Bailout approved of cash-strapped wireless bidders
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Elizabeth Douglass
STAFF WRITER | The Associated Press and Reuters contributed to this report.
26-Sep-1997 Friday
San Diego's NextWave Telecom Inc. and other cash-strapped bidders for
wireless licenses would get some financial relief under an already
controversial new plan federal regulators adopted yesterday.
The Federal Communications Commission yesterday ended six months of
wrangling and outlined four choices for NextWave and other bidders seeking
relief from hefty license payments due to the government.
But by the end of the day, the plan drew harsh criticism from some members
of Congress, and NextWave pledged to petition for changes.
"NextWave will seek reconsideration for those portions of the order which
we believe are unfair and anti-competitive," said Jennifer Walsh, a
spokeswoman for the company. "In the meantime, we'll be reviewing the range
of options . . . (but) three of the four options are non-starters."
"Clearly, the FCC was in a difficult spot," said Louisiana Rep. Billy
Tauzin, the chairman of the House Telecommunications subcommittee. "But I
am concerned that today's decision may not resolve the problem. Simply put,
I am disappointed and frustrated."
The FCC's action came after six months of difficult negotiations that
pitted three commissioners -- Susan Ness, Rachelle Chong and James Quello
-- against Chairman Reed Hundt over how much relief the bidders should be
given. He favored giving more and ended up dissenting on one part of the
plan.
The goal was to give some relief to cash-strapped bidders so that they can
move ahead on building their networks and give consumers more choices in
buying mobile phones and other services.
NextWave and the other struggling bidders took part in a special airwaves
auction meant to give small companies a chance to secure valuable licenses
for a new wireless service known as personal communications services, or
PCS.
The auction raised a stunning $10 billion for the government. The bidders
were to pay for their licenses in installments, and when they began to have
difficulty raising money, the bidders sought debt relief from the FCC.
One company filed for bankruptcy, and others had hinted they may follow
suit.
For months, the FCC has struggled to find a way to help the companies,
collect as much money as possible for the Treasury and stick close enough
to the original rules to discourage losing bidders and other rivals from
crying foul.
"I still think there needs to be modifications. They are being too harsh,"
said Michael Elling, an analyst for Prudential Securities Inc. "There's an
ability for the next commission to come in and modify the rules. If they
don't, I think you're looking at some bankruptcy filings."
By this fall, all but one of five FCC commissioners will be new.
Others predicted that losing bidders and rivals will call the proposals too
generous.
"The FCC should have stuck to their guns in the first place," said Jeffrey
Hines, an analyst at NatWest Securities Ltd. "These options will be
challenged for a very long time."
By Jan. 15, bidders will have to make a choice among four options:
<Picture>Continue making installment payments on licenses won at auction as they
would have done under the old rules.
<Picture>Return some or a portion of licenses to be reauctioned. Bidders' debt
would be reduced proportionately.
<Picture>Use 70 percent of their initial down payments to the government to buy
as many licenses as they can afford. Remaining licenses that they can't pay
for would be returned to be reauctioned.
<Picture>Without penalty, give back licenses they can't pay for to be reauctioned
and surrender their deposits.
NextWave's Walsh agrees on this point: "Overall, we thought they could have
done a lot better," she said. "It is not commercially reasonable for most
of the bidders . . . it's unnecessarily punitive." |
