Harbinger Capital’s Phil Falcone faced more bad news on Tuesday when the Federal Communications Commission decided to pull the cord on his LightSquared Inc.’s proposal to create a new national wireless network. At issue was whether it would interfere with Global Positioning System (GPS) devices. After reviews, it appeared the answer was yes.

This comes as a crushing blow to LightSquared and its founder, Falcone, who spent billions of dollars on the project. In response to the news, the firm said in a statement that it “profoundly disagrees” and that the agency’s conclusions, overlooking “more than a decade of regulatory orders, and in doing so, jeopardize private enterprise, jobs and investment in America’s future.”

The Commerce Department wrote in a letter to the FCC about LightSquare, there was “no practical way to mitigate the potential interference at this time.” FCC followed up with a statement that said it would reject LightSquared’s proposal due to GPS worries and it would dismiss its 2011 conditional approval.

Tuesday’s FCC decision will be open for public comment and it may be appealed to its commissioners.

LightSquared’s Plan

With the LightSquared project, its plan was to serve as a telecommunications wholesaler and sell to wireless companies, the use of its  network, according to The Wall Street Journal. The companies would then sell high-speed Internet service to public customers. GPS users such as the military and farmers expressed concern that the network would overpower GPS signals and stop service.

LightSquared had noted a problem with GPS receivers, citing sensitivity and listening outside from GPS boundaries. The company felt strongly that it should receive government approval, threatening legal action if it didn’t happen.

But if the firm does purse this, would it have enough money to do so?

At first, the plan seemed like a go in 2011 after LightSquared achieved conditional approval from the FCC. Technical issues were to be fixed but the company faced problems from Washington, who pointed out possible interference problems.

In a highly publicized case, Republican Sen. Chuck Grassley of Iowa opened an investigation into the FCC’s early 2011 conditional decision. Grassley, who took on the case from concern for his constituents and donors, freezed FCC board nominees, challenging the agency’s failure to turn over internal documents.

Harbinger Capital Losses

Tuesday’s news comes amid earlier troubles with Falcone’s Harbinger Capital. It has reported deep losses in their hedge funds and is the subject of regulatory investigations. The firm’s largest fund lost 47 percent in 2011 due to a write-down from its LightSquared investments, according to The Wall Street Journal.

On the regulatory side, the Securities and Exchange Commission has been reviewing Falcone’s hedge-fund business and an investigation has been opened for possible market manipulation.

Back in December, a Harbinger affiliate said Falcone and two senior executives had receiving a warning from the SEC of potential civil-fraud charges. Harbinger responded through a filing, that it was “disappointed” by the news and that should the regulatory agency bring enforcement action against them, it would “vigorously defend against it.”