LightSquared was banking on final approval for a waiver that would allow it to provide wholesale wireless broadband services, pending resolution of claims that its service interferes with global positioning systems.

Chairman and CEO Sanjiv Ahuja issued a statement on Wednesday deploring the FCC's decision, saying that LightSquared had already spent nearly $4 billion to develop wireless networks.

"There can be no more devastating blow to private industry and confidence in the consistency of the FCC's decision-making process," Ahuja said. Citing the need for wireless broadband networks, he called the decision "the height of bureaucratic irresponsibility."

The Reston, Va.-based company maintains that there is a solution to the engineering and political impasse. Still, the FCC's move increases the perception of financial distress at the telecom and provides support to other companies with strategic spectrum positions, such as Dish Network Corp. and Clearwire Corp.

LightSquared has previously said its funding would carry the company beyond the FCC's review of its proposal, which it expected in the first quarter. However, a Reuters report quoted a letter to investors explaining that the company would need more funding by the second quarter.

One question that has surfaced is whether the FCC announcement represents a material adverse change under the terms of LightSquared's $586 million term loan that matures in 2014, according to Menlo Park, Calif., research firm TMF Associates Inc. Representatives of the telecom could not be reached Wednesday, Feb. 15.

The company has to pay $85 million to partner Inmarsat plc in short order. LightSquared has a $56 million bill for a spectrum rebanding project that would be triggered Saturday, though the payment to Inmarsat would not be due until Feb. 20. A $29 million quarterly payment for a spectrum lease is also coming due in February.

One analyst put the likelihood that LightSquared would make both payments at 40%. Inmarsat declined to comment.

LightSquared's difficulties could present a tantalizing opportunity for distressed debt investors. However, as one restructuring source noted, if the technology doesn't work, a buyer would get little in the way of assets.

The FCC announced its ruling on LightSquared Tuesday night, citing concerns raised earlier in the day by the National Telecommunications and Information Administration about interference with GPS operations. Tammy Sun, an FCC representative, said the agency had initially approved LightSquared's proposal with the understanding the system wouldn't be rolled out commercially until harmful interference issues could be resolved. She said an NTIA letter indicated the issues hadn't been resolved and suggested the FCC and industry officials will have to work harder to make sure that receivers don't pick up signals from neighboring bands.

Repercussions from the fight over LightSquared have rippled through Washington. Sen. Charles Grassley, R-Iowa, upset over the way the FCC initially approved LightSquared's proposal, has blocked a Senate confirmation vote on two FCC nominees. Grassley said Wednesday he still wants to know why the FCC initially fast-tracked its clearance of the rollout.

LightSquared's struggles make Charlie Ergen's recent spectrum moves look especially shrewd.

Ergen's Dish is closing in on 40 megahertz of spectrum through a pair of bankruptcy purchases. The satellite television company already has licenses that it purchased for $700 million in a 2008 government auction.

Englewood, Colo.-based Dish is seeking FCC approval for its purchases of TerreStar Networks Inc. and DBSD North America Inc.

Like LightSquared, the companies have spectrum with satellite requirements and would need waivers to provide traditional wholesale services to terrestrial carriers. However, Dish's spectrum does not raise the same interference issues.

During DBSD's bankruptcy, Falcone's Harbinger Capital and Solus Alternative Asset Management LP put forward a tentative proposal that would have combined the company with TerreStar.

Mark Stodden of Moody's Investors Service suggested that Ergen could fold his spectrum into a network-sharing agreement with a telecom. Dish could strike a deal similar to the one that several cable operators reached with Verizon Wireless, selling their licenses and arranging a marketing agreement.

Clearwire stands to gain two victories because of LightSquared's struggles.

The Kirkland, Wash., wireless carrier is less likely to face competition from LightSquared. Jonathan Schildkraut of Evercore Partners Inc. wrote in a Wednesday report that Clearwire would be in position to win business from the more than 30 companies that have signed wholesale agreements with LightSquared.

It may also forge a closer relationship with its largest customer and top shareholder, Sprint Nextel Corp., which has a major network support contract with LightSquared.

Despite his political miscalculations, Falcone's vision of the coming demand for spectrum was accurate. LightSquared's service would be valuable to the have-nots of the spectrum world.

Moody's analyst Gerald Granovsky noted that while LightSquared's spectrum is now further from deployment, there has been progress in Congress on a deal to free up spectrum held by TV broadcasters.

Many station owners have objected to proposals to auction some of their licenses that are generally unused.

"How do you structure this to get maximum participation from the broadcasters, that's really the big thing," Granovsky said.

"Can you get enough broadcasters in that secondary or tertiary tier who would be willing to give up some of their spectrum for a pretty big payday?" he added. "Then you could have a pretty big swath of spectrum that telecoms would buy."

The demand for wireless capacity is clear enough. As LightSquared reflects, bringing spectrum to market, and collecting the payoff, involves daunting hurdles.

-- Ira Teinowitz contributed to this report.