When the FCC auctions off spectrum, it has conditions attached to it. For example, cellular (800MHz) licenses come with the requirement of 80% geographic coverage, IIRC. PCS licenses (1900MHz) come with the requirement of 80% population coverage, IIRC. These licenses come with the requirement that they're for satellite communication.

Now, if you're against government regulation (and I'm not saying that you shouldn't be against it), it's just going to be a stupid requirement. However, the thinking behind this is that the government wants to ensure a diversity of services to the population. One of those services that they thought was important was mobile communication by satellite that would cover where terrestrial mobile services don't.

The point isn't for LightSquared to communicate themselves with satellites over spectrum already being used in the 12-18GHz or 26.5-40GHz range (Ku or Ka bands). The point is for new services to be available in the spectrum they bought (1525-1660.5MHz).

--

So, LightSquared is banking on the FCC rethinking their conditions and thinking that greater 4G competition (against AT&T, Verizon, T-Mobile, Sprint, MetroPCS, and Clearwire) will be more important than a new satellite communications provider. However, even that's a tad problematic from a fairness standpoint. Most likely, the spectrum that they got was a lot cheaper than spectrum licensed for non-satellite mobile communication. The reason being that it's very expensive to run a satellite service and there's little market for it. They're taking a gamble. They know that they bought spectrum for a satellite service, but they're hoping that the FCC will essentially re-do their agreement to give them something more valuable than a satellite service. And the FCC might do so since there have been indications they'd like more competition in the wireless space.

Anyway, that's probably a way longer response than you wanted. Short answer, they have to because the entire point of letting them buy the spectrum was that they'd use it for satellite communications. If they aren't doing that and just using someone else's services, they don't need the spectrum.