One of the supreme ironies of the ongoing LightSquared saga is that the company’s efforts to promote its nationwide email initiative are not helped when emails about its own activities, written by U.S. government bureaucrats, become public under Freedom of Information legislation.

Recently, the Citizens for Responsibility and Ethics in Washington obtained more than 13,000 documents relating to LightSquared from the White House Office of Science and Technology Policy (OSTP), a critical Washington, D.C., “gatekeeper.” Going through the whole information dump could take weeks, but so far telecoms industry technology expert consultant Tim Farrar has pinpointed items that show clearly how official attitudes toward LightSquared have changed over time. In July 2010, the OSTP’s chief of staff felt LightSquared’s activity was “exciting,” and in September 2010 he kept “hearing great things” about the company.

Clouds Gather for LightSquared

But by early 2011, LightSquared’s counsel was asking “if there’s anything NTIA [the National Telecommunications and Information Administration] can do with the press on background to calm the waters” because “Press reports…are leading to big problems with investors–present and potential–customers, Sprint, et al.” By June 2011, following the report of severe GPS interference during government tests, plus increasing Congressional demands for top-level government documents, showed that “things were heating up.”

In August, the previously compliant FCC put out a self-protecting assertion that it would not allow LightSquared to operate until the interference question was resolved, which translated into “headwinds” for LightSquared. Also in August, after LightSquared had suggested discussing with the NTIA how to move things forward, the NTIA Administrator responded in an email headed “LightSquared is in Wonderland.” And by September, things started to become decidedly frosty, with a senior government official telling a representative from Harbinger Partners, LightSquared’s owners, “I must ask that you stop communicating with me regarding the LightSquared matter.”

Normally, that response would chill the average executive, but not Harbinger’s president Philip Falcone. With remarkable prescience, and later the envy of the financial community, he saw an opportunity in the meltdown of the sub-prime mortgage market to become a multibillionaire. His current investment in LightSquared is reported to be close to $3 billion, of which around $ 2billion was used to buy the assets–including two FCC-allocated frequencies in the radio spectrum’s L-Band–of a failing satellite Internet provider. And here again, Falcone’s approach sidestepped conventional wisdom.

Market research showed that government agencies could permit those weak satellite signals to be augmented by strategically located ground transmitters, to fill in the areas of poor reception. In fact, the FCC had already approved the technique for LightSquared’s predecessor, but it was never put into practice. So what could make more sense than following the FCC’s approval? Unfortunately, the agency wasn’t ready for Falcone. While the FCC saw the value of the augmentation concept in poor reception areas, it never thought to impose an upper limit on just how many ground stations would be needed, and how powerful they should be. After all, from reasonable–but blinkered–engineering considerations, it shouldn’t require that many, and they wouldn’t need to be powerful. Wrong again.

By the time that LightSquared gained FCC approval–reportedly fast tracked due to some adroit political maneuvering, it was getting ready to launch the nationwide network of 40,000 powerful ground stations, along with a plan to sell commercial advertising to all comers on a wholesale basis, neatly sidestepping another minor FCC impediment that the actual owner of the system isn’t allowed to advertise directly on line. The other unexplained oddity that the FCC approval was signed off by the chief of the agency’s International Office, even though LightSquared has no immediate plans to operate outside the U.S. Reportedly, the views of some FCC engineering and spectrum people who would normally be involved in such things was not requested.

The only problem that LightSquared has had to face is FCC’s stipulation that its ground station transmissions must not interfere with GPS, and it is now starting to look like the plan’s Achilles Heel. Somehow, the company’s original analysis of potential show stoppers utterly failed to recognise the likelihood of serious interference with GPS and the size, breadth and importance of the user community. Unquestionably, the seemingly disastrous results of tests performed in March by the DOD, FAA and other expert authorities, using a wide range of GPS receivers, came as a nasty shock to LightSquared and to some of its investors, and also had repercussions in political circles.

The March tests were conducted on the upper of LightSquared’s two frequencies that was closest to the GPS frequency. Tests in November of cellphones and general receivers against the lower frequency showed minimal impact on cellphones but interference with general-user receivers. LightSquared’s response has been to offer free filtering modifications to a relatively small number of specialized government survey receivers, but no other government units. LightSquared has no plans to help civilian users. It is, LightSquared states, the GPS manufacturers’ responsibility.

Yet despite these apparent setbacks, LightSquared still has a strong reserve of chutzpah, along with an obvious fondness for horse trading. Since its upper frequency is unlikely to be approved for use in the foreseeable future, it has proposed to the FCC that it would be willing to relinquish its claim to it, providing that in exchange it be granted government fast tracking of its use of the lower frequency. Conveniently, this ignores the fact that even that frequency has created interference and is a particular problem for the precision survey and similar industries that have major GPS equipment investments. As well, LightSquared has made the intriguing suggestion that instead of having tests performed by government bodies the only true evaluation of things such as claims of interference can be made by experts in the user community. Good luck with that, on pointing out the errors of their ways to the FAA.

What happens next is a good question, and perhaps more pressing upon LightSquared, which may be taking a much larger toll of Falcone’s fortune than he originally anticipated.