Jan 25, 2002 12:00 PM,

NEXTWAVE LOSES LEVERAGE

Dan O’Shea

Late last year, Congress failed to approve a settlement that would have paid off NextWave Telecom for turning over the spectrum it won, then lost, then won again during a horribly wasteful legal battle that had lasted several years. But it isn’t the worst thing to happen to NextWave. It isn’t worse than going bankrupt. It isn’t worse than having its licenses taken away--heck, it still has the licenses. The worst thing to happen to NextWave could be yet to come.

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Verizon Wireless and other wireless carriers that successfully bid for NextWave’s spectrum during an FCC re-auction last January have finally decided enough is enough. In particular, Verizon asked to have its $1.7 billion deposit from last winter’s re-auction returned and is refusing to come back to the negotiating table to craft a new settlement.

Whether this is a temporary stand or a complete change in game plan remains unclear. But it could well be the end of what until now has been perceived as NextWave’s control of the situation through smart and well-funded legal maneuvering.

What Verizon and others got a glimpse of over the holidays was the unwillingness of Congress to move on a document that many powerful lawmakers publicly criticized. This may be all they need to turn the tables on NextWave, if Verizon and other carriers are quick and decisive about moving on to consider other spectrum resources--such as the 700 MHz spectrum auction and Sprint’s MMDS spectrum holdings (which apparently are for sale).

NextWave might then be forced to wait still longer for an outcome to the controversy over its spectrum. It likely would spend the next several months preparing to tangle with the FCC in front of the U.S. Supreme Court while other carriers get on with their lives. Carriers have hesitated to walk away from the NextWave fight before because of how much spectrum was at stake, but alternative resources are looking more realistic and welcoming than ever. Those carriers should turn their backs on what has become a ridiculous process and walk away now.