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News that the Federal Communications Commission is going to rescind its preliminary approval for the wireless provider LightSquared to build a high-speed mobile-phone network serving as many as 260 million people was not a surprise. It was also the right decision.

Several rounds of government testing found that the sort of powerful ground-based signals transmitted by LightSquared's earth-based towers would disrupt the weaker satellite transmissions on the nearby spectrum, including GPS systems and airplane-safety technology.  There may be some validity to LightSquared's counterclaims that the testing was biased and  that GPS companies "squat" on portions of the spectrum it controls. But as we have argued at Bloomberg View, there was simply too much at stake for the FCC to rush through an approval.

Where does this leave the billionaire hedge-fund mogul Philip Falcone, whose Harbinger Capital Partners  has put $3 billion into the venture? To borrow a metaphor from his days as a Harvard hockey star: He's pulled the goalie and lost control of the puck.

Harbinger's funds under management have shrunk from $26 billion in 2008 to $4 billion at the end of last year. Bloomberg News's Todd Shields, who has led the media pack on this story, reports that Harbinger is keeping itself afloat by paying a painful 15 percent interest rate on a $190 million loan. Wall Street shark Carl Icahn has been buying up LightSquared's debt, likely hoping to get a bargain price on the venture's 59 megahertz of the domestic spectrum. The Securities and Exchange Commission is also in the mix, looking into whether Harbinger gave some investors preferential treatment and the nature of a $113 million loan Falcone took from one of his funds. Senator Charles Grassley is investigating whether Falcone, who has donated heavily to Democrats and Republicans, got favors from the White House. Others, such as the conservative blogger Ed Morrissey, are raising a host of related issues.

Falcone's travails aside, the real victims here are consumers, who would have gained from opening more of the increasingly congested spectrum to mobile technology. Thanks to shortsighted federal policy, companies and government agencies with spectrum holdings have never had much reason to conserve the space they use or invest in more efficient technologies. The FCC's plan is to revamp the auction system for unused spectrum, Here at the View, we have a better plan: Create a free market for the airwaves and require entities to pay rent on their spectrum allotments.

(Tobin Harshaw is a member of the Bloomberg View editorial board. Follow him on Twitter. Subscribe to his daily e-mail highlighting the View's upcoming content.)

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