WASHINGTON-Whether Congress and the White House can balance the budget for fiscal 2000 this week without delving into the Social Security Trust Fund may depend on whether the Clinton administration is able to push through a plan to recover at least $3.5 billion from the re-auction of licenses held by NextWave Telecom Inc.
The legislation, which came to light last Thursday, would require the bankruptcy court to auction NextWave licenses 45 days after NextWave’s reorganization plan is confirmed. However, that reorganization plan is not NextWave’s proposal, but one submitted by the government that would require the bankruptcy court to re-auction the licenses. The bill also clarifies that the Federal Communications Commission may transfer licenses from NextWave to the highest bidder within 60 days, according to a talking-points paper about the language obtained by RCR.
The proposed re-auction plan seems to favor Nextel Communications Inc. because it may be the only company to fit all of the criteria set out. Those criteria, according to the draft language, are:
A carrier generally eligible “to hold licenses in the personal communications services (band) without regard to its status or qualifications” under the designated-entity rules.
A carrier that can comply with a rule that prohibits carriers from controlling more than 45 megahertz of spectrum in any geographic area and that wouldn’t need to transfer licenses in some markets to comply with the spectrum cap.
And a carrier that “agrees to pay a minimum of [$3.5 billion] to the United States Treasury in consideration of transfer or assignment of the licenses in accordance with the terms of this section.”
Nextel has twice before been rejected when it applied for DE status. The FCC said in an August agreement it would grant Nextel a waiver from DE status if Nextel were to buy NextWave’s licenses for $2.1 billion.
The spectrum-cap requirement cuts out most, if not all, of the large nationwide carriers.
Finally, Nextel also would be able to meet the financial requirements of the legislation. Nextel recently created a large coffer through stocks, bonds and credit lines. Nextel negotiated a new $5 billion credit line; raised $2.4 billion in a stock offering; and solicited an additional $2 billion in the bond market.
NextWave was shocked at the legislation.
“Proponents of the new legislative proposal are taking a cynical gamble that Congress’ need to secure funds to balance the FY 2000 federal budget is so great that members [of Congress] are willing to trample NextWave’s property rights. It would be wrong to balance the budget on NextWave’s back by adopting a sweetheart deal that benefits only Nextel,” NextWave said in a statement.
NextWave also threatened to take the issue to the courts. “The proposal, if adopted, will generate litigation that will tie up the licenses for years. Taxpayers won’t benefit, and consumer welfare will suffer while the spectrum lies fallow,” NextWave said.
Although the FCC reportedly backs the legislation, the agency would not comment.
“Unless they denounce the legislation, only people who believe in the tooth fairy would believe the FCC has nothing to do with this,” charged NextWave.
Nextel’s favorable standing in the legislation continues a saga that began Aug. 10 when Nextel announced it had a deal with the FCC and the Department of Justice to buy NextWave’s licenses.
However, it is not a slam dunk to get this legislation into the budget. House Majority Leader Dick Armey, (R-Texas) consistently has opposed all attempts to re-auction licenses of bankrupt operators. Another bankrupt operator, Metro PCS, is located in Texas.
On Nov. 4, Armey was joined by nine other members of Congress from both parties in sending a letter to the president urging him not to use the C-block to balance the budget.
In budget negotiations, seven days is a lifetime, and since Metro PCS would not be negatively impacted by the legislation, it was unclear at press time whether Armey still opposes such legislative attempts.
If Armey opposes the bill, he may get some outside help from wireless carriers upset at the proposed language.
Vodafone AirTouch plc, which questioned the FCC/Justice Department/Nextel deal, said, “The re-auction of any C-block spectrum will only create value either for the treasury or the marketplace if all parties can participate in the re-auction.”
CTIA also said it would fight the amendment.
“We will oppose [the proposed legislation] based on process and procedure. An auction like this needs to be inclusive … We have said all along that the FCC shouldn’t cozy up to one company,” said Steven K. Berry, CTIA senior vice president for congressional affairs.
