WASHINGTON-At the root of two remaining legal battles from the personal communications service C-block debacle is one word-money.
If the Federal Communications Commission is not after money, it should not care what a New York bankruptcy judge ruled, says NextWave Personal Communications Inc.
If Omnipoint Corp. and VoiceStream Wireless Corp. want to merge and save money from litigation expenses, it should settle with National Telecom PCS Inc., was the message Omnipoint derived from a letter warning of additional FCC action sent to the companies last month by NatTel.
NextWave
The NextWave case continues in federal court this week as NextWave and the FCC argue whether Judge Adlai S. Hardin Jr.’s June 14 ruling destroys the integrity of the FCC’s auction and could allow others in future auctions to get out of paying the government what the government is owed.
“Future FCC auction bidders may well be encouraged by NextWave’s strategy to make unreasonably high bids-or even bids that they have no intention of paying-in hopes of having their obligations subsequently reduced in bankruptcy,” said the FCC in its brief.
The FCC, believing that its regulatory role means it is not subject to bankruptcy law, last month appealed the ruling that lowered the amount NextWave must pay for its 63 licenses from $4.74 billion to just over $1 billion.
In briefs filed with the court, the case basically comes down to whether bankruptcy or communications law carries the greater weight. If bankruptcy law is supreme, then the FCC is just another creditor. If communications law is supreme, then NextWave must pay the full amount it bid to protect the integrity of the auction process.
A decision in this case is expected before the end of the summer.
Congress ultimately could decide that indeed communications law is supreme.
The Senate commerce appropriations subcommittee included language in the FCC’s funding bill that would allow it to take back licenses tied up in bankruptcy, including licenses held by NextWave and General Wireless Inc., which also had the value of its licenses reduced by a bankruptcy judge in April 1998. The full Senate Appropriations Committee accepted the language and the bill is awaiting action by the Senate.
Similar language has not yet been included in the House version of the FCC’s funding bill. What happens in the House could be important for the bill since similar legislation was pulled last year by House Majority Leader Richard Armey (R-Texas).
VoiceStream vs. NatTel
NatTel on June 30 filed a supplement to the petition to deny it filed June 3 with the FCC, claiming it owns licenses that Omnipoint and VoiceStream won at the recently completed re-auction.
NatTel’s supplement claims Omnipoint and VoiceStream violated the FCC’s anti-collusion rules. Omnipoint responded NatTel is only after money, and uses a letter from NatTel to Douglas G. Smith, president of Omnipoint subsidiary OPCS Three L.L.C., as evidence.
“NatTel’s claims, in sum, are that NatTel is the rightful owner of all PCS licenses currently or formerly held by DCR … in order to avoid costly and time-consuming litigation … NatTel hereby, offers to accept, in full settlement of any and all claims regarding the DCR licenses won by your firm in the re-auction an amount equal to 10 percent of your firm’s total net bid for the DCR licenses [or] $3,098,590,” states the letter.
VoiceStream’s response to NatTel’s charges of collusion shows what some analysts had suspected. Omnipoint and Western Wireless Corp.-which spun off VoiceStream on May 3-had been talking before the Feb. 12 cutoff date.
“There is no question that Western had discussions with Omnipoint prior to Feb. 12,” stated John W. Stanton, chairman and CEO of both Western Wireless and VoiceStream.
However, both Stanton and Omnipoint’s Smith categorically deny that any communications-about auction strategy or anything else-occurred during the no-talk period of Feb. 12 to May 5.
During this period, according to FCC anti-collusion rules, communications concerning bid strategy was forbidden between competing bidders that have chosen the same markets on their short form.
Charges of collusion are rare, and the FCC is expected to investigate the matter but that doesn’t mean Omnipoint and VoiceStream won’t get their licenses. Instead, the FCC has a variety of enforcement tools-including taking no action-at its disposal. Additionally, the Department of Justice could investigate violations of the anti-collusion rule.
In its response, Omnipoint says the NatTel charges are frivolous and disingenuous, and should be stricken from the record.
NatTel’s supplement “contains no evidence, old or new. Rather, it consists only of supposition, conjecture and unsubstantiated ravings from the fertile imagination of Jack E. Robinson, the president of NatTel,” Omnipoint said in its response filed at the FCC last week.
Additionally, the FCC should make an example of NatTel and sanction the company, Omnipoint said. Omnipoint “concluded in its opposition [to NatTel’s original petition to deny] by suggesting that demanding money in return for withholding the filing of frivolous claims is exactly the type of abuse of process that should lead the [FCC] to consider sanctions … the [FCC] should consider seriously whether, as a matter of policy, an example needs to be set,” Omnipoint said.
NatTel argues that since Omnipoint and VoiceStream later announced a merger, there must have been something afoot during the auction. The company released a statement announcing the filing of the supplement that details what it believes to be the conspiracy.
“VoiceStream won Chicago in round 13 with a bid of $157.2 million, whereas Omnipoint was the previous high bidder in round 12 with a bid of $131 million. However, Omnipoint won St. Louis in round 14 with a bid of $17.2 million, and the previous high bidder was VoiceStream in round 8 at $15.6 million … VoiceStream was allowed to win Chicago in round 13, and Omnipoint was allowed to win St. Louis in round 14,” NatTel said in its statement.
