FCC Offers Partial Refunds for Wireless Auction

The Federal Communications Commission announced on Wednesday that it will refund to wireless carriers approximately $2.8 billion worth of down payments from a controversial auction of wireless spectrum once owned by NextWave Telecom, Inc. and UrbanComm-North Carolina, Inc.

The spectrum was originally awarded to NextWave and Urban Comm in a 1996 auction, but was repossessed after the two companies defaulted on payment obligations. NextWave, owner of the bulk of those licenses, had only paid $500 million before filing for bankruptcy in 1998.

After NextWaves appeal to the Supreme Court in 2000 was rejected, the FCC auctioned off the licenses again in January of 2001. Verizon Wireless, VoiceStream Wireless Corp. and other carriers handed over $3.3 billion in deposits.

While losing an appeal to the Supreme Court, NextWave eventually won a reprieve on different grounds in June of last year from the U.S. Court of Appeals for the D.C. Circuit. That court ruled that the government could not repossess the licenses without violating the U.S. Bankruptcy Code.

The FCC has since appealed the case to the Supreme Court, which granted the request for a review on March 4, 2002.

The amount returned today represents 85 percent of the $3.3 billion collected. In refunding that amount, the FCC said, it had “struck a public interest balance between the hardship that would be imposed by continued retention of the down payments and the need to protect the integrity of the auction by authorizing refund of a substantial portion of the down payments.”

The wireless carriers had argued that they were losing millions in interest on the funds held by the government. The FCC said it would retain an amount equal to three percent of each winning bidders total net bids for the licenses. This would be done in order to ensure the integrity of the auctions results, so that should the FCC win its appeal of the NextWave decision in the Supreme Court, the winning bidders would make good on their auction offers.

The FCC also dismissed Verizon Wirelesss claim that the delay of the auctions resolution meant the company should no longer have to pay the full price for the spectrum. The FCC said, “Verizon assumed a known risk of litigation-related delay and thus continues to be bound by the auction rules. Those rules require all bidders to pay their full bid in the event the Commission is ultimately successful in its litigation and the licenses are issued.”

Verizon Wireless did not immediately return calls seeking comment.