WASHINGTON-The Federal Communications Commission, as expected, last week rejected a request by bankrupt NextWave Telecom Inc. that the FCC reconsider its Jan. 12 decision to cancel its licenses and re-auction them. The FCC also set the re-auction for Dec. 12.
Meanwhile, the FCC found itself defending its decision to allow most of the original C-block licensees to restructure their debt and, in most cases, give back at least a portion of their licenses and pay for their remaining licenses with their auction down payments.
U.S. Airwaves Inc. and Sprint PCS argued before the U.S. Court of Appeals for the District of Columbia Circuit that they were harmed when the FCC allowed C-blockers to restructure their debt rather than defaulting and, in the case of U.S. Airwaves, making their licenses available for re-auction; and, in the case of Sprint, relieving them of debt.
To illustrate Sprint’s contention, the parties pointed to Omnipoint Corp. (now owned by VoiceStream Wireless Corp.) which saw its debt reduced by $300 million.
“Omnipoint is a good example. They were able to clean up $300 million of debt obligations,” said Robert A. Long, Jr. counsel for U.S. Airwaves and Sprint.
Whether U.S. Airwaves would have bid on any of the licenses if they had been canceled by the government was questioned by both the government and NextWave who pointed out that U.S. Airwaves returned the money to its investors and did not participate in the re-auction in March 1999.
Long said U.S. Airwaves could not participate because it was involved in the litigation. U.S. Airwaves has submitted to the court an affidavit claiming it is considering and willing to participate in the upcoming re-auction. Sprint is also able to participate in the re-auction due to a recent rules change made by the FCC that allows large companies to vie for licenses once reserved for small businesses.
U.S. Airwaves has also satisfied a dispute with the state of Delaware which NextWave used in both briefs and in court that NextWave said proved that US Airwaves is not a viable company. Long later told reporters that the dispute was settled for less than $1,000.
It is unclear what will happen if the D.C. Circuit rules in favor of U.S. Airwaves and Sprint. Long said the appeals court would probably send the matter back to the FCC for remedies. The licenses that were re-auctioned in 1999-many of which are being built out by such companies as Leap Wireless International Inc.-were conditioned on the outcome of this litigation.
The prospect of NextWave being on the same side as the government was good theater given the rancor that has existed between NextWave and the government since NextWave chose bankruptcy instead of the restructuring options under attack.
NextWave said that it joined in the case to make sure that the court did not make statements that would prejudge its case when it is presented to it.
“We want the court to rule on the narrow grounds that everyone had notice before the auction about restructuring. The FCC’s brief is an attempt to lure the court to make sweeping pronouncements on the C-block. The court should rule on the facts of this case and not make sweeping statements that are unnecessary to resolve this case but might spill over harmfully to other cases,” said Michael Wack, NextWave deputy general counsel.
The NextWave matter will soon be before the D.C. Circuit again following the FCC’s action to reject NextWave’s reconsideration petition.
The “FCC action is disappointing but not a surprise. The record in this case unambiguously establishes that the purported cancellation of NextWave’s licenses last January was unlawful. Commission review presented a good opportunity to end the litigation. … It is unfortunate that the proceedings will now have to move to another round of litigation. … NextWave will now move to a forum where we can get a fair review of the issues,” said Wack.
