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December 02, 2011

LightSquared, The FCC and the Law Firm That Represented Solyndra

I've been planning on writing about this for a couple weeks now, but decided to wait and let it play out a little longer hoping it would become easier to explain. Well, I waited and it's become even more confusing, so I might as well go ahead with the post now.


LightSquared

Back in September, news broke that the White House had attempted to pressure General William Shelton into changing his testimony to help LightSquared, a company owned by Philip Falcone, a major Democratic donor. The Pentagon was concerned that LightSquared's planned terrestrial-satellite hybrid wireless network could significantly disrupt GPS signals.

The four-star Air Force general who oversees Air Force Space Command walked into a highly secured room on Capitol Hill a week ago to give a classified briefing to lawmakers and staff, and dropped a surprise. Pressed by members, Gen. William Shelton said the White House tried to pressure him to change his testimony to make it more favorable to a company tied to a large Democratic donor.

...

Now the Pentagon has been raising concerns about a new wireless project by a satellite broadband company in Virginia called LightSquared, whose majority owner is an investment fund run by Democratic donor Philip Falcone.

According to officials familiar with the situation, Shelton’s prepared testimony was leaked in advance to the company. And the White House asked the general to alter the testimony to add two points: that the general supported the White House policy to add more broadband for commercial use; and that the Pentagon would try to resolve the questions around LightSquared with testing in just 90 days. Shelton chafed at the intervention, which seemed to soften the Pentagon’s position and might be viewed as helping the company as it tries to get the project launched, officials said.

In July of this year, LightSquared and Sprint unveiled a multibillion dollar network sharing deal.
Under the terms of the 15-year deal, LightSquared will pay Sprint $9 billion in cash and an estimated $4.5 billion in credits for LTE and satellite equipment. In exchange, Sprint will host LightSquared's spectrum and provide network services, while LightSquared will have roaming access to Sprint's 3G network.

The agreement allows to LightSquared to get a jump-start on building a network without actually incurring the cost of paying for much of the equipment. The company says the agreement will allow it to save out on $13 billion in capital investments and operating costs over the next eight years. It also plans to hit its target of covering 260 million Americans by 2014, a year ahead of the mandate from the Federal Communications Commission.

This deal was contingent on the FCC approving LightSquared's use of the spectrum that was shown to interfere with GPS signals. General Shelton's testimony would have been used in the FCC's decision and that was precisely what the White House was attempting to influence. It also turns out that there was plenty of communication between Sprint and the White House during this period as well.

Buried in the LightSquared FOIA disclosures is another very interesting (and hitherto unreported) story of Sprint’s plans to host the public safety D-block buildout, via a network sharing agreement based on the terms agreed with LightSquared. I highlighted back in June that it was strange of Sprint to mention hosting public safety (but not LightSquared) at the May 12 New America Foundation event. However, it appears that Sprint had been working in concert with the White House for several months to promote this concept, and had strong backing for this approach from Aneesh Chopra, the United States Chief Technology Officer, as recently as mid-September 2011.

Aneesh Chopra is the Chief Technology Officer of the White House's Office of Science and Technology Policy. The PDFs of his communication with Sprint are available here and here.

The FCC

In January, the FCC granted LightSquared a terrestrial-only waiver that allowed them to go ahead with plans to lease their airwaves to mobile carriers.

In other words, the entity gave LightSquared the green light to offer terrestrial-only phones, in addition to satellite service, as long as interference problems are addressed before the company starts building its network. Just two weeks ago, it looked like the FCC might strike down the proposal on a recommendation from the National Telecommunications and Information Administration (NTIA), which warned of potential interference on the SMS network with the likes of Department of Defense Communications.

Michael Turner, chairman of the Strategic Forces Subcommittee, was concerned how the FCC came to the decision to grant LightSquared a waiver since the spectrum band they were using was shown to interfere with GPS communications.

"Many have observed that the FCC followed an irregular process on the LightSquared waiver," Turner said, citing letters sent by the Defense Department and NTIA voicing strong concerns about LightSquared's impact on GPS before the agency granted the waiver.

Turner suggested that LightSquared backer and hedge fund billionaire Phil Falcone used his influence to get the waiver, quoting a letter from the National Legal and Policy Center that stated "over the course of the past year, a series of odd decisions, questionable meetings and procedural anomalies at the Federal Communications Commission and White House highlight Mr. Falcone's growing influence in the hallways of government."

The FCC is still stonewalling today. Last week, the FCC released documents online to comply with FOIA requests, but the documents they released had already been available. Senator Chuck Grassley was not pleased.

"This holiday week document dump and the fact that these documents are already publicly available is a continuation of the FCC's pattern of hiding any actual information regarding the LightSquared waiver," Grassley said in a statement. "Whether it's posting a bunch of old-news documents the day before Thanksgiving, or telling 99.6 percent of elected members Congress that the agency doesn't have to be responsive to oversight, this is an agency with a very serious transparency problem. The FCC needs to stop playing games and make itself accountable to Congress, the media, and the American people."

Grassley is concerned that the White House may have pushed for the waiver as a way to spur new wireless broadband service, which is one of the President's national priorities.

How cozy was LightSquared's relationship with the White House? In January, LightSquared sent an email to Philip Weiser, then at the NTIA. From the NTIA's website: "NTIA is the Executive Branch agency that is principally responsible for advising the President on telecommunications and information policy issues." LightSquared was looking for help handling the press because they were "getting battered". They said, "Press reports such as below are leading to big problems with investors, present & potential, customers, Sprint, et al. I'll call you to see if there's anything NTIA can do with the press on Background to calm the waters." PDF of the email is available here.

Recently, the FCC has been involved in another major decision: the proposed acquisition of T-Moblile by AT&T. This, naturally, would be a major threat to Sprint and LightSquared. How do I know? Well, because Sprint sued to block the merger.

AT&T claimed that the merger would create 96,000 jobs in the United States as well a promote wireless expansion, something the White House has claimed to be a top priority of the administration. Even the Communications Workers of America (CWA) union supported the merger. Despite that, the FCC moved ahead to block the acquisition.

AT&T finally decided to abandon their merger plans after this hassle and asked the FCC to allow them to withdraw their application, which was granted. This, apparently, wasn't enough for the FCC who decided to take a shot at AT&T on their way out the door.

When AT&T and T-Mobile requested to withdraw their application for FCC review of their proposed merger, preferring to concentrate for now on winning the unfair suit brought against them by the Justice Department, the initial response from progressives was furious. They demanded instead that the FCC dismiss the application with prejudice, effectively killing the merger despite the plain language of the commission’s own rules. And they further demanded that the FCC release its “staff report” on the merger, rumored to be highly negative thanks to the input of those same anti-merger groups.

Unfortunately, both of these things are against the rules and precedent. One might think that would be the end of the story, but no. Yesterday, the commission agreed to follow its own rules and dismiss the application without prejudice. However, it disgraced itself, landed a punch on AT&T, and pleased the Left by releasing the staff report. Notice that a staff report by definition does not reflect the judgment or even the consideration of the commission. The FCC action is unprecedented given that the applicants had won approval to withdraw their application without prejudice earlier that day from the full commission.

Today, AT&T has accused the FCC of cherry-picking facts to support its position. AT&T is also making a charge that has become all too familiar in this era of Obama:

The FCC recently said its $4.5 billion annual fund to promote broadband to underserved communities would create 500,000 jobs over the next six years.

"This notion -- that government spending on broadband deployment creates jobs and economic growth, but private investment does not -- makes no sense," Cicconi said.

Of course.

Meanwhile, the FCC finally approved a long-pending spectrum swap between AT&T and Qualcomm. This decision was regarded as a "consolation prize" for AT&T after being shut out on their bid to acquire T-Mobile. Guess who else profits from this decision?

LightSquared could profit from a more receptive FCC, as well, posits Smithen. For the past year, the Virginia-based firm has been seeking permission to construct a 4G/LTE network that – like Dish’s proposed service – would blend terrestrial and satellite technologies. Strenuous objections from GPS providers over interference issues have grounded LightSquared’s plans. Though both sides are still testing their respective claims, Smithen is now more confident the FCC will give LightSquared a “favorable ruling” (at some point) that would enable it to finally begin building a network.

Since LightSquared, like Dish, is viewed as a potential source of spectrum for Sprint, Smithen considers any LightSquared progress a positive catalyst for Sprint’s stock. Sprint has been vocal about its need for additional spectrum, saying it will run out of capacity after 2014.

First, the FCC granted LightSquared a waiver and has refused to release any information regarding how they came to that decision. Then, the FCC blocked the AT&T acquisition of T-Moble. This clearly helped LightSquared because of their partnership with Sprint. Finally in an entirely different decision, the FCC gave AT&T a "consolation prize", which just happens to benefit LightSquared again. LightSquared, the company owned by a major Democratic donor.

The Law Firm

In May, the FCC announced that they would be bringing in a former Justice Department official to run the review of the AT&T / T-Mobile merger. Who is she?

A former Justice Department Antitrust Division official will spearhead the Federal Communications Commission review of the proposed AT&T and T-Mobile merger, the FCC announced Tuesday.

Renata Hesse, who led the DOJ Antitrust Division Networks and Technology Enforcement Section, will be the FCC’s senior counsel to the chairman for transactions, looking over the proposed $39 billion merger of the telecommunications companies as part of her responsibilities. The FCC will determine whether the proposed deal is good for the public, while the Justice Department will examine it for antitrust pitfalls.

Hesse is currently a partner at the law firm of Wilson Sonsini Goodrich & Rosati in D.C.

Recognize that law firm? Yes, it's the same firm that represented Solyndra during the Department of Energy's government-backed loans to renewable energy projects, netting over $2.4 million in the process.

The same firm whose employees donated more than $130,000 to Obama's 2008 campaign.

The same firm that has Allison Spinner as a partner, wife of Obama super-bundler Steve Spinner (who also "helped monitor" the DoE's loan program).

The same firm that had John Roos as CEO up until 2009, who was a major Obama fundraiser and has since left to become Ambassador to Japan.

Renata Hesse, of course, is one of the six employees at Wilson Sonsini Goodrich & Rosati that personally donated more than $4,000 to Obama.

It always seems to be the same players in these stories, doesn't it?

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posted by JohnE. at 01:05 PM

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