* LightSquared launch contingent on solving GPS issues
* FCC wants solution that's also good for spectrum policy
By Jasmin Melvin
WASHINGTON, Aug 9 U.S. communications regulators were adamant on Tuesday that hedge fund manager Philip Falcone's satellite broadband start-up would not be allowed to operate if it posed a risk to GPS services.
The Federal Communications Commission and other agencies are evaluating Falcone's LightSquared after months of testing found its original plan for a high-speed wireless network would interfere with GPS services.
Some 500 million GPS receivers are estimated to be in government or commercial use in the United States, serving critical public safety functions like aviation navigation, emergency communications and weather tracking.
"We're not going to do anything that creates problems for GPS safety and service as we explore technical solutions that will both protect GPS and allow a new service to launch," FCC Chairman Julius Genachowski said during a press conference after the agency's monthly open meeting.
LightSquared in June unveiled a new plan for deploying its network that uses a different block of wireless airwaves that is farther away from the GPS band.
The company hopes this will deal with interference issues and satisfy the FCC, which must give its approval before the network can be built.
But an FCC official speaking at a background briefing for the press said creating such a "guard band" between LightSquared's airwaves and those used for GPS left a large swath of spectrum underutilized.
The official said they would like to find a solution that is better for long-term spectrum policy and allows efficient use of the airwaves.
The FCC is currently working with the Obama administration to make 500 megahertz of spectrum available over the next 10 years to meet the growing demand for mobile broadband.
Comments on the new proposal are due to the FCC by Aug. 15. The agency could not give a time table for when a decision might be made on how to proceed but said more testing may be warranted.
LightSquared intends to invest $14 billion over the next eight years to build a wireless network, and aims to sell wholesale wireless services to companies such as Best Buy Co (BBY.N), which would then resell the service under their own brand names.
Genachowski said ultimately "the facts and engineering" would hold LightSquared's fate.
The company would serve around 260 million people with its cellular network and provide satellite coverage over the entire United States, meaning subscribers with dual land-based and satellite service could make a call from anywhere in the country.
Falcone and investors in his Harbinger Capital Partners hedge fund have gambled billions of dollars on the success of LightSquared, making the fund the company's largest single equity investor.
The telecommunications start-up has become one of Falcone's riskiest and most high-profile bets.
The FCC official said that the agency is aware of LightSquared's financial situation but said that would have no impact on the agency's review of its network. (Reporting by Jasmin Melvin; Editing by Steve Orlofsky)