Phillip Falcone, a hedge fund manager and Obama campaign fund raiser, appears to have struck out on a $3 billion gamble to supply satellite broadband service to the bulk of the country.
Called Lightsquared Inc., the company held out the promise of fulfilling one of President Obama's pet agenda items - making broadband widely available to the general public. The Defense Department has just conducted a test about how the satellite's signal will affect GPS devices and it doesn't look good for Obama's buddy.
Philip Falcone's proposed LightSquared Inc. wireless service caused interference to 75 percent of global-positioning system receivers examined in a U.S. government test, according to a draft summary of results.
The results from testing conducted Oct. 31 to Nov. 4 show that "millions of fielded GPS units are not compatible" with the planned nationwide wholesale service, according to the draft seen by Bloomberg News.
"LightSquared signals caused harmful interference to majority of GPS receivers tested," according to the draft prepared for a meeting next week of U.S. officials reviewing the LightSquared proposal. "No additional testing is required to confirm harmful interference exists."
LightSquared, backed by $3 billion from Falcone's Harbinger Capital Partners hedge fund, faces challenges from makers of global-positioning system devices who say the service will disrupt navigation by cars, boats, tractors and planes. U.S. regulators are withholding approval as they check on claims of interference.
The Reston, Virginia-based company has proposed offering high-speed mobile Internet service to as many as 260 million people using 40,000 base stations. The service would operate on airwaves formerly reserved mainly for satellites, and near those used by GPS devices.
Lightsquared shot back that the signal level used in the test was too strong and that it's satellite would "only" disrupt 10% of GPS devices.
This is excellent news - unless you happen to be lost somewhere in Montana and it's YOUR GPS device that goes haywire.
No matter. The real story here is that the White House was pressuring DoD witnesses early last fall to alter their testimony about the bad effects of the satellite signal. AT covered that story and Tom Lifson noted at the time that this was a "do or die" project for Falcone whose investors were fleeing his hedge fund as the Lightsquared debacle grew.
If that was all there was to this story, then this would just be another commercial venture that struck out, with little interest outside the tech fields involved. However, the overwhelming failure of LightSquared's test puts allegations from last summer in a new light. In September, four-star Air Force General William Shelton accused the White House of pressuring him in August to change his Congressional testimony to make his assessment of LightSquared more favorable. Another Congressional witness told Eli Lake that the White House had "offered guidance" on how to testify favorably towards LightSquared.
Why is this important? Philip Falcone is a big donor to the Democratic Party, and he has billions of dollars at stake in LightSquared's approval. Also, Obama himself was an investor in LightSquared at one point, as were or are a number of his associates. The resounding failure in this test makes it look like the White House pressured witnesses to back off of exposing LightSquared's product as exactly the kind of dangerous problem that critics had maintained all along -- with the intent to mislead Congress into moving forward with LightSquared's government contracts.
Anything for a pal, eh Barry?