WASHINGTON-The Federal Communications Commission and bankrupt NextWave Telecom Inc. today signed an agreement that would require NextWave to continue to divest the majority of its spectrum holdings following a recently completed sale of licenses to Cingular Wireless L.L.C.
“After eight long years, we can finally end the litigation and begin the innovation. This landmark agreement takes valuable spectrum resources out of the courts and will put it in the hands of consumers who can finally use it,” said FCC Chairman Michael Powel. “Making additional next-generation wireless services available is good for the economy and good for broadband deployment. Ending one of the most hotly contended legal battles with a commercial solution that results in over $4 billion in value to taxpayers makes this settlement a success for the American people.”
The details of the agreement were not released but sources said that as part of the agreement, the FCC would receive more than $4 billion in both cash and licenses. In addition, NextWave has agreed to sell more spectrum-that will be at least 90 percent of its holdings including the Cingular sale.
Also, in the event that NextWave sells or leases any of the retained licenses before Feb. 14, 2007, the FCC will get a portion of the proceeds above certain target levels, which represent an increase in value.
A global settlement has long been anticipated following NextWave’s decision to sell licenses for 34 markets to Cingular for $1.4 billion. NextWave and Cingular announced the proposed sale last summer. Bankruptcy Judge Adlai S. Hardin Jr. approved the sale last fall and recently the FCC approved the license transfer.
Cingular paid the FCC $714 million of $4.7 billion NextWave still owes the government following a five-year litigation saga. The licenses gave Cingular spectrum in major markets, including Los Angeles, Chicago, San Francisco, Dallas, Houston, Washington, D.C., Atlanta, Boston, San Diego and Baltimore. The licenses-some of which are slices of the 30-megahertz licenses won by NextWave in 1997-cover 83 million potential customers.
NextWave still holds the rights to spectrum in 81 markets.
The Supreme Court said on Jan. 27, 2003, that NextWave could keep its licenses.
In an 8-1 ruling, the Supreme Court agreed with the U.S. Court of Appeals for the District of Columbia Circuit that the FCC could not take back NextWave’s licenses because they were protected by the Bankruptcy Code.
Congress has at various times tried to pass legislation to fix the conflict between the Communications Act and the Bankruptcy Code but has never succeeded.
Powell said the FCC learned its lesson from the NextWave/C-block debacle and will no longer auction off licenses using installment payments. He said this was unfortunate because the agency should create mechanisms to encourage small-business and minority spectrum use.
The Supreme Court decision ended nearly five years of litigation that began when NextWave filed for bankruptcy on June 8, 1998.
After a bankruptcy judge lowered the amount that NextWave owed to the government, the government won favorable rulings by the U.S. Court of Appeals for the 2nd Circuit, but that appeals court said it could not rule on whether the FCC could revoke NextWave’s licenses. The FCC claimed in January 2000 that the licenses cancelled in October 1998 when NextWave failed to make its installment payment. NextWave said the licenses were protected by the Bankruptcy Code.
