FCC Mulls Spectrum Withdrawal

According to reports, the Federal Communications Commission (FCC) is
apparently getting ready to release wireless carriers from $15.85 billion
in spectrum obligations.

Wireless carriers would not comment at press time, but it’s certain some
would take the FCC up on its offer to back out of spectrum once owned by
NextWave and Urban Comm-North Carolina, who have since gone
bankrupt. Since the auction, the demand and popularity for 3G phones has
diminished, with carriers delaying rollout and offering a service that’s
considered 2.5G by many in the industry.

A report from CNNmoney states the FCC might soon consider letting
wireless carriers opt out entirely from the spectrum auction, or seek
public comment for an answer to the current dilemma.

The FCC has already returned the
deposit each winning bidder paid for the spectrum, $2.8 billion, after
carriers petitioned the FCC to refund more than $3.1 billion. Because FCC
rules forbid waiving the entire down payment, regulators decided to assess
a three percent down payment ($500 million).

The problems began in 1996, when NextWave defaulted on its $4.7 billion
lease to the FCC; the cellular phone company subsequently filed for
bankruptcy. The FCC then moved forward with a spectrum auction and raised
$15.85 billion from bids by Verizon Wireless , Northcoast
Communications, Salmon PCS and others.

NextWave sued the FCC, saying the spectrum is considered an asset to be
used in its bankruptcy proceedings. The U.S. Court of Appeals in the
District of Columbia agreed and the FCC took the case to
the Supreme Court.

According to reports, the Bush Administration has been lobbying the Supreme
Court to set precedence in the case to avoid a repeat of the
situation. Since the NextWave ruckus began, wireless business leaders have
blamed the FCC and federal government for the mess, saying the U.S. spectrum policy
is “flawed.”

NextWave lawyers have already said they will appeal a Supreme Court ruling
on different grounds if it loses the current match, which suggests the
spectrum could be held up for years.

Many wireless carriers can ill afford to tie up its money in spectrum that
can’t be used. Many, like Verizon Wireless, are spending a great deal of
cash to support its 3G push throughout the U.S.