WASHINGTON-The House and Senate left town Friday without giving the wireless industry its Christmas present-legislation codifying the settlement to end the bankruptcy of NextWave Telecom Inc.
As wireless lobbyists all over town wondered how they could have gotten the legislative equivalent of a lump of coal, a realization hit: What happens now?
“Nobody has talked about alternative strategies,” said Daniel O. Pegg, senior vice president of public affairs for Leap Wireless International Inc.
While some analysts-who have long told clients that wireless carriers such as Verizon Wireless Inc. would get the NextWave spectrum-continued to hold onto the belief that the parties to the settlement would not walk away, there was the acknowledgement that come Jan. 1, they might do just that.
Other analysts believe the deal is dead.
“We believe the terms of the current agreement are unlikely to be extended beyond Dec. 31, given industry impatience, finances and continuing legislative uncertainties. … There may still be a deal that gives the wireless giants access to the NextWave spectrum, but it would likely take awhile and have different terms,” said Blair Levin, former FCC chief of staff now with Legg Mason Equity Research.
Congress is not expected to return until Jan. 23 and it might be March before the Senate holds hearings on the issue.
A senate source said that hearings on the NextWave settlement are expected early next year, but whether it would be soon enough to keep the parties in line remained in doubt.
House Speaker Dennis Hastert (R-Ill.) signaled the death of the NextWave legislation this session when he told reporters on Thursday morning, “If it’s a good deal today, it’ll be a good deal” after the first of the year.
Re-auction winners had pressed until the very end for Congress to pass the legislation. Late Wednesday, every member of Congress received a letter signed by the chief executive officers of five of the re-auction winners.
“The economic benefit of the NextWave settlement is further reflected in a comparison of the possible alternatives. The NextWave settlement will bring $10 billion into the U.S. Treasury; most if not all of which is expected in this fiscal year. This stands in stark contrast to what the government would receive from NextWave if it retains the licenses-the government would be entitled only to receive the remainder of the amount originally bid by NextWave, $4.7 billion, and paid over multiple years at a present value significantly less than this total,” said the letter.
The death of the legislation was mainly the work of the leadership of the Senate Commerce Committee.
As chairman of the Senate Commerce Committee and a member of the Senate Appropriations Committee, Sen. Ernest F. Hollings (D-S.C.) was a powerful foe. He was joined in his opposition by Sen. John McCain (R-Ariz.), ranking member of the Commerce Committee.
“This private, back-room settlement is fundamentally at odds with telecommunications law and has been presented to us at the 11th hour. The unmitigated gall of the proponents of this deal is appalling,” said Hollings in a “Dear Colleague” letter on Dec. 6.
“This thing would have happened but for one man,” said a wireless industry source who declined to be named.
“We are gratified that Congress was able to step back and not adhere to anyone’s schedule,” said Steven M. Roberts of Eldorado Communications L.L.C.
Roberts had urged the House Judiciary subcommittees during a Dec. 6 hearing to amend the legislation to make whole other carriers that won licenses in the 1996 C-block auction, but chose to give them back in a 1998 FCC-approved restructuring plan rather than take bankruptcy.
Roberts said $1 billion of the $6 billion that was set to be paid to NextWave could be given to the 75-80 licensees that did not go into bankruptcy.
Both NextWave and Verizon seemed to revert back to their old postures, even as they thanked Congress for what it didn’t do.
“NextWave greatly appreciates the efforts of the many members of Congress who supported the proposed settlement agreement. As the congressional hearing and extensive legislative debate concerning the settlement agreement made clear, consumers will be best served by ending pending litigation and putting NextWave’s licenses into productive use as quickly as possible. NextWave has continued to construct its wireless network during the settlement proceedings, and we will be in a position to start providing service to the public in the new year,” said Michael Wack, NextWave’s senior vice president and deputy general counsel.
“Verizon Wireless appreciates the work of the Congress on this issue. We regret that Congress was unable to provide a legislative endorsement of the agreement prior to completing the 2001 session. As a result, America’s wireless consumers will be denied the benefits that the prompt use of the spectrum would have afforded them. We thank [FCC] Chairman [Michael K.] Powell and all the other parties for their efforts to resolve the NextWave issue. We will continue to work to secure sufficient spectrum to meet the increasing needs of our customers,” said Verizon Wireless CEO Dennis F. Strigl.
The Federal Communications Commission declined to comment.
Both Verizon and the FCC previously signaled they were willing to walk away from the settlement.
After he appeared at a House telecommunications subcommittee hearing on Dec. 11, Powell told reporters that if Congress did not approve the deal by the end of the year, the commission might need to become a litigant as the Supreme Court appeal process moves forward.
Strigl also said at that time that his company could use the $8.8 billion it bid for NextWave’s licenses on other projects and it would have to begin looking at those options after Jan. 1 if legislation did not pass.
“The settlement is very fragile and if Dec. 31 comes and goes without the enacting legislation, there is no certainty it can be put back together,” said Strigl.
It was thought that NextWave would have a chance to signal its position this Friday when it was scheduled to go before Bankruptcy Judge Adlai S. Hardin Jr., but whether that hearing will now occur is in doubt.
Walking away from the settlement could mean that the NextWave litigation could go on for at least two more years.
First up would be the Supreme Court appeal by the government, which has been on hold while the parties tried to reach a settlement to end the litigation.
NextWave is scheduled to file its reply brief to the government appeal on Jan. 18.
Because of the briefing schedule of the Supreme Court and mail problems due to the anthrax scare, it is unlikely the court would hear oral argument before it leaves town this summer. That means-if the court were to agree to hear oral argument-it would be late 2002 before the case was heard and sometime in the first half of 2003 before a decision would be rendered.
Many legal scholars believe that no matter how or when the Supreme Court rules, the case will go again before the U.S. Court of Appeals for the District of Columbia Circuit either on remand from the Supreme Court or in reaction to actions by the FCC.
The D.C. Circuit ruled June 22 that the FCC had erred when it cancelled, reallocated and re-auctioned NextWave’s licenses while NextWave was under the protection of bankruptcy. At that time, it told the FCC to take actions “not inconsistent” with its ruling.
Some information for this story was taken from Reuters.
