NextWave prevails
Lynnette Luna
It’s been a long and bitter court battle between NextWave Telecom and the Federal
Communications Commission over 90 PCS licenses the company won in 1996.
And today, NextWave has the upper hand. The U.S. Court of Appeals for the D.C.
Circuit said the FCC violated bankruptcy laws when it repossessed NextWave’s licenses
and canceled them last September.
This court ruling could have far-reaching implications for the entire mobile wireless
industry and for the U.S. Treasury. The FCC auctioned those licenses and others for
nearly $17 billion in January. This means U.S. wireless operators like Verizon Wireless,
AT&T Wireless and Cingular Wireless probably have lost their rights to spectrum they
desperately needed to fill in coverage gaps and increase capacity. And rather than $17
billion going into the U.S. government’s hands, NextWave, which filed for bankruptcy in
1998, will likely be allowed to pay the original $4.7 billion it originally bid for the licenses.
The FCC was confident it would prevail. It had won previous lower court battles with
NextWave and the U.S. Supreme Court had twice refused to hear an appeal by
NextWave to prevent the FCC’s repossession of the licenses. The commission even was
prepared to help broker a deal to arrange transfer of the licenses to Nextel
Communications in 1999 to keep NextWave’s hands off the licenses.
Before the court battles began, NextWave had spent more than $1 million lobbying
Congress and the FCC in an effort to win a sweetheart deal, at one point offering $5.3
billion for the licenses. But members of Congress, led by Senator Judd Gregg and former
FCC Chairman William Kennard, stood fast. They insisted that the licenses, having
appreciated significantly since 1995, be put up for auction. Their decision to deny
NextWave netted them an extra $11.6 billion.
In a press statement released today, NextWave reminded the commission that it
promised the U.S. Court of Appeals that it would give NextWave’s licenses back if the
company prevailed in the case.
“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,” said Allen Salmasi, chairman of
NextWave’s board of directors.
Earlier this month, the bankruptcy court supervising NewWave’s Chapter 11
reorganization approved new debtor-in-possession financing that includes $90 million to
immediately begin deployment of NextWave’s network. The company plans to deploy
CDMA 1X technology as soon as possible. It’s unclear if the company will continue
with its original strategy of becoming a carrier’s carrier, reselling minutes of airtime to
various companies. NextWave once had a large resale deal with WorldCom.
Merrill Lynch analysts believe the FCC could try to broker a settlement with NextWave
whereby the company would receive bidding credits in future auctions in return for giving
up the licenses. Such a deal, however, would have to be agreeable to NextWave. And
it’s unclear when the FCC will hold future auctions for third-generation spectrum tied up
in government hands. Analysts believe NextWave’s spectrum may be the only
meaningful spectrum on the market for many years.
“Should the FCC and NextWave head down the settlement path, we think that it would
be preferable from the FCC’s perspective to have the backing of the re-auction bidders,”
wrote Merrill Lynch analysts. “However, given the differences (in terms of spectrum) in
what the major re-auction bidders have and perceive they could need in the future, we
think that it might be difficult for an agreement to be reached.”
"We are disappointed by the court's decision," said Verizon Wireless President and CEO
Dennis Strigl in a statement. "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."
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