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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: gdichaz who wrote (13714)	8/8/2001 8:22:04 AM
From: John Carragher	Respond to of 196985

todays wall street journal.,,editorial page,,,commentory section.

To: gdichaz who wrote (13714)	8/9/2001 7:36:23 AM
From: John Carragher	Read Replies (1) \| Respond to of 196985

August 9, 2001 front page highlight. wsj today NextWave Case Reveals The Price of Progress IMAGINE A BIDDING WAR for a hot baseball prospect named Sam Spectrum that ends with a new major-league franchise, the New York Waves, giving him a $4.7 million contract. Spectrum is thrilled until the owners discover that they were overly optimistic. They can't make promised payments and file for bankruptcy. While lawyers fight, Spectrum sits idle. Then the baseball business improves, and a richer team offers him $16 million. Though the Waves shout, "Foul!" he takes the higher offer. Lawyers fight some more, and the New York Waves prevail in court. There's a rub. The Waves have Spectrum now, but that's all. They have no stadium. Sportswriters speculate that the Waves are holding out for a big-bucks settlement. Not so, they insist, as they complete architectural drawings. Then the second team dangles an offer before the Waves: We'll give you between $3 million and $5 million of the $16 million we've promised Spectrum if you let him play on our team. Any resemblance to real life is not coincidental. In real life, though, the dollars are in billions -- with a "b" -- and the losers aren't baseball fans but U.S. taxpayers and anyone who has cursed the lousy quality of U.S. mobile-phone service. NEXTWAVE TELECOM Inc. is a Hawthorne, N.Y., company that topped other bids in a 1996 Federal Communications Commission auction by offering $4.74 billion for licenses to provide wireless service in 90 markets. It had trouble raising money to build a network and sought bankruptcy-court protection in 1998, largely in an attempt to get out of installment payments it had promised to pay the FCC. In January, despite a pending NextWave lawsuit, the FCC reauctioned the same slice of spectrum, accepting a $15.9 billion from a band of big phone companies. NextWave casts itself as victim, the FCC as villain (for driving down the value of NextWave's spectrum by selling too much subsequently) and the big phone companies as "wolves in wolves' clothing." Six weeks ago, NextWave won a federal appeals-court victory over the FCC. "It is a necklace of blunders that keeps getting one bad pearl after another," says Reed Hundt, who oversaw the initial auction as FCC chairman and yanked NextWave's license when it didn't pay as promised. The big losers are people in NextWave's territories. Each of those markets has one fewer competitor offering wireless telephone and Internet service, and a slower rollout of new wireless technologies. In this business, where the U.S. is advancing more slowly than Europe and Japan, five years is a long time. While business interests jockey for advantage and the government fumbles, consumers wait. With hindsight, a few early mistakes are obvious. Even Mr. Hundt admits the design of the auction was flawed. To satisfy a congressional mandate to ensure that small companies got a seat at the wireless table, the FCC allowed them to bid now and pay on the installment plan. Since bidders didn't have to convince anyone their business plans were sound, they weren't forced to bid prudently. Caught up in a modern equivalent of the California Gold Rush, NextWave, among others, seems to have overpaid. Had the FCC insisted that bidders provide third-party guarantees of promised installment payment, as the British did later, NextWave might not have bid so much -- and the auction's outcome might have been different. COURTS MOVED SLOWLY to resolve the NextWave-FCC dispute. Congress rebuffed FCC pleas for help. Settlement efforts failed. Animosity among the parties grew. NextWave dismissed most of its 600 employees and largely became a law firm and lobbying outfit to press its claims. Re-energized by its recent court victory, it says it's beginning to build the first pieces of a network in Detroit and Madison, Wis. NextWave insists it can raise the money to pay the government and build its network, and offered details this week in a bankruptcy-court filing. But the FCC vows to carry the fight to the Supreme Court, which means more delay. So everyone might yet swallow hard, and cut a deal that cancels NextWave's debt to the government and lets well-financed rivals pay it between $3 billion and $5 billion so it can exploit the now-unused spectrum. Any deal probably means diverting billions otherwise headed to the U.S. Treasury to NextWave, a company that, whatever the legal merits of its case, essentially drove up the auction price of spectrum and didn't pay for what it bought initially. A deal would be easier to swallow if the numbers weren't so big: NextWave stands to get more than the National Park Service's annual budget. "It is galling to see a company that effectively reneged on its promises to pay the American public walk away with a multibillion-dollar windfall," says William Kennard, who was FCC chairman until earlier this year. But prolonging the legal fight is a big loser for consumers and the economy, Mr. Kennard adds. The price of progress, it seems, is sometimes very high. -- David Wessel Write to David Wessel at capital@wsj.com