Sitting Pretty at Last

NextWave weighs options as FCC eases Spectrum licensing curbs.

NextWave Telecom Inc. still has no definite plans for its controversial spectrum licenses, but at least the company finally has some definite choices.

And apparently the company is wasting no time. Last week, NextWave was reportedly in talks to sell a chunk of spectrum to Cingular Wireless, the nations second-largest wireless carrier. Neither company would comment on the deal, but it makes sense, industry sources said. Cingular, a company burdened by roaming charges, could use the spectrum. NextWave, which is in bankruptcy protection, could use the money.

Late last month, the Federal Communications Commission announced the termination of a proceeding that had been pending since 1997. The proceeding blocked NextWave from officially applying for the long-contested C-block PCS (Personal Communications Service) spectrum, which the company has been fighting to get for years.

But in a May 23 statement, the FCC announced it was dismissing, with prejudice, two applications for review of the initial applications.

"In 1998, NextWave reached a settlement with the two companies that had petitioned against the initial licensing," said Michael Wack, senior vice president and deputy general counsel at NextWave, in Washington. "There had never been a final grant of the license applications."

This is the latest step in one of the United States most confusing spectrum battles.

NextWave, of Hawthorne, N.Y., bid $4.7 billion for the now-famous spectrum in 1996, agreeing to pay the FCC in installments as part of a government-conceived small-business spectrum payment plan. It had plans for a wireless data network, but it declared bankruptcy in 1998 and failed to make payments.

In early 2000, the FCC declared NextWave had lost the rights to the spectrum, and in early 2001 the commission reauctioned the licenses to several major carriers for $16 billion. Later that year, however, the U.S. Court of Appeals for the District of Columbia Circuit Court ruled that the FCC had no right to cancel NextWaves licenses, and in January 2003, the U.S. Supreme Court sided with NextWave.

Timing the NextWave

  • June 1998 NextWave declares bankruptcy and fails to make payments on spectrum won in 1996
  • January 2000 The FCC declares that NextWave lost rights to licenses in 1998
  • January 2001 In a reauction, the FCC takes bids of $16 billion from several carriers
  • June 2001 U.S. Court of Appeals rules the FCC had no right to cancel NextWaves licenses
  • January 2003 U.S. Supreme Court sides with NextWave
  • April 2003 The FCC rules that NextWave complied with five-year broadband PCS build-out rule
  • May 2003 The FCC votes to ease leasing restrictions for spectrum owners; NextWave in talks to sell spectrum to Cingular Wireless
"When the court remanded [the FCCs right to take back the spectrum], it said the FCC could still retain control of the regulatory issues in relation to NextWave," said Gary Oshinsky, an attorney in the Commercial Wireless Division at the FCC, in Washington.

Since then, FCC decisions regarding the spectrum have largely benefited NextWave.

Last month, the FCC voted, 4-1, to ease leasing restrictions for spectrum owners. One leasing option lets parties enter into spectrum leasing arrangements without obtaining prior commission approval as long as the licensee retains legal control of the license and working control of the leased spectrum. The second option permits parties to enter into leasing arrangements in which the licensee retains control of the license, while control of the airwaves is transferred to the lessee for the term of the lease. The latter requires prior FCC approval.

In April, the FCC ruled that NextWave had complied with the broadband PCS build-out rule, which states that a company has five years to deploy facilities to prove that it plans to do something with the spectrum in all its markets.

Originally, the deadline for build-out was January 2002, but the commission extended that to January 2003 to make up for the time that the FCC took the licenses away.

"Its illegal to build facilities if you dont have a license," Wack said. "That decision was important because once you meet the requirement, a lot of restrictions fall away. Now we can transfer them to whomever we want. This increases the marketplaces view of their value and eases NextWaves ability to obtain financing."

NextWave could use the financing, as it is still in bankruptcy. Still, the company has not decided what to do with the spectrum but is finally acknowledging it might act as spectrum landlord to other carriers that have more money to do something with it.

"Were looking at our options, which include build-out, leasing and sales," Wack said. "Theres no hard deadline for a reorganization plan, but we hope to have something put together over the summer. If theres one thing thats catching our eye, its the prospect of deploying a broadband wireless network utilizing EVDO [Evolution Data Only] technology."

NextWave doesnt have plans for voice services, Wack said.