS companies." He also said he expected "progress" in those talks in 2016: "It's hard for me to estimate how long it might take to complete this."