FCC to send NextWave spectrum case to the Supreme Court

The FCC said Monday that it will appeal to the Supreme Court in an effort to retrieve 63 wireless telephone licenses, worth billions of dollars, from bankrupt carrier NextWave Telecom.

At the same time, the carrier is preparing to unveil a $5 billion financing package to build a new national wireless network. The debt and equity package will be part of a reorganization plan that NextWave plans to file in a New York bankruptcy court Monday evening.

The FCC appeal could further delay the ultimate resolution of the case - with the valuable spectrum continuing to go unused - but also could bolster the FCC's hand in negotiating a quicker resolution with NextWave. If accepted by the Supreme Court, a ruling would be unlikely until mid-2002.

The agency has been butting heads with NextWave for years over the rights, which the carrier won for more than $4.7 billion at two government auctions in 1996 reserved for new and small companies. NextWave couldn't come up with the cash to pay for the rights and declared bankruptcy in 1998.

In June, a three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled that bankruptcy law prevented the FCC from reclaiming the licenses from NextWave and that the agency should be treated just like any other creditor.

The ruling blasted a hole in the U.S. Treasury because the FCC had already re-auctioned the rights for almost $16 billion earlier this year. And it also wrecked plans of the winning bidders at the re-auction, including Verizon Wireless and affiliates of Cingular and AT&T Wireless, to use the licenses to relieve their already overcrowded networks.

FCC Chairman Michael Powell said the high court needs to clarify that winning bidders couldn't run off to bankruptcy court to have their debts reduced. "High-court review will protect the integrity of the FCC's auctions program, which Congress has chosen as the best method of assigning scarce and precious spectrum resources to those that will put them to their most productive use."

NextWave, which plans to announce new financial backing later Monday, complained that the FCC was the party preventing the productive use of the licenses. "The company's network would have been built out long ago, absent the government's litigation," said NextWave deputy general counsel Michael Wack. "The company will oppose all efforts to block the build out of its advanced 3G [third-generation] network."

NextWave officials declined to comment on details of its new financing until the reorganization plan is filed.

Since the June appeals court ruling, analysts have predicted that NextWave and the government would make a deal to allow the winning bidders at this year's re-auction to pay NextWave for the rights. But throughout all the legal wrangling, the upstart carrier has maintained that it plans to hold the licenses and build its own nationwide cellular network.

Last month, the big carriers proposed paying NextWave several billion dollars, possibly as much as the $4.7 billion it originally bid, in return for the rights. According to the proposal, the government would then reduce the amount that the carriers owed for their winning bids at the re-auction by an equivalent amount.

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