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LightSquared’s quest to build a nationwide LTE network appears to be finished. After a year of LightSquared fighting the GPS industry and government agencies over whether its network would interfere with GPS receivers, the Federal Communications Commission dropped the hammer Tuesday, saying it would revoke the would-be carrier’s terrestrial network waiver. That leaves LightSquared few remaining options except suing.

The sudden capitulation by the FCC comes after the agency tried desperately to help LightSquared succeed — granting it multiple waivers so it could build a combined satellite and terrestrial mobile broadband network. The commission hoped LightSquared would create a wholesale wireless network that could mitigate the growing power and control that AT&T (s T) and Verizon Wireless (s vz) (s vod) have in the mobile industry. It apparently has given up on that dream, or found it politically expedient to back down.

Here’s the FCC’s statement from spokeswoman Tammy Sun:

LightSquared’s proposal to provide ground-based mobile service offered the potential to unleash new spectrum for mobile broadband and enhance competition. The Commission clearly stated from the outset that harmful interference to GPS would not be permitted. This is why the Conditional Waiver Order issued by the Commission’s International Bureau prohibited LightSquared from beginning commercial operations unless harmful interference issues were resolved. NTIA, the federal agency that coordinates spectrum uses for the military and other federal government entities, 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 International Bureau of the Commission is proposing to (1) vacate the Conditional Waiver Order, and (2) suspend indefinitely LightSquared’s Ancillary Terrestrial Component authority to an extent consistent with the NTIA letter. A Public Notice seeking comment on NTIA’s conclusions and on these proposals will be released tomorrow.

Early last year, LightSquared’s plan to build a competing nationwide mobile broadband network over repurposed satellite spectrum seemed to be sailing through, but the company quickly ran into the full might of the GPS industry’s lobbying arm. The Coalition to Save Our GPS claimed that there was no network LightSquared could deploy in the satellite L-band that wouldn’t knock out millions of GPS navigation, location and timing devices. Several government studies backed up the GPS industry’s claims, causing LightSquared to go on the offensive, refuting not only the conclusions of those studies but accusing the government agencies that penned them of bias.

At the heart of the LightSquared’s argument is that GPS device makers used sloppy designs to build their receivers. Instead of staying within the designated GPS bands, those receivers reached far out into the L-band, effectively squatting on LightSquared’s airwaves. While that was true, it put the FCC in a precarious political position. While it couldn’t condone the GPS industry invading LightSquared’s frequencies, it also couldn’t give the green light to a network that could potentially overpower millions of GPS devices.

Whether it was politics or practicality, the FCC is exercising its right to halt LightSquared’s plans. While LightSquared has portrayed itself as the victim of the whims of the GPS lobby, its waiver to launch LTE was always conditional. And the condition the FCC placed on the carrier was that its network would not harm GPS.

LightSquared’s plans aren’t officially canceled — there’s still plenty of bureaucracy to wade through, including a public comment period on the government’s GPS interference conclusions. But the FCC has made its position clear, which means that — saving some political miracle — LightSquared’s final resort will be the courts. Satellite band analyst Tim Farrar of TMF Associates, however, doubts LightSquared will have the financial wherewithal to fight much longer. He wrote in his blog:

With LightSquared set to run out of money in the near future, the company must now consider whether to file for bankruptcy and preserve its resources for the inevitable litigation fights, or continue pretending that all of these problems can be overcome while its cash drains away.

While we at GigaOM have doubted LightSquared’s ability to succeed, it’s a situation where we would have been happy to have been proven wrong.