John Dooley has a machine that he takes everywhere he goes. He’s carried it with him down country lanes in Vermont, into the middle of the Mojave Desert, and up a mountain trail in Northern California. He has set up his machine in New York’s Times Square, and in downtown Boston, Washington, D.C., Denver, and nearly every other major city in the U.S.
The device, which costs about $40,000, is called a spectrum analyzer. And for years Dooley, a consultant and self-appointed expert who left college after a year, has been measuring and recording wireless data traffic—the billions of transmissions that travel back and forth from smartphones and laptops to cell towers, routers, and other Internet connections. If you’re checking Facebook on your iPhone and Dooley is nearby, his machine will see it and light up. And if hordes of people are posting pictures to Instagram and streaming Netflix videos all around him, the display on Dooley’s machine will turn bright red. Dooley takes the readings to track which parts of the electromagnetic spectrum—the frequencies that carry everything from radio signals to X-rays—are degrading from overuse. He likes to think of himself as a “21st-century version of a land surveyor.”
What Dooley’s machine is telling him now is this: Wi-Fi is headed for a collapse. The preferred Internet connection for most users is quickly becoming overcrowded, he argues, and could soon be overwhelmed.
There’s no denying that we’re in the midst of a digital deluge. Already there are more than 7 billion Internet-enabled mobile devices on the planet. And the coming revolution in the so-called Internet of things—think refrigerators monitored by connected sensors—means there will be billions more devices connecting by Wi-Fi in the next few years. According to Cisco, the amount of data transmitted via Wi-Fi is projected to nearly triple in the next four years. The problem, says Dooley, is that the signals from all our wired devices are increasingly beginning to bump into one another, causing performance to suffer. “Left as it is, Wi-Fi as we have come to know it will eventually cease to exist,” says Dooley. “It’s the classic tragedy of the commons.”
But Dooley, 38, claims he has a solution to the looming crisis. And his plan to “save” Wi-Fi has become one of the most talked-about and contentious issues in the industry—with opponents ranging from Microsoft and Google to hearing-aid manufacturers to a few very vocal hedge fund managers.
A few years ago Dooley teamed up with Jay Monroe, 60, the billionaire majority shareholder and CEO of Globalstar (GSAT), a struggling publicly traded satellite-phone company. In the 1990s, Globalstar was granted the rights to a number of slices of spectrum to make its growing satellite-phone business work. The satellite-phone business, though, isn’t booming, and Wi-Fi use is. So Dooley and Monroe have hatched an idea that they claim will fix Wi-Fi’s capacity problem and at the same time create billions of dollars in value for Globalstar.
Globalstar’s plan, designed by Dooley and called terrestrial low-power service, or TLPS, would convert one of the company’s pieces of satellite spectrum into a private Wi-Fi channel and charge for access to it. Monroe declines to get too specific about how this payment system will work. He does say that to provide the service Globalstar would probably have to partner with a bigger tech company, such as Verizon or Comcast, which could then offer the service exclusively to its customers. Use of the current Wi-Fi spectrum is technically free—though hotels and airports often charge for access to their local networks. But Monroe says Globalstar’s new Wi-Fi network will be faster and more secure than what exists today. And in the age of the hack, Monroe thinks the latter could be what actually gets customers to sign up. “Unlike public Wi-Fi, we will know who is on our network,” says Monroe.
If successful, the spectrum conversion could make Monroe, who owns 63% of Globalstar’s common stock, an enormous pile of money. In fact, just the prospect has already boosted the value of his company hugely. After Globalstar’s application made it past the Federal Communications Commission’s initial review stage in 2013, the company’s stock price soared from below 30¢ per share to nearly $4.50. At its recent share price of $2, Globalstar’s market value was about $2.5 billion. Analyst Jason Bernstein of Odeon Capital, who has a buy rating on the company’s stock, calculates that the value of Globalstar’s spectrum if converted to Wi-Fi would be some $4.4 billion. The FCC declined to comment on when it will rule on Globalstar’s application. But Monroe says he expects to get an answer by early 2016.
Meanwhile, a growing chorus of critics say that Globalstar’s warnings about a Wi-Fi apocalypse are completely unfounded—and that its plan, rather than fixing spectrum congestion, would actually make the situation much worse.
One of Globalstar’s loudest opponents is hedge fund manager Sahm Adrangi, 34, founder of the $400 million Kerrisdale Capital. Adrangi announced last year that he was shorting, or betting against, Globalstar’s stock and, à la Bill Ackman, made his case in a scathing 66-page report. He has since maintained a website (FactsAboutGlobalstar.com) arguing against the company’s plan, which he says won’t work, and has filed letters with the FCC urging the agency to reject Globalstar’s application. Adrangi thinks the $4.4 billion estimate of what Globalstar’s Wi-Fi network could be worth is ridiculous. His estimate: zero. “The company’s Wi-Fi plan is worthless,” says Adrangi, “and the company’s stock is worthless.”
Perhaps an even bigger problem for Globalstar is the widespread pushback it faces from the Wi-Fi industry. Over the past two years the FCC has received more than 200 comment letters about Globalstar’s application, and the vast majority of the letters call for the agency to give Globalstar the thumbs-down.
Some of Globalstar’s critics, like Google (GOOGL), object primarily to the fact that the company wants to charge for its spectrum. But the biggest concern of most critics—including Microsoft (MSFT), Sprint, networks ABC and CBS, and trade groups representing Wi-Fi and Bluetooth device makers—is that converting Globalstar’s segment of spectrum to Wi-Fi will cause massive interference with other signals. Dooley’s plan to save Wi-Fi, in other words, could end up causing the very collapse that he is warning about.
Globalstar’s headquarters is a boxy three-story building in Covington, La., an hour’s drive north of New Orleans, most of it across the 24-mile-long Lake Pontchartrain Causeway. The office shares a parking lot with a Hilton Garden Inn. Three doors down is a daiquiri bar with a drive-through window.
The company was created in the early 1990s as a joint venture between Qualcomm and Loral to provide so-called low earth orbit communications, such as satellite-phone service. Globalstar was granted its spectrum allocations by the FCC in 1995, and by early 2000 it had 48 satellites in orbit and was ready to operate. The business quickly crashed and burned. Globalstar filed for Chapter 11 in 2002. That’s when it attracted the attention of Monroe, a billionaire investor looking to expand into communications technology. Through his investment company, Thermo Capital Partners, Monroe bought a controlling stake in 2004 and guided Globalstar out of bankruptcy.
A few years after Monroe bought in, Globalstar’s satellites started falling out of the sky. Satellites do that. But it happened sooner than Monroe had expected. And the company was forced to suspend phone service, ballooning losses. The stock price crashed from $17 to well under $1. Monroe had to pump more than $600 million of his own money into the company to get its satellite network back up and running, on top of the $43 million he had paid to acquire 81% of the company out of bankruptcy.
Inside Globalstar’s office there’s little evidence that it is trying to be a player in Wi-Fi. In fact, there’s almost no one in the building working on the project. Monroe has relied on Dooley and other outside consultants for his Wi-Fi plans. One of the company’s bestselling products is its $149 Spot GPS device, which includes an emergency-call button used by mountain climbers and others. Globalstar also sells tracking devices that can be used for cargo, as well as its satellite phones. But it has just a small fraction of the market compared with rival Iridium Communications. In the first nine months of 2015, Globalstar had $68 million in sales and over $84 million in losses, after excluding the accounting effects of a derivative.
Monroe originally made his money buying up power plants in his home state of Colorado in the 1980s during a period of deregulation-driven turmoil in the utility business. In the 1990s he bought real estate in downtown Denver, including the abandoned, historic Union Pacific Freight House, which is now a popular eating and shopping spot next to Coors Field. He began buying fiber-optic networks in the early 2000s on the cheap, when everyone else thought there was too much supply. That’s what led him into the telecommunications business and Globalstar. Last year Bloomberg estimated Monroe’s net worth at $3.2 billion. He says he now splits his time between Denver and a spartan office on the first floor of Globalstar’s headquarters.
On paper, Globalstar looks as if it could be Monroe’s biggest haul yet, even after last year’s stock plunge. Monroe’s stake in the company, minus what he’s put in, is now worth over $600 million. (Monroe doesn’t draw a salary from the company.) Monroe says his investment in Globalstar isn’t fundamentally different from buying real estate or power plants. “We are about assets,” says Monroe. And while he maintains that the satellite-phone business is viable, he admits that from the start the asset that attracted him to Globalstar was its spectrum. It is a finite and increasingly valuable commodity.
“Spectrum” is the general term for the range of waves that carry all wireless transmissions—from shortwave radio to long-wave satellite signals. In the U.S., the FCC regulates who can use what part of the spectrum and for what. Before the advent of smartphones, that was a considerably less complicated and less lucrative task. But the value of controlling portions of the radio band has been rising almost exponentially. In its most recent spectrum auction, earlier this year, the FCC raised a total of $44.9 billion, with carriers Verizon and AT&T spending more than $10 billion each.
Most of the existing Wi-Fi usage lies in the 2.4 gigahertz band. (The length of radio waves is measured in megahertz and gigahertz, and 2.4 gigahertz is relatively short.) In the 1980s the FCC declared that slice of the spectrum free for everyone to use; it was the same frequency used by microwave ovens and thought to be otherwise worthless. But because it was free to access, inventors began experimenting in the 2.4 gigahertz zone and ultimately developed what became Wi-Fi.
As demand for Wi-Fi grows, the debate over how to expand capacity has become increasingly contentious. To promote his solution, Monroe has attached himself to a cause: Save Wi-Fi. He sometimes uses questionable rhetoric to make his pitch. “The FCC’s view is that Wi-Fi is clogged up,” says Monroe. “No question that there is a congestion problem. People who deny Wi-Fi spectrum problems might as well deny the Holocaust.”
Despite that over-the-top assertion, it turns out that there is anything but a consensus on the extent of the problem. Pierre de Vries, a spectrum expert who is a senior adjunct fellow at the Silicon Flatirons Center at the University of Colorado at Boulder, wrote in a paper last year that Wi-Fi congestion was mostly hype. “There are places at times that have more people who are trying to use Wi-Fi than available capacity, but I think that is more of a question of how those systems were engineered,” says de Vries.
In early 2013, then FCC chairman Julius Genachowski raised concerns about Wi-Fi undercapacity. Since then, though, the FCC has opened up more spectrum for Wi-Fi, this time in the 5 gigahertz range. Some think the new spectrum has already resolved the congestion problems for Wi-Fi.
Others give more credence to the warnings of Monroe and Dooley. Jon Peha, a professor at Carnegie Mellon and a former chief technologist at the FCC, says he believes congestion risk, while manageable, is real. He says the Internet of things might not be a problem now. But like smartphones, those devices are going to get only more sophisticated and bandwidth-hungry. “We have increased the amount of spectrum, but usage continues to grow,” says Peha.
Dooley first contacted Monroe in 2010 to solicit money from the Globalstar CEO for a venture capital fund that Dooley was trying to launch to invest in wireless technology. Monroe declined, but the two began talking. Dooley, drawing on his encyclopedic knowledge of all things spectrum, pointed out to Monroe that part of Globalstar’s allocation had originally been designated for Wi-Fi before it was given to Globalstar for satellite transmissions. Monroe hired him to help Globalstar make the conversion.
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Dooley says Globalstar’s spectrum is Wi-Fi-ready now. It just needs to set up a connection for users, which is what TLPS does. Globalstar says its plan will increase Wi-Fi speeds for -everyone—not just its own users. Moving some customers onto Globalstar’s paid service, Monroe says, will relieve congestion in free Wi-Fi as well. In all, Globalstar says its plan will increase throughput times, a measure of speed, by 40%.
Critics of Globalstar’s plan say that any benefits of adding the new capacity will pale in comparison to the new problem it creates: a phenomenon called “adjacent channel interference.” The antenna on most Wi-Fi devices is pretty small and cheap. And so the signals tend to bleed outside the channel they are supposed to be on. That’s what may be the main source of Wi-Fi interference now—signals from different bands, or channels, bumping into one another, rather than a lack of space. Add another channel, critics say, and the problem will only get worse. What’s more, Globalstar’s proposed channel is extremely close to other high-use 2.4 gigahertz bands, including those that carry Bluetooth. Globalstar denies that the proximity of the channels is problematic and says its testing shows that TLPS doesn’t cause congestion.
In March, in an effort to satisfy critics, Globalstar ran a demonstration of TLPS at FCC headquarters and invited its opponents to bring their own equipment. But the test has only provided Globalstar’s opponents with more talking points. CableLabs, which does testing for the cable industry, said it detected an increase in interference when Globalstar turned on TLPS. Globalstar says CableLabs put five routers on one conference room table, which is what Globalstar says caused the interference.
Mark Powell, who heads Bluetooth SIG, the organization that represents Bluetooth devices, also characterizes the results of Globalstar’s test as not promising. “When you delve into the test results, there is a lot of smoke and mirrors,” says Powell. -“Globalstar’s TLPS interferes with Bluetooth devices, and it does it in a destructive way.”
Microsoft has led the charge against Globalstar. In a May letter to the FCC, the software giant said its analysis of Globalstar’s plan was that it’s likely to lead to a worse experience for Wi-Fi users. What’s more, Paul Mitchell, a general manager of technology policy at Microsoft, says it’s a very bad precedent for the FCC to hand out exclusive rights to Wi-Fi to any one company. “The whole theory of Wi-Fi is that it is shared. That’s what has led to a tremendous amount of innovation,” says Mitchell.
Google’s argument is more one of public policy. The search giant thinks the new Wi-Fi band will reach only a limited number of customers in Globalstar’s hands. Google would prefer the FCC make the channel free to everyone, like the rest of Wi-Fi. But the bigger issue is this: If Wi-Fi really has a congestion problem, adding one private channel is not going to solve it.
Monroe views the pushback as merely incumbents not wanting a new competitor. The fact that it’s coming from players as large as Google and Microsoft, he says, is evidence that he has something really valuable. Monroe also says that the fact that Google isn’t making a technical argument proves his point that the technology works. Globalstar has talked to a number of companies that are interested in partnering with it to roll out TLPS, according to Monroe, but he won’t say who.
In September, Globalstar released the results of a test it did on a college campus in Chicago over the summer. This time Globalstar, in a filing to the FCC, said adding TLPS to the campus’s existing Wi-Fi network increased capacity by 90%, and it found no interference issues. But Microsoft, once again, called Globalstar’s testing method flawed. The tech giant said the types of Wi-Fi access points that Globalstar used were more expensive and better equipped at filtering interference than those typically used in Wi-Fi systems. What’s more, Microsoft noted, if you really wanted to test a high-density environment, a student center in mid-August is probably not your best choice.
Adrangi, the short-seller, says the question of whether TLPS will work or whether it causes too much interference is moot. To Adrangi, the much larger point is that even if Globalstar does get its plan approved, the company is still in trouble. Not enough people will use its service, he argues, because we no longer need it. The new 5 gigahertz band has 22 channels in it, and it’s free. Plus, it’s faster than 2.4 gigahertz. “Who is going to pay for worse Wi-Fi?” Asks Adrangi.
When it’s pointed out that investors are still valuing Globalstar at over $2 billion, Adrangi, who has already made a lot of money off his Globalstar short, simply shrugs, “There are many companies that aren’t trading at $0 that deserve to be.”
Without Wi-Fi, Globalstar’s value could collapse. The company has been close to bankruptcy a number of times since 2004, but each time Monroe has injected more capital. Even Bernstein, the analyst who rates it a buy, says that Globalstar will be close to burning through its existing cash by the end of 2016. Of course, Monroe could always bail it out again.
If the FCC does approve Globalstar’s application, the company will be relying on Dooley to help implement its plan. Though he remains a contractor and the terms of his compensation aren’t disclosed, Dooley is operating as Globalstar’s main Wi-Fi expert, including on calls with analysts.
His credentials for the job are hard to assess. Dooley, who dropped out of Worcester Polytechnic Institute after his freshman year to pursue a business venture, says he has spent two decades investing in and developing wireless technologies. He was awarded a first patent as a teen in 1995 and a second one just this October. He claims that he has several more applications pending. Dooley has an early-stage company called Nanoton, which he says is developing nanotechnology to improve wireless antennas. The venture fund that he was trying to raise when he first contacted Monroe never took off. But earlier this year a company that Dooley formed with hedge fund investors bought $398 million of spectrum in an FCC auction. And then there’s Globalstar.
Just because Dooley’s track record is sparse doesn’t mean his warnings should be ignored or that his TLPS plan won’t create value for Globalstar. Devin Akin, a Wi-Fi architect and a co-founder of one of the industry’s top accreditation programs, says 2.4 gigahertz congestion is something we have to worry about. Akin thinks the long-term answer is 5 gigahertz. The problem is that 2.4 gigahertz chips are cheaper, and they still have better range. So he doesn’t think enough customers or products will switch bands until Wi-Fi speeds really slow down.
In the meantime, that creates an opportunity for Globalstar, even if its technology won’t really solve the problem. “It’s absolutely absurd to say that Globalstar’s plan will save Wi-Fi,” says Akin. “But that doesn’t mean they won’t be able to make some money off it for a few years.” And then maybe all the time -Dooley has spent with his machine will finally pay off.
A version of this article appears in the December 1, 2015 issue of Coins2Day with the headline “The Would-Be Wi-Fi Kings.”
