WASHINGTON-Sen. Judd Gregg (R-N.H.), chairman of the appropriations subcommittee that controls the Federal Communications Commission’s purse strings, last week signaled he would like the FCC to waive spectrum cap and small business eligibility rules for the re-auction of bankrupt NextWave Telecom Inc.’s wireless licenses in July.
During questioning at last Tuesday’s appropriations hearing, FCC Chairman William Kennard agreed with Gregg that waiving spectrum cap and designated-entity rules would increase revenue from the sale of NextWave’s 90 personal communications services licenses.
But the FCC chairman said there is more than auction revenue to consider, alluding to 1993 legislation passed by the then-Democratic controlled Congress that directed the FCC to promote wireless opportunities for small businesses, women, minorities and rural telephone companies. A 1995 Supreme Court ruling that curbed affirmative action diluted Congress’ 1993 mandate.
“It’s going to be a balancing,” said Kennard.
NextWave bid $4.7 billion for 63 mobile phone permits in the C-block PCS auction in 1996. The firm afterward purchased F-block licenses before subsequently filing for bankruptcy.
NextWave recently secured new financing and said it would pay the full $4.7 billion for the PCS licenses, but the FCC rebuffed the offer.
The FCC is under growing pressure from top wireless carriers to waive DE and spectrum cap-restrictions for the July re-auction.
Nextel Communications Inc., SBC Communications Inc., GTE Corp. and Sprint Corp. have sought DE waivers. GTE is joined by AT&T Corp., BellSouth Corp. and Bell Atlantic Mobile in seeking removal of the spectrum cap for the re-auction.
Kennard told Gregg that Nextel was willing to pay $8 billion for NextWave’s licenses and that some on Wall Street predict a re-auction could net $6 billion to $10 billion.
Kennard gave no clues which way he is leaning. “It’s hard for me to say at this point. I really haven’t decided yet,” stated Kennard.
The FCC is expected to set re-auction rules next month.
The issue of whether the FCC can reclaim NextWave’s wireless permits and re-auction them is pending before the U.S. Court of Appeals for the Second Circuit in New York.
Initially, a federal bankruptcy court reduced NextWave’s debt from $4.7 billion to $1 billion. But subsequent court rulings have thrown that ruling as well as NextWave’s future in doubt.
After the Senate appropriations, Kennard told RCR he is getting feedback from all sides on re-auction guidelines. “I want to talk to some more people and see how it [waiving spectrum cap and DE rules] would affect the bidding.”
Gregg, for his part, was clearer on where he stood once the hearing ended.
“I’m thinking about it. It seems to me the more people in the auction the better,” he said. Gregg has been a strong backer of Kennard during FCC litigation against NextWave.
Indeed, during the hearing, Gregg again offered support for the re-auction and for the $237 million the FCC is seeking for 2001.
Sen. Sam Brownback (R-Kan.), a member of the Commerce Committee, introduced legislation last November to lift the spectrum cap permanently. Under FCC rules, wireless firms cannot hold more than 45 megahertz in urban markets and 55 megahertz in rural markets.
But Gregg and Brownback, as influential as they are, face a major roadblock to waiving the spectrum cap for the re-auction and to legislating its repeal generally. His name is Trent Lott (R-Miss.), the Senate majority leader. Lott opposes revamping what originally was designed as a small business auction in 1996.
Not only are lawmakers divided on the DE and spectrum cap issues. A deep schism exists in the wireless industry on both matters as well.
