WASHINGTON-In a stunning turnabout, a federal appeals court in New York last week sided with the Federal Communications Commission and reversed a lower court ruling that had approved a bankruptcy judge’s decision to lower NextWave Telecom Inc.’s payment for personal communications services licenses from $4.7 billion to $1 billion.
“The judgment of the United States District Court for the Southern District of New York, affirming the judgment of the bankruptcy court, is reversed, and the bankruptcy case is remanded for further proceedings,”said the U.S. Court of Appeals for Second Circuit in a one-page notice.
Last Wednesday’s ruling, which surprised many as official Washington readied for Thanksgiving, was issued by Circuit Judges Joseph McLaughlin, Dennis Jacobs and Robert Sack.
Because the court’s opinion was not immediately available-yet is expected to be released this week-it could not be determined why the appeals court ruled as it did and what it means for the legal struggle between the FCC and NextWave. NextWave bought 95 PCS licenses at a 1996 FCC auction before filing for bankruptcy in June 1998.
Even so, the Second Circuit’s ruling is not good news for NextWave. NextWave, having bested the FCC in court up to now, was poised to emerge from bankruptcy. The firm had rounded up fresh financing to implement a business plan emphasizing wireless Internet access. That still could happen.
On the other hand, depending on how the opinion is written, NextWave’s very existence as a commercial entity may be in jeopardy.
“NextWave will examine the court’s opinion when it is available before reviewing the company’s options and deciding what next steps are appropriate,” the firm stated.
The spotlight now shifts back to the bankruptcy court in New York, which to date has not looked kindly on the FCC and its legal arguments. The bankruptcy court previously ruled the FCC-owing to regulatory delay and other factors-is to blame for the massive depreciation in the value of NextWave’s wireless licenses.
“This is a very encouraging development and the chairman [William Kennard] looks forward to receiving the opinion,” said an FCC spokeswoman.
The New York federal appeals court ruling came just days after NextWave narrowly escaped efforts in Congress-driven by the administration, Nextel Communications Inc. and others-that would have let the FCC reclaim NextWave’s licenses and either re-auction them or sell them to Nextel.
The bankruptcy provision, which ultimately died in the final hours of budget negotiations between the White House and Congress, came close to becoming law because it would have provided more than half of the $6 billion shortfall President Clinton needed to fund fiscal 2000 budget priorities. Budget negotiators ended up finding the money elsewhere, and Congress has adjourned for the year.
A Nextel spokeswoman said the Reston, Va., firm could not comment because of a gag order imposed by the New York bankruptcy judge overseeing the case.
Nextel has aggressively lobbied for NextWave spectrum because, according to some, the firm’s current spectrum position is too weak to support third-generation, Internet-friendly wireless data services.
Washington reporter Heather Forsgren Weaver contributed to this report.
