NextWave spectrum settlement in jeopardy

Powerful Sen. Ernest Hollings, D-S.C., recently sent a letter to Congressional colleagues opposing the proposed NextWave Telecom settlement, calling the deal that would deliver valuable spectrum to wireless carriers and $5 billion to the bankrupt firm a “scam” that could set a damaging precedent in telecom law.

Opposition from Hollings will make it difficult for Congress to pass the spectrum settlement by the Dec. 31 deadline attached to the deal, because the bill likely would have to get through the Senate Commerce committee chaired by Hollings, who cited several reasons for opposing the proposal.

For instance, Hollings notes the proposed settlement was not approved by the FCC--the governing body responsible for overseeing the distribution of spectrum—although the Attorney General indicated the commission agreed to it. Instead, the deal between NextWave and large wireless operators such as Verizon Wireless was “engineered” by FCC Chairman Michael Powell.

“This private, back-room settlement is fundamentally at odds with telecommunications law and has been presented to us at the 11th hour,” Hollings’ letter states. “The unmitigated gall of the proponents of this deal is appalling.”

Under the deal, the government would receive $10 billion of the more than $15 billion wireless carriers bid in the January reauction. The spectrum was auctioned after the FCC reclaimed the licenses when NextWave failed to pay for them. Proponents of the settlement note the government could use the $10 billion and that the wireless carriers need the now-unused spectrum.

“They don't focus on the fact that Congress is being asked to reward a group of speculators who put 10 percent down ($500 million), litigated, lobbied, and lawyered for five years, and are now on the cusp of a $5 billion payment,” Hollings’ letter states. “Now you know why Congress is being told that it has to act by Dec. 31 or all is lost. The lobbyists don’t want this scam exposed.”

The settlement was forged in the wake of a U.S. appeals court ruling that the FCC acted improperly in reclaiming the licenses from NextWave, which argued the spectrum was an asset that should have been protected under bankruptcy law. The unusual circumstances of the case have caused the wireless carriers to seek Congressional approval of the settlement to insulate the spectrum from future litigation. Hollings believes Congress should not legislate the individual settlement but should consider enacting a law that clarifies that the FCC’s oversight of airwaves takes priority over bankruptcy claims.

“Enactment of such a bill would give the government more than $15 billion that was bid in last year's reauction,” the letter states. “More importantly, fundamental communications law and policy would be upheld and affirmed, rather than repealed.”

Meanwhile, Hollings called for hearings to be conducted next year “to examine thoroughly and fairly the claims of all involved in this dispute.”