" 'We'll pay you to go away.'''
Court Rules for NextWave on Licenses
biz.yahoo.com
By Jeremy Pelofsky
WASHINGTON (Reuters) - Wireless companies who bid billions of dollars for licenses in January
may not get the coveted airwaves after a U.S. appeals court ruled on Friday that communications
regulators were not entitled to repossess them from bankrupt NextWave Telecom Inc.
The Federal Communications Commission
repossessed 90 licenses Hawthorne, New
York-based NextWave won at auction in 1996 after the company was unable to
pay the $4.7 billion it bid for the licenses on time. The company eventually
entered bankruptcy protection.
``We conclude that the commission violated the provision of the bankruptcy code
that prohibits governmental entities from revoking debtors' licenses solely for
failure to pay debts dischargeable in bankruptcy,'' the U.S. Court of Appeals for
the District of Columbia said in its ruling.
The ruling could spark further appeals or set the stage for settlement talks
between the government, NextWave and wireless companies that participated in
the second auction, discussions urged by Verizon Wireless, the biggest winner in
the auction.
The decision was a stunning win for NextWave which had lost most of its
previous court challenges to the FCC's action. The agency said it is reviewing the decision and declined further comment.
The airwaves, or spectrums, were broken into 216 licenses and resold as part of a larger auction in January this year in which wireless operators bid $16.9 billion for a total of 422 licenses, but none of the NextWave-related licenses have been issued.
``NextWave sincerely hopes that today's decision marks the end of this litigation, and that it clears the way for us to resume our deployment efforts and begin delivering high-quality wireless services to consumers,'' NextWave Chairman Allen Salmasi said in a statement.
The FCC said when the airwaves were auctioned that if it lost in the courts the disputed licenses would be returned to NextWave. The appeals court remanded the case back to the FCC.
The decision ``will create continued uncertainty in an already uncertain industry that is dealing with spectrum shortages and technology upgrades,'' said Knox Bricken, a wireless analyst with the Yankee Group.
BANKRUPTCY LAW
The three-judge panel said the FCC must adhere to bankruptcy laws when it comes to auctioning off wireless licenses.
``The commission, having chosen to create standard debt obligations as part of its licensing scheme, is bound by the usual rules governing the treatment of such obligations in bankruptcy,'' Judge David Tatel said in the ruling.
The FCC's argument that allowing NextWave to retain the licenses was grossly unfair to those that made timely payments or forfeited licenses they had won at auction appeared to fall on deaf ears at the appeals court.
``Any unfairness, however, was inherent in the commission's decision to employ a licensing scheme that left its regulatory actions open to attack under Chapter 11 of the bankruptcy code,'' the ruling said.
The agency could appeal the ruling to the Supreme Court or seek a hearing by the full D.C. appeals court.
``Now that the court has acted, this case cries out for a settlement,'' William Kennard, who was chairman of the FCC during much of the NextWave legal spat, said in a statement. ``The settlement should still net billions of dollars to U.S. taxpayers.''
One industry analyst agreed that the parties would open settlement talks so that the FCC can keep the $16.9 billion proceeds from its January auction, pay NextWave some money to walk away from its legal victory and make the airwaves finally available for use.
``The FCC will want to settle this matter,'' said Rudy Baca, an analyst with the independent research firm The Precursor Group. ''There's plenty of room to pay off NextWave because they're so far behind others building out their network and the FCC will say: 'We'll pay you to go away.'''
``Who the real winners here are I think are the re-auction bidders because they get to build out those licenses and give them the critical spectrum they need,'' Baca said.
In trading on the Pink Sheets, NextWave Telecom shares closed up $4.70 to $7.80.
COMPANIES AFFECTED
Verizon Wireless, the nation's biggest mobile phone carrier and a joint venture of local phone carrier Verizon Communications (NYSE:VZ - news) and Britain's Vodafone Group Plc (quote from Yahoo! UK & Ireland: VOD.L), won 101 licenses after bidding $8.78 billion in the January auction.
``Verizon, for example, has to create contingency plans of how to proceed if they get the licenses, or how to get capacity in other ways,'' said Yankee's Bricken.
Verizon urged settlement talks begin with the FCC, NextWave and the winners in the auction while the firm's president and chief executive officer, Denny Strigl, urged the FCC and NextWave to settle the dispute in a way that preserves the most recent auction results.
``The FCC and NextWave need to settle this dispute in a way that permits the FCC's auction results to stand, and this spectrum to be quickly deployed,'' he said in a statement.
Alaska Native Wireless, a firm with ties to AT&T Wireless Group Inc. (NYSE:AWE - news), was second behind Verizon in the bidding, offering $2.89 billion for 44 licenses.
The licenses at stake include airwaves in coveted markets such as Boston, New York and Los Angeles, among other cities, where Verizon, AT&T and Cingular Wireless, a joint venture of local telephone companies SBC Communications Inc. (NYSE:SBC - news) and BellSouth Corp. (NYSE:BLS - news) that bid in the auction via Salmon PCS, are seeking to expand and improve service. |
