LightSquared suffered another blow to its hoped-for wholesale 4G mobile business on Wednesday as budget carrier Cricket announced it will use Clearwire to flesh out a planned LTE service.
Cricket was LightSquared's first well-known carrier partner when it signed up with the carrier last March, and it becomes the second would-be customer to turn to Clearwire since the U.S. Federal Communications Commission acted to block LightSquared's hybrid network plan last month. Concerns over interference with GPS shot down the proposal.
Cricket, the operating company of Leap Wireless, plans to deploy its own LTE network across about two-thirds of its coverage footprint over the next two or three years, starting with LTE coverage for about 25 million U.S. residents by the end of this year, it said in a press release. But under the five-year agreement announced on Wednesday, it will use Clearwire's LTE network for capacity offload from its own network.
Cricket did not say whether it had cancelled its deal with LightSquared. Cricket representatives could not immediately be reached for comment.
LightSquared hopes to launch a high-speed mobile data service over a terrestrial LTE network, which would complement a slower but more widely available satellite offering. Its plan is to sell other carriers capacity on either or both networks. The company has announced more than 30 wholesale customers, but some are now turning to Clearwire, which now also plans to build an LTE network and sell capacity on it.
In moving to Clearwire, Cricket joins FreedomPop, a startup that plans to offer free mobile broadband to some subscribers, which likewise had signed up as a LightSquared wholesale partner but announced a deal with Clearwire last month. Worse news could come as early as Thursday: Sprint Nextel, LightSquared's main wholesale partner, has given the company until mid-March to win FCC approval for its network. Under the companies' 15-year deal, LightSquared would pay Sprint US$9 billion in cash and Sprint would host the startup's spectrum on its Network Vision infrastructure.
Meanwhile, LightSquared appears to be gearing up for a major legal battle to gain permission to build its network. On Wednesday, the company confirmed it has brought prominent Washington lawyers Theodore Olson and Eugene Scalia, both of the firm Gibson, Dunn & Crutcher, onto its legal team. Olson represented George W. Bush in the Bush vs. Gore case following the 2000 presidential election and later became solicitor general under Bush. Scalia has argued several important cases involving federal administrative rulemaking, according to Gibson Dunn's website.
A likely legal strategy for LightSquared would be to appeal the FCC's decision to the U.S. Court of Appeals for the Federal Circuit, arguing that the agency's conclusions were based on a flawed interference testing process, according to one longtime satellite attorney. However, industry observers say this plan would be a long shot.
Earlier this month, Sanjiv Ahuja resigned as LightSquared's CEO and the company said it was looking for a permanent replacement for him. Chief Network Officer Doug Smith and Chief Financial Officer Marc Montagner are serving as interim co-CEOs.