WASHINGTON-What’s good for the goose should be good for the gander, commenters say, when it comes to personal communications services financial-restructuring relief offered by the Federal Communications Commission.
Forwarding an option menu to C-block winners was a good start, entrepreneurs said, but that plan also should have been offered to F-block licensees.
Petitions for reconsideration of an FCC order adopted earlier this fall regarding C-block PCS repayment terms were submitted to the commission early last week, with most in favor of the plan but wanting it to go further. As things stand today, C-block licensees have until Jan. 15 to choose one of four financial restructuring options:
Keep things status quo and resume interest payments on March 31;
Disaggregate 15 megahertz under specified terms for a reduction of any remaining debt by 50 percent;
Give back all licenses for immediate amnesty from additional payments;
Prepay debt for licenses to be retained in return for cancellation of debt for licenses surrendered, with a 70-percent credit for the down payments on returned licenses.
Cellular Holding Inc., which owns 14 F-block basic trading area licenses in six noncontiguous states, believes C-block and F-block players-as entrepreneurs and small businesses-should be treated the same. Ticking off the similarities between the C and F blocks, CHI said, “the exclusion of F-block licenses from equivalent payment options is highly prejudicial to F-block licensees who not only must meet their payment obligations but must overcome perhaps the worst head-start disadvantage faced by any wireless system operators in telecommunications history.”
Going further, CHI said many bidders would have changed their auction strategy had they known that the rules and installment-payment policies were going to be altered, with some bidding higher on some markets and some assembling different clusters.
Central Oregon Cellular Inc., an F-block winner of the San Diego BTA, is another player that advocates the goose-and-gander approach, telling the FCC that its perception without explanation that C-block financing problems “appear” to be different from those of F-block winners “cannot be justified.” Citing head-start dates enjoyed by A-, B- and C-block winners coupled with the amount of spectrum each was able to buy “serves to counterbalance the `price’ rationale raised by the commission in distinguishing between C- and F-block licensees,” it wrote.
COCI also would like the FCC to reconsider part of its buy-out option, attaching a “net present value” to each license to make up for the lack of installment payments. “Clearly, the use of NPV serves to further congressional goals. It will also further the commission’s goal of minimizing its involvement as a banker,” COCI wrote. “The commission should appreciate that, for a single licensee such as COCI, the current buy-out option offers nothing. There is simply no reason to search out private financing and to agree to the considerably higher interest rate without receiving any benefit for prepayment.”
Northern Michigan PCS Consortium L.L.C. (winner of 7 C-block BTAs) and Wireless 2000 Inc. (winner of three C-block BTAs) want the commission to modify its restructuring plan several ways. First, they want a recalculation of license prices to reflect average per-pop prices in past and current auction scenarios. If such prices were ratcheted down, carriers might be able to negotiate better with infrastructure manufacturers. The two companies say infrastructure prices have risen 40 percent from the time their input was used to put together initial business plans.
Northern and Wireless 2000 also would like to see rural BTA buildout benchmarks “relaxed” to match D-, E- and F-block requirements to cover one-quarter or provide “substantial service” within five years “and no additional showing within 10 years.” The costs of C-block BTA buildout requirements could cost many millions more and still not serve the required number of people.
Other modifications requested by the two carriers include: allowing commercial lenders to own a security interest in licenses; pushing back the March 31 interest-payment resumption date by at least two more years; allowing any company that disaggregates spectrum to rebid on that spectrum at auction; recalculating license values to NPV numbers; standardizing C-block interest rates at 6.5 percent; and postponing the Jan. 15 option election date.
C-block reseller One Stop Wireless of America Inc. in Irvine, Calif., praised the commission’s efforts to formulate the restructuring option plan but still said it will not work for most C-blockers and will only aid A- and B-block licensees already in operation.
Saying that today’s entrepreneurial businesses need “five, 10 and 15 years” to evolve, FCC rules need to be responsive to that, the reseller wrote. Congressional input into the plan by Reps. Edward Markey (D-Mass.), Tom Bliley (R-Va.) and Billy Tauzin (R-La.) should have been heeded, and new FCC chairman Bill Kennard now has the chance to put that right.
“Please, sir, reconsider the commission’s ruling to allow licensees to utilize their full down payment in the disaggregation and prepayment options, and adjust the prepayment option to reflect the NPV of forgoing installment payments,” One Stop wrote. “Additionally, we ask the commission to consider again the recommendation by the Small Business Administration Office of Advocacy to allow for short-term deferral in the submission of installment payments in combination with an extension of the five-year construction deadline or alternatively a long-term deferral with no change to the construction deadline.”
The biggest potential recipient of the restructuring plan, NextWave Telecom Inc., agreed with much of what its smaller counterparts told the commission, and it added other ideas in its petition for reconsideration. “The restructuring order imposes draconian financial penalties and restrictions on reauction participation,” it began. “This is unreasonable and unlawful.” Again, this licensee backed NPV pricing of markets, saying, “The adjustment is not a discount, and it does not reduce the bid amount in real terms. It is a standard commercial practice to make a NPV adjustment any time a debtor buys back commercial paper which includes a term payment. The adjustment yields a current note value that mirrors the alignment of creditor and debtor interests reflected in the original payment schedule.”
In addition, NextWave asked the commission for the following modifications: entire down payments should apply to disaggregation and prepayment options; surrendered spectrum should be open to any C-block player “of good standing;” the commission should clarify its amnesty buildout exceptions to reflect network investment; the Jan. 15 option election date should be deferred until after the World Trade Organization rules take effect in February, thus allowing licensees to try and attain more foreign capital; and the option menu should include a plan to allow licensees to use all capital for buildout in the near term, with repayment obligations including interest to be repaid sometime within the license term.
There are those who still believe the commission should enforce its payment rules as they were stated in the original C-block bidder’s handbook. Cook Inlet Region Inc., which owns 14 C-block and seven F-block markets, reminded the FCC that its rules “were designed to address the difficulties smaller businesses would face in competing for and operating broadband PCS systems, and that [because] a handful of larger entities placed irresponsible bids does not diminish the fairness of these provisions.” In addition, Cook Inlet asked the FCC to refuse any C-block requests to re-enter the bidding wars should relinquished licenses go on the block. “Indeed, without a cross-default policy, a bidder that acquired a market th
at it does not truly desire simply may default on its payment obligations for
that market while retaining the markets that it values more highly,” the carrier wrote.
“The handful of large bidders at the root of this matter first assured the commission that the simple deferment of payment obligations for one year would secure their ability to obtain financing, only to substitute much more dramatic demands for relief once the commission stayed [its] March 1997 payment due date,” Cook Inlet wrote. “If the commission reinstates C-block installment payment obligations as of March 31, 1998, these overextended bidders will have received the very one-year deferment for which they so forcefully argued.”
Taking a shot at NextWave, Cook Inlet pointed out that the C-block giant, despite its financial difficulties, “voluntarily entered net high bids totalling $128,971,750 for F-block licenses and accepted government financing on the balance due. Those F-block licenses had not even been granted when NextWave asked the commission to postpone the repayment of its C-block debts.”
