NextWave Settles Dispute With Feds

The government has settled its long airwaves battle with NextWave Telecom with a $16 billion deal that could improve service for mobile-phone customers in many U.S. cities. Under the agreement, NextWave would free its wireless airwaves for the nation's biggest mobile-phone carriers to fill coverage gaps in congested markets. The deal must still be endorsed by Congress, the Justice Department and a New York bankruptcy judge.

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The government settled its long airwaves battle with NextWave Telecom Inc. on Friday with a $16 billion deal that could improve service for mobile-phone customers in dozens of U.S. cities. Under the agreement, NextWave would free its wireless airwaves for the nation’s biggest mobile telephone carriers to fill coverage gaps in congested markets. It still must be endorsed by Congress, the Justice Department and a New York bankruptcy judge and survive any legal challenges. “At bottom, it is a deal that serves the public interest, for it will get licenses out from under litigation and into the market, where the public will benefit from improved service quality, enhanced coverage and greater reliability,” Federal Communications Commission Chairman Michael Powell said in a statement announcing the deal. NextWave won the airwaves in a 1996 government auction, but paid just $500 million of its $4.7 billion bid before seeking protection from creditors, largely the FCC, in a New York bankruptcy court. The FCC then seized and re-auctioned the licenses, bringing $15.8 billion for the same chunk of spectrum from major telecommunications companies, including Verizon Wireless and affiliates of Cingular Wireless, VoiceStream Wireless and AT&T Wireless Services Inc. But a federal appeals court ruled in July the government was wrong to have resold the licenses and ordered them returned to NextWave. The FCC has asked the U.S. Supreme Court to overturn that decision. It took weeks of intense negotiations for the parties to agree how to resolve the court dispute. NextWave insisted all along it intended to build itself into a viable wireless carrier. Chairman Allen Salmasi acknowledged the settlement takes the company “down a different path.” “It’s a winning solution for all parties,” he said. Wireless companies hailed the agreement as a major step. “It’s too early to pop the champagne corks, but with the Bush administration’s leadership on Capitol Hill to enact legislation that will support the recently announced settlement, we are encouraged that the NextWave situation will be fully resolved very soon,” said Denny Strigl, president and chief executive of Verizon Wireless. Under the deal, the carriers would pay the government essentially what they bid in the second auction, by the middle of next year, to purchase NextWave’s licenses, Verizon spokesman Jeffrey Nelson said. The new spectrum will allow them to expand services in lucrative but overcrowded markets such as New York, Los Angeles, Chicago, Seattle, San Francisco, Washington and Philadelphia. Verizon would get by far the largest share, followed by AT&T Wireless’s affiliate. The FCC would transfer about $9.6 billion of the carriers’ money to NextWave. After paying taxes and other fees back to the government, investors in the 60-employee Hawthorne, N.Y.-based company would net more than $5 billion. NextWave has yet to build a network or offer service. The company still plans to launch service sometime next year, through networks being built in Detroit and Madison, Wis. — areas covered by five licenses NextWave actually paid for. The government, in turn, would gain $10 billion for the U.S. treasury, Powell said. That’s about $6 billion less than if the second auction were upheld. The government would not drop its Supreme Court challenge until it was clearer that the settlement would stand. With all sides, especially the government, out to minimize the risk of losing money from defaults or legal challenges, the deal foundered over whom would be paid first and how the money and licenses would be transferred among the entities. Congress will be asked to pass legislation funneling all legal challenges to one federal appeals court in Washington, Powell said. The legislation also is needed to give the FCC authority to pay NextWave, said a source close to the negotiations. Most involved in the deal believe key Capitol Hill players are receptive to the terms. Sen. John McCain of Arizona, the top Republican on the Commerce Committee, said he will review whether the settlement protects “the American taxpayer from being shortchanged.” Copyright 2001 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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