WASHINGTON-The FCC’s Wireless Telecommunications Bureau appears willing to remove some, if not all, of the small business restrictions on the licenses it reclaimed from NextWave Telecom Inc.
This during the same week a House subcommittee signaled it would pass legislation returning the licenses to NextWave if an appeals court agrees with the Federal Communications Commission.
An end to designated entities?
A move to remove the designated-entity requirement could add yet another legal cloud over the licenses, which already are subject to litigation in the U.S. Court of Appeals for the 2nd Circuit.
“We have always been concerned with short-range spectrum planning. This is not spectrum planning; it is spectrum ad-hocism at its worst form to announce a re-auction, to announce and invite comment on upfront payments and still not know who is eligible,” said Brent Weingardt, vice president for government relations for the Personal Communications Industry Association.
The FCC appears to want re-auction rules in place before the May 8 deadline for short forms in the 700 MHz commercial auction.
Many DEs and members of Congress believe the rules do not need to be changed.
“We are comfortable that the major players on the Hill continue to support the set aside so we are not sure where the [FCC] is heading here,” said Weingardt.
In recent weeks, the FCC has received letters from key members of Congress seeking to sway the agency on how it should proceed with the scheduled re-auction of NextWave’s 90 C- and F-block licenses. Most of the letters attempted to persuade the FCC to keep the re-auction restricted to designated entities. Rep. Billy Tauzin (R-La.), chairman of the House telecommunications subcommittee, recently weighed in on the side of the DEs as have some members of the Congressional Black Caucus.
Larger telecom carriers want access to the spectrum to add network capacity and prepare for third-generation wireless services. Sprint Spectrum L.P. and U S West Wireless L.L.C. have petitioned the FCC to divide the 30 megahertz C-block licenses into three 10 megahertz licenses; authorize non-DEs to bid for these 10 megahertz C-block licenses, the 15 megahertz C-block licenses and the 10 megahertz F-block licenses; and provide DEs with bidding credits.
Comments on the petition are due today. No reply comments are allowed.
Simultaneous with the petition filing, WTB staff have been briefing commissioners’ offices about a proposal-apparently endorsed by Chairman William Kennard’s office-that would allow all carriers to bid on licenses in markets above 2 million pops. Markets smaller than 2 million pops would be restricted to DEs.
DEs don’t like it.
“Our first choice would be to stick with the original rules. There is really no cause to make these changes … It isn’t broken, don’t try to fix it,” said Dan Pegg, senior vice president for public affairs with Leap Wireless International Inc.
“We recognize that there are tremendous pressures from all sides … We are not opposed to discussing various proposals, but maintaining spectrum for small businesses is absolutely paramount,” said Russell Wilkerson, director of corporate affairs for TeleCorp PCS Inc.
Twenty-three of NextWave’s licenses, including New York, San Francisco and Kansas City, Mo., would fall into the all-comers category and 67 licenses in the DE-only category.
Sprint and U S West’s proposal-which does not call for any restrictions-is also in play. Under that plan, the FCC would not have to waive or modify spectrum-cap rules.
Even without policy changes, the process is expected to come under fire from NextWave. At press time, the company was drafting comments that question the FCC process.
Regulator vs. creditor
While the FCC is gaining friends in the Senate, it was under attack in the House last week. The House Judiciary commercial and administrative law subcommittee held a hearing at which the FCC and the Department of Justice were forced to defend the FCC’s cancellation of the NextWave licenses. The agencies said they could cancel the licenses under a regulatory agency exception in the Bankruptcy Code.
This argument did not seem to impress members of the subcommittee, who believe the exception should not be used for creditor matters.
Rep. Lindsey Graham (R-S.C.) likened the licenses to mineral rights. If the licenses are not part of the estate, he said, how would anyone obtain financing?
“If I was a judge, I would throw you out on your ear … What you are trying to do here is say that because you regulate,” you are different from a creditor, Graham commented. If agencies on a whim can shut down a business, no business would be able to function, he continued.
Rep. Jerrold Nadler (D-N.Y.), ranking member of the subcommittee, also said he was appalled by the government’s actions.
“This kind of thing is dangerous. The more I hear, I am appalled,” he said. “It says that no company can reorganize … Who would ever lend them money?”
The subcommittee also was upset the FCC has been working with the Senate Appropriations Committee to get language that would allow it to cancel the licenses of bankrupt C-blockers.
“I think the language should be written by this subcommittee rather than the appropriations committee,” said Rep. John Conyers Jr. (D-Ga.), ranking member of the House Judiciary Committee.
The FCC responded by saying it had attempted to work with the House Judiciary Committee as far back as 1997 but did not receive a positive reception. FCC staff later confided they had blanketed the Hill with a letter looking for support and then began working with interested senators.
A panel of bankruptcy experts testified the FCC acted as a creditor, not a regulator, in taking back the licenses.
“This problem is relatively simple. Would the agency be doing what it is doing if it wasn’t owed any money?” asked Douglas G. Baird, vice chairman of the National Bankruptcy Conference.
Delaying the auction
In other action, FCC Commissioner Harold Furchtgott-Roth said the agency should delay the re-auction until all legal clouds have been lifted.
“I think the auction definitely should be delayed so we have a clear understanding of the legal issues,” he said. “There is a long and sad history of how this agency has dealt with C-block and F-block. It is not a happy history.”
