U.S. To Return $2.8B to Wireless Carriers - Wireless NewsFactor
wireless.newsfactor.com
By Jay Wrolstad
Wireless NewsFactor
March 28, 2002
The FCC said the companies remain bound by their bids in the disputed auction. 'We remain
on the hook for $8.7 billion for licenses [the FCC] haven't delivered and can't deliver. We need
the slate wiped clean,' Verizon Wireless spokesperson Jeffrey Nelson told Wireless
NewsFactor.
Wireless carriers tangled in legal actions associated with a disputed auction of airwaves got some
relief Wednesday. The Federal Communications Commission (FCC) agreed to refund US$2.8 billion,
or 85 percent, of the $3.1 billion in down payments carriers made for bids on air wave licenses
claimed by NextWave Telecom.
The carriers to get refunds for their deposits on winning bids in the spectrum auction held in January
2001 include Verizon Wireless (NYSE: VZ), VoiceStream, Leap Wireless (Nasdaq: LWIN), and
companies associated with AT&T Wireless (NYSE: AWE) and Cingular.
Still Bound
The decision gives bidders access to
the bulk of their money while preserving
the results and integrity of the auction in
question, the FCC said. The agency
also said the companies remain bound
by their bids.
If the agency prevails in the pending
case, which is now before the U.S.
Supreme Court, the winning bidders
must pay the full amount of their offers.
In January, 13 carriers demanded full
refunds on the $3.1 billion in payments
made for 197 licenses they won in the
disputed auction, claiming that delays in
awarding the spectrum licenses were
costing them $3 million a week in lost
interest income.
The carriers also alleged that by holding their money in escrow, the FCC was inhibiting investment in
service upgrades.
In February, Verizon Wireless filed a lawsuit demanding a full refund of its money.
Expected refunds on down payments made break down as follows:
Verizon Wireless, $1.5 billion to be returned on $1.75 billion deposited;
AT&T partner Alaska Native Wireless, $491 million to be returned on $578 million deposited;
Cingular partner Salmon PCS, $400 million to be returned on $470 million deposited;
VoiceStream and affiliate Cook Inlet, $167.8 million to be returned on $197.5 million deposited;
and
Leap Wireless, $60 million to be returned on $70 million deposited.
Right Direction
"A return of 85 percent of our deposit is a step in the right direction. But we have made no secret of
our position that the auction in question is void," Verizon Wireless spokesperson Jeffrey Nelson told
Wireless NewsFactor. "We will look at options to resolve this difference of opinion."
The FCC said, in response, that Verizon Wireless assumed the risk of delays caused by litigation
and is bound by the auction rules.
Nelson pointed out that the FCC still holds some $260 million of the company's deposit money.
"In addition, the FCC says we remain on the hook for $8.7 billion for licenses they haven't delivered
and can't deliver. We need the slate wiped clean," Nelson said.
Preservation Theory
Conrad Bagne, managing member of Alaska Native Wireless, said his company is satisfied with the
agency's decision.
Bagne stated that Alaska Native Wireless was "pleased" with the decision, as it relates both to the
refunding of down payments and preserving the integrity of auction results.
"We are delighted with the refund and pleased to see that the FCC has recognized the need for
capital to be deployed in other ways," Leap Wireless spokesperson Jen Carroll told Wireless
NewsFactor.
Lingering Dispute
Legal wrangling over the spectrum, which covers lucrative markets such as New York City and Los
Angeles, has been ongoing since 1996, when NextWave won 90 licenses with bids totaling $4.7
billion in an FCC auction. The company later defaulted on its payments and filed for bankruptcy
protection in 1998.
The FCC reclaimed the licenses and re-auctioned them for some $16 billion last year. However, an
appellate court ruled in June that the government did not have authority to revoke NextWave's
licenses.
Then, a proposed deal to settle the matter fell through when Congress declined to act on it, and the
U.S. Supreme Court, earlier this month, agreed to hear the case.
The latest step taken by the FCC also includes refunds on $93 million in payments for 41 licenses
previously held by bankrupt operator Urban Comm-North Carolina.
To deliver the refunds, the FCC said it will retain 3 percent of each winning bid, instead of the 20
percent required under auction rules, which represents the penalty for defaulting on a bid. |
