Documents show Obama’s FCC used regulatory muscle to destroy LightSquared’s competition
By Matthew Boyle - The Daily Caller 1:35 AM 02/22/2012 The Daily Caller has obtained documents, emails and communications showing how President Barack Obama’s Federal Communications Commission demolished wireless broadband company LightSquared’s competition through a pattern of regulatory decisions apparently aimed at establishing an “open-access” Internet in the United States.
The FCC successfully green-lighted LightSquared’s corporate formation in 2009 by allowing Wall Street hedge fund Harbinger Capital Partners to purchase majority ownership in satellite company SkyTerra. A major obstacle that still remained in LightSquared’s way was competitor GlobalStar.
GlobalStar had a similar operation to the one LightSquared was building at the time. A major difference, though, was GlobalStar’s already-orbiting satellites, and the broadband Internet access it was already providing to Americans in rural areas of the country.
GlobalStar leased terrestrial spectrum to Open Range Communications, a company that provided broadband Internet access to customers in underserved parts of rural America. Open Range’s business model depended on a 2008 loan, worth $264 million, from the U.S. Department of Agriculture’s Rural Utilities Service.
In 2008 the FCC gave GlobalStar a 16-month waiver from so-called “gating” rules, which required it to guarantee that its satellite service would be continuously available everywhere it offered broadband service, and also required it to maintain spare satellites in case of an urgent need. GlobalStar had said the issues its system faced would be fixed when it could launch 24 new satellites, which it planned to do by July 1, 2010.
The waiver was meant to allow GlobalStar and Open Range to continue building their networks while GlobalStar fixed those issues. Open Range depended on GlobalStar for its continued operation.
Then, the unthinkable happened: On April 6, 2009 an earthquake struck L’Aquila, Italy, damaging a factory that made component parts essential to GlobalStar’s satellites. The factory closed, reopening eight months later in early December 2009. (RELATED: Documents: LightSquared shaping up as the FCC’s Solyndra)
Citing the earthquake and disruptions because of the global financial meltdown, GlobalStar filed a request with the Obama administration’s FCC on Dec. 14, 2009, asking for an additional temporary waiver from the agency’s requirements so it could continue building its network.
The FCC didn’t acknowledge receipt of the extension request until March 5, 2010, and didn’t open it up for public notice until four weeks later, on April 2.
During the months while GlobalStar’s request languished in the FCC’s slow-moving bureaucracy, the agency was helping to finalize the sale of SkyTerra to Harbinger. That company would ultimately become LightSquared.
On Feb. 26, 2010, one week before the FCC acknowledged GlobalStar’s request, Harbinger and the FCC agreed on conditions that would forbid LightSquared from selling to Verizon and AT&T any spectrum it would later acquire.
Verizon and AT&T are the nation’s two largest wireless carriers.
FCC spokeswoman Tammy Sun did not answer when The Daily Caller asked her to explain why GlobalStar’s waiver extension request was delayed for 75 days, during the same time the FCC was finalizing its deal with LightSquared executives.
Also during those late spring months in 2010, several advocacy groups funded by left-wing billionaire George Soros were advocating for the adoption of “open-access” Internet rules. Soros’ Open Society Institute has donated more than $1 million to the four organizations that comprise the Public Interest Spectrum Coalition. He is reported to have invested $200 million personally in Harbinger.
Public Interest Spectrum Coalition member groups hold the position that spectrum “belongs to the public” and should be subject to as little corporate influence as possible. Their goal is to create a community-oriented, taxpayer-subsidized and highly regulated broadband system, essentially making Internet access a public utility.
With GlobalStar’s July 1, 2010 compliance deadline fast approaching, and still no solution on the table, the FCC granted the company two brief extensions of its temporary waiver. The first of those brief extensions, approved on June 30 of that year, moved GlobalStar’s deadline back to Aug. 2.
Documents obtained by TheDC show Obama administration officials and LightSquared’s allies nailing down details of their plans during that same timeframe. Henry Goldberg, a Harbinger lawyer, emailed the administration contact with whom he and Harbinger owner Phil Falcone had met at the White House just a few months earlier.
“It’s happening,” Goldberg emailed Obama’s White House Science and Technology Policy chief of staff Jim Kohlenberger on July 20, 2010. “Thanks for your help and encouragement. As we bolt together the network, we’ll come in with details.”
“Congrats,” Kohlenberger replied. “Very exciting.”
About a week after Goldberg sent that email, several senior FCC officials met behind closed doors to discuss “LightSquared on [a] 4G network.” The meeting, which official records indicate occurred on July 28, 2010, also included FCC Office of Strategic Planning Chief Paul de Sa, FCC Office of Engineering & Technology Chief Julius Knapp and FCC International Bureau Chief Mindel De La Torre.
With the new GlobalStar compliance deadline just around the corner after that July 28 meeting, and the LightSquared plan apparently still not set in stone, FCC officials approved a second waiver extension for GlobalStar the next day, on July 29, setting Sept. 15 as the company’s final deadline.
During the next few weeks, activity heated up again. On Aug. 2, White House visitor logs show that de Sa, Knapp and FCC Telecom Bureau Deputy Chief John Leibovitz, among others, met with Jason Furman, the deputy director of Obama’s National Economic Council.
Those visitor log records also show that Gary Epstein, who served on Obama’s White House transition team before becoming a senior leader at LightSquared predecessor SkyTerra in 2009, met with Phil Weiser, Obama’s senior adviser for technology and innovation, at the White House on Sept. 8.
Epstein disclosed on his LinkedIn profile that he left SkyTerra in June 2010. There is no indication that before Epstein’s departure he sold the several thousand shares of SkyTerra he acquired. His SkyTerra stock eventually became LightSquared stock after the merger.
Open Range continued to operate, meanwhile, still depending on LightSquared competitor Globalstar for its continued viability. On Sept. 10, just two days after Epstein’s meeting with Weiser, Rural Utilities Service administrator Jonathan Adelstein, who oversaw Open Range’s operating loan, wrote to FCC Chairman Julius Genachowski about concerns he had that Open Range’s business plan was “predicated on the continued use of the GlobalStar, Inc., spectrum.”
After explaining to Genachowski the importance of the loan, Adelstein pointed out that the FCC could ultimately force Open Range to fail, leaving the Rural Utilities Service — an agency of the U.S. Department of Agriculture — on the hook for millions if the company couldn’t repay what it owed.
“[T]he Open Range loan represents the single largest loan of the [Rural Utilities Service] Broadband Program,” Adelstein wrote. “A loan failure of a large magnitude could significantly affect the subsidy rate of the program and necessitate larger congressional appropriations, or would otherwise result in what could be a major reduction of the agency’s present funding levels.”
Adelstein then said Genachowski and the FCC needed to make a “commitment” that Open Range would have access to the spectrum it needed to continue building and operating under the conditions of its loans. Otherwise, he said, the company — and its $264 million loan –would fail.
Documents show that on Sept. 13, three days after Adelstein sent his email, Obama’s technology adviser Phil Weiser hosted another White House meeting. Attendees included Adelstein, de Sa and several other high-ranking officials in the FCC and USDA.
Later that day, after the meeting, Adelstein emailed de Sa in what appears to be an indication of what transpired.
“Thanks for taking so much time for the helpful meeting today,” Adelstein wrote. “Would you mind letting the Harbinger folks know I will call them soon so we look like a coordinated effort so they don’t feel they have unlimited leverage to stick it to Open Range?”
“Happy to hook you up,” de Sa replied, “although one thought is that at the moment the ball is in openrange [sic] court (in that they have the term sheet), so I wonder if rather than spending your intervention bullet now when [there are] no issues with negotiation, whether it would be better to wait until if/when a problem arises after the fcc order comes out?”
de Sa added, regarding Adelstein’s concern that the parties involved “don’t want to give harbinger any ideas about sticking it to openrange,” that it was “totally your call tho, just let me know what u prefer.”
GlobalStar’s final request for an extension on its rule waiver was denied on Sept. 14, the very next day.
The emails obtained by The Daily Caller may indicate that the White House officials who met with Adelstein on Sept. 13, 2010 already knew GlobalStar would be rendered unable to operate just one day later.
Another possible interpretation is that the FCC, or some other agency in the Obama administration, had already informed LightSquared executives that their main competitor would be denied its waiver extension.
It is also possible, however unlikely, that Adelstein’s concern about LightSquared executives having “unlimited leverage to stick it to Open Range” indicated that the FCC and the USDA’s Rural Utilities Service were planning to keep Open Range in business without GlobalStar by making it dependent on LightSquared’s broadband spectrum instead. If LightSquared executives were already aware that GlobalStar would soon lose its regulatory permission to operate, they were also aware that their company would soon enjoy a practical monopoly.
The FCC officially denied GlobalStar’s waiver extension request on Sept. 14, 2010, a move that crippled the company and cleared the way for the politically-connected LightSquared to build its own network without competition from its biggest rival.
FCC spokeswoman Tammy Sun didn’t answer when TheDC asked her specifically about who knew what, and when, about the Obama administration’s refusal to give GlobalStar its final requested rule extension — a decision that essentially doomed Open Range.
Sun also didn’t reply when TheDC asked her if anyone in the federal government had informed LightSquared that GlobalStar would soon no longer be permitted to operate.
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