Wire­less for drones, trains and au­to­mo­biles

After LightSquared’s big flop, the firm reemerges with big­ger am­bi­tions

The Washington Post Sunday - - BUSINESS - BY BRIAN FUNG

In its bid to blow up the na­tion’s cel­lu­lar in­dus­try a half-decade ago, a com­pany named LightSquared pro­posed some­thing no wire­less car­rier had done be­fore: It vowed to build Amer­ica’s first re­tail cell­phone net­work us­ing air­waves tra­di­tion­ally re­served for or­bit­ing satel­lites.

The idea was ex­cit­ing — and un­proven. While main­stream car­ri­ers such as Ver­i­zon and AT&T waged war over more tra­di­tional low-fre­quency air­waves, Re­ston-based LightSquared wanted to beam mo­bile In­ter­net from cell tow­ers to cus­tomer smart­phones over high­fre­quency waves, by­pass­ing the com­pe­ti­tion and en­ter­ing as a new, hun­gry ri­val in a mar­ket dom­i­nated by big cor­po­ra­tions. It was seiz­ing on the po­ten­tial of what was, at the time, less de­sir­able air­waves.

But the project quickly fell be­hind. With a $3 bil­lion in­vest­ment at stake, LightSquared filed for bank­ruptcy pro­tec­tion in 2012 after fail­ing to keep up with its debts and be­com­ing em­broiled in a high­stakes con­fronta­tion with John Deere, Garmin and even the mil­i­tary. The once-rad­i­cal ef­fort stalled.

After a mul­ti­year re­struc­tur­ing dur­ing which LightSquared’s owner and top in­vestor — hedge-fund man­ager Philip Fal­cone — stepped aside, the com­pany has reemerged. It has a new name — Li­gado — and grander am­bi­tions.

If it suc­ceeds, Li­gado will be well­po­si­tioned to con­trol a mas­sive chunk of the in­dus­trial mar­ket for con­nected de­vices, a mar­ket that Mor­gan Stan­ley thinks will be worth $110 bil­lion a year by 2020. Suc­cess, how­ever, de­pends on bil­lions of dol­lars of in­vest­ment in con­struc­tion, not to men­tion get­ting the bless­ing of reg­u­la­tors who blocked the com­pany’s path once be­fore.

Li­gado is promis­ing not only to build the world’s first wire­less net­work us­ing ground-based air­waves that had long been con­sid­ered un­suit­able for cel­lu­lar use, but it’s also plan­ning to join that ca­pa­bil­ity with a satel­lite hov­er­ing above North Amer­ica. The novel pair­ing, its ex­ec­u­tives say, will largely sup­port in­dus­trial cus­tomers, not in­di­vid­ual con­sumers. But, they em­pha­size, that doesn’t mean the av­er­age Amer­i­can won’t see ben­e­fits from the hy­brid net­work.

“It’s new own­ers, a new board, a new man­age­ment team,” Li­gado chief ex­ec­u­tive Doug Smith said. “We’re ex­cited with the so­lu­tion we came up with. This is not an­other cell­phone net­work. It is ab­so­lutely a type of ser­vice that doesn’t ex­ist to­day.”

For ex­am­ple, the new sys­tem could al­low self-driv­ing cars to re­ceive in­stant GPS lo­ca­tion read­ings that are ac­cu­rate to within 5 inches, ac­cord­ing to Smith. Achiev­ing that level of ac­cu­racy will prob­a­bly be­come vi­tal to the au­to­mo­tive in­dus­try as ve­hi­cle au­to­ma­tion goes main­stream — whether for par­al­lel park­ing or for stay­ing in the cor­rect lane at 60 miles per hour.

Li­gado’s satel­lite-ter­res­trial net­work could also give rail­road com­pa­nies a boost. The high-pre­ci­sion lo­ca­tion fea­tures may al­low train dis­patch­ers to pin­point the pre­cise end­points of a train, which could help avoid col­li­sions or im­prove the ef­fi­ciency of rail op­er­a­tions.

“Know­ing ex­actly where that end-of-train is at any mo­ment makes it much safer,” said Sid Bakker, president of TPSC, a rail­road telecom­mu­ni­ca­tions provider. “If we can com­mu­ni­cate that to the back of­fice, or to other trains or main­te­nance ve­hi­cles, we just in­crease driver safety.”

Emer­gency he­li­copter ser­vices could ben­e­fit from satel­lite-ter­res­trial com­mu­ni­ca­tions, too — en­abling res­cue work­ers to keep their chop­pers hum­ming at peak per­for­mance by au­to­mat­i­cally send­ing di­ag­nos­tic data back to base. That data about the equip­ment could help main­te­nance crews an­tic­i­pate a me­chan­i­cal or elec­tronic prob­lem in the air­craft be­fore it be­gins.

In an in­dus­try in which ev­ery­thing is fine-tuned to the last de­tail and backed up by con­tin­gency plans, the in­abil­ity to get live, re­al­time main­te­nance data from air­craft is the miss­ing piece, said Mike Stan­berry, chief ex­ec­u­tive of Shreve­port, La.-based Metro Avi­a­tion, which sup­plies he­li­copters and main­te­nance ser­vices to hos­pi­tals across the coun­try.

“We were killing peo­ple in the in­dus­try be­cause we were de­fi­cient in th­ese ar­eas,” Stan­berry said. “This live data in­for­ma­tion was the last bucket, and prob­a­bly the most im­por­tant.”

Li­gado’s net­work will be built in stages. Al­though the com­pany’s main satel­lite, SkyTerra 1, has been op­er­a­tional since 2011, Li­gado is await­ing per­mis­sion from fed­eral reg­u­la­tors to be­gin build­ing ground-based cell tow­ers. The first ben­e­fi­cia­ries will be com­pa­nies such as TPSC and Metro Avi­a­tion, along with ports, util­ity com­pa­nies and other in­dus­trial busi­nesses. Be­cause most of th­ese firms op­er­ate in ge­o­graph­i­cally spe­cific ar­eas, don’t ex­pect Li­gado to build a na­tional cel­lu­lar foot­print. It’ll start by set­ting up ground-based tow­ers in just the places that need them most, said its ex­ec­u­tive vice president, Va­lerie Green.

The net­work is ex­pected to split its du­ties ac­cord­ing to the type of traf­fic it’s han­dling. For rel­a­tively small pack­ets of in­for­ma­tion that re­quire high speed and low drag — such as di­ag­nos­tic data — the satel­lite con­nec­tion will be key. But the ground-based net­work will han­dle more band­width-heavy ap­pli­ca­tions, such as the video pro­duced by an aerial drone while in­spect­ing a rail­road track.

The un­con­ven­tional net­work is Li­gado’s crown jewel as it seeks a dom­i­nant po­si­tion in a new sec­tor of the econ­omy. As more Amer­i­cans turn to the In­ter­net of Things — a con­stel­la­tion of Web-en­abled smart de­vices and ap­pli­ances — to per­form tasks, the broad­band provider that can sup­port the con­stant flow of com­mu­ni­ca­tions stands to make a great deal of money.

Other tele­com com­pa­nies have in­vested heav­ily in the In­ter­net of Things, too. For in­stance, Ver­i­zon’s IoT divi­sion is nearly a bil­lion-dol­lar busi­ness an­nu­ally, ac­cord­ing to its ex­ec­u­tives. But Li­gado’s fo­cus on in­dus­trial in­fra­struc­ture is both de­mo­graph­i­cally and ge­o­graph­i­cally unique, Smith said.

“I think the re­quire­ments would be dif­fer­ent,” he said. “If you go back to the rail ex­am­ple, there’s lots of miles of track that just don’t have any cov­er­age on it to­day. So one of the first rea­sons [a tra­di­tional cel­lu­lar car­rier can’t op­er­ate there] is be­cause it’s not there.”

As the first com­pany to at­tempt a hy­brid net­work us­ing satel­lite air­waves, Li­gado’s ex­per­i­ment is be­ing closely watched by net­work op­er­a­tors and reg­u­la­tors around the world. But the com­pany’s new strat­egy emerged after a long and dif­fi­cult road.

LightSquared’s plans to build a na­tion­wide 4G data net­work were foiled in 2012 when the Fed­eral Com­mu­ni­ca­tions Com­mis­sion re­scinded the com­pany’s air­waves li­cense, cit­ing con­cerns by Deere, Garmin and other crit­ics that trans­mis­sions over LightSquared’s satel­lite air­waves would in­ter­fere with GPS nav­i­ga­tion de­vices.

At the time, Fal­cone, a for­mer pro­fes­sional hockey player known on Wall Street for his com­pet­i­tive streak, had pledged a long-haul bat­tle over the fu­ture of his com­pany.

“One of the things I learned in hockey is that the game’s not over un­til the buzzer sounds at the end of the third pe­riod,” he told The Washington Post. “And un­til that buzzer sounds, you keep on play­ing as hard as you can.”

In 2012, the buzzer rang out. Al­ready un­der fi­nan­cial pres­sure from cred­i­tors, LightSquared filed for bank­ruptcy pro­tec­tion, and a path to emerge only came clear in March 2015 when a num­ber of in­vest­ment firms, in­clud­ing Cen­ter­bridge Part­ners and Fortress In­vest­ment Group, pro­posed to take over from Fal­cone’s Har­bin­ger Cap­i­tal Part­ners. Un­der that deal, Fal­cone would re­tain a non­vot­ing stake in LightSquared. But he would lose the abil­ity to lit­i­gate or ne­go­ti­ate with the GPS com­pa­nies he blasted with a law­suit in 2013 for al­legedly stand­ing in his way.

“Fal­cone was clearly a bombthrower — typ­i­cal New York guy,” said one per­son fa­mil­iar with the ne­go­ti­a­tions who spoke on the con­di­tion of anonymity be­cause the talks were pri­vate. “He was just shot­guns blaz­ing, all hours of the day. And really, he prob­a­bly could have done the same deal that Doug Smith did, if he had been will­ing to ne­go­ti­ate and com­pro­mise.”

The new man­age­ment swiftly moved to defuse ten­sion with the GPS in­dus­try. Know­ing that LightSquared’s satel­lite air­waves were still in­tensely valu­able, they named a for­mer chair­man of the FCC, Reed Hundt, to the board, as well as for­mer Ver­i­zon chief ex­ec­u­tive Ivan Sei­den­berg. To­gether with Smith, the group de­vised a new ap­proach — one that had the com­pany mak­ing sig­nif­i­cant con­ces­sions.

Among the changes were a de­ci­sion to dras­ti­cally re­duce LightSquared’s trans­mis­sion power lev­els so that any data trav­el­ing over its air­waves would not jam the GPS sig­nals. The firm agreed to clean up its sig­nals so that less noise would spill over into the GPS in­dus­try’s back yard. And LightSquared com­mit­ted to never us­ing one of its satel­lite chan­nels for ground-based pur­poses, en­sur­ing a buf­fer be­tween the GPS air­waves and the LightSquared air­waves.

“The new lead­er­ship is com­mit­ted to a con­struc­tive ap­proach to in­ter­fer­ence con­cerns,” said Jared Hen­dricks, a se­nior man­ag­ing di­rec­tor at Cen­ter­bridge.

Days after for­mally ex­it­ing bank­ruptcy in De­cem­ber 2015, LightSquared an­nounced it had reached a com­pro­mise with GPS in­dus­try of­fi­cials. A cou­ple of months later, the firm re­launched as Li­gado — and has been hop­ing ever since for a green light from the FCC to be­gin build­ing its cell tow­ers.

By most mea­sures, Li­gado ap­pears ready for take­off once more. Deere could not be reached for com­ment, and Garmin de­clined to do so. But other GPS in­dus­try of­fi­cials say they are largely sup­port­ive of the changes the com­pany has put in place, though some out­stand­ing is­sues must still be ne­go­ti­ated.

“Dis­cus­sions with Li­gado have been con­struc­tive with the new lead­er­ship,” said Jim Kirk­land, se­nior vice president and gen­eral coun­sel at Trim­ble, a GPS de­vice maker that had clashed with LightSquared. “We’re happy we’re able to re­solve some of the spec­trum is­sues, and we’re com­mit­ted to work­ing with Li­gado on the re­main­ing is­sues.”

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