Tuesday, March 20, 2012

Phil Falcone tries to rip off taxpayers

This is from the guy who took a $113 million loan from a fund he managed for his clients.

His vehicle - Lightsquared - owned a bunch of satellite spectrum. It was zoned for satellite - allowed to be used for low powered devices that did not interfere with users of adjacent spectrum.

He got its use changed - so that he could use it for high powered devices - that is a terrestrial LTE network. There was a condition. That his devices did not interfere with adjacent devices - namely GPS receivers.

This condition was clear right from the start.

Tests were conducted to see whether Phil's network would interfere with the GPS system.

And it did. And how. The devices could jam GPS at many miles range.

OK - so Phil was not allowed to build his LTE network.

He still owns satellite spectrum. What he started with. The FCC took nothing from him.

But he wants the FCC to give him spectrum he is allowed to use - spectrum more valuable than the stuff he previously owned.

They can’t just leave us without some alternative to build a network,” said Jeff Carlisle, Lightsquared's EVP for regulatory affairs and public policy, at a briefing with media on Friday.

Yes they can. And they should. Of course I could lobby the FCC to get them to give me 10-20 billion dollars worth of spectrum I am not entitled to.

I could. But I am not that brazen.

If the government wants to give away that much spectrum they should auction it and the money should be used for the benefit of all taxpayers (say by paying off debt).

Make no mistake about it. If you are an American taxpayer Phil Falcone is trying to loot assets that rightly belong to you.

You should not let him. And you should despair if he gets away with it.



John

17 comments:

Buboe said...

John,
don't you normally giev a disclaimer on positions on this type of article.

John Hempton said...

No disclaimer needed. I have no position.

I am just explaining what Phil Falcone is up to as a public service.

John

Ev said...

Wait you run a hedge fund and have an opinion about something that doesn't make you money? I thought all people in finance were gambling, whoring, psychopaths who hate puppies and want to see the world burn as you smoke your cigars made of the average mans souls.

mullacc said...

Is there any credibility to Lightsquared's claim that GPS devices are poorly designed? I don't have any particular sympathy for Lightsquared, but the GigaOm article makes it sound like Garmin/Trimble are profiting from the lack of FCC standards that would otherwise prevent their devices from receiving interference from adjacent spectrum.

John Hempton said...

Yes there is some credibility to that claim.

If GPS devices were better-designed they would not receive pollution from adjacent transmissions.

HOWEVER - and this is an important however

(a) the GPS devices are already out there. If you wanted a partial fix you could remove every single GPS device out there and fix - so you would have to rip out every car nav, every inbuilt system in planes and

(b) even that would be at best a partial fix.

The FCC does not regulate aerials.

Lotus eater 1 said...

I could. But I am not that brazen.

Unlike GS, AIG, Bof A, Citi etc.?

Why not write to your Senator and ask, preferably with some enabing legislation?

Anonymous said...

the roller said,

"Could such a land ever exist
Where those so many could be rendered oh, so weak?
And still be listening by the phone
To buy shares in things that we already own"....

-Paul Weller

http://www.youtube.com/watch?v=as3Xb2mkV3M

Anonymous said...

1. For about two years all participants in the industry were scratching their heads trying to figure out how Lightsquared could make a business out of this.

2. In addition to this he forced his investors into this without ever explaining that they would become speculative investors in an unproven telecoms technology.

3. Now he wants the government to pay for his mistake.

On the first two points I think he clearly made mistakes and should be punished through normal market mechanisms.

However, given the political environment of the last few years in the US I think Phil probably has a valid claim on the final point... he pushed the rules in a highly regulated market while keeping the regulators well informed of his moves - in effect making them unwilling partners in his plan. He failed. Now he wants a bail out.

It worked for the finance industry.

America did have this fantasy of rewarding those who tried to succeed through legitimate means; not it rewards those to fail while bending the rules.

Maybe its our values that need to change; this is the new global standard in economic leadership.

If you want evidence take a look at some other strong economies. Indonesia, the People's Republic, Singapore, Russia,

seems like there is a global race to the bottom.

AJ

Av8r said...

There is no way EVER that they would have been allowed to use the spectrum they have. GPS. Is so much a part of air navigation that ground based navaids are being decommissioned on a program over some years. The plan must always to scam useful spectrum.

IF said...

Thanks for keeping an eye on this.

Anonymous said...

VOD......

Anonymous said...

Why are you trying to help out the government here? I used to believe the government cared about us US citizens but they don't. They allow fraud to be commited all the time here and they just don't care about the people. I stopped wanting things like luxuries. Who cares? Why should I accumulate riches when others will try to steal them from me. Why should I when the government protects the criminals and not the citizens. Why should I hire others when I know I can trust myself and not other peoples words? Why should I open a business when the government does not enforce the laws that keep civilization intact? The great United States is being reduced to a country full of lawlessness because of selfishness and lack of respect for others. At least God will judge the bad people and the bad people will finally learn there are consequences to their actions. Bad people may get away with it now but later there will be judgement passed on everybody.

Scott said...

What are your thoughts on this:

Australia Passes 30% Tax on Iron-Ore, Coal Mining Profits

www.bloomberg.com

"Australia passed legislation that will reap about $11 billion in taxes within three years from BHP Billiton Ltd., Rio Tinto Group and other iron-ore and coal miners as the government seeks to turn its budget to surplus."

A non-conformist action by the Australian government. Hard to see how the miners can avoid, and China clearly needs the raw material to keep its economic engine turning. Australia seems to have a strong position.

WellRed said...

I don't see it the way you do John. I have no vested position at all, but it seems like poor enforcement of GPS design is to blame for LightSquared's problem. If I understand correctly, GPS design was sloppy. As a result, if LightSquared uses their bandwidth for their intended purposes, then it will interfere with said GPS units. On this basis, LightSquared should not be allowed to use this bandwidth for what would otherwise be a legitimate purpose? Unless I am missing something, LightSquared should be able to go ahead and sloppy GPS designs should be replaced as a result. What gives GPS designers the right to effectively dictate who uses adjacent bandwidth for what?

Is this following a fair analogy? Government sells parcel A to factory owner, then looks the other way while factory owner violates the building code, building too close to parcel B. Investor buys parcel B, but when he goes to break ground finds that violation of building standards by factory A is preventing him from using parcel B as planned. In response to complaints, the government says "too bad, it would be too expensive to ask the factory owner to retool his factory to meet our specs, so you are just going to have to eat the losses on your investment". In this instance, I think the investor in parcel B is justified in asking for recourse from the government and/or the factory owner for not operating according to standards.

Your thesis seems to read "well GPS designers were sloppy, but since they have distributed product, then they have the right to limit the use of adjacent bandwidth". You are so concerned with the effect on US taxpayers, but it seems to me that they have also been ripped off by GPS producers, who have prevented them from realizing full value on nearby bandwidth.

You are a smart guy so I trust your intuition, but it seems to me that LightSquared has a legitimate beef here.

Squat Kromera said...

WellRed, you forgot parcel B was intended for low margin small business and that was reflected in the price much lower than regular commercial estate

Anonymous said...

Minor FYI John: your March Client performance letter is listed as April 12 on your site-proper.

I would apologise for being a pedant, but I get the impression you are as much stickler for such details as me.

I also just wanted to take the opportunity to say that I'm a big fan of your blog (UK based). I have been following it for quite a while now, and I couldn't overstate just how much I've learnt here, both from blog and comments.

Please do keep it up, and best of luck!

Regards,

Tom

Cash212 said...

I think you are wrong on this one- this guy explains it well:
http://market-ticker.org/akcs-www?singlepost=2914587

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The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author.  In particular this blog is not directed for investment purposes at US Persons.