WASHINGTON-Two attempts to stop litigation involving bankrupt wireless operator NextWave Telecom Inc. failed last week as both a federal appeals court and a bankruptcy judge refused requests to interpret a recent appeals court ruling in such a way that it would mean an end to the litigation.
Meanwhile, the FCC’s Wireless Telecommunications Bureau said last week that NextWave’s 90 personal communications service licenses were canceled on Oct. 29, 1998. And SBC Communications Inc. asked the Federal Communications Commission to lift the rules requiring winners of the licenses in question to be small businesses.
The U.S. Court of Appeals for the Second Circuit denied a request from the federal government to move the NextWave litigation to its jurisdiction. The Second Circuit did grant the government’s request for a stay of NextWave’s confirmation of its reorganization plan pending the outcome of the litigation. Confirmation of a reorganization plan is a necessary step for NextWave to emerge from bankruptcy.
The government tried this route to prevent Bankruptcy Judge Adlai S. Hardin Jr. from ruling on whether the FCC could cancel the NextWave licenses and re-auction them. On Jan. 21, Judge Hardin asked the government to explain when the licenses canceled and how NextWave was to know that the licenses had been canceled.
At a Jan. 25 press conference, WTB Deputy Bureau Chief Kathleen O’Brien Ham said the licenses were canceled Oct. 29, 1998.
In the government’s official filing with Hardin, it said that if the FCC had extended the Oct. 29 deadline 60 days, the licenses would have been canceled as of about Jan. 1, 1999.
“NextWave simply cannot maintain that it was not sufficiently on notice that failure to make timely installment payments on its C-and F-block licenses would result in their automatic cancellation,” said Daniel S. Alter, assistant U.S. Attorney. The Department of Justice represents the FCC in court.
In the press conference, Ham did not directly answer why, if that was the case, the FCC has continued to battle the bankrupt PCS operator in court before issuing on Jan. 12 a public notice announcing that the licenses had been canceled and are to be re-auctioned on July 26. In his letter, Alter admits that the first time this was mentioned in court was Jan. 21.
NextWave believes that since the FCC did not seek relief from the automatic stay, which protects debtors from their creditors, that the FCC cannot take back an asset that is part of the bankruptcy proceeding. NextWave asked Hardin if its interpretation is correct, but Hardin has yet to rule.
In a related matter, Hardin told NextWave and Nextel Communications Inc. last Thursday to attempt to settle on their own whether Nextel should be sanctioned for attempting a now-aborted hostile takeover of NextWave.
Nextel tried to avoid appearing before Hardin, saying he did not have jurisdiction because of an earlier Second Circuit decision that said communications law-not bankruptcy law-should be used to regulate spectrum. But Hardin did not rule on the request and the hearing went forward.
NextWave had asked Hardin to sanction Nextel for violating bankruptcy rules. Hardin suggested during the hearing that the damages in such sanctions would be minimal. He did note, however, that NextWave would like the ruling regardless of the amount of sanctions, but said that would only lead Nextel to pursue endless litigation.
In December, Nextel announced it was mounting a hostile takeover of NextWave, but a day later withdrew its bid after the Second Circuit made its ruling regarding the regulation of spectrum. It was this ruling that prompted the FCC to officially cancel NextWave’s licenses and announce their re-auction.
The FCC now will have to rule whether it will lift the restrictions on who can bid for the NextWave licenses.
Congress specifically said that the FCC was to set aside PCS spectrum for small businesses. In the original auctions, C- and F-block licenses were restricted to small businesses, known as designated entities. In previous C-and F-block re-auctions, bidding was limited to DEs.
In a press conference on Jan. 19, FCC Chairman William Kennard said that the rules were not being changed and more to the point, no one had asked for them to be changed.
Now SBC has taken him up on his offer.
“Limiting who can participate in this auction is unfair to wireless consumers, hurts taxpayers and slows the growth of the wireless industry … We intend to compete for and win some of these licenses,” said Stan Sigman, SBC president for national operations in charge of the wireless units.
The Cellular Telecommunications Industry Association also believes the designated-entity rules are anti-competitive and is working on Capitol Hill to have Congress pressure the FCC to lift them.
