LightSquared gets its waiver -- with a caveat

The FCC has granted a waiver to LightSquared allowing it to use its satellite spectrum for terrestrial-only broadband service, paving the way for the new operator to support smartphones, tablets and any number of mobile devices without embedding within them an expensive satellite receiver chip. The catch is that LightSquared has to ensure its new base station network won’t interfere with nearby GPS frequencies, over which the country’s critical satellite location and timing networks operate.

LightSquared is setting up a commission composed of technology experts from both the mobile and GPS industries to work up a solution that alleviates the National Telecommunications and Information Administration’s (NTIA’s) concerns. Assuming LightSquared sews together the proper technology patch, it has the greenlight to offer essentially the same type of mobile broadband services as the Tier 1 mobile operators.

LightSquared’s L-band satellite frequencies are off in their own little corner of the electromagnetic spectrum, requiring special radios for its devices, but that obstacle is small compared to what it would have faced if the FCC had kept the satellite requirement in place. By being forced to offer a dual-band satellite broadband-long-term evolution (LTE) service, LightSquared would have alienated the vast majority of its potential customers.

LightSquared is pursuing a wholesale model in which it sells network access to other operators, ISPs, telcos and even retail brands, which would then resell the service under their own names. Most of those potential customers are only interested in the terrestrial component, selling their services in populated areas where LightSquared’s proposed 40,000-base station network would have been more than adequate. Furthermore, dual-mode satellite-terrestrial phones would be well beyond most consumers’ price range. For instance, a Windows Mobile satellite-3G phone launched by Terrestar and AT&T is being priced between $800 and $900.

LightSquared is sure to find a market for a dual-mode service—many government agencies, law enforcement, and outdoor equipment retailers and manufacturers would find 100% geographical coverage very useful—but operators need to be able to offer a terrestrial only service in order to scale.