Supreme Court to hear NextWave case

The U.S. Supreme Court today announced it will hear the controversial case regarding NextWave Telecom, meaning the company’s spectrum probably will be in limbo for at least another year.

In taking the case, the Supreme Court will decide whether an appeals court ruled properly in returning to NextWave the spectrum licenses that the FCC reclaimed because the carrier did not meet its payment schedule. NextWave argued that the licenses should not have been reclaimed, because they were protected assets under the carrier’s bankruptcy proceedings.

That ruling wreaked havoc with the spectrum plans of leading U.S. mobile carriers such as Verizon Wireless, Cingular Wireless and AT&T Wireless, which bid $15.85 billion for the NextWave airwaves when they were reauctioned in January 2001. The additional spectrum is necessary to offer next-generation services. Verizon has asked the FCC to return its $1.7 billion deposit on the licenses, but the FCC said it would not return the downpayment until the Supreme Court ruled on the case.

“I am gratified that the Supreme Court has decided to review the D.C. Circuit's decision in the NextWave case,” said FCC Chairman Michael Powell said in a statement. “This will allow the Court to clarify the relationship between public spectrum auctions and the U.S. bankruptcy laws.”

The Supreme Court will hear oral arguments on the case in the fall and is scheduled to rule on the matter in the first quarter of 2003, according to Michael Wack, NextWave’s senior vice president.

Meanwhile, NextWave will continue to build out its network, which will be data-enabled nationwide in April and voice-capable in the Detroit and Madison, Wis., markets in the fall. However, the legal questions will make it impossible for NextWave to raise the billions of dollars in financing to make its entire network capable of carrying wireless voice traffic.

“We think the money’s out there, we just need to get rid of this litigation cloud,” Wack said. “Today’s decision means the litigation cloud will continue to hover over us for the foreseeable future.”

Indeed, if the Supreme Court overturns the appeals-court ruling, the case will be remanded to the appeals court, where the non-bankruptcy issues of NextWave’s case will have to be heard.

If the Supreme Court rules for NextWave, the wireless carrier clearly will own the spectrum and would have the right to sell it, if it wished, according to Wack.

Wack declined to comment whether the Supreme Court’s decision to hear the case might spark renewed interest in a settlement. NextWave, the FCC and the winning bidders in the January 2001 auction reached a settlement last fall, but Congress failed to ratify the deal. Verizon has said it will not participate in any future settlement negotiations until the FCC returns its auction deposit.