Subject: [NEXTEL-1] With High Court's Backing, What's Next For NextWave?

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Date: Mon, 27 Jan 2003 18:12:56 -0500

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With High Court's Backing, What's Next For NextWave?

By Mark Rockwell
January 27, 2003
news@2 direct

WASHINGTON-Even though the U.S. Supreme Court, in a
much-anticipated ruling, backed NextWave Telecom's ownership of PCS C- and
F-block spectrum today, the company 's future is far from clear.

The court ruled almost unanimously, with a single dissenting vote, that the
FCC acted unlawfully in canceling the company's PCS licenses after the company
filed for bankruptcy shortly following its winning $4.7 billion bid in a 1996
spectrum auction.

The tortured case has dragged on for years, as the
spectrum licenses were re-auctioned to other bidders, including Verizon
Wireless, only to be subsequently held up as the legal case proceeded. The FCC
finally relented on refunding deposits to the re-auction winners, but only after
dogged pursuit of the repayment

NextWave contended that the FCC wasn't acting lawfully by canceling the
licenses. The FCC said it was merely trying to get the bill paid and the
spectrum activated for public use.

Commented Tom Wheeler, president and CEO of CTIA: 'Finally, this Gordian
legal knot has been cut. This valuable spectrum, tied up in the courts and thus
left fallow for far too long, can now be put to use delivering wireless service
to America's consumers.'

Despite the favorable ruling, NextWave still has some issues at the FCC,
primarily open proceedings on the percentage of its foreign ownership,
percentage of minority ownership (the company bid as a minority-owned company,
but some contend that it isn't) and has to meet build-out requirements set by
the FCC.

'The Supreme Court's decision brings much needed certainty to an unsettled
area of the law. We are in the process of examining all of the ramifications of
the court's decision. 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,' FCC Chairman Michael
Powell said in a statement following the ruling.

Privately, FCC officials say, it's generally a big sigh of relief. Although
the commission lost the battle, it may have a simpler time with the spectrum,
they say, because the case has been draining significant time and resources for
some time.  The ruling also makes the commission's decision to return
re-auctioned winners' bid down payments look prescient, instead of simple
appeasement.

NextWave officials, as expected, praised the decision. 'We are extremely
pleased with the decision because it clears the way for us to move forward and
complete our reorganization,' said NextWave Chairman and CEO Allen Salmasi in a
prepared statement. 'Everyone will benefit from achieving finality, putting the
litigation behind us, and getting the licenses into use as quickly as possible
to provide service to the public and help fuel the economy.'

The sighs of relief, however, might be a little premature for NextWave,
analysts say. 'We've always backed NextWave, but it faces some challenges,' says
Rudy Baca, vice president and global strategist at Precursor Group, a
Washington, D.C., telecom investment research firm. 'The FCC requires them to
provide 'substantial' service, but this is discretionary' and isn't really
definable, says Baca. It's up to the FCC to decide how much buildout is
adequate.

The FCC seems to be leaning a little toward the lenient side on the build-out
requirements. FCC officials say the company can't realistically be expected to
have significant networks built out in light of the court battle and unsettled
ownership of its spectrum. The minority and foreign ownership issues may require
a little more investigation, they say.

In the meantime, NextWave can't really try to sell itself off to another
carrier, says Baca. Any deal would be subject to penalties tied to the spectrum.
'The company would forfeit 90 percent of any money it received for the
spectrum,' he says.

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