Carriers ask the FCC to return their NextWave-spectrum money

In the wake of Congress’s failure to pass legislation to enact a settlement that would free spectrum owned by NextWave Telecom, wireless carriers that submitted winning bids a year ago for the airwaves have asked the FCC to return their payment deposits.

After bidding on the spectrum in January 2001, the carriers deposited more than $3.1 billion as payment for airwaves held by NextWave. The money has been held by the government in an interest-free account for almost a year, costing the carriers more than $140 million in potential interest earnings during the period, according to a petition the carriers filed with the FCC on Friday.

NextWave, the winning carriers and the FCC reached a controversial settlement that required approval from Congress by Dec. 31 or all participants were free to dissolve the agreement. Because Congress did not approve the measure, winners of the January 2001 auction “now face an indefinite period of time” before the FCC can issue them the NextWave spectrum and want their downpayments for the airwaves returned, the petition states.

“The time has come for the commission to return ... more than $3.1 billion in downpayments, which the commission has held interest free since February 2001,” the companies said.

The petition requests FCC action by Jan. 18.

Under the proposed settlement, NextWave would receive $5.85 billion and the government would receive $10 billion from the winning carriers from the January 2001 auction. Although the petition is a discouraging note, the settlement does not necessarily mean the carriers have abandoned hope that Congress will enact the proposed settlement, according to Rudy Baca, wireless analyst for the Precursor Group.

“In the end, I still think this [settlement] is going to get through Congress, because the downsides of not doing the deal are so great for everyone,” Baca has said.

Indeed, without the settlement, the carriers would not get the spectrum that many believe is needed to offer next-generation services. In addition, NextWave investors would lose the immediate $5.85 billion windfall and would have to pay for the spectrum and the cost of building out a network. Finally, the government would receive only $4.75 billion for the spectrum from NextWave--instead of the $10 billion promised in the settlement proposal--and faces the possibility of undermining future auctions.

One concern expressed by Congress is that the agreement rewards NextWave for violating FCC rules. Instead of relinquishing its spectrum upon failure to make its payments, NextWave included the spectrum as an asset during its bankruptcy filing.

An appeals court last year determined that the FCC erred by reclaiming the licenses after NextWave declared bankruptcy, returning the spectrum to NextWave. The Supreme Court is expected to decide in the next month whether to hear the FCC’s appeal of the case.