NextWave wins FCC court battle
On Jan. 27, the U.S. Supreme Court ruled that NextWave Telecom will keep its 90 wireless licenses worth billions of dollars — despite its failure to meet payment obligations.
Consequently, NextWave is free to develop the wireless licenses itself or turn around and re-sell them to the highest bidder.
When NextWave won the licenses in 1996, it agreed to pay $4.7 billion. The company made a single payment of $50 million. The company was unable to make any further payments and filed for bankruptcy in 1998.
The Federal Communications Commission then seized the licenses from NextWave and sold them for more than $16 billion in January 2001 — nearly four times what the company originally paid.
The company successfully sued in federal appeals court for return of the licenses. The case eventually found itself in front of the Supreme Court. The court supported NextWave’s case in an 8-1 decision — penned by Justice Antonin Scalia.
Scalia wrote that the U.S. Bankruptcy Code “prohibits the FCC from revoking licenses held by a bankruptcy debtor upon the debtor’s failure to make timely payments to the FCC for purchase of the licenses.”
Justice Stephen Breyer offered the lone dissenting vote, writing, “Why should the government (state or federal), and the government alone, find it impossible to repossess a product, namely, a license, when the buyer fails to make installment payments?”
Most experts concede that NextWave is unlikely to obtain the same price for its licenses if it decides to sell them.
While the big wireless carriers insist the value of the licenses has dropped considerably since the 2001 auction in the wake of a still-spiraling U.S. economy and resulting collapse of the telecom industry.
In argument before the Supreme Court last year, the FCC insisted that it had the right to seize licenses when companies failed to make required payments.
The court, however, noted that the agency also had the authority to extend deadlines.
FCC Chairman Michael Powell said of the ruling, “The Supreme Court’s decision brings much needed certainty to an unsettled area of the law. We are in the process of examining all of the ramifications of the Court’s decision. The Commission will faithfully implement the Court’s mandate and looks forward to facilitating the provision of service in these bands to the American people as soon as practicable.”
