An unsettling settlement

A cursory look at the proposal offered last week to the FCC by five winning bidders in the commission’s re-auction of NextWave Telecom’s C Block wireless spectrum—bidders that had their licenses yanked out from under them by an appeals court last month—shows a cooperative attempt by companies with everyone’s financial interests in mind to settle a contentious matter. Closer examination reveals an attempt to exploit a dubious public service angle and an offer of economic terms that all but the filing parties will find inadequate.

An ironic part of the settlement proposal—issued by Verizon Wireless, VoiceStream Wireless, Dobson Communications, Alaska Native Wireless and Salmon PCS—and its accompanying legal justification is that the companies are forced to come to the defense of NextWave, their nemesis in the fight for spectrum and an entity whose legitimacy they have challenged again and again. It’s ironic because they have anticipated the invocation of the FCC’s so-called “greenmail” rule, which prohibits payments in exchange for an agreement not to fight.

In other words, the FCC has a rule that says no one entity can pay another to go away, which is exactly what the five bidders want to do: give a portion of the money they agreed to pay the FCC for their licenses to NextWave in exchange for NextWave agreeing to drop its claim to the spectrum and not dispute the proceedings further.

The companies that filed the proposal are thus forced to argue that NextWave’s Petition to Defer was not purely litigious, even though the tacit implication during these proceedings has been that NextWave is a speculator. In case the FCC doesn’t agree with that, though, the filers also remind the commission that it has the authority to waive the greenmail rule if it identifies the waiver to be in the best interest of the American public.

I’m immediately skeptical when any business entity borrows the “American public” phrase from the political lexicon and drags it into a battle that is clearly about commercial interests. The companies that drafted this proposal use the phrase or some variation of it several times as they plead to the FCC that settling this issue is “the right thing to do” to meet “rapidly growing demands for new and improved access to wireless voice, data and Internet communications.” They point to the “tremendous sum” they bid on the spectrum licenses as evidence of “the commitment we share to deploying the very best wireless communications services to the public.”

I’m a member of the American public and I certainly agree with the need for advanced wireless services. But what these companies leave out is how much competitive ground—not to mention revenue—they stand to lose if they don’t get the spectrum they need to build their next-generation wireless networks. That is an entirely legitimate reason for finding a speedy resolution to this mess, and one that renders their altruistic arguments unnecessary.

The final flaw in this proposal also centers around commercial interest: By my read, the proposal suggests that the FCC relieve the filing companies from a certain amount of their bids so that they can give the difference to NextWave. They suggest that figure be somewhere in the $4 billion to $5 billion range because NextWave originally bid $4.7 billion for the licenses. So they believe that NextWave, which now holds spectrum for which other companies bid nearly $16 billion, will be satisfied to receive the amount of money it currently owes the FCC so it can pay off its debts and walk away with nothing. I think the filing companies, perhaps because they became so immersed in the interests of the American people, forgot that NextWave is a business and can do the math.

This first crack at settlement won’t go very far. If this situation can be settled—and I have my doubts about that—the agreement must consider the financial interests of all parties involved, not rely on patriotic overtures and unreasonable financial figures.
Contact Jason Meyers at jmeyers@primediabusiness.com.