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NextWave Telecom, a tiny wireless carrier enmeshed in bankruptcy, on Friday won back the rights to airwave licenses that are worth billions of dollars, as a U.S. Appeals Court ruled that federal regulators had stripped the company’s spectrum improperly. The 90 licenses at issue, which NextWave picked up in a 1996 Federal Communications Commission auction for more than $4.7 billion, provide as much as 30 megahurtz — a large and valuable chunk of spectrum — in major cities around the country including New York, Los Angeles and San Francisco. Established wireless carriers including Verizon, AT&T and Cingular might be the biggest losers in Friday’s decision. The spectrum-starved companies, or their close affiliates, bid billions at a January re-auction of NextWave’s licenses. Now those bids may be canceled and the carriers may not get the extra spectrum they need unless the FCC can work out a settlement with NextWave. Former FCC Chairman Bill Kennard, who supported fighting NextWave in court during his tenure, predicted that a negotiated settlement would be forthcoming. “The licenses are back in bankruptcy and the FCC is the largest creditor,” says Kennard, now a managing director at the Carlyle Group. “This decision today cries out for a settlement.” The FCC had subdivided licenses from NextWave and other companies prior to the January re-auction. Slightly more than half of the licenses auctioned — 216 out of 422 — came from NextWave, but all of the big money — $15.9 billion out of $16.9 billion in winning bids — went for the NextWave licenses. The court’s decision does not affect 206 licenses that came from companies other than NextWave. In a 3-0 ruling, a panel of the U.S. Court of Appeals for the District of Columbia strongly rebuked the FCC for violating bankruptcy laws when it canceled Nextwave’s licenses for nonpayment after the carrier had already filed for bankruptcy in 1998. “Applying the fundamental principal that federal agencies must obey all federal laws, not just those they administer, we conclude that the commission violated the provision of the bankruptcy code that prohibits governmental entities from revoking debtors’ licenses solely for failure to pay debts dischargeable in bankruptcy,” the court said. The scathing ruling marks just the latest embarrassment for the FCC related to the 1996 auction that was intended to give small and startup businesses entry into the wireless phone market. Although the auction raised more than $10 billion, the agency allowed winning bidders to pay in installments over 10 years. When capital markets proved unwilling to back many of the winning bidders, several upstart carriers, including NextWave, filed for bankruptcy. After Friday’s ruling, NextWave, based in Hawthorne, N.Y., said in a statement that it plans to begin rolling out its wireless phone service nationwide. The company also could decide to sell its licenses to the major carriers — possibly for even more than the carriers bid at the re-auction. “We feel very fortunate to be in a position where we can get out of the courtroom, get into the field, and resume doing the things the company was created to do, which are to build wireless networks and serve customers,” NextWave Chairman Allen Salmasi said in a statement. The company, which remains under bankruptcy-court supervision, has only $90 million of approved financing for building its network. Then again, in light of Friday’s ruling, lenders might be more willing to aid the company. Verizon Wireless, which was the most successful bidder at the January re-auction with winning bids totaling $8.8 billion, urged the FCC to reach a quick settlement with NextWave. “The FCC has an obligation to ensure that the American people don’t continue to lose out,” says Verizon Wireless President Denny Strigl. “The FCC and NextWave need to settle this dispute in a way that permits the FCC’s auction results to stand, and this spectrum to be quickly deployed.” Alaska Native Wireless, an upstart carrier with backing from AT&T Wireless, was the second-leading bidder, with $2.9 billion in winning bids. AT&T was not immediately available to comment. Salmon PCS, the third-leading bidder with winning bids of more than $2.3 billion, is backed by Cingular. A Cingular spokesman said 33 of the 72 licenses won by Salmon originally were owned by NextWave and could be affected by Friday’s ruling. An FCC spokeswoman said the agency was reviewing the decision, which could be appealed to the Supreme Court. Related Articles from The Industry Standard: Court Rules for NextWave on Licenses Don’t Be Mistaken: WAP Is Back Wireless Industry Gaining Users, Healthy Competition Copyright � 2001 The Industry Standard

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