Petition against NextWave merely the beginning

Late last week three companies, Alaska Native Wireless, Verizon Wireless (www.verizonwireless.com) and VoiceStream (www.voicestream.com), petitioned the FCC (www.fcc.gov) to audit NextWave’s (www.nextwavetel.com) eligibility to hold C and F Block licenses. The move is the latest salvo in the dispute involving NextWave.

In late June, the U.S. Court of Appeals ruled the FCC inappropriately reclaimed the carrier’s licenses. Early this year, the FCC re-auctioned those licenses, taking in more than $16 billion.

The current petition questions NextWave’s foreign ownership, its status as a designated entity in the original auction and its ability to meet future license payments. The filing also asks the FCC to invite public comment on the issue and grant the non-NextWave re-auctioned licenses to their respective winners.

Knox Bricken, Yankee Group (www.yankeegroup.com) analyst, said that this filing is just the beginning of what will be a long process to an eventual resolution of the conflict. “This is an attempt by the national carriers to throw roadblocks in the way of NextWave’s deployment and to create further complications which, in the end, hope to convince the federal regulators to keep things the way they are (by) giving the licenses to the national carriers,” she said.

Michael Wack, NextWave deputy general counsel, called the allegations in the petition procedurally infirm and without merit.

“These guys lost in court, they have been unable to have any success on Capitol Hill,” he said. “Their last gasp is to turn to the regulatory agency and tie us up in administrative proceedings.”

One of the petition’s major points is foreign ownership. According to the filing, foreign investment in NextWave exceeded 25% in 1997. The Communications Act requires foreign investment in excess of 25% to be approved by the FCC as in the public interest. Investment from companies based in WTO countries is presumed to be in the public interest as part of the United States’ membership in the WTO.

NextWave was directed by the FCC to submit monthly reports delineating how it was decreasing its foreign ownership percentage. Those reports have been “self-serving, unresponsive and wholly lacking in information,” the filing reads.

Wack said that NextWave’s current foreign ownership is less than 10%, but declined to add who those investors are or where they are from.

“It is absurd for foreign ownership allegations to be raised by carriers who are fully or substantially owned by Deutsche Telekom, Vodafone and NTT DoCoMo,” Wack said in a statement.

The carriers behind the filing represent three of the top bidders in Auction No. 35, which included the repossessed NextWave licenses.

“One of the most notable facts about the filing is that there are only three carriers involved and everyone in the industry was invited to join in,” Wack said. “You don’t see Nextel, Cingular, Sprint … you don’t see a lot of carriers there.”

Dan Pegg, Leap Wireless (www.leapwireless.com) senior vice president of public affairs, said that, to his knowledge, Leap was not invited to participate in the filing. Leap Wireless was the high bidder on 22 licenses.

Salmon PCS, backed by Cingular (www.cingular.com), was the high bidder on 79 licenses. The carrier would like to be able to put them to use.

“Salmon favors preserving the results of FCC auction No. 35 and generally supports the efforts by other auction high bidders intended to achieve that result,” said George Crowley, Salmon PCS president & CEO. “The immediate focus of Salmon’s attention, however, is to encourage the FCC to process and grant the non-NextWave licenses so that service to the public can be initiated in the near future.”