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Reporters' Roundtable Ep. 111: Lightsquared and the spectrum messHow do you throw away $4 billion? Buy spectrum you can't use. That seems to be what Lightsquared did, once the FCC revoked a license that would have let the company build a new nationwide wireless broadband network. Today, Rafe discusses with CNET editors...
Everyone looked to reporters' roundtable primary -- in San Francisco -- this week really -- show how do you. Throw away four billion dollars. Here's one way by -- -- spectrum can't use that seems to be what that lightsquared has done the company bought access to satellites. And a chunk of spectrum plan to create a whole new wholesale wireless network. But the FCC said this week no wait -- planned use -- spectrum interferes with GPS the FCC withdrew the waiver had previously given the company to operate. And now lightsquared sitting on what appears to -- of toxic asset. Not only cannot use the spectrum. But the FCC ruling means that no one else can use either. -- -- What's happening here and how will it affect you the user of a wireless device that is never fast enough. That's were discussing today with two great guests both CNET people. First in New York Roger -- who's our executive editor and in New York bureau covering all things wireless and New York. -- thanks for joining us. -- -- -- And Maggie Reardon also in New York is senior writer on also on the mobile and wireless beat Maggie -- -- for joining us from -- kitchen studio. It's not -- It's good to have you guys -- -- this has -- such uninteresting story -- has been developing a lot of people of course don't know about what's been happening with lightsquared -- -- in them. The admin and consumer products yet so to bring us up to speed com. Maggie -- it is or was lightsquared kind of the executive summary version. Well lightsquared is gonna build a nationwide. Four GL TE network and -- Arkin a self service directly to consumers but they were going to sell service to other service providers like -- Or eating us retailers like -- by leap wireless was gonna be another on what -- their partners and through this network. And -- carriers would be able to offer -- services and so it would offer a true competitor you AT&T and Verizon. On in terms of next generation four G wireless so -- any provider couldn't. Worked with -- and with lightsquared and and -- would've been able to compete with. With AT&T and Verizon took out a wholesale wholesale competitor to the existing carriers and it wasn't satellite based Sierra. On the well yet had not asked now what actually did this spectrum that -- use it and big band -- for satellite service. The waiver that they were getting from FCC listened to eight -- used on terrestrial. Or land based only on communications and years ago the FCC -- okayed that you know but but the well a the rules were written. Com. Ever use that spectrum also had to provide some kind of satellite service to you but -- expensive -- include satellite. Radios in you -- Devices -- -- really expensive -- It's not cost effective for any of lightsquared. Partners indeed act so that one strategists EA air land based. Com service and -- GPS looks like. Is. That okay that's you're gonna get into before we get into what happened here -- a little bit more background in the what's the big deal about -- some we've got pretty good coverage or at least building out coverage is being built out. On. The major -- AT&T Verizon's networks. Do we do we need this Roger and -- are consumers. -- consumer wireless grow as -- as it is growing without lightsquared do we need something like that to give us additional bandwidth. Is debatable whether or not it's needed but it's that they wanted and the FCC it has been pushing for this in the industry has been complaining about. Not having a spectrum to go around and here you are you've got a -- of spectrum that with the company that was willing to invest and build a network when. And then it just -- completely done. -- yet not I think terrorists definitely is a need. Verizon AT&T -- yes there are building -- Tina now them. It's I think it's important to have another competitor and the more competition that's out there the better it is for consumers right. Well that's the argument. Yet NTT's fight with buying it he mobile but anyway yeah that's -- -- -- Is gonna say I mean rate now on we got. Two major carriers that it hold most of the wireless spectrum out there and what we're seeing you know of course. Up eighteen -- was not allowed to merge with T-Mobile but now there's top. They're going to -- acquire more -- -- -- -- I'm so I think what we're gonna see over time and is -- on this duopoly is -- get stronger and lightsquared was really eat. The only. The only company it could -- -- -- -- competition and lightsquared itself. I guess when you didn't so much a competitor as. The other -- providers it it would allow you be able to compete AT&T. And bright and because it's those guys control most out. On the spectrum -- suffer for this wireless broadband. Men and you know there's nobody else it hasn't money invest in building -- own network or even acquiring spectrum. Let's let's light up the winners and losers in this thinks of personal who was funding lightsquared this whole venture. -- harbinger capital which is a hedge fund that's run by -- -- -- Okay so there is a new player in in them in the com Spacey as it is says harbinger in other -- other companies this area. -- know this was actually they've been actually reduce their holdings -- basically just lightsquared cell phone -- was betting basically everything. On this service OK so we've got a new player coming in here by trying to release a build out a new network. That does -- you have a you're making any book or tablet or something or some wireless devices in the nest and some thermostat something. And you want it to get you wanna get it on them a wireless network now you can go to this new company. And buy wholesale access from them right right that's that's the big dilemma right there because. Right now is -- era if you building that connected thermometer -- caller whatever. You have -- AT&T Verizon and there's a fairly lengthy process. To approve the device to make sure it's clear for the network. So it's it's a costly effort it kind of makes it difficult for those garage startup companies to actually get involved with this. Okay I screw it offered a much easier option right. So I'm just trying to line up here how via the battle lines are drawn because it it looks like to me. That on the one hand you have gained a new company trying to break into a business that is pretty much controlled by two major players. -- you could -- were eighteen T and Verizon could lose out on with you know a a lower cost easier to access competitor. But then you have this a wild -- coming in. The GPS guy's saying no. The lightsquared terrestrial use of GPS a frequencies adjacent to GPS. Will make GPS and reliable what was the role of the government which runs a GPS satellites. In while the government agency or its GPS satellites in dealing with the government agency that runs the airwaves the FCC. In basically putting the kibosh on -- lightsquared a proposition. Well that was really it. Is it GPS industry you know encompasses lots of players right so it it it's some of the users of GPS sent a rock so got. And folks an FCC actually doesn't have control over an -- for their -- are what they do that anyway. Basically to GPS guys out and they don't like anybody -- and neighbor and using any service that went ultra wide end what is on was coming on any government actually. What it used ultralight and GPS complained about it industry is -- up but because the government -- -- use ultra wide and they just sent out. No planes -- iPod and I do this anyway each and the problem really is is it's not that -- Lightsquared has. It signals are going outside. Of its. Its defiant. Actor and I mean it's it's doing everything that it's pressed to be doing the problem is that the GBS spokes. Have receivers on their devices that can -- singing. Come to these other things so it's at for example it's -- If your neighbor is having argument in their house. Airlock at -- House -- -- if you're you're kept hearing -- it's like turned up so high. You can hear everything it's going out in -- house in -- gonna complain about it. Odd because they're -- -- -- well that's not really -- is you're allowed to do whatever you want your house. Is wanted it -- answer to bleed over into your neighbors but if you're gonna hack you know a receiver that it is tuned so. I'm so high you can hear what else going on in your in your neighbors area -- -- -- just really care so that's kind of what's happening book written with yet. Other two angles or -- -- will get into in the first one is I'm. Howell. Lightsquared. Bet. Billions of dollars on being able to do what it -- ultimately fanatic could not -- did it not know. That it would have this problem with. I'm gonna -- GPS interference but with it with. The while sixty gets -- interference because it but did they not know. That they were gonna get slapped down because of the -- being adjacent to the GPS -- and and possible interference perhaps you don't know when you put millions into. This process has been going on earth for more than ten years on an all -- on the way. Eight you know -- -- see -- is granted then the licenses they its granted and on. You know -- -- -- to use terrestrial based on the incident and gone every step along the way. In GPS is a -- and things saying that they were not sure about this but they didn't put up a big fight until last year when it became. Really clear. -- you know witness FCC Labor Day at lightsquared was actually gonna build this network was -- ever gonna do. Just -- make it's it's gone unused for a really long time so I -- GPS is just hoping no one would use. You know it's kind of like again you got a house and you to -- on either side -- -- it. Nobody buys that landing -- outside and when you find out it you know they'd actually gone and filed plans to build outs and maybe start -- -- Roger will mean a plan was for lightsquared. To work with the GPS initiative developed filters and basically remedy the interference issues the palm was the GPS industry was supposed to have -- filters in place. -- they never really but the man why not. They just -- And let's -- SP clear when you say when we say -- GPS -- we save the wireless industry or a human rights and eighteenth hearing kind of picture I had what that industry -- We talk but GPS it's a little bit different the G right it did GPS industry when the satellites are run by the government. And would develop for the military and the commercial applications and -- was all GPS receivers -- Smartphones. And I am now more more in our cars that the commercial applications seem to have come much after the government and military applications so what is the GPS industry. And who's behind this at com read this attack are on the use of these these -- I should be more specific means that 9% of vast majority that GPS devices that are out there including the ones on your phone. -- works fine with -- spectrum actually they have the necessary filters but there are -- -- small subsection of these GPS devices. Are allowed them which our government of that don't have these filters and related to only pay attention to this mandated FCC had. Partly because the FCC doesn't have any jurisdiction over the government. I -- stop there and say and and just point out the the weirdness of this that the FCC a government agency charged with managing our Airways. Can't tell private industry how to use the Airways. But this government agency can't tell the another government agency in the military -- of the DOD or whatever it what to do with the airwaves that their government agency a. Is responsible for which I just think -- bizarre. And a second go ahead put ya notice an -- and that's. One of the biggest reasons why. -- failed a lot of them -- a lot of government devices. -- You know if it doesn't work for government devices then its network for anyone. It is bizarre it's not unlike that -- That's speaking of government devices -- -- -- negative for a second. Curse you Airways and -- -- why I can't. Are you on Wi-Fi I am on lightsquared is beaming all of its -- used you know. I -- right into your apartment we go to some other lightsquared bandwidth I know we really could deceit and this is why we're doing the show guys. We lightsquared exit make it work be nicer to the FCC barred him gift baskets he messed up -- -- hit with a. Yeah I mean sadly the FCC. You know they wanted it happened at -- all art and on into forty meg records that spectrum. On. Which is not insignificant means -- FCC at the planned in no time at the next ten years that they want to free up 500 megahertz spectrum. -- to be re auctioned under or reallocate it -- used for wireless broadband. And now. Yelling and they had targeted at freeing up it up 300 here earth. By a when he -- -- And Garrity two years and the planned and they -- freed -- anything so. This was a significant chunk of spectrum that they wanted to see going to use it could've -- -- use immediately so it's it's really unfortunate that it's not. -- it sounds stimulate. The the FCC is getting -- -- -- ended up will collect the inept company -- -- -- operation here because they couldn't free up spectrum that would have been good for industry that it it almost looks like. And at other people over and this is hardly an original observation that. Did GPS testing set up the whole thing that ended up there are putting the kibosh on the whole lightsquared thing. Was influenced by the eighteen -- Verizon lobby make that Scott are very popular conspiracy theory. I don't they eat it it honestly no I don't think it was bright AT&T it this -- GPS industry on who have a lot of a lot of cool in you know as Roger explained in the government. Com and it big thing in -- eighteen team Brighton -- it. Get on board with its the part that they were upset about was at the waiver process. They feel that if FCC is an -- make exceptions for terrestrial only use. A spectrum it's. -- force satellite. -- need to make a ruling and they need to have a rule so that everybody but April's instead of doing it on a case by case basis and just any sweepers them. -- -- -- Valid lot of problems with this waiver is easy basically granted this one off wavered -- lightsquared. -- though the previous owners of for the spectrum. But -- really clear at what he GP ministry -- -- sort of slap that can. They did actually candidate -- that's where it's kind of a little bit fox. Did little chemistry -- ten years con men and two in fact -- it's -- -- ridiculous in a way. FCC could have just say yes. 888. And didn't have to be conditional later they had already gone through the process. Of making sure that this was -- don't work -- their party rules in place about filters for the GPS industry they could have just said. You know go ahead build your network GPS industry. Com -- ain't had ten years the processes done figured out. On eight didn't eight -- sort of you know Howard I guess you to -- pressure and eight you know not until probably the middle of the years. Didn't anybody ain't it I GPS as an end. Rally -- support and -- did the ending they killed this from a political standpoint is necessarily. -- technical people argue with -- say -- You know but planes are gonna thought -- -- -- -- not actually turn it into. Now I thought I wanna get to 11 thing here about this testing that -- that'll Malia helped put the nail on the coffin here. There have been reports -- he wrote a story saying that -- lightsquared claims that the GPS tests which showed interference where. Either -- -- -- in secrecy or somehow. Irrelevant. A technologically wrong can you comment on that for a move on to the bigger picture here what's gonna happen and going forward. Yet on you know lightsquared had a lot of issues -- and it attacks ink for one -- GPS industry picked out which devices should be tested some of them. We're obsolete or not even -- use anymore and also the -- determining which. Out whether or something. Had interference -- -- have an appearance on basic you know the interference. -- -- it's unacceptable for its testing. Wii is interference could only be detected in a laboratory and in real world com cases it. Wouldn't affect the operation of the devices so -- -- If that's true I add in 88 -- -- -- -- on the yeah I think they're certainly awaits you design test and interpret results on. They can get you the results want an and I think that's how they field -- And it was done it wasn't open testing wasn't like request for comment requests on a result it was. -- done by some committee who then released the results as a kind of physical clear yet. Right and and part of the testing was also done up you know would help other agencies. In the government who have an interest in in. In this because they have GPS devices so again it seemed a little bit skewed. -- and I'm having a hard time understanding what the GPS industry such as it is stands to gain from. Blocking. -- Use. Spectrum is a funny thing nobody. You know its it. It's a scarce resource. And everybody wants to hold onto their licenses. On the everybody's afraid of interference. On who owns a spectrum license ends. GPS industry over. The whole history of -- you know of existence. They had not -- anybody. Around their spectrum. As they don't want any interference it -- again you know somebody who builds a house in a country and and they don't want to have any neighbors. And and they get really annoyed when people buy at the property around them. Well you know it's not their property and somebody at the rate outlet and build it out and -- Siri you know GPS is using. 24 megahertz spectrum. But a whined about for your fifteen or -- on each side of -- cleared so today you're using up the total -- a hundred megahertz. Spectrum is buffer you know and any grand scheme of things. That's just not. Tenable I mean. We need to free up more spectrum -- people use and you know right now there's -- Outside -- sent me to. Megahertz of spectrum -- allocated. For hot rod and mobile prod and used mainly -- -- -- -- another I've heard a hundred megahertz or that you wanna keep. You know just yourself is is a lot so. How much of the investment in lightsquared went to acquiring spectrum. -- almost all -- so the question is can. Lightsquared go back to the government from whom they've bought rights to use the spectrum -- -- -- -- back. If the more likely -- -- -- -- point yes they have a alright moving on. This is what a mess -- so we have this national broadband plan 2010 -- program and how was this part of this and can we believe that the FCC can be effective now in managing the growth of wireless. In the distribution of spectrum licenses are after what -- lightsquared Roger you mean how do we feel that the FCC's. Efficacy moving forward. Not in -- you -- a great piece on this yesterday -- -- it's no -- noted that politics is served on the way of freeing up spectrum as badly needed in the industry. And yet at least with the lightsquared example it just hasn't -- its a its a bad first step for -- FCC. The first step that Maggie and -- welcome. And -- yeah I mean there's other there's another on the chuck of spectrum it out. Nobody's really talk about it's it's this at about -- -- megahertz spectrum. It did it and controls. And you know -- didn't end up in its -- This latest on the spectrum -- ill bet I. On was tacked onto the payroll tax cuts there's gonna be auctions. For spectrum. And on and so ninety megahertz which was thirty year -- for on. Word to be freed up it is controlled by the Department of Defense. -- is probably not -- be used because the FCC doesn't really -- the power going in and tell. DOD. -- did you know. Move on this quicker you can move year your people around an inch I get on two different. Specter menus -- more efficiently we need for commercial use so that I think is is a big problem. On an -- spectrum policy is -- FCC only controls commercial spectrum. Each government agency has its own spectrum controls what it does with that spectrum and they don't wanna give it up and as -- explain nobody ever get out -- wireless spectrum. Not even not use and so com. Yes so it becomes a real problem for commercial use. Are so what's next for lightsquared. Customers or partners sprint was doing a deal with them. Freedom pop which try to buy the Skype guys on it. What of companies do who were kind of hoping to be able to access. A new. Act and -- a swath of broad -- what are we gonna do. Well. One of the big winners here is clear -- is clear wireless service Natal. Reposition its business. And now it's our -- going to become a full wholesale provider of multi serves as right now they use a different four G technology called WiMax and but there are undergoing sort of an upgrade to move into LTE didn't eat or more in line with Verizon AT&T offers. And so -- big winner because all these companies like best buy or -- -- -- whoever wants to get LTE capacity. In -- clear wire -- color wise upping their doors up it is basically anyone else do once at least time off their network. And we have a story up about what dish is going to do you know or -- looking -- FCC for cues. Based on what happened in part with. With lightsquared. What does it mean for a company like dish that's is that again is trying to figure out how to navigate the idea. -- The spectrum. With the lightsquared deal falling apart how do you change direction if you are having are having to deal with this issue and bring a new consumer device. Hopefully right -- dishes and dishes in a really good position right now. With lightsquared spectrum sort of deemed toxic. Dish has sort of the next best -- inspection. And it's very similar to lightsquared and it's -- that's our satellite characteristics and requires the same kind of conditional waiver. That's what they're looking for right now there are actually looking for a one off waiver. And that sources have told me that they don't get that waiver and that's when -- -- stated they can either sell they. Celebrating team of partner with T-Mobile or they can just sit on that spectrum which -- one really wants but is that should come a Smart move because the spectrum. Goes up and die basically just sit on and some eventually someone's gonna come in you know -- up for a higher price. Have a special goes up in value every time that the FCC said -- puts a ruling out the says that the company can't use the spectrum they have been up all the other threats from by nature goes up in value until. The -- from your sitting on the same thing happens here that just happened to lightsquared so. It just it seems to be like there -- lot of really big bets going on here and a I want to wrap up by asking what this means. For you and me for consumers who as I said of the top of the show. We're frustrated we're paying a lot for bandwidth and band -- is. Diminishing because there you know within the whats the percentage -- in the last couple years. The use of wireless broadband has grown by -- like 20000%. Or more. It's just exploding everybody's going wireless everybody wants more speed more services more streaming. And we're running out of band -- so what is the future what the FCC gonna do what are companies going to do who's gonna win his analysts. -- simple question. Well I think that the first thing we can expect is that I am the network's gonna get -- -- and content so that means -- You're gonna have probably poor quality service and what you have today. -- they're gonna be stricter data caps so on -- networks get really crowded. And you'll probably the AT&T. You know eighty lowering Saturday caps and -- on or maybe you'll see EI -- -- -- And in the time of day -- you. And use you're out your wireless data like for example -- -- -- at peak times. Com -- it'll cost you more. It to use your data and verses if you're doing it at -- time where there are a lot of people using it so I mean we can see a lot of things like that it. -- carriers themselves are apt get more create and about how they use their networks so they're gonna -- to find ways to -- -- shrink their their cell sites -- because the whole thing here is we're talking about. -- -- -- The data is in the air right it. Like your data isn't any -- -- on the report and how it's a wired network and get on some sort of like hard wired fiber -- and connection in the ground. So if they -- shorten that distance between island. From your phone to want to there wired connections. And 98 concedes some bandwidth so they might. Have more -- Wi-Fi hot -- -- we're seeing. I new technology coming out new standards to make that easier. And make it more seamless process for consumers so I think we're gonna have to see a lot of different things going on but you know -- growth. And usage continues on -- pack -- everybody says that it's it's going on Denon you know. It's gonna be a problem in the future if we can't get more resources allocated to these services. Roger. Mann -- Maggie it's this is bad for consumers -- you're -- -- higher prices to support service and that's -- -- -- the reality. -- especially as we get to three years out. -- -- -- -- still dragging their feet on the spectrum issues than. It's -- -- for the carriers can prompt for us. Every -- it's not it's not an FCC in its dragging its feet FCC's trying it's it's the political. Its content yet you know. I am so like for example Arizona a bill before congress right now -- In -- -- brought an -- And -- mention they wanted to get to 300 megahertz of spectrum. Hi I want eighteen so the guy who wrote it -- and land -- player to -- and I talk to you all. I expected from congress just -- one line. Com bill authorizing. Auctions. And were done -- get into it as one and the idea isn't in this up plan -- TT. Unused spectrum from TV broadcasters. They could voluntarily give up their spectrum and it would get a cut of the proceeds -- and you spectrums are quietly. Unpopular. Now in Washington because they generate a lot of -- billions and billions of dollars so because they generate much revenue ends up in the US -- general revenue. And -- now. On it's become highly politicized so instead of just. Have one -- -- right it's being tacked on you either. On pieces of legislation -- been very controversial. And then there's been -- in fighting. Odd how spectrum auctions should be designed should FCC have the ability to -- Tim -- rules so that certain companies don't come too far ahead in inspection for example -- mean. SE -- really doesn't want. Verizon ET. -- to have too much on. Power in the -- up because that and we don't have competition that's not good for consumers so there are ways that they can design obvious Specter. Options so that. Those power houses don't get all of Specter of -- -- -- little room for us little guys to potentially get in and dom. You know there are some out beastly AT&T for example doesn't quite so it was lobbying pretty -- Apps and very harsh rules set up on FCC it'll do an accident -- that. As we've seen in so many other Washington is -- -- Nothing nothing happens so here are two years into -- and and and getting spectrum. In mean. Authorizing an auction is one thing but it can take up to ten years. You get the rules written anti to identify exactly which spectrum you're -- -- -- It clear that spectrum and then to recur -- -- ready to be used so. I mean we're looking at a really long process here anyway and the problem is that it's become so political detaining. And -- To say the work. I can tell you I feel yeah what I did -- Jon Stewart on this thing but this is -- have a complicated and really messy and very unsatisfying resolution to what should be something that. Is for the benefit of both are just gonna say this. When my son or your child can't stream their Sesame Street over the iPhone app you have there in their crying -- Blame the DOD. And blame the FCC. I'm guessing you guys when by the politicians that's what went -- and actually to be be perfectly honest I -- I don't. Think that. The big players AT&T and Verizon are that their hands are clean in this whole mess because of -- there's so much money on the -- they have so much to gain by controlling spectrum. In Texas. Absolutely and when -- controlling meaning if you don't wanna give up any control ranked and each of its. In when it's disheartening for someone like me covered technology and I'm not a Washington person -- -- -- -- DC reporter at every time. You know I start talking to people being issued any need tell you one -- Like on background I mean so many people and backgrounds -- telling me you know like the FCC and other people and government really. I mean it's it's getting a raw deal in what can we say it sucks really sucks but this is the political process -- Washington. Went to get politicians involved this app. I'm originally thought to be to be congressman. He's different -- don't. -- do it from me pay out where at a time and time may think so much real lynching here perspective on all the stuff keep up the great work Roger likewise. -- to your readers the Roger tang and and Maggie Reardon a cover wireless. Mobile. Broadband. And to the extent that we are able politics and PC that affect all of the for. Do not miss their ongoing coverage of this it's -- on news.com. Thanks guys I thank Steve for producing thanks ever for watching reporters' roundtable be back next week Friday 10 AM Pacific time with another great show CNN.