FCC REJECTS $4.3 BILLION PAYMENT FROM NEXTWAVE
FCC Abandons Largest Payment Ever Tendered for Licenses; Action will Indefinitely Delay Public Use of Spectrum; NextWave to Take All Legal Steps to Protect its Rights
HAWTHORNE, N.Y. – January 13, 2000 – The actions taken by the FCC yesterday, purporting to revoke licenses granted to NextWave and seeking to put these licenses up for re-auction in July 2000, are null and void under the bankruptcy laws. In purporting to take this action, the FCC inexplicably rejected NextWave's written offer to make an immediate payment to the FCC of $4.3 billion. This represents full payment of NextWave's bid in the FCC's auctions, a bid that the FCC had earlier accepted. The FCC thus abandons the largest payment ever tendered for any spectrum licenses and an opportunity to provide the benefit of these licenses to the American public immediately. Unfortunately, the action taken by the FCC will inevitably lead to lengthy delays in the utilization of this PCS spectrum and will entail further rounds of time-consuming litigation.
NextWave Telecom has done everything in its power to avert further litigation with the FCC and place its licenses into productive use immediately. The FCC has repeatedly acknowledged that NextWave's payment obligations are suspended by operation of the Bankruptcy Code. The FCC's action is a radical departure from established law and agency conduct, and an unwarranted blow to the reasonable reliance that the Company and its creditors placed on the agency's own statements in various courts.
Company to Assert All Legal Rights
The FCC has violated the legal rights of NextWave and its creditors and investors. The Commission's action forces the Company to take all legal steps necessary to protect its rights and those of the many people and companies who have invested in its licenses. The Company has over 3000 creditors and shareholders, the majority of whom are small businesses and individuals, and it intends to defend their assets against arbitrary and illegal actions by others, including the FCC.
In addition to NextWave, there are approximately twenty other small business auction participants (along with all of their creditors and shareholders) that are in various bankruptcy courts across the nation fighting a similar battle. They will also be severely impacted and irreparably harmed by this Commission action. The ultimate price paid by these small businesses, which were invited by the United States Congress and the FCC to participate in the federal auctions, is incalculable.
NextWave Offers to Make Full Payment in Single Lump Sum
On December 16, 1999, with the overwhelming support of its creditors and equity investors, NextWave filed a modified plan of reorganization with the Bankruptcy Court which provided full payment of its bid price to the FCC, together with all accrued interest to date, under the terms of the FCC's installment payment notes.
Earlier this week, in an effort to avert any legitimate rationale for further litigation, the Company proposed to satisfy its entire financial obligation to the FCC by making a lump sum payment of over $4.3 billion to the U.S. Treasury upon confirmation of its modified plan, currently scheduled for January 21, 2000. That payment, together with the $505 million of license payments already made by the Company, would total in excess of $4.8 billion and would be the largest payment ever made by a company to the United States government for any spectrum auction held to date. In addition to the full payment, NextWave has offered to provide $1 billion in free Internet access to underserved populations across the United States.
Unaccountably, the FCC rejected that proposal, even though it would have served the public interest by ensuring prompt utilization of the PCS spectrum covered by NextWave's licenses while providing for an immediate and complete payment in full of any amounts due. Under the FCC rules, NextWave had no obligation to pay any of the principal amounts of the C-block notes until the first quarter of 2003.
Throughout NextWave's reorganization proceeding and other C-block litigation, the FCC's position has always been the same – the FCC must be paid in full or else its "auction integrity" will suffer. NextWave's offer to immediately pay the FCC the full amount of its bid price under the modified plan both protects the integrity of the auction process, and puts the C, D, E and F block licenses held by NextWave to immediate commercial use. Against this backdrop, the FCC's rejection of NextWave's offer to immediately pay the FCC the full amount of its bid price is inexplicable and arbitrary.
FCC Actions Contrary to Laws and Regulations
In June of 1998, NextWave sought protection under the bankruptcy code to reorganize its business. Consistent with the purposes of the bankruptcy laws, which are designed to facilitate and support the rehabilitation of businesses, NextWave was able to prepare and finance a plan of reorganization that paid the FCC and its creditors in full and would put its spectrum into immediate use for the public benefit. The Commission's rejection of NextWave's tender of $4.3 billion is contrary to law, and amounts to an impermissible attempt to punish the Company for asserting the statutory rights made available to it by Congress.
The FCC acknowledged early on that NextWave has enjoyed "bankruptcy protection from collection of C-block license payments pending reorganization of its business affairs." This position was reiterated numerous times in pleadings throughout NextWave's Chapter 11 proceedings. Now, eighteen months after giving NextWave, its creditors and investors such assurances, the FCC seeks to ignore its previously acknowledged application of the bankruptcy laws in order to revoke and reauction the Company's licenses, alleging that Next Wave missed interest payments while in bankruptcy. The FCC's action yesterday is untenable under the bankruptcy laws and unsupported by any rulings in the current proceedings between the Company and the Commission. As the FCC well knows, numerous provisions of the federal Bankruptcy Code, the Communications Act, and the Administrative Procedure Act prevent the Commission from rescinding or reclaiming NextWave's licenses in the manner it proposes.
The FCC had also acknowledged throughout all the court proceedings that NextWave never defaulted on any of its payments to the FCC. NextWave paid $505 million in full compliance with its initial payment obligations, and under the Bankruptcy Code NextWave's Chapter 11 filing had the effect of automatically staying any further payment obligations during the pendency of the reorganization proceeding. The FCC now asserts that the automatic stay of the Bankruptcy Court no longer applies to it, but federal law does not authorize such a dramatic departure from fundamental bankruptcy principles. Moreover, the FCC has taken this position without any guidance on the application of the automatic stay from the courts. The FCC's attempted action seeks to bring into question the applicability of the Bankruptcy Code to federal agencies in general.
Companies in other regulated industries, such as the airlines industry, have sought protection under the bankruptcy laws while they reorganize, later emerging as stronger competitors. These companies were not deterred or intimidated by federal regulators from exercising their statutorily provided rights, and consumers have benefited.
NextWave's plan of reorganization is supported by $5 billion of new capital, $4.3 billion of which would be paid to the government, and vendor financing commitments that support the immediate build-out of the network. Confirmation of this plan was set for the end of January, enabling the immediate deployment of a new wireless network. Contrary to the implications of the FCC, NextWave's reorganization and business plan complies fully with the Commission's rules and timetable for build out of the spectrum. Over $100 million has been invested to date toward the build out of NextWave's network and activities have continued at a pace well within the requirements of the FCC's rules.
The FCC's efforts to block the commercialization of NextWave's licenses and its election to pursue unlawful actions to punish NextWave for exercising statutorily granted rights are at odds with federal laws and with the Commission's own statements regarding the need for prompt utilization of NextWave's spectrum. In addition to thwarting the policy objectives mandated by Congress, the FCC's action callously harms other creditors and the investors, including numerous private and state pension funds, in a manner that the bankruptcy laws were specifically designed to prevent. We are confident that the courts will respond appropriately to the FCC's unlawful action and that NextWave's rights will be vindicated.
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For More Information:
NextWave Telecom Inc: Michael Wack 202-661-2083 ( mwack@nextwavetel.com); Michael Regan 202-661-2084 (mregan@nextwavetel.com).
Posted at the NextWave website:
nextwavetel.com
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