House Energy & Commerce Committee

The House Energy and Commerce Committee plans to hold a hearing Friday to review the Federal Communications Commission’s actions regarding the now-bankrupt wireless firm LightSquared, which proposed a nationwide 4G network later found to create major interference problems for GPS users.

At issue are the circumstances surrounding the conditional waiver the company received from the FCC to move forward with its network in 2011. Some Republicans are questioning whether the FCC rushed the approval process without independently assessing whether LightSquared would interfere with GPS services located on nearby frequencies.

The hearing, requested by the Republican majority, will explore whether the FCC skipped its own procedures and ignored policy to hurry approval.

Sen. Charles Grassley (R-Iowa) has raised questions about the FCC and LightSquared owner Philip Falcone, who has donated nearly $100,000 to the Democratic Party.

“Without transparency, and with media coverage of political connections in this case, there’s no way to know whether the agency is trying to help friends in need or really looking out for the public’s interest,” Grassley said last September after unsuccessfully trying to get the FCC to pass along documents regarding the venture.

The Center for Public Integrity found numerous political connections between LightSquared and the Democratic Party:

• Several major Democratic campaign contributors and longtime Obama supporters have held investments in the company and its affiliates during its tangled decade of existence. They include Obama’s good friend and political donor Donald Gips, his former White House personnel chief, who now serves as U.S. ambassador to South Africa. Records show that Gips maintained an interest, worth as much as $500,000, as the FCC was weighing LightSquared’s request.
• Obama himself was an early investor and came to the presidency a firm believer in expanding broadband. He remains close to other early investors, like Gips and investment manager George W. Haywood, inviting some to luxe social events at the White House and more intimate gatherings like a night of poker and beer.
• Obama installed one of his biggest fundraisers, Julius Genachowski, a campaign “bundler” and broadband cheerleader, as chairman of the FCC, whose staff granted LightSquared a special waiver to operate.
• LightSquared’s current majority owner, hedge fund manager Philip Falcone, made large donations to the Democratic Party while his broadband request was pending before the FCC. He and LightSquared executives met with White House officials. Neither Falcone nor the White House would comment on what was discussed.
• LightSquared employs lobbying firms that wield formidable Democratic firepower: Ed Rendell, former governor of Pennsylvania and onetime chair of the Democratic National Committee, as well as the firm of former House Majority Leader Richard Gephardt.
• Jeffrey J. Carlisle, the company’s vice president for regulatory affairs, served with Genachowski and Gips on Obama’s transition team.

With nearly $3 billion sunk into the venture by hedge fund owner Falcone and his backers at Harbinger Capital, fierce lobbying pressure was applied to win the conditional FCC waiver, granted by the FCC before it reviewed comprehensive reports affirming interference problems.

When independent tests showed LightSquared’s service would overwhelm sensitive GPS receivers and render the location-tracking service nearly useless, last February the agency withdrew its permission for LightSquared to operate, beginning a death spiral for the 4G venture, which filed for bankruptcy in May.

Tribune-owned WCCT was seen on certain Cablevision systems in Connecticut.

Tribune Broadcasting Corporation’s WPIX-New York, KWGN-Denver, WPHL-Philadelphia, and WCCT-Waterbury/Hartford, Conn. were all dropped from Cablevision’s lineup late last week in the latest fee dispute between TV station owners and cable systems.

Tribune says the stations were taken off Cablevision as the two sides were in a negotiating session, even after offering the cable company an extension of their current agreement to avoid upsetting viewers.

“Cablevison took this action despite our offer of an unconditional extension of the current carriage agreement with no change in terms while negotiations continued,” Tribune said in a statement. “To be clear, Tribune was willing to provide Cablevision subscribers access to the valuable programming on these stations while working toward a new agreement. Tribune never made any threat to withdraw these stations or any demand that Cablevision remove them.”

Cablevision’s decision to discontinue the New York/Philadelphia stations affects subscribers in suburban Connecticut and New Jersey, Brooklyn, the Bronx, and Long Island. KWGN is a common superstation seen on Cablevision/Optimum West systems in Colorado, Montana, Wyoming and Utah.

Cablevision accused Tribune’s owners of anti-consumer behavior over their demands for higher retransmission fees.

“The bankrupt Tribune Co. and the hedge funds and banks that own it, including Oaktree Capital Management, Angelo Gordon & Co. and others, are trying to solve Tribune’s financial problems on the backs of Cablevision customers,” Cablevision said. “Tribune and their hedge fund owners are demanding tens of millions in new fees for WPIX and other stations they own. They should stop their anti-consumer demands and work productively to reach an agreement.”

WPIX management counters the station is asking for less than a penny extra per day per subscriber.

Both sides are appealing to the public, but city comptroller John C. Liu is fed up.

“These blackouts are happening all too often,” Liu said.  “Cablevision, as a city franchisee and service provider, should do all it can to ensure that this blackout is resolved swiftly because New Yorkers deserve to get what they pay for, not be unfairly punished because of battling corporate interests.  If a swift resolution cannot be achieved, the Department of Information Technology and Telecommunications must step up to hold the provider accountable to the subscribers, who feel the brunt of this irresponsible disagreement.”

Liu adds that New Yorkers are effectively paying Cablevision for channels they no longer receive, and the cable operator is not offering any refunds.

Eventually, both sides will come to an agreement for higher payments, which will be passed along to subscribers with the next rate increase.

[flv width=”640″ height=”380”]http://www.phillipdampier.com/video/Bloomberg Cablevision Blacks Out Tribune Channels in Dispute 8-17-12.flv[/flv]

Bloomberg News talks with Matthew Harrigan from Wunderlich Securities about the impact of the Tribune-Cablevision dispute. Does WPIX and Tribune have enough clout to get Cablevision to cave?  (2 minutes)

Failure, Squared

LightSquared, Inc. filed for bankruptcy this afternoon after its plan to deliver high-speed wireless broadband nationwide was blocked by federal regulators over interference issues.

LightSquared was a pet project of billionaire hedge fund manager Phil Falcone, who earned his money pitching George Foreman grills and betting against sub-prime mortgages. Falcone invested billions in the satellite Internet venture, despite knowing the wireless technology had run into controversy with nearby satellite spectrum users who claimed it interfered with GPS reception.

Starting in 2010, Falcone convinced the FCC to approve his purchase of SkyTerra Communications, on the condition he construct a nationwide wireless broadband platform that could serve up to 260 million Americans. His hedge fund, Harbinger Capital Partners, spent $3 billion to gain control of 74 percent of the fledgling LightSquared project, despite Falcone’s knowledge the technology would potentially interfere with adjacent spectrum users. But Falcone dismissed those concerns, believing the interference problem was actually the fault of GPS technology that encroached on his spectrum or receivers that were not properly constructed to reject adjacent channel interference.

Falcone

Falcone’s steadfast belief in LightSquared, and the enormous financial backing he gave it, flew in the face of network engineers who reviewed the technology startup.

DirecTV was one company interested in the potential of LightSquared’s wireless satellite broadband back in 2004, but quickly backed away when even tentative tests flashed red lights of caution for DirecTV executives.

“A young engineer we had went and tested it and said, ‘It conflicts with GPS, it will never work.’ So we backed away immediately,” CEO Michael White told Business Week.

Falcone assumed any problems could be smoothed over with the federal government, White added.

With sufficient lobbying money and inside D.C. influence, he might have even overcome the alliance of GPS users that formed to fight the venture.  But in the public debate that followed, the GPS community eventually proved their case and the FCC put the project’s approval on hold. Now some parties involved in the LightSquared debacle are wondering if things might have gone better had the company been more sensitive to those GPS users and had found a way to overcome the interference problems.

Ultimately, the FCC delivered the death blow issuing an eventual revocation of the company’s license to operate its broadband system as presently designed.

Most of the group’s working partners have fled the LightSquared project, Harbinger has seen the biggest drop in assets in industry history — losing $23 billion from direct losses and client withdrawals, and billionaire Falcone is even accused of allegedly stiffing the contractor working on his Long Island home at least $1.2 million, according to a lien filed in Suffolk County.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg The Fall of Phil Falcone 4-16-12.flv[/flv]

Fabio Savoldelli, a finance professor at Columbia University, talks about Harbinger Capital Partners’ Phil Falcone and his investment in wireless broadband startup LightSquared Inc. It has been rough sailing for Falcone ever since he turned the project into a major priority for himself and his investors. Savoldelli shares how it all went wrong with Bloomberg News.  (8 minutes)