Subject: [NEXTEL-1] Supreme Court Rules for NextWave

From: Marcel <[email-masked]>
Date: Mon, 27 Jan 2003 18:09:18 -0500

January 27, 2003
Supreme Court Rules for NextWave
By Caron Carlson

After spending nearly five years and untold funds in a protracted and contentious legal
battle, the Federal
Communications Commission lost its bid to repossess spectrum licenses assigned to NextWave
Telecom
Inc. The U.S. Supreme Court ruled Monday that bankruptcy law protects the bankrupt
carrier's licenses,
setting the stage for the long-fallow spectrum to be put to use carrying new wireless
services.

In an opinion written by Justice Antonin Scalia, the court said that it is irrelevant
whether the FCC had a
valid regulatory motive for canceling NextWave's licenses. "What petitioners describe as a
conflict boils
down to nothing more than a policy preference on the FCC's part for (1) selling licenses
on credit and (2)
canceling licneses rather than asserting security interests when there is a default. Such
administrative
preferences cannot be the basis for denying NextWave rights provided by the law's plain
terms," Scalia
wrote.

Responding to the ruling, FCC
Chairman Michael Powell said that
the decision brings much needed
certainty to the law. "The
Commission will faithfully implement
the Court's mandate and looks
forward to facilitating the provision
of service in these bands to the
American people as soon as
practicable," Powell said in a
written statement.

The 8-1 ruling was a major blow to
the FCC, which fought vehemently
to take back NextWave's licenses,
appealing numerous lower court
decisions that chided the agency
for its stance. Throughout the
circuitous battle, the commission
took seemingly self-contradicting
positions and issued hasty
decisions, which caught the industry by surprise, raised the ire of members of Congress
and caused at
least one commissioner to chastise his own agency.

The policy missteps began in 1996 with an ill-advised installment payment plan, in which
the commission
acted as a creditor of sorts to small business bidding on spectrum licensees (known at
"C-block" licenses)
at auction. NextWave bid $4.7 billion but declared bankruptcy in 1998 and failed to meet
its payments. Many
of the C-block auction winners, determining that the licenses were over-valued at auction,
defaulted on
their payments and/or declared bankruptcy.

During the court proceedings, the commission rejected repeated offers by NextWave to end
the wrangling
and pay its remaining debt as part of its bankruptcy reorganization. In a move that caught
the industry off
guard, the commission declared in January, 2000 that NextWave's licenses had
"automatically" canceled in
1998. At the end of 2000, in the midst of a very uncertain legal environment, the FCC
decided to re-auction
the licenses and took bids of approximately $16 billion from the major wireless carriers,
including Verizon
Communications Inc.

Perhaps the most questionable move on the part of the FCC throughout the proceedings was a
secret
agreement to aid Nextel Communications Inc. in a unilateral effort to buy NextWave's
licenses out of
bankruptcy in 1999. If the licenses had "automatically canceled" in 1998, as the FCC later
declared, they
could not have been transferred to Nextel in 1999. The House Commerce Committee conducted
an inquiry
into the secret pact, citing "what appears to be a pattern at the FCC of engaging in
closed-door deal-making
with private parties on matters that affect public interest."

The FCC did not handle all C-Block licensees in the same manner, which angered many in the
industry.
Some companies that failed to meet payment terms were allowed to continue operating, and
not all of the
licenses that were deemed to have "automatically canceled" were re-auctioned in 2000.

http://www.eweek.com/article2/0,3959,847554,00.asp

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