WASHINGTON-More trees died last week as parties expressed their views in comments on what should be done with the personal communications services licenses of bankrupt NextWave Telecom Inc.
In the end, NextWave appeared to be the only entity that believed it will still have its C- and F-block licenses after July 26, the date when the Federal Communications Commission has said it will re-auction them.
“At the outset, NextWave respectfully notes that the (FCC) cannot permit Nextel (Communications Inc.), SBC (Communications Inc.), or anyone else to bid for C- and F-block licenses issued to NextWave in 1997 for the simple reason that, notwithstanding the (FCC’s) pronouncements in its Jan. 12 public notice, NextWave’s licenses have not canceled, and any effort to re-auction licenses lawfully held by a (FCC) licensee is a nullity,” said NextWave.
Large players in the wireless industry filed a friend-of-the-court brief supporting the FCC in its contention that the licenses canceled a year ago due to nonpayment.
“Movants are primarily concerned with the outcome of this proceeding because the integrity of the entire FCC licensing process and auction process is dependent on compliance by FCC licensees with FCC regulatory requirements, particularly with license conditions … Movants strongly oppose any efforts for bankruptcy courts to adjudicate regulatory issues affecting the communications industry and thereby supplant the legitimate and legislatively mandated exercise of regulatory expertise by the FCC and the (U.S. Court of Appeals for) the D.C. Circuit,” said the Cellular Telecommunications Industry Association, BellSouth Corp., U S West Wireless L.L.C., Nextel and SBC in the amicus curiae brief filed with the U.S. Court of Appeals for the 2nd Circuit.
The industry brief was filed the same day the federal government filed its brief giving its view on the status of the NextWave licenses.
The 2nd Circuit is deciding whether its December opinion saying bankruptcy law could not be used in the licensing and regulating of spectrum governed by communications law means the FCC can cancel NextWave’s licenses even though the bankruptcy automatic stay is still in effect.
The appeals court announced earlier this month that it would give each of the parties, including Bankruptcy Judge Adlai S. Hardin Jr., the opportunity to explain the status of NextWave’s licenses. If necessary, oral argument on this issue will be heard in March.
Judge Hardin said on Jan. 31 that the 2nd Circuit’s December opinion did not mean the FCC could take back and re-auction the licenses. Indeed, he said the move amounted to “self-help repossession by ambush.”
Meanwhile, the FCC last week received numerous comments on two waiver petitions that would allow large businesses to participate in the re-auction notwithstanding the original intent of the C- and F-blocks that they be set aside for small businesses, known as designated entities.
Comments also were filed on a proposal by Nextel to hold an auction that would allow one company to bid on a portion of all the
licenses at once.
In Nextel’s “bulk-bidding” proposal, the FCC would split NextWave’s 63 C-block licenses into two blocks-one of 20 megahertz and one of 10 megahertz.
The 20-megahertz blocks would be combined together and added to the remaining 15-megahertz licenses the FCC is also re-auctioning to create one mega-license. This license would be auctioned to the highest bidder on May 31, and the money would be deposited into the treasury by Sept. 30. The opening bid would be set at $2 billion.
The 10-megahertz blocks would be auctioned on July 26 and would remain restricted to DEs.
Not surprisingly, the comments split between large and small carriers with small players wanting the original rules to be kept and large entities wanting changes to the rules.
What the large players can’t seem to agree on is what should be done with the Nextel proposal-although there seems to be scant support for the bulk-bidding proposal.
Bell Atlantic Mobile likes Nextel’s idea of splitting the 63 C-block licenses into two licenses worth 20 megahertz and 10 megahertz.
On the other hand, Sprint PCS would like the 30 megahertz licenses split into thirds. Unlike BAM, Sprint would not eliminate the spectrum cap, which restricts carriers from controlling more than 45 megahertz of spectrum in urban areas and 55 megahertz in rural ares.
The FCC “need not eliminate or waive the spectrum cap in order to broaden participation in the auction since 10 MHz blocks would allow existing licensees to bid for additional spectrum to meet near-term capacity needs and thereby enhance existing services,” Sprint said in its comments.
Small players are also concerned about the Nextel bidding proposal, but what really concerns them is the elimination of the designated-entity rules.
“In order to truly assess the opportunity of small entities to bid successfully in a competitive bidding environment that includes both small and large entities, one must look no further than the 800 MHz auction. In that auction, generally referred to as the `Nextel’ auction, small or very small businesses acquired only 32 out of the 524 auctioned licenses (7.25 percent). 475 out of the remaining 486 (90.6 percent) licenses were acquired by Nextel,” said Thomas Gutierrez in comments filed on behalf of Telecorp PCS Inc., American Wireless L.L.C., Tritel Communications Inc., Alaska Digitel L.L.C., Poplar PCS L.L.C. and Eldorado Communications L.L.C.
The NextWave bankruptcy saga began when the C- and F-block licensee filed for bankruptcy on June 8, 1998, rather than participate in an FCC C-block restructuring effort. The case went to trial last April.
In a win for NextWave, Hardin reduced the value of NextWave’s licenses from $4.7 billion to $1 billion because he said the FCC had erred when it transferred the licenses. The action, he said, was a fraudulent conveyance.
The FCC said the fraudulent conveyance ruling impairs the integrity of its auction process.
The government appealed to the federal district court and lost. It then appealed to the Second Circuit.
Neither the bankruptcy court nor the district court should have used bankruptcy law to tinker with the FCC’s regulatory process of awarding spectrum licenses, the Second Circuit said.
Notwithstanding the Second Circuit, NextWave scheduled a confirmation hearing for its reorganization plan for late January. In papers filed with the bankruptcy court the same day the FCC canceled the licenses, the government officially objected to the reorganization plan because it was contingent upon NextWave keeping its licenses. This reorganization has been stayed pending the outcome of the Second Circuit court case.
