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I read with amazement yesterday regarding the Federal Communications Commission’s withdrawal of support for LightSquared’s US national rollout of LTE equipment.
LightSquared had hoped to rollout 4G or LTE equipment to provide broadband services to 260 million Americans. One hedge fund has sunk $3bn into the project. Today’s news is somewhat of a shock – however, the alleged potential interference of GPS signals caused by LightSquared’s infrastructure has been hotly debated for some time now.
What amazed me is how can a company’s product attract so much investment, be approved by federal government yet not have been properly tested?
I’m sure there’ll be an outcry as to whether the interference is real or whether this is all politically motivated and so on, but one figures that where there’s smoke there’s usually fire – even if it’s merely smouldering away quietly under a business plan somewhere…
I wonder if anyone knows of any other instances where a product which has attracted so much investment has ultimately been found to be fatally flawed?
Answers on the back of a postcard please! (Oh and by the way cigarettes and the like don’t count!)
Steve Blake is Head of Technology, Media and Telecommunications at Interim Partners.
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February 17th, 2012 at 7:44 am
Hi Steve,
South Sea Island bubble, Enron, et al
Regards
February 17th, 2012 at 9:06 am
Steve, we have come accross this first hand observing the way VCs resource due diligence, leading to at best very odd and maybe even as in this case the wrong decisions being made. Intelectual property (IP) is a far greater and less obvious risk than pure product issues. Recent examples are with China blocking exports of Apple products through the unique Chinese powers to hold product exports in customs. When I was at Lexar there was a IP dispute with a JV partner which Lexar won – paying out $750m. Stitching companies up as we all know is a way of life in the US. regards Tom
February 17th, 2012 at 9:43 am
There was a product in the UK around the early 90’s called CT2 and there were 3-4 operators on the scene all pushing variations of the technology. CT2 or Cordless Telephony 2 was a zone based mobile phone service where a user could call out when within a zone, but could not receive calls in at any point. The service was clearly flawed.
The consortium of Barclays, Phillips and Shell (BYPS) ran the Rabbit Phone system through a network of zones attached to Barclays banks, Shell petrol stations and other corner store outlets.
There was a serious amount of investment made into these systems, although they could not actually be used in or around petrol stations at the time due to health and safety concerns. So effectively you had a handset, partly funded by and infrastructure provided by a partner, who then could not give you permission to use the service within their domain.
It seems people never learn, particularly monied people!
February 17th, 2012 at 1:27 pm
As you mention, LightSquared’s 4G plan would have caused very significant disruption to GPS signal coverage across North America. This created quite a furore amongst the General and Business aviation community in the U.S., who made they feeling very clear by lobbying congress and the FAA about the implications for flight safety (which as a lowly PPL here in the UK, I tend to agree with). That community has a demographic profile that is quite influential.
I have to agree, where is the due diligence in the product concept? I can’t see any, and would be fascinated to see the presentations and background documentation provided to potential investors.
February 19th, 2012 at 12:07 pm
So after years of complaining about government interference and the need for Wall St to self regulate, they make some bad investments and decide to blame the government?
The telecomms industry makes billions in profits, it should be prepared to invest in the building of new and improved infrastructures, stop begging for handouts. Vodafone, Sprint and others should be funding this, instead of just avoiding making their tax payments.
February 21st, 2012 at 6:48 pm
Interference from 4G is not just a US thing.
Communications Minister Ed Vaizey recently announced that a £180million help scheme will fund solutions to TV signal interference resulting from new mobile services!
February 24th, 2012 at 8:29 am
Without investment and sometimes a leap of faith, there would be no innovation
April 19th, 2012 at 2:07 pm
I think we can add Ionica, Cambridge; & Iridium Satellite (not Iridium Comms) to this list.