Who Will Get NextWave's Licenses?

The pending auction of NextWave C-block PCS licenses has operators of all sizes concerned. Court action brings into question whether the auction, once set for July 26, can go on as scheduled. If and when it does take place, there is the issue of which operators will be allowed to bid.

Smaller operators initially thought that they alone would be allowed to bid on the spectrum. Previous C- and F-block re-auctions were limited to designated entities (DEs) in order to enable small businesses to compete, but the FCC public notice for the NextWave license cancellation and re-auction was vague about their status. Smaller wireless-service providers that meet DE rules now worry that the larger providers may swoop in and outbid them. Many cite pressure on the FCC by CTIA and some in Congress to open up the bidding to all, lest taxpayers are shortchanged for the NextWave fiasco.

Nextel, the most aggressive suitor for the PCS licenses, wants the DE provision waived. Nextel already has made several controversial moves to acquire the NextWave licenses.

Beside pushing to have the DE status waived, other major U.S. wireless-service providers want the 45MHz spectrum caps raised in urban areas so that they can use the additional spectrum if they're the highest bidders. That strategy also would provide a beachhead against Nextel in their established markets.

NextWave itself wants to pay back the $4.7 billion it owes the government in an effort to keep the spectrum. This initially was rejected by the FCC when it cancelled the NextWave licenses.

Caught in the crossfire are the DEs, which argue that limiting the C and F blocks to their bids would promote competition and lower consumer costs in the spirit of the Telecom Act.

"Our position is that the FCC set rules, and a lot of people went out like (us) and invested a great deal of time and money in business plans that work under those rules," said one DE's chief counsel, who asked not to be identified. "To change it now is going to cost a lot of companies great disruption and financial harm."

CTIA, meanwhile, is concerned that some members will be shut out of the bidding process as they attempt to cobble together enough spectrum to roll out high-capacity 2.5G and 3G networks. It wants the DE status waived.

PCIA wants the DE status upheld. Its members typically have shallower pockets that limit their ability to bid on spectrum such as TV channels 60 to 69, up for auction April 25. DEs also want to roll out their next-generation networks but might be hamstrung if the spectrum is available to those with deeper pockets.

Meanwhile, many DEs are taking heart in a statement by FCC Commission Chairman William Kennard: "When we made the announcement about the NextWave licenses, we were not changing our auction rules in any way," Kennard said. "As we speak, our designated entity rules are currently in place. As far as I know there is no request for a waiver."

The NextWave PCS licenses are a moving target as the FCC and the courts attempt to deal with the issue.

* Jan. 12: The FCC announced that it is reclaiming with the intent to re-auction PCS licenses held by bankrupt NextWave.

* Jan. 20: Commission Chairman William Kennard stated that only "designated entities" would be allowed to bid on NextWave licenses, but left the door open to the idea of larger wireless companies asking for waivers to bid.

* Jan. 21: U.S. Bankruptcy Judge Adlai S. Hardin asked the government to explain when the NextWave licenses were cancelled and how NextWave was to have known that the licenses were cancelled.

* Jan. 31: Hardin rejected the FCC's Jan. 12 actions to cancel NextWave's licenses, saying that the FCC was in violation of the Bankruptcy Code. The ruling reversed a decision last month by the U.S. Second Circuit Court that said bankruptcy law could not trumptelecommunications law.

* Feb. 1: The FCC announced plans to appeal Hardin's Jan. 31 decision.