NextWave settlement not approved by Congress

Congress will not pass legislation to enact the controversial spectrum settlement with NextWave Telecom by the Dec. 31 deadline stipulated in the deal, but analysts believe lawmakers will revisit the matter after the holidays because none of the parties are in a position to walk away from the accord.

“It’s like the old Francisco Franco joke on Saturday Night Live--this deal is still dead,” said Blair Levin, regulatory analyst at Legg Mason.

Not given to Congress until late in the session, the only practical way for the settlement to be approved by lawmakers was to be attached to other legislation being considered. One of the most likely candidates--the much-discussed economic-stimulus package--was never even brought to the floor for a vote.

Under the deal, the government would receive $10 billion of the more than $15 billion wireless carriers bid in the January reauction for NextWave’s spectrum, which would be given to the auction winners. Proponents of the settlement note the government could use the $10 billion--double the $5 billion NextWave owes for the licenses--and that the wireless carriers desperately need the now-unused spectrum to deliver more bandwidth-intensive services.

The spectrum was auctioned after the FCC reclaimed the licenses when bankrupt NextWave failed to pay for them, but an appeals court returned the licenses to NextWave. If the Supreme Court decides not to hear the appeal of the case, NextWave will get to keep the licenses. However, virtually no one believes the carrier can get the funding necessary to build out a network.

“I’m very skeptical of their business plan,” Levin said. “I don’t think Wall Street has an appetite for building another wireless network.”

NextWave probably would like to resell at least some of the spectrum to the January auction winners to raise capital, but the FCC could block such a license transfer by citing a litany of rules, including network build-out requirements.

If the Supreme Court decides to hear the case, a ruling would not be given until at least the first half of 2003. Even in the FCC prevails in the case, such a delay would limit carriers’ ability to offer next-generation services and undermine the government’s future spectrum-auction plans.

“I think that’s why this thing ultimately will get done, because there are so many downsides to not doing it and they’re all so bad,” said Rudy Baca, global telecom strategist for the Precursor Group.