Crony Socialist Blind-Sided By Obama

I must admit to a certain amount of Schadenfreude in reporting to you that one of Barack Obama’s pet crony projects has been suddenly and abruptly cut off at the knees by the FCC. Executives at LightSquared were caught entirely unawares by the FCC announcement that there is no practical way to fix LightSquared’s basic problem of high-powered terrestrial broadcasts on a spectrum slice intended for low-power satellite communications.

LightSquared had proposed a 4G high-speed wireless telephone network. Its founders and early shareholders had already invested “billions of dollars” in the plan. The FCC, under orders from the White House, had granted waivers allowing LightSquared to experiment with the system. Those waivers would normally be granted on a very short-term basis, but after pressure from the White House were extended for a nearly unheard-of period of one year AFTER the initial problems with interference with GPS were discovered.

This project was supposed to be a boon to the Obama administration since he had expressed his firm approval of a project that would be entirely privately-financed. But crony socialism has more facets than the obvious government loans. In the case of private investments, supervising federal agencies can be told to look the other way, grant special privileges (such as the waivers), and even act as lobbyists for the investors at Congressional hearings.

The big investors are Philip Falcone and his investment firm Harbinger Capital. They also make other major investments, such as contributions to Obama presidential campaigns. The FCC seemed to be in the barrel for LightSquared right up until this past Tuesday. Suddenly, Assistant Secretary for Communications and Information Lawrence Strickling at the Commerce Department announced that “government testing showed LightSquared’s network would cause widespread problems with GPS devices, including those used by pilots to prevent their airplanes from crashing.”

FCC Chairman Julius Genacowski almost immediately chimed in with a memorandum agreeing with Strickling’s statement that “we conclude at this time that there are no mitigating strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment.” Thus, the waivers were canceled immediately, and LightSquared must, with all deliberate speed, dismantle the towers they are already using for testing and cease all related operations.

LightSquared’s network was an Obama dream. It was supposed to highlight his devotion to private industry and its role in expanding broadband for “the people” by creating serious wholesale competition for AT&T and Verizon. Even The Washington Post, which normally carries water for the Obama administration, said “LightSquared was supposed to be a poster child for the Obama administration’s broadband expansion, and turned into a potential exhibit for their crony capitalism instead.” The Post favors crony capitalism to my use of crony socialism, but that’s just a quibble.

While LightSquared was touting its brilliant system and claiming to be the White Knight in its dealings with the government, here are some sample headlines in both the MSM and not-so MSM over the past year: “Sen. Grassley says LightSquared offered me a political ‘win’ in exchange for backing down on FCC probe.” “LightSquared to FCC: Quit screwing around and give us the approval.” “General accuses White House of pressuring him to change testimony for Democratic donor.” "SEC warns LightSquared figure [Falcone] of potential fraud probe.”

“White House offered ‘guidance’ to second witness in LightSquared inquiry.” “LightSquared disrupts 75% of GPS receivers in government testing.” “LightSquared running out of cash.” “Sprint [a potential investor] to LightSquared: You’ve got thirty days to get FCC approval or we walk.” "LightSquared accuses NASA and GPS firm Trimble of collusion and bias against LightSquared."

Falcone and Harbinger Capital have learned a very expensive lesson. Barack Obama is not to be trusted. No matter how much you may enrich him with campaign donations, if the political costs go too high, he will drop you like a hot potato. The lesson they didn’t learn and now won’t have to learn is that even if yours is an entirely private firm, administrations like Obama’s will still find a way to insinuate themselves into your business. Loans and taxpayers investment may bail you out at some future time, but you will always live with federal bureaucracies telling you how to run your business. Then, they can pull the rug right out from under you if you cross them.

I do not particularly ever want to see a private enterprise fail. But I also don’t like seeing a private enterprise profiting from backroom deals with the White House which work against the interests of the American people. All indications are that back nearly at the start, this project was simply not going to work. It shouldn’t have taken the FCC over a year to discover the obvious. I have to wonder if its original intention was to simply wait until the first jumbo jet crashed because of GPS interference then blame the crash on unregulated private industry.

Final note: One of LightSquared’s first investors was one Barack Obama. I will not draw any conclusions, but he pulled his investment out about the time the FCC started producing negative reports. And he still allowed the waivers to continue for another year