WASHINGTON-Federal Communications Commission Chairman William Kennard last week told the House of Representatives’ top telecommunications lawmaker, Rep. Thomas Bliley (R-Va.), that a letter signed by the FCC general counsel does not bind either him or the other commissioners to agree to a deal that would allow Nextel Communications Inc. to buy licenses held by the bankrupt NextWave Telecom Inc.
“The staff agreement also does not bind me or any individual commissioner. In that regard, the staff recognized that, while its own analysis indicated preliminarily that a waiver would be lawful under the [FCC’s] rules and policies, the [FCC], after considering the comments and other matters, might reach a different conclusion. Thus, any such waiver decision by the [FCC] would be reached only upon the [FCC’s] independent conclusion that a waiver would be consistent with the [FCC’s] rules and regulations governing waivers and is in the public interest,” wrote Kennard in a letter to Bliley, chairman of the House Commerce Committee.
Additionally, the White House and the House leadership engaged in a fight over language in the FCC spending bill that would allow the FCC to take back spectrum licenses from bankrupt operators, including NextWave.
On Aug. 10, Nextel announced the FCC and the Department of Justice had agreed to allow it to buy NextWave’s licenses. A week later, it released a letter signed by FCC General Counsel Christopher Wright and a term sheet that said it would pay $2.1 billion for the licenses or receive a termination fee if the FCC chose to sell the licenses to another company.
When the FCC initially refused to answer questions from the wireless industry, some people said the entire process was underhanded. When Congress returned from its August recess, Bliley sent a letter to Kennard with a series of pointed questions.
Questions and answers
The questions focused on how licenses set aside for small businesses (known as designated entities) could be sold to a company like Nextel that has twice before been rejected when it previously applied for DE status, and what was the process that led up to the consummation of the agreement.
Kennard’s response is very detailed.
In the response, Kennard lists names, lays out the negotiation process and offers legal rationales for the DE waiver. He also supplied confidential and private documents, but asked that those documents be kept confidential due to the bankruptcy litigation.
“Disclosure of such materials would be extremely detrimental to the interests of the FCC and the United States in this litigation … and may encourage other litigants to seek to use congressional document requests to obtain litigation materials that they would otherwise be forbidden from obtaining under litigation discovery,” Kennard said.
A variety of top FCC staff, including the chairman, were involved in the negotiations with Nextel. Nextel also briefed the other commissioners’ offices, but their names are not mentioned as having been personally briefed by Nextel. At PCS ’99, three of the five commissioners-Michael Powell, Susan Ness and Harold Furchtgott-Roth-emphatically stated a decision on the Nextel deal had not been made.
Negotiations with Nextel began before the NextWave bankruptcy case went to trial, according to the letter, but broke off because a final agreement could not be reached. They resumed in June, resulting in the final August agreement.
Nextel could receive a waiver, according to a preliminary FCC staff analysis, that relies mostly on the integrity of the auction process argument that the government has used in the bankruptcy litigation and shows the staff is concerned about how much money would be lost if NextWave prevailed.
“The FCC staff viewed the effective choices as between 1) the proposed NextWave plan, in which the American taxpayer would receive only an additional $549 million for licenses over the next seven years, a small fraction of the $4.2 billion owed after counting the down payments; and 2) the proposed Nextel plan in which the government would be paid at least an additional $1.6 billion in cash (after likewise counting NextWave’s prior down payments), plus the possibility of a higher amount based on a competitive market test … The staff viewed the NextWave plan as damaging the integrity of the auction process by allowing a winning bidder to retain its acquired licenses without paying the winning bid amount,” said Wright in an appendix to the Kennard letter.
Not wanting to rely on only Kennard’s side of the story, Bliley also sent inquiries to Attorney General Janet Reno and Daniel F. Akerson, former chairman of the board and chief executive officer of Nextel. Although responses were also due last week, as of RCR’s deadline, neither had responded.
Bankruptcy legislation
Other letters coming to light last week showed the FCC’s favored method of getting the licenses back from NextWave could erupt in a major battle on Capitol Hill, as Congress and the White House struggle to come up with spending bills for the federal government for fiscal year 2000, which began on Friday.
Last week, President Clinton signed a bill that allows the government to continue to operate under 1999 spending rules until Oct. 21.
There is language in the Senate version of the FCC spending bill that would allow the FCC to take back licenses in bankruptcy cases. The language was not included in the House version after Bliley and others protested the legislation during House consideration. The issue will be debated in a conference committee between the House and Senate.
The letters come from both sides in the bankruptcy legislative fight.
One letter from six House members, including Bliley and the top Republican and Democrat, urges potential negotiators on the FCC budget to insist on the House position and eliminate the bankruptcy legislation.
The bankruptcy language “would have extraordinary ramifications for all telecommunications companies that have been issued radio licenses by the [FCC] … The provision targets these companies specifically by stripping away important rights that are available to all other American companies under the Bankruptcy Code. Worse, it would do so retroactively,” the House members said.
Signing the letter were Bliley, Reps. John D. Dingell, ranking Democrat on the House Commerce Committee; Billy Tauzin (R-La.), chairman of the House telecom subcommittee; Edward J. Markey (D-Mass.), ranking Democrat on the House telecom subcommittee; House Majority Leader Richard K. Armey (R-Texas); and House Minority Leader Richard A. Gephardt (D-Mo.).
Another letter from the Office of Management and Budget highlights the importance of the bankruptcy legislation by citing it in the opening of a laundry list of things the Clinton administration does not like about the Commerce, State, Justice and the judiciary appropriations bill. The FCC, and therefore the bankruptcy language, is included in this bill as a related agency. It is cited as a positive example of an offset-money raised to pay for money spent-that Congress has approved.
“Congress has approved and the president has signed into law nearly $29 billion of such offsets in appropriations legislation since 1995. The administration appreciates the Senate’s adoption of one such proposal, language clarifying the relationship of bankruptcy law with regard to spectrum licenses. This provision will also help ensure the integrity of the spectrum auction process,” wrote OMB Director Jacob J. Lew.
