Wholesale Channel: NextWave, FCC Settle Dispute Over PCS Licenses

Posted: 1/2002

Wholesale Channel

NextWave, FCC Settle Dispute Over PCS Licenses

By Khali Henderson

NextWave Telecom Inc. announced Nov. 16 it had reached an agreement with the Federal
Communications Commission (FCC), the U.S. Department of Justice (DOJ) and numerous wireless service providers to resolve a long-standing dispute over PCS licenses the would-be carrier’s carrier held.

The agreement calls for NextWave to sell C and F block licenses it won in 1996 to the wireless carriers that won them at a federal government re-auction last January.

So, the Auction 35 winners — Verizon Wireless, AT&T Wireless and VoiceStream Wireless Corp. — will pay the FCC roughly the $16 billion they had bid, and the commission will pay NextWave for the licenses.

The agreement requires Congressional action and the approval of the bankruptcy court overseeing NextWave’s Chapter 11 reorganization.

In a press statement, FCC Chairman Michael Powell said the government would net about $10 billion out of the deal — $6 billion less than from the second auction but twice what it would have gotten if the NextWave would have kept the licenses in accordance with court rulings.

Last summer, the U.S. Appeals Court for the D.C. Circuit ruled the FCC had wrongfully seized the NextWave’s licenses after NextWave defaulted on payments after the carrier filed for bankruptcy protection in 1998. NextWave had paid only $500 million of the $4.7 billion it bid for the licenses.

“The commission has fought aggressively for years to recapture these licenses, insisting they were public assets that could not be held by private company (and insulation from repossession in bankruptcy) that did not comply with the terms of the auction,” said Powell in a press statement. “Regrettably, the D.C. Circuit [Court] has interpreted the law differently, and without a prospective legislative change, the public will bear the risk in future auctions.”

Powell said the deal serves the public interest by getting the license out of litigation and into the market. The additional spectrum will allow the large wireless companies to fill gaps in overcrowded markets, such as New York, Los Angeles, Chicago, Seattle, San Francisco, Washington and Philadelphia.

Denny Strigle, CEO of Verizon Wireless, the company that will gain the majority of the disputed licenses should the deal go through, said the settlement was good for the government and wireless operators.

“The federal treasury receives significant revenue, while Verizon Wireless and other winning bidders get the licenses we wanted, at a price we are willing pay,” he said in a press statement, noting that the company would use the licenses it won to add capacity and roll out advanced services.

Once the deal receives the necessary approval, NextWave says it intends to file a new reorganization plan. It had filed Aug. 6, with the U.S. Bankruptcy Court for the Southern District of New York, providing total financing of approximately $5 billion.

The company plans to continue building its network in all 95 of its licensed markets until the settlement becomes fully effective. Those markets include five D and E block auction licenses that are not part of the settlement agreement.

The most extensive of its construction efforts is in two of the D and E block markets, Detroit and Madison, Wis., where the company anticipates launching commercial service during the first half of this year.

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