Kennard lashes out
US appeals court rules against FCC wireless
re-auction
By Peter Spiegel in Washington
Published: June 22 2001 17:43GMT | Last Updated:
June 22 2001 23:58GMT
news.ft.com
A US appeals court ruled on Friday that federal regulators illegally
re-auctioned $17bn (£12bn) in wireless phone licences in January,
throwing the country's already muddied telecom spectrum
management into chaos.
The Federal Communications Commission resold the precious
"spectrum" arwave licences after the original owner, NextWave
Telecom, defaulted on the $4.7bn it bid during the original 1996
auction for the rights.
The month-long re-auction was the largest in US history and
covered territory with approximately 163m people, including New York, Philadelphia and Los
Angeles. The licences were won by some of the largest wireless companies in the US, including
Verizon Wireless, which won the most licences with bids totalling $8.7bn.
But a three-judge panel in Washington ruled unanimously that the FCC was in error when it
seized the licences from NextWave, which was in the midst of bankruptcy proceedings at the
time, saying the federal government had to wait in line like all other creditors. The re-auction was
contingent on the court's decision.
"Federal agencies must obey all federal laws, not just those they administer," wrote Judge David
Tatel. "The [FCC] violated the provision of the bankruptcy code that prohibits government
entities from revoking debtors' licences solely for failure to pay debts dischargeable in
bankruptcy."
The FCC has three months to decide whether to appeal against the decision, but analysts said it
would probably move to seek a settlement with NextWave. The FCC had no immediate comment,
saying it was still reviewing the decision.
William Kennard, the former FCC chairman who ordered the licences seized, called on the two
sides to settle the case, but lashed out at NextWave for pressing the case even after losing
similar appeals in different courts: "By welching on its promise to pay the US government,
Nextwave could walk away with billions."
Despite the win in court, NextWave is unlikely to be the final owners of the licences. Talks
between the company and the FCC will probably centre on a cash settlement, paid out of the
re-auction proceeds, to NextWave. The FCC would then take possession of them and pass them
on to the winners of the January auction.
But Blair Levin, a telecom regulatory analyst with Legg Mason, cautioned that such an agreement
might be difficult to reach, given the entrenched positions both sides have taken.
Denny Strigl, chief executive of Verizon Wireless, urged the two sides to resolve the dispute
quickly so the new owners can build out on the spectrum.
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How much of NextWave's problems with the FCC were due to Kennard's personal animus toward the company? |
