"Lightsquared and GPS use different frequencies - but they are close to each other. GPS receivers should filter out frequencies not used for GPS, and be immune to Lightsquared's transmissions. In real life, GPS manufacturers used cheap filters that let enough of Lightsquared's signals through to cause confusion."
That's part of the issue, the 2nd part is what BristolBachelor pointed out -- the GPS filtering (even on the cheap ones) works fine if LightSquared intended to use these frequencies licenses for satellite communications to communicate with satellites; but they intended to use the very same frequencies with high-powered ground stations.
Anyway... even before this issue popped up, LightSquared's plans seemed a bit umm... "Up in the air". 2004-era plan was for a primarily satellite system with some ground stations (XM/Sirius also do this... for most people it's 100% satellite, but "urban canyons" like New York City will have a few ground stations due to the skyscrapers causing widespread blockage of any view of the sky to see the satellites.) As far as I know, no satellite has been launched. By 2011 they received a waiver to launch products that did not even support satellite, and intended to use this satellite spectrum strictly via a large (40,000 planned) number of ground stations. That is where they ran into trouble regarding possible GPS interference. But, I think they would have found rolling out *40,000* sites to be quite a bit more expensive than they planned anyway.