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hi everyone welcome to reporters roundtable i'm rafe needleman in San Francisco this week really interesting show how do you throw away four billion dollars here's one way by a lot of spectrum you can't use that seems to be what LightSquared has done the company bought access to satellites and a chunk of spectrum and plan to create a whole new wholesale wireless network but the FCC said this week no way your planned use of spectrum interferes with GPS the FCC withdrew the waiver it had previously given the company to allow it to operate and now LightSquared is sitting on what appears to be a toxic asset not only can it not use the spectrum but the FCC ruling means that no one else can use it either or can they what's happening here and how will it affect you the user of a wireless device that is never fast enough that's what we're discussing today with two great guests both cnet people first in New York Roger Chang who is our executive editor on in the New York bureau covering all things wireless and New York Roger thanks for joining us that's traveling me and Maggie Reardon also in New York a senior writer also on the mobile and wireless beat Maggie thanks a lot for joining us from your kitchen studio ok it's good to have you guys with us this has been such an interesting story as it's been developing a lot of people of course don't know about what's been happening with light squared because it's been there haven't been any consumer products yet so to bring us up to speed Maggie what is or was LightSquared kind of the executive summary version well LightSquared was going to build a nationwide 4G LTE network and they weren't going to sell service directly to consumers but they were going to sell service to other service providers like Sprint or even some retailers like Best Buy leap wireless was going to be another one of their partners and through this network then these carriers would be able to offer 4G services and so it would offer a true competitor to AT&T and Verizon in terms of next generation 4G wireless so that any provider could have worked with with light squared and and had would have been able to compete with with AT&T and Verizon hopes a wholesale a wholesale competitor to the existing carriers and it was a satellite base yeah um well yeah that not necessary and enforce at alight services but the waiver that they were getting from the FCC was so that they could use terrestrial or land-based only communications and years ago the FCC had okayed that you know but but the wuff a the rules were written whoever used that spectrum also had to provide some kind of satellite service to but that's expensive if you have to include satellite radios in your devices that's going to be really expensive so it's not cost-effective for any of lightsquared's partners to have to do that so that they wanted to have it just be a land-based service and the GPS folks didn't like that is that okay that's what we're going to get into before we get into what happened here I want a little bit more background what's the big deal about this I mean we've got a pretty good coverage or at least building out coverage is being built out on the major networks AT&T verizon's networks do we do we need this Roger our consumers can consumer wireless grow as as it is growing without light squared or do we need something like that to give us additional bandwidth it's debatable whether or not it's needed but it's definitely wanted and the FCC has been pushing for this I mean the industry has been complaining about not having enough spectrum to go around and here you are you've got a bunch of spectrum that with a company that was willing to invest and build a network and it just failed completely so yeah no I think there definitely is a need verizon AT&T yes they're building their LTE network now but it's I think it's important to have another competitor I mean the more competition that's out there the better it is for consumers right well that's the argument yeah AT&T is trying to fight with buying it t-mobile but anyway yeah sorry Maggie go ahead yeah I was going to say I mean right now um we've got two major carriers that that hold most of the wireless spectrum out there and what we're seeing you know of course 18t was not allowed to merge with tmobile but now there's talk that they're going to acquire more spectrum from someone like dish so I think what we're going to see over time is that this duopoly is going to get stronger and LightSquared was really the only the only company that could have offered some sort of competition and LightSquared itself I guess wouldn't have been so much a competitor as the other providers that it would have allowed to be able to compete with AT&T and Verizon because if those guys control most of the spectrum that can be used for for this wireless broadband then you know there's nobody else that has enough money to invest in building their own network or even acquiring that spectrum so let's line up the winners and losers in this thing so first of all who was funding LightSquared this whole venture harbinger capital which is a hedge fund that's run by Phil Falcone okay so there was a new player in in them in the comma space he has is a harbinger in other space companies in this area no this was actually they'd actually reduce their holdings basically just light squared so Falcone was betting basically everything on this service okay so we've got a new player coming in here trying to release a build out a new network that say if you have you're making an e-book or tablet or something or some wireless device or say the nest or some thermostat something and you want it to get you want to get it on 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 if you're if you're building that connected thermometer dog collar whatever you have to go to AT&T and Verizon and there's a fairly lengthy process to approve and make sure it's clear for the network so it's a costly effort and kind of makes it difficult for those garage startup companies to actually get involved with this okay y squared would offered a much easier option right so I'm just trying to line up here how the the battle lines were drawn because it looks like to me that on the one hand you have a new company trying to break into a business that is pretty much controlled by two major players so you could see where AT&T and Verizon could lose out with you know a lower-cost easier to access competitor but then you have this wild card come in the GPS guys saying no the light squared terrestrial use of GPS of frequencies adjacent to GPS will make GPS unreliable what was the role of the government which runs the GPS satellites in well the government agency with artist GPS satellites in dealing with the government agency that runs the airwaves the FCC in basically putting the kibosh on the whole LightSquared proposition well that was really it was the the GPS industry you know encompasses lots of players right so it's some of the users of GPS are also government folks and the FCC actually doesn't have control over them or their spectrum or what they do but anyway basically the GPS guys they don't like anybody coming in their neighborhood and using any services in fact when ultra-wideband was was coming on and the government actually wanted to use ultra wideband GPS complained about that too in the industry so but because the government wanted to use ultra wideband they just said you know no planes are not going to fall out of the sky and we're going to do this anyway and the problem really is is it's not that LightSquared's its signals are going outside of its its defined spectrum bands i mean it's it's doing everything that it's supposed to be doing the problem is is that the GPS folks have receivers on their devices that can listen in to these other things so it's for example well it's like if your neighbor is having an argument in their house they're allowed to have an argument in their house you know and but if you're if you're have a hearing aid it's like turned up so high that you can hear everything that's going on in their house and you're going to complain about it because they're too noisy well that's not really fair because you're allowed to do whatever you want your house as long as it doesn't sort of bleed over into your neighbors but if you're going to have you know a receiver that that is tuned so so high that you can hear what else is going on in your in your neighbors area it's just not really fair so that's kind of what's been happening okay with GPS now there are two angles are I want to get into and the first one is how light squared bet billions of dollars on being able to do what it ultimately found out it could not do did it not know that it would have this problem with I'm not going to say GPS interference but with it with the well I will say GPS interference because it did they not know that they were going to get slapped down because of the VBA ssin to the GPS band and possible interference Minh how could you not know when you put millions of dollars into a company's this process has been going on for for more than 10 years and all along the way a you know the FCC has granted them the licenses they it's granted them you know the okay to use terrestrial based so they've gone every step along the way and GPS has you know filed some 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 that you know with this FCC waiver that LightSquared was actually going to build this network was I think they were going to do just mess around it's it's gone unused for a really long time so I think GPS was just hoping that no one would use you know it's kind of like again you've got a house and you have two lots on either side of you and you just sort of hope that that nobody buys that land and builds a house on it and then when you find out that you know they've actually gone in while the plans to build the house then maybe you start complaining Roger well I mean the plan was for a light squared to work with the GPS initiator developed filters and basically remedy the interference issue the problem was the GPS industry was supposed to have these filters in place only they never really put them in why not they just in and let's be let's be clear when you say when we say the GPS interested on we say the wireless industry we're talking about verizon AT&T I can kind of picture I had what that industry is when we talk about GPS is a little bit different the G the GPS industry when the satellites are run by the government and developed for the military and the commercial applications I mean we've all got GPS receivers in our smartphones and now more and more in our cars but the commercial application seemed to have come much after the government to the military application so what is the GPS industry and who's behind this Brett this attack on the use of these these bands I should be more specific I mean they ninety percent or a vast majority the GPS devices that are out there including the ones on your phone work fine with the spectrum actually they have the necessary filters but there are there's a small subsection of these GPS devices a lot of them which are on government devices actually that don't have these filters and really generally pay attention to this mandate that FCC had probably because the FCC doesn't have any jurisdiction over the government I want to stop there and just point out the the weirdness of this that the FCC a government agency charged with managing our airwaves can tell private industry how to use the airways but this government agency can't tell another government agency the military or the DoD or whatever right what to do with the airwaves that the government agency a is responsible for which I just think is bizarre I'm just saying go ahead please yeah no it is I mean that and that's one of the biggest reasons why this thing failed I mean a lot of them are it's a lot of government devices and government you know if it doesn't work from government devices then it's not going to work for anyone it is bizarre and it's not done like that speaking of government devices oh yeah we lost Maggie there for a second curse you airwaves a bitch is on Wi-Fi are you on Wi-Fi I am I wife LightSquared is beaming all of its unused bandwidth right into your apartment we could some of that light squared bandwidth I know we really could this eat this is why we're doing the show guys wheat LightSquared fix it make it worth be nicer to the FCC buying gift baskets you messed up Maggie go ahead please yeah well I mean sadly the FCC you know they wanted this to happen this is all part of this is 40 megahertz of spectrum which is not insignificant I mean that the FCC has a plan in the next 10 years that they want to free up 500 megahertz of spectrum to be reaction door reallocated and used for wireless broadband and now you know and they had a target of freeing up about 300 megahertz by 2015 and they're already two years into the plan and they haven't freed up anything so this was a significant chunk of spectrum that they wanted to see going to use and it could have gone into use immediately so it's it's really unfortunate that it's not it's it sounds to me like the the FCC is getting there ended up looking like the inept company or the inept operation here because they couldn't free up spectrum that would have been good for industry that it almost looks like and other people have written this is hardly an original observation that the GPS testing set up the whole thing that ended up putting the kibosh on the whole LightSquared thing was influenced by the 18-team verizon lobby like that's got to be very popular conspiracy theory I don't think did it honestly though I don't think it was verizon and AT&T this was the GPS industry who have a lot of a lot of pool in you know as Roger explained in the government and the thing is is AT&T and Verizon didn't even have to get on board with this the part that they were upset about was the waiver process they feel that if the FCC is going to make exceptions for terrestrial only use of spectrum that's banded for satellite they need to make a ruling and they need to have a rule so that everybody is playing by this rules instead of doing it on a case-by-case basis and just granting waivers mmm so that's what I was said about that was one of the problems with this Waverly yes you say basically granted this one-off waiver to LightSquared are the previous owners of for the spectrum but they did really clear it with the GP industry they just sort of slapped that they did actually know that that's that's where it's kind of a little bit false the JPM industry had 10 years to comment into in fact it's kind of ridiculous in a way the FCC could have just said yes they didn't have to be a conditional waiver they had already gone through the process of making sure that this was all going to work that there were already rules in place about the filters for the GPS industry they could have just said you know go ahead build your network GPS industry you know you've had ten years the process is done figure it out they didn't they sort of you know coward I guess to to the pressure and I think you know not until probably the middle of the year did anybody think that GPS was going to rally such support and they did I mean they killed this from a political standpoint this isn't necessarily a technical thing and people will argue with me they'll say oh you know but planes are gonna fall out of this guy that's not actually true now i want i want to get on to one one thing here about this testing that l that ultimately helped put the nail in the coffin here there have been reports Maggie you wrote a story saying that LightSquared claims that the GPS tests which showed interference where either rigged done in secrecy or somehow irrelevant technologically wrong can you comment on that before we move on to the bigger picture here what's going to happen going forward yeah you know LightSquared had a lot of issues with the testing for one the GPS industry picked out which devices should be tested some of them were obsolete or not even in use anymore and also the way they determine which you know whether something had interference or didn't have interference they said you know the interference that made this unacceptable for this testing was interference it could only be detected in a laboratory and in real-world cases it wouldn't affect the operation of the devices so you know if that's true I think they they have a point there you know I think there's certainly a way to design a test and interpret results that can get you the results that you want and I think that's how they feel this testing went down and it was done it wasn't open testing wasn't like request for comment request on the result it was done by some committee who then released the results as a kind of a fait accompli right yeah right and part of the testing was also done you know with the help of agencies in the government who have an interest in in this because they have GPS devices so again it seemed a little bit skewed just I'm having a hard time understanding what the GPS industry such as it is stands to gain from blocking adjacent use spectrum is a funny thing nobody you know it's it it's a scarce resource and everybody wants to hold on to their licenses everybody's afraid of interference who owns a spectrum license and the GPS industry over the whole history of their of existence they have not liked anybody around their spectrum because they don't want any interference it's again you know somebody who who builds a house in the country and they don't want to have any neighbors and then they get really annoyed when people buy up the property right around them well you know it's not their property and somebody has a right to sell that and build on it same here you know GPS is using 24 more megahertz of spectrum but they want about 40 or 50 megahertz on each side of them cleared so that you're using up a total of 100 megahertz of spectrum is buffer you know in in the grand scheme of things that's just not that's not tenable I mean we need to free up more spectrum for people to use and you know right now about five hundred and seventy two megahertz of spectrum that's allocated for broadband mobile broadband use today and we want to free up another 500 megahertz so 100 megahertz there that you want to keep you know just to yourself is a lot so in scheme of things how much of the investment in light squared went to acquiring spectrum make almost all right so the question is can light squared go back to the government from whom they bought rights to use the spectrum and say give us our money back I think the more like a su that's one yeah okay all right moving on um this is what a mess man so we have this national broadband plan 2010 broadband plan 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 after what's happened with LightSquared Roger I mean how do we feel about the FCC's efficacy moving forward no I mean Maggie wrote a great piece on this yesterday and I mean it's no I mean answer's no it's the politics has sort of got in the way of freeing up spectrum that's badly needed in industry and yeah at least with the light squared example it just doesn't look good it's a it's a bad first step for the FCC first step Maggie I mean what were ya I'm een there's other there's another chunk of spectrum that that nobody's really talked about it's it's this about 90 megahertz of spectrum that the Department of Defense controls and you know that didn't end up in this this latest spectrum bill that was tacked on to the payroll tax cuts there's going to be auctions for for spectrum and so 90 megahertz which was sort of earmarked for four to be freed up and is controlled by the Department of Defense is probably not going to be used because the FCC doesn't really have the power to go in and tell DoD you have to you know move on this quicker you have to move your your people around and get on to different spectrum and use this more efficiently we need this for commercial use so that I think is is a big problem in our spectrum policy is that the FCC only controls commercial spectrum each government agency that has its own spectrum controls what it does with that spectrum and if they don't want to give it up and as I've explained nobody ever wants to give up their wireless spectrum even if they're not using it so yeah so it becomes a real problem for commercial use all right so what's next for LightSquared's customers or partners sprint was doing a deal with them freedompop which is founded by the skype guys what a companies do who were kind of hoping to be able to access a new new swath of broadband what are they going to do well one of the big winners here is clearwire this clearwire was served in the middle of repositioning its business it now it's starting to go into become a full wholesale provider of LTE services right now they use a different 4G technology called wimax but they're undergoing sort of an upgrade to move into LTE to eat sore more in line with verizon AT&T offers and so I think Clearwire's a big winner because all these companies like Best Buy or lead or Metro whoever wants to get LTE capacity can now go to clearwire because clearwire is opening their doors up to basically anyone else who wants to least time off their network and we have a story up about what dish is going to do now or dish looking to the FCC for cues based on what happened in part with with light squared what does it mean for a company like dish that's that again is trying to figure out how to navigate the the spectrum with the light square deal falling apart how do you change direction if you having are having to deal with this issue and bring out new consumer devices hopefully right well dishes in this is in a really good position right now with LightSquared spectrum sort of team toxic dishes sort of the next best piece of spectrum and it's very similar to light squared and it's got that sort of satellite characteristics and requires the same kind of conditional waiver and that's what they're looking for right now they're actually looking for a one-off waiver and sources have told me that they don't get that waiver that's when things get interesting they either sell they sell the AT&T partner with t-mobile or they could just sit on that spectrum which one really wants but it's actually kind of a smart move because the spectrum goes up in value basically just sit on it and some eventually someone's going to come and you know scoop it up for a higher price yeah the spectrum goes up in value every time the FCC said puts a ruling out that says that a company can't use the spectrum if they have than all the other direction by nature goes up in value until the spectrum you're sitting on the same thing happens to you that has happened to light squared so it just it seems to be like they're a lot of really big bets going on here and I want to wrap up by asking what this means for you and me for consumers who as I said at the top of the show we're frustrated we're paying a lot for bandwidth and bandwidth is diminishing because there you know the what's the percentage i read in the last couple years the use of wireless broadband has grown by something like twenty thousand percent or more it's just exploding everybody's going Wireless everybody wants more speed more services more streaming and we're running out of bandwidth so what is the future what's the FCC going to do what our company is going to do who's going to win who's going to lose what simple question well I think the first thing we can expect is that the network is going to get more congested so that means that you're going to have probably poor quality service than what you have today they're going to be stricter data caps so if the network's get really crowded then you'll probably see AT&T you know maybe lowering their data caps I mean who knows the or maybe we'll see carriers restricting the time of day that you can use your your wireless data like for example maybe you know at peak times it'll cost you more to to use your data versus if you're doing it at a time where there aren't a lot of people using it so I mean we could see a lot of things like that i think that the carriers themselves are going to have to get more creative about how they use their networks so they're going to have to find ways to shrink their their cell sites because the whole thing here is we're talking about when the data is in the air right but but your day isn't in the air very long before it's somehow hits a wired network and gets on some sort of like hardwired fibre broadband connection in the ground so if they can shorten that distance between from your phone to one of their wired connections then they can save some bandwidth so they might have more Wi-Fi hotspots and we're seeing new technology coming out new standards to make that easier and make it more of a seamless process for consumers so I think we're going to have to see a lot of different things going on but you know if growth usage continues on the path that everybody says that it's it's going on then you know it's going to be a problem in the future if we can't get more resources allocated to to these services mmm Roger I mean I agree with Maggie this is bad for consumers you're gonna see higher prices you see poor service and that's just going to be the reality that'll i specially as we get to three years out the sec is really still dragging their feet on the spectrum issue then it's gonna be a problem for the carriers could be problem for us mr. family I feel like it's not it's not even an FCC that's dragging its feet the FCC is trying its it's the political process it's congress yeah you know so like for example there's a bill before Congress right now in the National Broadband Plan as I mentioned they wanted to get to 300 megahertz of spectrum by 2015 so the guy who wrote the Broadband Plan Blair Levin I talked to him he said you know all all I expected from Congress was just a one-line bill authorizing you know auctions boom then we're done and we can get into it because one of the ideas in in this plan was to take unused spectrum from TV broadcasters they could voluntarily give up their spectrum and they would get a cut of the proceeds and you know spectrums are wildly popular in in Washington because they generate a lot of revenue billions and billions of dollars so because they generate too much revenue and you know the u.s. is in a real revenue crunch right now it's become highly sighs so instead of just having a one-line bill authorizing this it's been tacked on to other pieces of legislation that have been very controversial and then there's been a lot of infighting about how the spectrum auctions should be designed should the FCC have the ability to to write rules so that certain companies don't come too far ahead in in spectrum for example I mean the FCC really doesn't want verizon an 80 to have too much power in the market because that then we don't have competition and that's not good for consumers so there are ways that they can design the spectrum auctions so that those powerhouses don't get all of the spectrum so that they leave a little room for some little guys to potentially get in there and you know there are some obviously 80 for example doesn't like that so it was lobbying pretty hard to have some very harsh rules set upon the FCC not to be able to do that so then what that does as we've seen in so many other things in Washington is there's just deadlock nothing nothing happens so here we are two years into this plan and getting spectrum I mean authorizing an auction is is one thing but it can take up to 10 years to get the rules written to identify exactly which spectrum you're going to use to clear that spectrum and then to repurpose it and have it 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 we can't even get started it's frustrating to say the least worked up about it I can tell you I feel like I wanted to do it Jon Stewart on this thing but this is a kind of a complicated and really messy and very unsatisfying resolution to what should be something that is for the benefit of all I'm just going to say this when my son or your child can't stream their sesame street over the iphone that you have there and they're crying blame the DoD and blame the FCC I'm just saying you guys when where the politicians that's what I'm together actually to 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 so there's so much money on the table they have so much to gain by controlling the spectrum hmmm that's just oh absolutely and when you're in control I mean you don't want to give up any of that control right I mean it's it what's disheartening for someone like me like I cover technology i'm not a Washington person I'm not a DC reporter and every time I'm you know I start talking to people about these issues I mean they tell you one thing you like on background I mean so many people on background we're telling me you know like at the FCC and other people in government were like yeah I mean late squares getting a raw deal I mean what can we say it sucks it really sucks but this is the political process this is Washington once you get politicians involved this is what happened I'm raising my son to be economy to be a congressman he's gonna fix it all because too late for me hey we're out of time time Maggie thanks so much real interesting to hear your perspective on all the stuff keep up the great work Roger likewise great hear from you guys the Roger Cheng and Maggie Riordan cover wireless mobile broadband and to the extent we are able politics and DC that affect all of us do not miss their ongoing coverage of this is all on news com thanks guys thanks Steve for producing thanks everyone for watching reporters roundtable will be back next week friday ten a.m. pacific time with another great show see you then thank you