WASHINGTON-The Federal Communications Commission is expected this week to issue a public notice that will include in the July 26 scheduled re-auction of personal communications services C- and F-block licenses the licenses of most, if not all, of the bankrupt C-blockers.
At press time, a public notice was being drafted that could include the licenses of such companies as Kansas Personal Communications Services Ltd., Urban Communicators PCS and Personal Communications Network Inc. These companies are in the early stages of bankruptcy.
Kansas PCS and the federal government are scheduled to appear in bankruptcy court on Wednesday on a motion the government filed asking KPCS to amend its reorganization plan to delete the licenses because they had canceled for non-payment. KPCS has objected to this motion.
UrbanComm is in the same appeals district as NextWave Telecom Inc. The FCC said on Jan. 12 that it was canceling NextWave’s 90 PCS licenses and would re-auction them on July 26 along with the licenses of MagnaCom Wireless L.L.C. and left-over licenses from last year’s re-auction. It said at that time that additional licenses might be added.
The FCC based its Jan. 12 actions on a Dec. 22 opinion from the U.S. Court of Appeals for the Second Circuit that said bankruptcy law could not be used in the licensing and regulating of spectrum governed by communications law.
In addition to appealing this action to the Second Circuit and the FCC, NextWave is also appealing it to the U.S. Court of Appeals for the D.C. Circuit.
Other bankrupt licensees include Airadigm Communications Inc., DCR PCS Inc. (also known as Pocket Communications Inc.) and Metro PCS (formerly General Wireless Inc.).
For a variety of reasons, it is unclear whether these licenses will also be added to the auction block. For example, Metro PCS’s bankruptcy case is currently before the U.S. Court of Appeals for the Fifth Circuit so it would seem unlikely that these licenses could be canceled when they are at the same point in the legal process as the NextWave licenses.
The FCC would only confirm that a public notice was being drafted.
Adding more licenses to the mix would allow the FCC to say it is holding a nationwide auction thus perhaps adding value to the licenses.
The chairman of the FCC, William Kennard, on Wednesday, while maintaining that the FCC’s cancellation and proposed re-auction of NextWave licenses was “about process,” told reporters that the licenses would bring “far more” in the re-auction than the $4.7 billion NextWave bid in 1996.
“Even with [designated entity] rules, it would go for far more … [The spectrum] It is just more valuable than it was in ’96. It is not about the money. It is fundamentally not about the money. It is about process,” Kennard said.
Prior to this Kennard had said that “under any scenario” the licenses would bring more than the NextWave bid. He said the FCC believes this by reading reports from Wall Street analysts but could not confirm that these analysts had predicted that DEs would pay large values for the spectrum. In a 1999 re-auction of C- and F-block PCS licenses open only to DEs, the average bid was cents on the dollar compared with what NextWave bid.
The FCC is continually getting advice from Capitol Hill and industry as to whether to let large wireless companies bid for licenses once reserved for small businesses. Indeed, Sen. Barbara Boxer (D-Calif.) last month said “now is not the time for the FCC to change its policy of keeping a portion of the PCS spectrum for [DEs].”
Kennard’s comments to reporters were made following a hearing before the House commerce, justice, state, and judiciary Appropriations subcommittee where the issue of NextWave’s licenses was the subject of a line of questions from the subcommittee’s ranking Democrat, Jose Serrano of New York.
Serrano noted Congress has seen ads placed by NextWave in Capitol Hill newspapers. The ads question the FCC’s Jan. 12 decision to cancel NextWave’s licenses and re-auction them on July 26 rather than accept an offer of $4.3 billion made on Jan. 11. Kennard said the offer “came too late in the game.”
Kennard was probably not surprised that Serrano brought up the NextWave ads. He had answered another congressional inquiry about the ads the week before.
“It was only after the Second Circuit’s decision that NextWave offered to cure its missed installment payments and pay off the outstanding balance. In fact, NextWave’s offer came after another company had sought to acquire NextWave and its licenses for $8.3 billion, dwarfing the $4.3 billion in outstanding debt. In any event, the FCC rejected NextWave’s offer on the ground that the licenses automatically canceled pursuant to the express terms of the licenses and pursuant to the express provisions of the [FCC’s] rules … NextWave’s ads do not mention any of these facts,” Kennard told Rep. Bart Gordon (D-Tenn.) on March 23.
Gordon asked Kennard on March 17 to respond to the ads “because Congress may be considering legislation addressing this issue in the near future.”
This action, if Kennard has his way, would be to pass legislation stating specifically that spectrum licenses are not subject to the bankruptcy code. In fact, Kennard urged Gordon to support such legislation.
“The long delays in the FCC’s ability to reclaim the valuable licenses held by NextWave only serve to underscore the importance of enacting legislation similar to the kind adopted by the Senate last year. That legislation would have ensured that a declaration of bankruptcy can not inoculate a licensee from its payment obligations … Such legislation would give the FCC the same protection that now exists for many other federal agencies engaged in lending, including [the] Department of Housing and Urban Development (HUD) and [the] Department of Health and Human Services (HHS),” Kennard said.
Last year, the Senate passed legislation that would have allowed the government to take back licenses from bankrupt operators but the House of Representatives refused to accept the language as part of the FCC spending bill, so it died.
