The Federal Communications Commission said yesterday it that has canceled wireless telephone transmission licenses held by bankrupt NextWave Telecom Inc. and plans to auction them anew in July in a bid to add more competition to the airwaves.
Though NextWave is likely to appeal that decision, the FCC's move is sure to unleash a high-stakes scramble for the rights to the airwaves: The licenses cover markets that are home to 165 million people.
Nextel Communications Inc., the Reston-based national wireless telephone provider, has been the most prominent suitor. In the past couple of months it has assembled a multibillion-dollar war chest through stocks, bonds and credit lines, and in December it offered to buy out NextWave for $8.3 billion. But several other companies also have shown interest, among them AT&T Corp., Global Crossing Ltd. and SBC Communications Inc., the nation's largest local telephone provider.
NextWave claimed the licenses in a special auction restricted to relatively small businesses--rules that would have left Nextel and other major players out of the running. An FCC public notice issued yesterday implies that the old rules will prevail in the new auction but leaves open the possibility that larger companies may ask for a waiver that would allow them to bid.
The Cellular Telecommunications Industry Association, a trade group, and SBC have both lobbied the FCC to waive the old rules and open the licenses up to larger companies. That campaign will now intensify. Meanwhile, an association that represents smaller companies, the Personal Communications Industry Association, urged the FCC not to scrap the old rules.
Yesterday's decision amounts to the latest wrinkle in a wireless saga that has swept across Capitol Hill and through more than one courthouse. NextWave gave the FCC a $500 million down payment when it won the auction for the spectrum. It never paid another dime. The company landed in bankruptcy court proceedings last year.
The FCC has maintained that the rights to the airwaves should revert back to the federal government so they can be sold to another company and put to use. Congressional efforts to reclaim the licenses for the federal government have twice died in last-minute budget negotiations.
When, last June, a bankruptcy court in New York ruled the licenses were actually worth only $1 billion, it appeared NextWave would emerge the victor: If the company could come up with another $500 million, it could walk away with licenses. But the FCC appealed to the 2nd U.S. Circuit Court of Appeals. Last month, the court ruled for the FCC, finding that the commission has "exclusive jurisdiction" over wireless licenses, meaning it has the authority to reclaim them and sell them again.
The decision prompted Nextel to withdraw its takeover bid, given the chance it might be able to acquire the licenses directly from the FCC in an auction at a lower price.
In recent weeks, the FCC has considered NextWave's proposal that it be allowed to retain the licenses, provided it could come up with the full $4.7 billion purchase price, plus interest. But the FCC declined. In a filing made at bankruptcy court in New York yesterday, the commission asked the court to reject NextWave's reorganization plan and honor its claims that the licenses have been canceled and now belong to the federal government.
"Allowing a company to keep its licenses despite its failure to pay on time would be unfair to others who played by the rules and would undermine the integrity of our auctions process," FCC Chairman William E. Kennard said in a written statement. "This spectrum has lain fallow for too long."