The FCC has hammered what could be the final nail in the coffin for LightSquared's LTE plans.

The agency said yesterday that it would block LightSquared from launching its network following an NTIA report saying that there was "no practical way" to mitigate the service's impact on GPS.

The news is a huge blow for LightSquared and its primary backer Philip Falcone's hedge fund Harbinger Capital Partners, which has sunk $3 billion into the company, its largest investment.

"There are no mitigation strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment," NTIA administrator Lawrence Strickling wrote in a letter to FCC Chairman Julius Genachowski on Tuesday. The NTIA is in charge of coordinating spectrum use for the military and other federal agencies, many of whom rely on GPS for critical operations.

The expected conclusion came after a series of government tests showed LightSquared's planned LTE network knocked out large swaths of GPS receivers, even under a revised plan that moved the service to spectrum located farther away from GPS bands. High-precision equipment used by the military and aviation industries was found to be particularly susceptible, since wideband GPS receivers pick up on signals from neighboring bands to fine-tune their coordinates.

In response to the NTIA's findings, the FCC said it would not allow LightSquared to launch its network. The agency granted LightSquared a waiver for its service last January that required it to address any problems with GPS interference before moving ahead with its network.

"The Commission clearly stated from the outset that harmful interference to GPS would not be permitted," FCC spokeswoman Tammy Sun said. "[The NTIA] has now concluded that there is no practical way to mitigate potential interference at this time. Consequently, the Commission will not lift the prohibition on LightSquared."

The FCC plans to vacate its original waiver for the service and indefinitely suspend LightSquared's ancillary terrestrial component authority, which allowed it to deploy base stations on the ground in addition to its satellite service. A public notice seeking comment on the NTIA's conclusions and the FCC's proposals is expected to be released today.

In response to the NTIA's recommendation to the FCC, LightSquared yesterday said it "remains committed to finding a resolution with the federal government and the GPS industry to resolve all remaining concerns. … LightSquared profoundly disagrees with both the NTIA's and the PNT's recommendations."

LightSquared maintained that the government's testing process was flawed and relied on "obsolete and niche devices."

LightSquared planned to deploy a wholesale LTE network in spectrum formerly reserved for satellite signals that would use a hybrid of on-the-ground base stations and satellite service. The FCC's decision leaves more than 30 companies signed up for the service out of options, including Leap Wireless International and Best Buy.

One of LightSquared's customers jumped ship and signed up with Clearwire today. FreedomPop inked a deal with LightSquared last December to offer free broadband and voice services in underserved markets. Less than a day after the NTIA's decision went public, FreedomPop said it would use Clearwire's WiMAX network instead.

The venture-backed company said it will pay wholesale rates for access to Clearwire's network, but specific terms of the deal were not disclosed.