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Court rules government should return unused wireless licenses

Tuesday, January 28, 2003

WASHINGTON -- The Supreme Court ordered the government Monday to give back billions of dollars worth of unused wireless licenses to NextWave Telecom Inc., a decision that could lead to better service and more options for cellular customers in many major American cities.

The airwaves slices have been in limbo during a protracted fight between NextWave and an agency that confiscated the licenses and resold them at a huge profit after NextWave filed for bankruptcy protection.

The high court ruled that the Federal Communications Commission did not have the authority to take away licenses from the company while it was reorganizing its finances.

Now NextWave can finish building a network or sell the licenses to other companies. It will free up wireless spectrum in dozens of crowded markets, including Chicago, Los Angeles, New York, Philadelphia, San Francisco, Seattle and Washington.

Market-wide effects

"Now the spectrum that's been tied up in litigation all these years can be put to use to serve the public, as NextWave always intended," said NextWave lawyer Donald B. Verrilli Jr. "You'll probably see market-wide effects."

Companies like AT&T Wireless, Cingular Wireless and Verizon Wireless may vie for the airwaves, analysts said.

FCC Chairman Michael Powell said the commission will move quickly to get the wireless spectrum into service. The court's decision, he said, cleared up confusion over what the government can do when it doesn't get paid for licenses.

Justice Antonin Scalia, writing for the court, said the commission could not justify intervening in the bankruptcy proceeding to take the licenses by claiming a regulatory motive. "In our view, that factor is irrelevant," he wrote.

Justice Stephen Breyer said in a solo dissent that the ruling makes it harder for the government to collect debts than private businesses like car dealers, appliance companies and home developers. Breyer said his colleagues were misinterpreting the bankruptcy law.

The Hawthorne, N.Y.-based NextWave bid $4.7 billion for the frequencies in 1996 but didn't finish paying for them. The FCC then sold the licenses in 2001 to Verizon Wireless, VoiceStream Wireless and other companies at a second auction for nearly $16 billion at the height of the then-frenzied market. The companies were never allowed to use the spectrum because of the legal battle, and the FCC decided last year to let them cancel licenses and get their money back.

Rebecca Arbogast, a telecommunications analyst for Legg Mason and former FCC lawyer, said companies should be able to get licenses cheaper from NextWave, in part because of the decline in the telecommunications industry.

"It seems good for both NextWave and the wireless industry. Everybody agrees that the spectrum was kept in limbo far too long," she said Monday.

NextWave was formed in 1995 and promoted a nationwide cellular calling plan and 10-cent-a-minute service, far cheaper than what was offered by large wireless companies at the time. The company built wireless facilities in 95 markets, and a company spokesman said NextWave would move ahead now with plans to get out of bankruptcy court and compete in the wireless market.

The cases are FCC v. NextWave Personal Communications, 01-653, and Arctic Slope Corp. v. NextWave, 01-657.

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On the Net:

Supreme Court: http://www.supremecourtus.gov

Federal Communications Commission: http://www.fcc.gov

NextWave: http://www.nextwavetel.com


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