The FCC released a memorandum opinion and order and declaratory ruling today that clears the way for LightSquared to exit from chapter 11 bankruptcy protection. The company renewed its pledge to work with the GPS industry on a solution to allow it to deploy its planned nationwide LTE network.

The FCC item adopted in IB docket 15-126 approved the transfer of licenses and international section 214 authorizations and the transfer of domestic section 214 authority from LightSquared Subsidiary LLC Debtor in Possession to LightSquared Subsidiary LLC, subject to conditions.

LightSquared filed for bankruptcy protection in 2012 (TRDaily, May 14, 2012) after it ran into GPS obstacles, and the U.S. Bankruptcy Court for the Southern District of New York approved its reorganization plan in March (TRDaily, March 27). “Today’s FCC approval will enable LightSquared to successfully exit bankruptcy protection, but, more importantly, it kick starts a major step toward private investment in our national wireless infrastructure,” said Ivan Seidenberg, the former chairman and chief executive officer of Verizon Communications, Inc., who will be chairman of the new company’s board.

Mr. Seidenberg added that “we intend to do everything possible to achieve a reasonable business solution as well as an engineering consensus between wireless broadband and the GPS industry. We recognize that our number one job will be to resolve technical issues and liberate scarcely-used satellite spectrum that’s actually ideal for the cellular industry. I am confident we can reach a mutually-acceptable outcome that not only makes industry better off but also benefits consumers of wireless and GPS products.”

Another new board member will be former FCC Chairman Reed Hundt. “Enabling the utilization of incremental mid-band spectrum, like AWS-3, and the existing licenses held by LightSquared, is critical to maintaining and extending American mobile leadership,” Mr. Hundt said. “Mid-band spectrum offers a combination of coverage and capacity that is essential to the acceleration of next-generation technologies and that facilitates the wireless industry’s future transition from 4G to 5G. We intend to reach consensus on the use of this spectrum so that the wireless industry is better equipped to satisfy skyrocketing consumer demand for more affordable broadband.”

“We are very appreciative for today’s FCC action which will allow LightSquared to begin anew and recommit to work with all stakeholders to resolve important technical matters, identify necessary solutions, and remove regulatory uncertainty that the company has faced over the past three and-a-half years,” said LightSquared CEO Doug Smith. “We will emerge from restructuring with new owners representing some of the world’s top investors, and they have committed significant new capital to give the company the runway it needs to grow and operate the business.”

The new company will no longer be controlled by Phil Falcone, through his Harbinger Capital Partners. “Following consummation of the transaction, Harbinger, JPMorgan Chase & Co. (‘JPMorgan’), Fortress Investment Group LLC (‘Fortress’), and Jeffrey Aronson (‘Aronson’) and Mark Gallogly (‘Gallogly’), through Centerbridge Partners, L.P. (‘Centerbridge’), will hold substantial interests in New LightSquared, the parent of the reorganized LightSquared Sub,” the FCC noted in its order. “Grant of the Application serves the public interest by enabling LightSquared entities to emerge from bankruptcy with access to significant new capital, furthering the viability of their service offerings.”

The order was conditioned on JPMorgan’s entering into a proxy agreement until the FCC can address whether it has the character qualifications to hold licenses in light of its felony guilty plea and agreement to pay a $550 million fine for a violation of antitrust law related “to participation in a conspiracy to manipulate the price of the euro/U.S. dollar currency pair exchanged in the foreign exchange market.” A court has not yet approved the plea agreement. J.P. Morgan has said that the case should not disqualify it from maintaining its 21.25% ownership in LightSquared.

The FCC said that “as an interim mechanism until the Commission can rule on its character following the District Court’s resolution of the charges brought by the United States, JPMorgan has agreed to a Proxy Agreement by which it will be prohibited from having any involvement in the management or operation of New LightSquared, and thus from any role in New LightSquared’s ‘dealings with the Commission,’ or influence on whether New LightSquared’s operations will be ‘consistent with the requirements of the Communications Act and the Commission’s rules and policies.’

“Under the terms of this Proxy Agreement, JPMorgan will grant to an independent proxy holder (the ‘Holder’), the selection of which will be approved by the Commission, sole and exclusive authority to exercise all management rights with respect to its ownership interest in New LightSquared,” the order added. “These include the exercise of any voting, director appointment, consent, approval or management rights arising under the New LightSquared Operating Agreement. Most significantly, JPMorgan has further agreed that it will not communicate with the Holder, management of New LightSquared, or the Holder’s appointed director regarding the management of the company. The Proxy Agreement provides that the Holder’s proxy shall be irrevocable, and will terminate only upon a Commission finding that JPMorgan possesses the requisite qualifications, including those of character, to hold its New LightSquared interest without such restrictions on its permitted voice in the company’s affairs, or otherwise with the Commission’s approval.”

Commissioner Ajit Pai approved in part and concurred in part in the item. “In my view, we should be deciding in this Order whether every applicant has the requisite qualifications to hold an FCC license. As a result, I am voting to concur in this part of the decision,” he said in a separate statement.

In another statement, Commissioner Mike O’Rielly said he has “a small investment” in JPMorgan, but that the Office of General Counsel determined “that my holdings fall far below the threshold to trigger any such [conflict of interest] issues. Only after this matter was resolved did I participate in this proceeding or entertain any related meetings.”

He added that the order “appears to properly handle pending non-communications-related legal actions by walling off those involved from LightSquared’s decision-making process until the particular issues are fully resolved.” Mr. O’Rielly added. “As the new LightSquared moves forward, it should be clear that I have no intent to revisit the process circus that encircled the previous version of LightSquared. In particular, I will not be party to any effort to undermine any legitimate protections afforded to the Global Positioning System and its commercial users.”

The GPS Innovation Alliance (GPSIA) said in a statement today that it “supports LightSquared’s goal of bringing broadband to rural and underserved areas, as long as GPS is protected from interference. GPSIA continues to participate in the ongoing government proceedings to ensure that both technologies can coexist harmoniously.”

LightSquared supporters praised the FCC’s action. “Enabling LightSquared’s midband frequencies to be utilized for mobile broadband could be tremendously useful to our members and very beneficial to American consumers,” said Steve Berry, president and CEO of the Competitive Carriers Association. “Competitive carriers long for additional spectrum to support growing consumer demand and the next generation of wireless applications. Given the experience and expertise of the company’s new leadership team, LightSquared seems more than prepared to finally putting this spectrum to good use.”

“An estimated 350 additional megahertz of spectrum will be needed in the next five years to meet the growth of wireless broadband.  The move by the Commission to make full use of greenfield mid-band spectrum such as LightSquared’s is an important step toward meeting that goal,” said Thomas Lenard, senior fellow and president of the Technology Policy Institute. “U.S. consumers, businesses and the wireless ecosystem at-large stand to benefit significantly by the Commission’s action enabling greater economic use of LightSquared’s spectrum holdings.” – Paul Kirby, paul.kirby@wolterskluwer.com

Courtesy TRDaily