Weekend Thoughts—LightSquared, the telecom industry, and how things work in the Land of the Free

I've known about the LightSquared story for a number of weeks (LightSquared is in a battle with GPS heavyweights; latest here). There's no way to understand it, though, without digging deep. It's complicated — but not too complicated to follow.

And it's a perfect example of how telecom works in the good ol' U.S.A. — a peasant's view of the nobility at their feast. So let's dig in.

The LightSquared story has several aspects:

■ It has a technical side. It's about LTE, a 4G network upgrade to GSM systems for mobile phones and data terminals (like cell phone systems that use SIM cards). LTE can be used for smartphones and wireless modems, and it has a lot of nice features. CDMA carriers (like Verison, whose phones don't use SIM cards) will also be migrating to LTE.

The LightSquared company is developing a 4G-LTE-based broadband offering integrated with its satellite network. It plans to sell wholesale (not retail) broadband services to retailers like Sprint. (Will that change telecom pricing? Probably not.)

■ It has a corp-on-corp violence side. There are interference issues between LightSquared network devices and GPS devices; the two don't play nicely together (see below for why). Thus the GPS companies and LightSquared are duking it out to see who pays for a fix, if any.

(If you didn't know, GPS isn't a government service. It's a group of high-dollar corps, just like the broadband companies are. They have lots of money — Trimble took in $1.3 billion in 2008 — a profit path, CEOs of the usual ilk, industry lobbyists, and their own paid Congress-people, folks like man-of-integrity Chuck Grassley, whom we'll meet shortly.)

■ It has a political side. LightSquared's major investor, Harbinger Capital, has ties to the Democratic party.

■ It also has a "why is broadband ripping us off?" side. As you probably know, the price of broadband in the United States (all of it, new, old, straight, crooked, ancient & just-thought-up) is enormously overpriced relative to, say, all of the rest of the world.

The news side of the story deals with the first three aspects only. You need to add the fourth aspect to understand what's really happening.

What happened so far?

It looks like LightSquared, an old-line satellite services company, is trying to open up new business by selling broadband services using a next-gen technology, satellite delivery, and expanded wavelengths, to retail companies like Sprint. This allows Sprint (and others) to bundle broadband internet into their telecom packages. You'd see "Sprint" (etc.) on the modem, but it would be LightSquared inside.

LightSquared is very close to FCC approval. But in the new part of the spectrum where LightSquared devices operate, there's interference with GPS devices. GPS companies are profitable and established. The key questions are — What are the causes? Who pays for the fix?

Howie Klein summarizes this part well (my reparagraphing):

[B]ig GPS players such as Trimble and John Deere and their friends in the monopolized telecom business ... have decided to just make this go away, even though, "the interference is a result of GPS devices receiving signals from outside of their designated frequencies." So, once again it is GPS' fault, but they don't want to deal with it.

Says The Hill (same link as in the quote above):

[LightSquared], which has invested billions of dollars to launch a wholesale wireless broadband service, has become embroiled in controversy since tests showed its planned network could interfere with GPS devices.

The Federal Communications Commission (FCC) granted LightSquared a conditional waiver to move forward last year, but commission officials say the company will not receive final approval to launch its network until it solves the GPS issue. ...

[Rep. Greg Walden (R-Ore.) chairman of Energy and Commerce's technology subcommittee] noted that the interference is a result of GPS devices receiving signals from outside of their designated frequencies — not by LightSquared's signal bleeding into the GPS band. He said he hopes it would be possible for GPS companies to modify their receivers to work in the presence of LightSquared's network.

As I said above, so far this is just a corp-on-corp violence story. Two money machines (one struggling, one firmly planted in the money pool) trying to figure out who is going to pay so the FCC can give final approval.

Here's where the story gets political

Corps want only money. GPS companies like Trimble and John Deere (yes, them) don't want to pay a dime they don't have to; they own more Congress people than LightSquared; and those Congress people lean right, as in far-right. So they brought out the big guns to make LightSquared go away, and those big guns are serving themselves as well, by using the Solyndra playbook:

Michele Bachmann:

"Sadly, I believe President Obama is willing to overlook the risks the LightSquared 4G network could pose to the American people and national security because he would rather grant political favors to two of his supporters involved in this situation," she wrote, referring to Federal Communications Commission Chairman Julius Genachowski and billionaire Philip Falcone, who is a top investor in LightSquared. "Our national leadership should be ashamed. The support of LightSquared is crony capitalism at its worst," she wrote."

Chuck Grassley:

I ... asked FCC Chairman Julius Genachowski if he was concerned about these multiple SEC investigations of Mr. Falcone related to market manipulation, especially since the FCC had granted Mr. Falcone's company a $10 billion victory with LightSquared following an unusual, shortened public comment period. ... Now, more than ever, the FCC chairman should [help us find out] how the agency decided to give Mr. Falcone, Harbinger Capital Partners, and LightSquared this multi-billion-dollar grant.

Harbinger Capital is run by Philip Falcone, and Falcone has multiple ties to the Democratic party.

Pretty ugly, yes? The biggest players in a billion-dollar industry (GPS) are going to save some money (the cost fixing technical errors in their own devices) by making a company with a fledgling product go away.

And they do it by buying say-anything Republicans, who get (1) lobbying money; and (2) get one more chance to play the Solyndra card (which is a "nothingburger," by the way).

Looking beyond the news

There's a small story here about "the next Solyndra" and "expanding broadband" in the "interest of the general public" — a story that's both ephemeral and of low importance.

▪ The "next Solyndra" is just a junk attack, a stick for R's to beat the D's with, until another stick shows up.

▪ "Expanding broadband" will happen anyway. The only question is: Will GPS companies have to clean up their devices before the devices die a natural death? (My guess — GPS will win. Why? (1) Obama needs a billion dollars; (2) GPS lobbyists are a well-supplied, equal-opportunity paymaster; and (3) GPS corps can re-engineer the next round of GPS devices and pretend to the FCC that they care. Just my guess, but it won't be the first time things play out this way.)

▪ The "interest of the general public" won't be considered, because it hardly ever is. But pretending that it's being sniffed at will always be in the interest of corporations and their retainers (including those in the media). So you'll hear noises like "public interest" briefly, just before the next headline-blonde goes missing.

You'll know the public interest is actually being considered — on the day broadband prices in the U.S. match those in Europe, and fall by 75%. In the meantime, Sprint (etc.) will charge the going rate, and LightSquared will take as big a cut of that as it can negotiate.

What this does give us, however, is a rather detailed look at how public policy gets decided in the Land of the Free. The big dinos (industry giants like Trimble and Deere) kill off the smaller ones by throwing money at their paid say-anything political retainers.

Us — we're the proto-primates, a few inches tall, eating leaves and picking at the droppings of the dinos for undigested protein.

In the telecom industry, for most jobs all you have to do is buy John McCain, who ran the powerful Senate Commerce Committee:

Senator John McCain raised nearly $90,000 from broadcast and telecommunications companies in four instances shortly before or after he interceded on their behalf with federal regulators in 1998 and 1999, according to campaign records reviewed yesterday.

Aides released about 500 letters that McCain has written as chairman of the Senate Commerce Committee since 1997, and it appeared last night that only 15 involved contributors to his campaigns. McCain, who has built his presidential candidacy around denunciations of special-interest money in Washington, said yesterday that his only concern was to protect consumers.

But in several cases, according to federal campaign finance records that were matched against the letters, the correspondence to the Federal Communications Commission, which McCain's committee oversees, coincided with substantial fund-raising efforts by the companies that stood to benefit from his actions.

In one case, officials of BellSouth Corp. donated $16,750 to the Arizona senator at a fund-raiser on May 6, 1998. Four months later, McCain asked the FCC in a letter to give "serious consideration" to allowing BellSouth to enter the long-distance market.

BellSouth isn't the employee; John McCain is the employee, the paid retainer. There's much more at the link, and even more in the google. This is his business, folks, and he's good at it.

And that's telecom in the U.S.A. Bought from top to bottom, big dinos eating little ones, little dinos buying D protection from R hired guns, and vice versa.

When will this change? As soon as Americans actually want their country back. When will that be?

My old Uncle Straight Talk puts the over-under as "two weeks after it will do any good." What a card; he also thinks the Super Bowl is next week. (Shh; we still have a bet on.)

GP