By Jasmin Melvin

WASHINGTON (Reuters) - U.S. government officials called for more testing of hedge fund manager Philip Falcone's satellite broadband start-up to address interference issues with global positioning systems, but showed interest in finding a solution rather than shutting the venture down.

Falcone's LightSquared has come under fire after months of testing found its original plan for a high-speed wireless network would interfere with GPS services.

Aviation, maritime operations, emergency communications, weather tracking and General Motors Co's OnStar equipment are among the government and commercial uses for the 500 million GPS receivers estimated to be in use in the United States.

"We have now tested one proposal here, and we found unfortunately that it did not work as originally hoped. That does not mean the story is over," said Department of Transportation Under Secretary for Policy Roy Kienitz.

"Our goal at DOT is to look for a win-win where we can have much better broadband service nationwide, but to do so without disrupting GPS and vital services it provides," he said at a joint hearing of two House of Representatives Transportation and Infrastructure subcommittees on Thursday.

LightSquared is investing $14 billion over the next eight years to build a wireless network, and aims to sell wholesale wireless services to companies such as Best Buy Co, which would then resell the service under their own brand names.

Signals from the company's ground antennas overwhelmed most GPS units tested, causing them to show inaccurate location information or no data at all.

"I want to be absolutely direct, clear and unequivocal: LightSquared has no intention of operating its system in any way that will compromise government or commercial aviation or maritime operations in the United States, nor do we believe the FCC would ever allow us to do so," said Jeffrey Carlisle, LightSquared's executive vice president of regulatory affairs and public policy.

The company unveiled a new plan for deploying its network earlier in the week that it hopes will curb interference issues and satisfy the Federal Communications Commission, which must give its approval before the network can be built.

Falcone and investors in his Harbinger Capital Partners hedge fund have gambled billions of dollars on the success of LightSquared. To date, Harbinger has sunk about $3.1 billion into the wireless venture, making the fund the company's largest single equity investor.

LightSquared's new proposal would use a different block of wireless airwaves for its network than originally planned. These airwaves are 10 megahertz, located farther away from the GPS band.

The company also agreed to voluntarily give up using higher power levels and to only incorporate spectrum closer to the GPS band when the FCC is sure there is no interference risk.

"We believe operating on spectrum farthest away from GPS will avoid overload for over 99 percent of (GPS) receivers, including those used for aviation and maritime operations," Carlisle said.

Kienitz said it is a well intentioned general strategy. "Very preliminary thinking indicates that if they're transmitting in a zone that's much farther away from the GPS band, the interference is likely to be less," he said.

Department of Defense Chief Information Officer Teri Takai noted that testing of this will have to await an official filing of the plan with the FCC, which will direct federal agencies on what to test.

"In aviation there's no room for error," House Aviation Subcommittee Chairman Tom Petri said.

He urged thorough testing "to ensure the FCC does not approve plans that would introduce unacceptable risk into the aviation system or leave aviation GPS users with new and costly burdens."

The telecom start-up has become one of Falcone's riskiest and most high-profile bets.

(Reporting by Jasmin Melvin, editing by Bernard Orr)