LightSquared Files For Chapter 11

Wireless Internet provider LightSquared has filed for Chapter 11 protection.

LightSquared, the ambitious 4G wireless venture recently poised to bring lightning-fast Internet to the masses, filed for Chapter 11 bankruptcy protection earlier today. Government tests found that LightSquared's signals interfered with GPS reception, a setback LightSquared was never able to recover from.

In an official statement, LightSquared's Terry Neal announced that the firm "commenced voluntarily reorganization cases under Chapter 11 of the U.S. Bankruptcy Code to give it time to resolve regulatory issues that have prevented it from building its coast-to-coast integrated satellite 4G wireless network. The company will also file a recognition proceeding in Canada." Neal also stated that LightSquared would continue normal operations during the process.

Fast Company reported on LightSquared's troubles in 2011. Despite the revolutionary potential of LightSquared's technology to deliver high-speed Internet to computers and smartphones for far less cost than current mobile data plans, LightSquared ran into multiple challenges. LightSquared's biggest issues were limited early testing of their technology—which would have resolved the GPS issue, an overreliance on lobbyists to solve the resulting legal issues, and financial backer Philip Falcone's colorful backstory. The Securities and Exchange Commission (SEC) has repeatedly threatened to charge Falcone with securities fraud allegedly related to his hedge fund, and Falcone's wife Lisa Marie is a New York gossip section regular.

According to LightSquared's bankruptcy filing, which is available online, the company maintained an elaborate series of related corporations—including offshore holdings in Bermuda—in what appears to have been a last-minute strategy to stay financially healthy.

In the end, LightSquared's greatest challenge was that their LTE (long term evolution) data network effectively knocked out GPS receivers near their communication towers. Although GPS is not the only satellite geolocation protocol out there, it effectively has a lock on the American market—the only comparable rival is the Russian GLONASS system, which does not have many commercial users. Despite LightSquared's best efforts, the GPS industry managed a highly effective effort to convince the FCC to deny the firm any spectrum rights.

For more stories like this, follow @fastcompany on Twitter. Email Neal Ungerleider, the author of this article, here or find him on Twitter and Google+.

[Image: Flickr user Barry Skeates]

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