We derive fundamental accuracy limits for distributed localization when a fusion center has access only to independently rate-distortion (RD)-optimally compressed versions of multi-sensor observations, under a line-of-sight propagation model with a Gaussian wideband waveform. Using the Gaussian RD test-channel model together with a Whittle spectral Fisher-information characterization, we obtain an explicit frequency-domain Cramér-Rao lower bound. A two-band, two-level specialization yields closed-form expressions and reveals a rate-induced regime change: RD-optimal compression under a squared-error distortion measure can eliminate localization-informative spectral content. A simple band-selective scheme can outperform RD compression by orders of magnitude at the same rate, motivating localization-aware compression for networked sensing and integrated sensing and communication systems.