NextWave, FCC Settle Wireless Spectrum Battle

Bringing the eight-year feud to a resolution, NextWave will keep 300 MHz of spectrum while returning most of its licenses to the FCC for reauctioning to other wireless carriers.

NextWave Telecom Inc. and the Federal Communications Commission have finally settled an eight-year battle over the highly contested and valuable wireless spectrum.

Under the terms of the resolution, NextWave will return some of its licenses to the FCC, which will then auction them to other wireless carriers. Some industry observers expect that NextWave eventually will sell the remainder of its licenses to other carriers.

In February 2003, the U.S. Supreme Court ruled that, contrary to the FCCs stance, NextWave rightfully held the spectrum despite having defaulted on payments to the government. But because of complicated license-transfer rules, NextWave was unable to use its licenses freely until it reached this weeks agreement with the FCC.

"After eight long years, we can finally end the litigation and begin the innovation," FCC chairman Michael Powell said in a statement. "This landmark agreement takes valuable spectrum resources out of the courts and will put it in the hands of consumers who can finally use it."

NextWave will return 1,550 MHz of spectrum in 60 commercial markets, said officials at the Greenwich, N.Y., company.

The company will retain 300 MHz of spectrum in 25 markets where the company is licensed to provide Personal Communications Services (PCS). These markets include some of the countrys most lucrative, including the mid-Atlantic region.

The FCC will retain the $714 million it received in April in connection with the sale of some license rights to Cingular Wireless, as well as $504 million that NextWave has paid since 1996, when the spectrum saga began.

Prior to the Supreme Court ruling last year, the FCC took numerous seemingly self-contradictory positions and issued hasty decisions in the contentious NextWave proceedings, catching the industry by surprise, raising the ire of Congress members and causing at least one commissioner to chastise his own agency.

The FCCs missteps began in 1996 with a failed installment payment plan, in which the agency acted as a creditor of sorts to small businesses bidding on spectrum licenses (known as "C-Block" licenses) at auction. NextWave bid $4.7 billion, but it declared bankruptcy in 1998 and failed to meet its payments.

Many of the companys fellow auction winners determined that the licenses were overvalued at auction, defaulted on their payments or declared bankruptcy.

NextWave Timeline:

  • June 1998: NextWave declares bankruptcy and fails to make its payments on spectrum it won in 1996.
  • January 2000: The FCC declares that NextWave lost rights to the licenses in 1998.
  • January 2001: In a reauctioning of the licenses, the FCC takes bids of $16 billion from several carriers.
  • June 2001: The U.S. Court of Appeals for the District of Columbia Circuit rules that the FCC had no right to cancel NextWaves licenses.
  • January 2003: The U.S. Supreme Court also sides with NextWave.

In January 2000, the FCC decided that NextWaves licenses had "automatically canceled" about two years earlier. At the beginning of 2001, in the midst of an uncertain legal environment, the FCC reauctioned the licenses, taking bids of about $16 billion from the major wireless carriers.

Perhaps the FCCs most questionable move throughout the proceedings was its secret agreement to aid Nextel Communications Inc. in a unilateral effort to buy NextWaves licenses out of bankruptcy in 1999. If the licenses had "automatically canceled" in 1998, as the FCC later maintained, they could not have been transferred legally 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."

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