BOISE, Idaho-One way to solve the capital crisis facing wireless companies today would be for the Federal Communications Commission to void the re-auction of bankrupt NextWave Telecom Inc.’s PCS C- and F-block licenses, the president of Verizon Wireless Inc. told the nation’s governors on July 15.
“The federal government can take one specific action today to ease the capital crisis for our industry. Eighteen months ago, we and others agreed to pay nearly $16 billion in an auction to get spectrum that the [Federal Communications Commission] took back from a start-up company. But a court ruled that the FCC’s auction was illegal, and told it to give the spectrum back to the original company. The FCC complied-but did not free us from the $16 billion commitment. . When FCC Chairman [Michael] Powell was appointed to the President’s Corporate Fraud Task Force last week, he confirmed how critical it is for government to act on the severe capital crisis straining the telecom industry. One action the government can take today is to remove the $16 billion liability hanging over the wireless industry. If the FCC ever gets the spectrum back, it can re-auction it then,” said Denny Strigl, Verizon Wireless chief executive officer.
Strigl made his comments during a speech to the National Governors’ Association.
Verizon Wireless, in speeches made by Strigl and in court filings, has said the January 2001 re-auction of NextWave’s licenses should be re-wound. The FCC has agreed to give back the bulk of the deposit money from the auction while it waits for the U.S. Supreme Court to rule whether communications law trumps bankruptcy law. The Supreme Court is expected to hold oral argument in the case in the fall with a decision early next year.
Taxes are a big problem for the wireless industry, said Strigl. “Wireless prices are down 32 percent in the last four years alone. Yet, sales and use taxes and fees imposed on wireless consumers add nearly 18 percent to the average consumer’s monthly bill nationwide. In some states, it’s much higher: in New York, for example, wireless taxes add almost 23 percent and in Florida, they add almost 25 percent. . The tax discrimination is most startling when you compare wireless to the Internet. We are both high-tech, job-creating industries. Yet, Congress imposed a moratorium on all state and local taxes on Internet access services, while wireless services are taxed at levels comparable to liquor and tobacco,” he said.
To stem the tide of state taxation, Strigl warned the governors that it-the nation’s largest wireless company-would start more aggressively lobbying at the state level.
“My industry has not done a good job in communicating with you and your states on how this issue impacts your constituents. We’ve been more focused on building our business and on federal policies. You will be hearing more from us,” said Strigl.
