FCC pressured to forgive bids in NextWave re-auction

A group of economists representing the nation’s most prestigious universities are urging FCC Chairman Michael Powell to cancel all bids made in the auction of NextWave Telecom’s wireless licenses, or permit winning bidders to opt out of the re-auction.

Operators bid more than $16 billion for licenses, the majority of which were tangled in the NextWave bankruptcy proceeding but later canceled by the FCC, in Auction 35, which ended January 2001. Verizon Wireless put up more than $8 billion in bids.

But NextWave won the right to keep its licenses in appeals court last summer. The FCC has appealed to the Supreme Court and a decision isn’t expected until next year. Meanwhile, the commission has refused to cancel the auction results until the mess is settled. Verizon and others have been lobbying the FCC to forgive the bids.

“The commission auctioned something that it did not have —-immediate access to the spectrum for the winning bidders,” the economists said in a letter to Powell. “Thus, if the commission forces the winning bidders to pay, they will sue the agency for forcing them to pay for something they did not receive. Alternatively, their shareholders will sue the companies.”

Earlier this week, the Cellular Telecommunications & Internet Association (CTIA) sent a similar letter to Powell, warning him that holding the licenses hostage would hurt economic recovery in the United States.

“The practical effect of this continuing $16 billion overhang liability is to deprive the wireless industry of capital that could otherwise be spent to expand service and create jobs, both in the service provider and in the hard-hit equipment supplier sectors,” said CTIA President Tom Wheeler.

“In these challenging economic times, there is simply no leeway in the financial markets and the commission’s failure to free these funds makes that lack of flexibility even more profound.”