[opendtv] News: NextWave Pact With F.C.C. Ends Airwave Dispute
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Thu, 22 Apr 2004 08:37:26 -0700
http://www.nytimes.com/2004/04/21/business/21spectrum.html?th
April 21, 2004
NextWave Pact With F.C.C. Ends Airwave Dispute By STEPHEN LABATON
WASHINGTON, April 20 - The government forged an agreement with
NextWave Telecom Inc. on Tuesday that will free valuable airwave
licenses vital to improving the nation's cellphone system.
The agreement, announced by the Federal Communications Commission and
approved by the Justice Department, provides a windfall potentially
worth billions of dollars to NextWave, which has battled the
government over the licenses for nearly eight years. The company,
which has been in bankruptcy protection since 1998 and has no other
significant assets, will be allowed to keep some of the most valuable
of the disputed licenses in the largest cities.
The agreement ends a fierce legal, regulatory and political battle
over the licenses that NextWave won in 1996 but never paid for. It
will return to the commission more than 75 percent of the licenses
that for years have gone unused. They will be re-auctioned, a process
that ultimately could be a significant benefit to phone users.
The government will also receive $1.1 billion on top of the $500
million down payment it received years ago from NextWave, and could
get additional money if NextWave sells its remaining licenses at
sufficiently high prices.
The settlement will relieve overcrowded airwaves, which have either
made it difficult to complete calls or resulted in a high number of
dropped calls, especially in the biggest cities. For years, the
nation's largest phone companies have been clamoring for more
licenses to make greater use of the spectrum. The problems have
worsened as consumers are increasingly turning to the airwaves for
browsing the Internet from handheld and laptop computers and for
transmitting e-mail messages and other data.
"After eight long years, we can finally end the litigation and begin
the innovation," said Michael K. Powell, chairman of the Federal
Communications Commission. "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."
The settlement is also a significant victory for NextWave. The
company will be able to erase its debts to the government and retain
licenses in many of the largest and most lucrative markets, including
Baltimore, Boston, Detroit, Los Angeles, New York, Philadelphia and
Washington.
Those licenses were valued at $7.2 billion in an auction in 2000 that
was nullified last year by the United States Supreme Court, according
to Douglas P. Teitelbaum, one of NextWave's largest investors and a
managing principal of Bay Harbour Management, an investment firm
specializing in distressed securities. He played a leading role in
negotiating the deal on behalf of the company. Some analysts said
that because of market declines, the licenses are now valued at less
than half that amount.
"This deal is a win-win for everybody," Mr. Teitelbaum said on Friday
from his cellphone in Midtown Manhattan during a call that was
dropped once before being completed. "The F.C.C. will get to auction
off licenses that are vital to the economy. We get to hold licenses
in cities such as New York, Philadelphia, Detroit, Baltimore,
Washington and Boston."
Analysts expect that NextWave will sell those licenses, but it is
also possible that the company will lease them or act as a wholesaler
and sell space on the airwaves to the cellphone providers.
The agreement resolves one of the longest running and lucrative
lobbying and legal battles in the telecommunications industry.
"This is telecom's version of 'Bleak House,' which is to say the
litigation has gone for so long that it's hard to remember what it
was about," said Blair Levin, an analyst at Legg Mason and former
senior official at the F.C.C. "The great irony is that mistakes were
made by every party. The government made some mistakes. The parties
themselves made some bad calculations. Yet competition in the
wireless sector has done well."
NextWave was founded in 1995 by Allen B. Salmasi, a former top
executive at Qualcomm, and financed by a group of veterans of Drexel
Burnham Lambert, the defunct investment banking firm, and a group of
hedge funds. A year later, NextWave won the licenses in two auctions
under a plan in which it agreed to pay $4.7 billion over 10 years.
But the company said the licenses were devalued by later F.C.C.
auctions. It refused to pay for them and sought bankruptcy protection
under Chapter 11. A stream of litigation and lobbying by the company
and industry rivals ensued.
The government ultimately confiscated the licenses, and resold them
in an auction in 2000 for about $16 billion. The biggest winner was
Verizon, which bought $9 billion in licenses. Other winners included
business partners of AT&T Wireless, Cingular, VoiceStream and Sprint.
But NextWave challenged the auction and said that federal bankruptcy
law prohibited the F.C.C. from taking the licenses back. When the
Supreme Court agreed to hear the case, Mr. Powell reached a
preliminary deal to settle the dispute that failed after Congress
refused to adopt the necessary legislation to put it in place. (No
such legislative action is required for the deal announced today.)
The court ultimately concluded that the F.C.C. violated bankruptcy
law by taking the licenses and auctioning them again.
The long-running fight has yielded millions of dollars in fees to
lobbyists and lawyers and also provoked a significant political
battle in which both sides raised huge sums of money for many of
Capitol Hill's top lawmakers.
Lawyers and lobbyists working for NextWave over the years have
included Theodore B. Olson, who is now solicitor general; Haley
Barbour, the new governor of Mississippi; and Robert L. Livingston,
the congressman who was elected House speaker but resigned before
taking the post. Their opponents included a battery of lawyers and
lobbyists on the payroll of the nation's telephone companies. They
included James Cicconi, a former top aide to the first President
Bush; Anthony Podesta, brother to one of President Clinton's chiefs
of staff; and the firm formerly headed by Nicholas E. Calio, who also
worked for the first President Bush.
Executives in the cellphone industry praised the settlement.
"The Department of Justice, Chairman Powell, and his colleagues at
the F.C.C. should be applauded for clearing up these unsettled issues
and finally bringing to an end the eight years of uncertainty
regarding the use of this valuable spectrum," said Steve Largent,
president and chief executive of the Cellular Telecommunications and
Internet Association, the industry's main trade organization. "It is
great news for American consumers that the wireless industry can now
put this extremely valuable spectrum to use in delivering innovative,
competitive services to urban and rural areas."
One of the breakthrough steps leading to today's agreement was a
recent deal that NextWave reached with Cingular. Earlier this year,
the company closed a $1.4 billion agreement to sell 17 percent of the
licenses to Cingular in a transaction in which more than $700 million
was turned over to the government and more than $600 million went to
NextWave.
Copyright 2004 The New York Times Company
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