C block woes continue: Bankruptcy reorganizations may not solve problems

The list of tragedies stemming from the C block auction got longer recently when Airadigm Communications filed for reorganization under Chapter 11. However, Airadigm insists it should not be lumped together with bankrupt C block license winners such as Pocket, NextWave and GWI. Airadigm serves 13,000 customers, while the other bankrupt companies never had networks in place.

Airadigm also already has the support of its two biggest creditors, Ericsson and The Oneida Enterprise Development Authority, for the restructuring plan. With their backing, Airadigm hopes to continue operating.

Airadigm's case hinges on the FCC reducing its debt. "If you look at GWI and NextWave, both are winning their cases. It bodes better for the bankrupt companies," said Jerome Fowlkes, director of domestic consulting for BIA Telecom.

Even if a company's debt is reduced, it still won't be in the clear. "Even with the decrease, people are still going to have problems with their business cases," said Becky Diercks, senior director at Cahners In-Stat Group. "There are so many successful wireless companies out there, it will be difficult to compete."

Additionally, investors may shy away from working with companies that have filed for bankruptcy, Fowlkes said.

One solution to clearing up the C block debacle would be for the FCC to give the debt to a quasi-private institution that could work through the bankruptcies case-by-case as a normal lender would, Fowlkes added. The FCC, though, may be concerned that agreeing to reduce the debts of these bankrupt companies will result in a similar run by other C block licenses.

Airadigm blames the FCC for accepting licenses back after many bidders in the initial C block auction ran into trouble and re-auctioning them for what resulted in far lower prices. "You can't change the rules in the middle of the game," said Bob Schulze, senior vice president at Airadigm.