WASHINGTON-NextWave Telecom Inc., whose subsidiary NextWave Personal Communications Inc. is bidding in the C-block personal communications services auction, wants to pin the Federal Communications Commission down as to how participants acting as “fronts” will be treated if a ruse is discovered and proved.
In a Feb. 29 letter to FCC Wireless Telecommunications Bureau Chief Michele Farquhar, company attorneys wrote, “NextWave and other applicants in this auction find themselves bidding against some entities whose bids exhibit very substantial resources, but whose Form 175 do not disclose any source of funding. Without commission involvement, NextWave cannot ascertain whether these entities are meeting the requirements of the commission’s rules or whether some of their investors are undermining the auction through unlawful reliance on `fronts’ in contravention of the commission’s rules. Needless to say, the actions of such fronts would threaten the integrity of the auction.”
NextWave, headed by Janice Obuchowski and Allen Salmasi, put down one of the largest deposits to participate in the C-block auction, and it has bid aggressively on several major markets, including New York City, for which a bidding war with North Coast Mobile Communications Inc. has ensued. Although no company names were mentioned in the letter, it is clear to auction followers that North Coast-which could be partnering with cable giant Cablevision after the auction ends-is part of NextWave’s concern. North Coast currently holds New York City with an $857.9 million bid.
While it would be perfectly legal for Cablevision to hold up to a 49.9 percent share of North Coast, such equity agreements were supposed to have been disclosed on the Form 175.
The commission was asked to take three steps immediately to ensure that the auction will not be disrupted by disengenous parties:
Investigate via subpoena or other enforcement device, bidders who submitted Form 175s that showed no financial resources. “It cannot escape the commission’s attention that this auction is exceeding all projections,” NextWave wrote. “At the same time, many bidders have staked their careers, their finances and their investors’ finances on the opportunity promised by this auction.”
Clarify how “bad actors” will be punished, perhaps including the possibility of license revocation. “We believe the commission should commit to full prosecution, not only of the putative applicants but of any companies found to be operating through these fronts, including substantial fines, removal of licenses and criminal referral as necessary,” NextWave added.
Allow any licenses taken back from errant companies to be bought by the next-highest bidder. According to NextWave, too many delays already have put C-block bidders in a catch-up position in relation to existing wireless carriers operating in the marketplace. “This delay … could be a death knell in those markets which must be re-auctioned,” NextWave wrote. “In NextWave’s case, delay in re-auctioning would jeopardize the commitment of some NextWave investors in its PCS business.”
Because such a clarification would have an effect on the bidding process, NextWave asked the commission to make a decision soon, even if the auction must be suspended temporarily to do so.
“NextWave understands that the commission’s resources are limited, but the commission must act now so that all the resources that went into designing an auction that could be exemplary in promoting competition, entrepreneurship and small business interests not be wasted,” NextWave said.
NextWave spokesman Kevin Christiano said, “Nothing in particular pushed us over the edge, but we were concerned about the integrity of the auction. There are companies out there that have not been as forthcoming as we have.”
