American telecoms firms are clamouring for more wireless spectrum. Hence the interest in LightSquared, a firm which had hoovered up a chunk of airwaves formerly used by satellite operators. It planned to build a high-speed terrestrial network and rent it out to others. But on 14 February, America’s Federal Communications Commission (FCC) said no.

The FCC’s announcement was prompted by a report from another government body, the National Telecommunications and Information Administration (NTIA), which concluded that LightSquared’s technology would interfere with navigation equipment used by planes and other moving things. The company protests that the testing process the NTIA has used is deeply flawed. It is hoping to convince the FCC to take the NTIA’s findings with a generous helping of salt.

Its efforts are likely to prove futile because the FCC isnt in a position to conduct its own tests. “I think the writing has been on the wall for LightSquared for a few months,” says John Fletcher of SNL Kagan, a market-research firm. If the FCC does not relent, this will be a serious blow to LightSquared, which has invested almost US$4bn to develop its business, and to its backer, Harbinger Capital Partners, a hedge fund run by Philip Falcone, a politically connected billionaire.

LightSquared could turn to the courts to challenge the regulator, but the firm may not have the stomach for a long and costly legal battle. Much will depend on what impact the FCC’s decision has on the numerous firms that have already inked deals with LightSquared to use its spectrum. If they abandon it in droves, it will be in big trouble. All eyes will be on Sprint Nextel, a big wireless firm, which has an agreement with LightSquared to build and operate its network.

Ironically, the LightSquared saga also represents something of a hiccup for the FCC, which has been telling anyone who will listen that America faces a looming spectrum crunch unless more airwaves are freed up for wireless use. The agency has been doing a good job of making more spectrum available in various clever ways. Adding a fast new national network to the mix would certainly have helped its cause and encouraged more competition in a market that is still dominated by Verizon Wireless and AT&T. Now it looks unlikely that LightSquared will be in a position to switch itself on. — (c) 2012 The Economist