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FCC to Grant Full Refunds on NextWave Auction

The Federal Communications Commission ruled Thursday that wireless carriers will not have to pay the $16 billion they bid when the FCC offered the now-contested NextWave spectrum for sale. The FCC said any company that had successfully bid for the space could receive a full refund of their deposits and have no further legal liabilities.

In June of 1996, NextWave declared bankruptcy and defaulted on $4.7 billion due on spectrum wireless licenses awarded to the company by the FCC. The agency seized NextWave's spectrum rights, arguing that the company had paid only a fraction of the $4.7 billion, and re-auctioned the rights last January to companies including Verizon and VoiceStream. The auction raised $16 billion.

NextWave's lawyers filed suit, contending that U.S. bankruptcy laws protected the company from the FCC license revocation. In June, the U.S. Court of Appeals for the District of Columbia agreed with NextWave, and the case has now moved on to the U.S. Supreme Court.

Meanwhile, throughout the second half of last year, NextWave, the FCC and the Department of Justice attempted to broker a deal over the disputed licenses. That fell through when Congress killed a proposed a deal that would have paid NextWave $5.8 billion and transferred the spectrum rights to the new owners.

Verizon Wireless then filed a lawsuit seeking the return of its $1.74 billion down payment.

On March 26, the FCC refunded approximately $2.8 billion to the winning bidders of the Nextwave auction that had not yet received their licenses, but it retained an amount equal to three percent of the net winning bids, approximately $495 million, for the licenses and maintained the pending status of the applications for these licenses.

The Commission said Thursday that although the FCC is under no legal obligation to provide relief to the wireless carriers who bid on the NextWave space, "the public interest is served by this plan of relief, which provides eligible winners an opportunity for finality and certainty."

Noting that the telecommunications industries have been undergoing serious economic difficulties, the FCC said that granting the relief "may help consumers by promoting greater stability in the wireless sector and allowing the companies to redirect their capital and focus their resources on providing communications services."

The ruling, for instance, allows Verizon Wireless to remove almost a $9 billion liability off its books.