When the Federal Communications Commission granted LightSquared Inc. expedited approval to launch a new wireless Internet service, some powerful voices in Washington expressed alarm, including the Pentagon and one-third of the U.S. Senate.
LightSquared's bold $14 billion plan, its detractors said, could cripple GPS systems and threaten aviation safety, disrupt military and rescue operations and interfere with high-tech farming equipment and the everyday navigation devices used by millions.
LightSquared says it has pursued its case through official channels. But little gets done in the nation's capital without some kind of political connection, and in this regard, LightSquared's bloodline is particularly rich. Its ties to President Obama's supporters and the administration's policy interests run deep, explaining the company's ability to do battle with powerful entrenched interests:
- Several major Democratic campaign contributors and longtime Obama supporters have held investments in the company and its affiliates during its tangled decade of existence. They include Obama's good friend and political donor Donald Gips, his former White House personnel chief, who now serves as U.S. ambassador to South Africa. Records show that Gips maintained an interest, worth as much as $500,000, as the FCC was weighing LightSquared's request.
- Obama himself was an early investor and came to the presidency a firm believer in expanding broadband. He remains close to other early investors, like Gips and investment manager George W. Haywood, inviting some to luxe social events at the White House and more intimate gatherings like a night of poker and beer.
- Obama installed one of his biggest fundraisers, Julius Genachowski, a campaign "bundler" and broadband cheerleader, as chairman of the FCC, whose staff granted LightSquared a special waiver to operate.
- LightSquared's current majority owner, hedge fund manager Philip Falcone, made large donations to the Democratic Party while his broadband request was pending before the FCC. He and LightSquared executives met with White House officials. Neither Falcone nor the White House would comment on what was discussed.
- LightSquared employs lobbying firms that wield formidable Democratic firepower: Ed Rendell, former governor of Pennsylvania and onetime chair of the Democratic National Committee, as well as the firm of former House Majority Leader Richard Gephardt.
- Jeffrey J. Carlisle, the company's vice president for regulatory affairs, served with Genachowski and Gips on Obama's transition team.
LightSquared insists it has found a way for its technology to coexist with GPS systems. But as lawmakers and technology experts wrestle over the conflicting claims, some in Congress suspect the FCC of favoritism in its haste to decide the matter.
"It is a textbook example of Washington at work," Ken Boehm , the chairman of the National Legal and Policy Center, told iWatch News . The conservative public interest group is pressing Congress to investigate.
Sen. Charles Grassley , R-Iowa, said he has been trying, without success, to get the FCC to disclose basic information about LightSquared's investors and their relationships to the White House. The agency's "lack of transparency," he says, has raised his suspicions.
"Are there ties between the investors and the administration that might lead to the perception that the administration is biased toward approval?" Grassley said in a statement to iWatch News. " In the absence of transparency, the perception might be that the FCC is rushing the public's business to help a friend in need, regardless of the consequences for the public and the economy."
LightSquared is a privately-held firm that does not have to publicly disclose its owners. The company says that none of the Obama friends and donors currently retain any financial interest in the firm, and regulatory affairs chief Carlisle dismissed the notion that the company's success at the FCC resulted from political influence.
"LightSquared participates in numerous proceedings in front of the FCC and other regulatory authorities," said Carlisle. "We trust that regulatory decisions in these proceedings are made on the merits of the case, and believe that they have been."
White House officials echoed that. "The Federal Communications Commission is an independent agency with its own standards and procedures for considering these types of decisions and we respect their process," said White House spokesman Eric Schultz.
But the controversy draws attention to the sway of campaign donors on the administration, a sensitive topic given Obama's campaign promise to limit the clout of special interests in Washington. iWatch News recently reported that nearly 200 of Obama's bundlers have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events.
FCC chairman Genachowski, a friend of Obama since they attended Harvard law school, bundled more than $500,000 for the 2008 Obama campaign. He also has made dozens of trips to the White House, leading some Republicans in Congress to complain that the regulatory chief is too cozy with the administration.
The FCC's backing of LightSquared is especially controversial because of concerns that the new network could interfere with such a broad range of government, commercial and personal GPS systems. GPS, which stands for global positioning system, is a space-based technology that, since being adapted for civilian use in the 1990s, has allowed objects to be tracked in motion. Half a billion GPS devices are in use in North America, the industry says.
The Department of Defense and Federal Aviation Administration have invested more than $38 billion in the technology and expect to spend billions more in coming years, while private industry has sunk at least $2 billion more in the systems. The defense department argues that the FCC did not give adequate consideration to its concerns over possible GPS interefence.
In two rulings, the FCC gave its blessing to Falcone's purchase of the company on March 26, 2010, and for a waiver of FCC rules on Jan. 26, 2011, which will allow the firm to transform what was originally conceived as a satellite-based network to one that relies primarily on some 40,000 radio towers. The signals from towers are far more powerful than space-based ones, and could dot the