Should Nextel succeed in obtaining the licenses from NextWave, I wouldn't think there would be an interest in purchasing Southern Linc. But if the price is right it makes sense. It's got to be tough for a regional operating primarily in two states to compete against national players, especially without roaming agreements. Nextel is holding all the cards if and when negotiations take place.
Here's the latest regarding the NextWave/FCC/Nextel fiasco:
From the November 8, 1999, issue of Wireless Week
FCC Sorts Out C-Block Role In Court
By Caron Carlson
NEW YORK--Regulator or creditor? In its case against Next-Wave Personal Communications Inc. before a three-judge
panel of the 2nd Circuit U.S. Court of Appeals last week, the FCC argued that the case is a regulatory rather than a
bankruptcy matter--and the financial and regulatory aspects should not be entangled.
As the C-Block licensing conundrum continues to unfold, the conflict inherent in the FCC's attempt to act simultaneously as
regulator and creditor becomes increasingly clear. Unlike earlier accounts to Congress, the agency did not emphasize in court
last week its duty as a creditor, but rather pointed to its role as a regulator.
The agency appears to be tailoring its argument to its audience, but where that strategy will lead in this long-running,
high-stakes battle over the disposition of spectrum held by bankrupt license holders is far from clear.
Daniel Alter, an assistant U.S. attorney arguing for the FCC, told the panel that the bankruptcy court did not have the authority
to reduce the debt NextWave owes the FCC for the spectrum because the commission alone has jurisdiction over the terms
and conditions of licenses. He also contested the bankruptcy court's decision that the licenses were fraudulently conveyed to
NextWave. Alter said radio spectrum is not a commodity, and the FCC was not acting as an ordinary creditor but as the
public guardian of a trust.
This argument to the court of appeals portrays the FCC's role as creditor in a considerably different light than arguments the
government has made to defend the confidential "agreement" signed with Nextel Communications Inc. Aug. 10.
Responding to dismay in Congress and outrage in the industry after it became known that FCC General Counsel Christopher
Wright pledged his support to Nextel's plan for NextWave's licenses, the FCC and Department of Justice highlighted the
commission's role as creditor in the bankruptcy matter.
For example, in defending the staff-level agreement to the House Commerce Committee, the Justice Department began by
describing the FCC as "NextWave's largest creditor." FCC Chairman William Kennard said the commission would be remiss if
it "did not at least consider other opportunities to obtain the best result for the American taxpayer and ensure the efficient use of
this spectrum within the context of the bankruptcy litigation." Wright said that in deciding to support Nextel's offer, the FCC
staff "viewed the effective choices as between" the $549 million it would get under NextWave's reorganization plan and the
"$1.6 billion in cash" it would get under Nextel's plan.
In defending the terms of the Aug. 10 agreement with Nextel-- including an exclusive termination fee worth millions of dollars if
the plan were to go through and be topped by another carrier--FCC staff have repeatedly argued that this is a provision
commonly included by commercial entities in bankruptcy settlements.
The 2nd Circuit judges did not dwell on the FCC's jurisdictional argument but instead asked numerous questions regarding the
matter of fraudulent conveyance and at what time NextWave's debt to the FCC arose. NextWave attorney Deborah
Schrier-Rape said the company's debt obligation did not arise the day the auction closed but nine months later after the FCC
resolved outstanding ownership issues, at which time the market for spectrum had plummeted.
One thing that became clear in last week's hearing was Judge Dennis Jacobs' opinion of the policy decisions underlying the
C-Block auction. Acknowledging that Congress set aside the C Block for designated entitities, Jacobs said that for the
government to auction the licenses to small businesses was "an extremely stupid policy."
NextWave's reorganization confirmation hearing is tentatively scheduled for Nov. 29.
Ron |
