WASHINGTON-The Federal Communications Commission again this year is hoping Congress will
pass legislation so it does not have to fight to get back wireless licenses from bankrupt companies.
Legislation to
exclude communications licenses from bankruptcy estates has been included in the president’s budget, said Ari
Fitzgerald, wireless legal adviser to FCC Chairman William Kennard. “If you bid on a license, you should pay
what you bid. You should not be able to use bankruptcy to not pay your debt to the federal taxpayers and then hoard the
licenses instead of providing service to the public,” Fitzgerald said in describing the motivation behind the
legislation.
This is the same legislation the Clinton administration and the FCC attempted to get passed in the 105th
Congress. The administration failed in the waning days of the session when the House leadership refused to accept the
language.
It is unclear what, if any, support such legislation has today. However, any such bill likely will have to
wait a long time before it is considered in either house because of the president’s impeachment trial.
Even without
the trial, the FCC’s bankruptcy legislation may be wishful thinking. Such legislation never was introduced as a separate
bill in the 105th Congress and only appeared in the conference on the 1999 budget. Many telecom insiders suspect the
FCC has had little success in trying to find someone to introduce the legislation.
In court
With such a rough road
ahead for bankruptcy legislation, the government is forced to fight in bankruptcy courts across the country.
The
fights stem from the 1996 C-block personal communications services auction debacle. Pocket Communications Inc.
was the first company to declare bankruptcy, owing more than $1 billion for 43 licenses.
Although this dispute
seemed to be over in November, the Pocket estate recently filed a settlement that could re-open the matter. Pocket’s
proposed settlement would allow the administrative claims and the unsecured creditors to be paid, and the Debtors in
Possession lenders to continue their fraudulent conveyance litigation.
Industry watchers thought this portion of the
trial had been completed in November when Judge E. Stephen Derby allowed Pocket to elect to return some of the
licenses to the FCC and sell the others to pay off the administrative claims. The unsecured creditors and the DiP
lenders, it seemed, would get nothing.
This did not sit well with the DiP lenders-Pacific Eagle Investments Ltd.,
Masa Telecom Asia Investment, Ericsson Inc. and Siemens Information and Communications Networks Inc.-which
Jan. 14 filed papers claiming to have reached a different settlement with the unsecured creditors and the rest of the
Pocket estate, including Daniel Riker, the former owner of Pocket.
“The election was an improper exercise of
the debtors’ business judgment and sacrificed valuable estate assets for minimal consideration,” said the DiP
lenders.
Riker apparently went along with the DiP lenders’ plan even though the November ruling allowed him to
get out of the mess. “This was something that was proposed by our creditors … the creditors are the party who we
have the primary duty to,” Riker said.
If Derby accepts the settlement, it is expected the FCC will say it has
terminated the licenses and taken them all back for re-auction on March 23.
The FCC refused to comment on the
Pocket settlement. A hearing is set before Derby on Feb. 12.
In the other high-profile C-block bankruptcy case
involving Next-Wave, the FCC in December lost its bid to have the case thrown out. “The basic defect in the
FCC’s argument is that Congress did not confer upon the FCC the power to determine unilaterally its own rights as a
creditor in competition with and to the detriment of other creditors. A fundamental objective of the bankruptcy code is
to ensure fairness and equal treatment among creditors whose claims may vastly exceed the assets of the debtor, as in
this case,” said Adlai S. Hardin Jr., judge in the NextWave case.
The NextWave case is expected to go to trial
in April.
