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Douglas Teitelbaum has been schlepping to Capitol Hill nearly every month for the past year, lugging a 300-page fact book in a last-ditch attempt to save one of his companies. The New York-based venture capitalist is part owner of NextWave Telecommunications Inc., a company that seemed poised to cash in on the wireless phone craze in 1996 when it was the high bidder for lucrative telecom licenses. Since then, NextWave’s fortune has dramatically changed: It has found itself rebuffed by the Federal Communications Commission, forced into bankruptcy, beaten up twice by a federal appeals court, and turned away by a panel of D.C. judges. The FCC, which manages the airwaves, says that NextWave lost the rights to the licenses after it failed to make payments on them. The agency, which estimates it could get between $8 billion and $10 billion for the licenses, says it will put them up for auction again by November. After all the setbacks, some might call it quits. Not Teitelbaum. “We are not going to just roll over when the government essentially nationalizes our property,” says Teitelbaum, who has sometimes made two pilgrimages a week to the Hill. “This is not Chile, and the government can’t just nationalize our property because it thinks it can resell it for more money.” To make sure that his message gets through, Teitelbaum has brought on top-dollar assistance from Washington, D.C.’s Barbour, Griffith & Rogers and Timmons. The lobbyists are trying to convince Congress to pass legislation that would prevent the FCC from taking back the licenses. For its part, the FCC says the matter is relatively simple, involving a company that failed to live up to its end of a bargain. “Auction winners must play by the rules and honor conditions placed on our licenses; otherwise, bidders will have no confidence in the FCC’s auction authority,” FCC Chairman William Kennard wrote in a letter to Congress in March. NextWave’s competitors — telecom giants including the AT&T Corp., Bell Atlantic Corp., and Nextel Communications Inc., as well as almost every other player in the wireless business — have also been lobbying, hoping to keep NextWave from pulling an 11th-hour miracle. They, of course, hope to have a shot at getting the licenses themselves. BIDDER STATUS CHALLENGED The fracas involving NextWave began at the end of 1995, when the FCC offered scores of spectrum licenses known as “C-block” licenses that could provide wireless services for more than 160 million people. NextWave, started by Allen Salmasi, a former president of Qualcomm Inc.’s wireless business, came out the winner. NextWave’s bid of nearly $4.8 billion raised hackles among some of the losers, as the auction was supposed to be open only to “small businesses” worth less than $500 million. Two of the losing bidders filed complaints against NextWave, alleging it had exceeded the FCC limits on foreign ownership because it was partly owned by a Korean steel company. The FCC launched an investigation. Over the next year, NextWave put down the nearly $500 million required for its deposit, even as it began setting up shop all over the country, signing purchase deals with Hughes Network Systems and Lucent Technologies Inc., among others, and forging an agreement to sell 10 million minutes of air time to WorldCom Inc. The FCC’s probe took months, during which the value of the licenses plummeted. The agency, which held back from officially granting NextWave the licenses, set up an arrangement that would give the company more flexibility in paying the $4.3 billion balance, even offering to wipe the slate clean by returning the company’s deposit in exchange for the licenses. But NextWave, which by this time had obtained preliminary clearance for use of the licenses, wanted more time to negotiate and to find financing. On June 8, 1998, unable to make its payments and up against the deadline for restructuring its deal with the FCC, NextWave filed for Chapter 11 bankruptcy protection in New York. The same day, the company accused the FCC of improperly holding up the granting of its license and hindering the company’s ability to land investors. FCC: CREDITOR OR REGULATOR? In April 1999, NextWave got a break. Although the FCC argued that it was entitled to the licenses, the New York bankruptcy court ruled that the licenses were part of the bankruptcy estate and thus beyond the reach of the agency. Further, the judge slashed the amount NextWave owed — from $4.3 billion to roughly $1 billion — because the company had not obtained possession of the licenses until after their value dropped. The U.S. District Court for the Southern District of New York agreed with the bankruptcy judge’s finding. The victory was short-lived. In November 1999, the 2nd U.S. Circuit Court of Appeals wiped out the lower court rulings, concluding that the bankruptcy court had no right to reduce the purchase price. The appeals court also ruled that the FCC was acting as a regulator, not a creditor, and was well within its rights to take back the licenses after NextWave defaulted on payments. NextWave has asked the Supreme Court to hear the case. NextWave then took its case to Capitol Hill. It has been running an aggressive ad campaign, touting the fact that even after it attracted investors that offered to pay the full $4.3 billion balance, the FCC wouldn’t budge. By the end of 1999, Teitelbaum, whose Bay Harbour Management has holdings in Barneys New York department stores and the Planet Hollywood International Inc. restaurant chain, brought on two of the heaviest lobby firms in town, Barbour Griffith and Timmons and Co., to argue that the company got a raw deal and to push legislation to block the FCC from taking the licenses. Working the issue for Barbour, Griffith is former Republican National Committee Chairman Haley Barbour, former Bush administration official Ed Rogers, and Carl Biersack, a former legislative director to Senate Majority Leader Trent Lott. Timmons brings a bipartisan team: Handling the Republican side is Bryce Larry Harlow, a former assistant secretary for legislative affairs at the Bush Treasury Department; handling the Democrats is former Carter administration official William Cable and Timothy Keating, a former special assistant to the president and staff director in the legislative affairs office of the Clinton White House. Even the company’s creditors — who would like to see the valuable licenses remain a part of NextWave’s bankruptcy estate — have a lobbyist. In an unusual arrangement, the bankruptcy court has approved the hiring of Bob Livingston, the former chairman of the House Appropriations Committee, to lobby on behalf of the creditors committee. The team came close to success in May when Senate Judiciary Chairman Orrin Hatch, R-Utah, and Sen. Robert Torricelli, D-N.J., the ranking member of the Judiciary Subcommittee on Administrative Oversight and the Courts, inserted a provision in the pending bankruptcy overhaul legislation that would make the FCC and all other agencies subject to bankruptcy laws. That was quickly knocked out by other companies seeking access to the spectrum license. NextWave and its allies are now focusing on making headway during the bankruptcy conference, or trying to add their provision to an appropriations bill. “What they need is to attach it in the dead of night on something that’s not going to receive a vote,” says Steven Berry of the Cellular Telecommunications Industry Association, which is fighting NextWave. NextWave lobbyists say their supporters include such influential members as Hatch, Torricelli, House Judiciary Chairman Henry Hyde, R-Ill., and House Commerce Chairman Tom Bliley, R-Va. A Torricelli spokesman confirmed the senator’s support. The other members could not be reached for comment. NextWave’s chief in-house advocate, Michael Regan, formerly worked for Bliley on the Commerce Committee. “The battleground now is in the offices of the congressional leadership and the appropriations committees,” says Howard Woolley, chief lobbyist for Verizon Wireless, a joint venture of NextWave opponents Bell Atlantic Corp. and Vodafone AirTouch PLC. LOBBYING BY FCC, COMPETITORS Verizon and 13 other wireless companies, sent a letter June 22 to Speaker Dennis Hastert, R-Ill., petitioning against any legislation to give relief to NextWave. The FCC, which tried unsuccessfully in 1997 to get Congress to pass a law specifying that its licenses are not property that can be claimed by the bankruptcy courts, is again seeking such legislation. “The long delays in the FCC’s ability to reclaim the valuable licenses held by NextWave only serve to underscore the importance of enacting legislation,” Kennard wrote in the March letter. The main allies of the other wireless companies have included Sen. Judd Gregg, R-N.H., chair of the appropriations subcommittee that oversees the FCC, and Rep. John Kasich, R-Ohio, chair of the House Budget Committee, according to Woolley. Not only are the other wireless companies trying to block NextWave from getting a fix in Congress, some are using the opportunity to loosen the rules for how the FCC auctions the spectrum licenses. Currently, much of the spectrum is reserved for what the agency defines as “small businesses,” which means that larger, more established companies are locked out. Perhaps the most aggressive company vying for the license is Reston, Va.-based Nextel Communications Inc., which last year offered to pay $8.3 billion to acquire NextWave’s spectrum. One of Nextel’s lobbyists says the goal is to get the chairs of the Commerce committees, which oversee the FCC, to put pressure on the commission to lift the size limits on bidders and to auction the spectrum as a single bloc. Nextel’s in-house lobbying team is led by Robert Foosaner, a former FCC official. The company also has podesta.com’s Anthony Podesta and Drew Littman, a former policy director to Sen. Barbara Boxer, D-Calif. In addition, the company has been using the services of Stuntz, Davis & Staffier. Berry, of the cellular association, says the only thing his members agree on is that the license should be reauctioned. As soon as the questions turn to what size a company should be in order to participate, and whether the spectrum should be sold in different parts or kept together, the consensus breaks down. “Each company is trying to get the best deal for themselves,” he says.

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