WASHINGTON-The Federal Communications Commission is seeking comment on whether bidders in the re-auction of bankrupt NextWave Telecom Inc.’s PCS C- and F-block licenses should be able to withdraw entirely from the re-auction or choose to keep certain licenses and discard the rest.
“Since the commission issued its partial refund order several months ago, the state of the capital markets for entities, including the applicants, engaged in the provision of wireless telecommunications services, as well as other [telecom] services, has continued to decline rapidly,” the agency said in a widely anticipated public notice. “As we have seen in the past, market downturns affect the value of spectrum licenses won at auction and licensees’ (or applicants’) ability to meet auction payment obligations. At the same time, the commission remains concerned about protecting the integrity of its spectrum auction program. Concerns about the state of the capital markets must be balanced against this important public-interest consideration.”
The FCC seeks comment by Oct. 11 on the two options-full refund and option to dismiss all pending applications and/or selective opt-out. Reply comments are due Oct. 21.
Verizon Wireless Inc. on Monday asked the U.S. Court of Federal Claims to order the FCC to return its remaining deposit money and allow it to withdraw from the re-auction. In addition to asking for summary judgement, Verizon Wireless asked the federal claims court to allow the case to go to trial if it decides that summary judgement is not warranted.
Verizon Wireless has been fighting for months to withdraw from the re-auction in which it bid $8.8 billion. On March 5, Verizon Wireless told the FCC it was withdrawing from the re-auction because the spectrum had not been delivered and requested the FCC refund the $1.7 billion deposit it had made when the re-auction closed in January 2001.
The FCC eventually countered by returning all but 3 percent of Verizon’s and others deposits.
FCC Chairman Michael Powell told reporters earlier on Thursday that the public notice should not be seen as caving into the intense lobbying by Verizon.
The U.S. Supreme Court is set to decide next month whether the FCC erred when it canceled, reallocated and re-auctioned NextWave’s licenses for non-payment. The U.S. Court of Appeals for the District of Columbia Circuit ruled that it did, saying that the licenses were protected by the bankruptcy code.
Even if the Supreme Court rules in the FCC’s favor, the case is expected to be sent back to the D.C. Circuit to resolve other issues.
Powell told reporters that the issues being decided by the Supreme Court and the re-auction were separate and that rewinding the re-auction would have no impact on the merits of its Supreme Court arguments.
“Although the oral argument in the Supreme Court case is fast approaching and the [FCC] has the utmost confidence in the merits of its case, the commission and winning bidders in [the re-auction] still face the possibility of prolonged litigation over such licenses during uncertain and trying economic conditions,” said the FCC in its public notice.
Wall Street has been pounding Verizon and other re-auction winners because of the FCC’s claim that their bids are still valid until all of the litigation is exhausted.
In addition to its case in federal claims court, Verizon Wireless has appealed to the D.C. Circuit, but the appeals court refused to expedite the case so it is unlikely it would rule before the Supreme Court does.
Finally, Verizon Wireless is scrambling on Capitol Hill to get legislation passed that would require the FCC to allow bidders to opt-out of the re-auction. The legislation has 40 cosponsors in the House and eight in the Senate.
