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Eager to jump-start talks that might lead to a settlement in the long-running NextWave Telecom Inc. dispute, the Federal Communications Commission is preparing to return a substantial portion of the $3.1 billion in deposits that the nation’s wireless carriers paid the government last year as part of a failed re-auction of NextWave’s wireless spectrum licenses, according to sources. These sources said the agency is considering a plan under which 85 percent of each winner’s bids would be returned. The carriers had asked for 95 percent while the FCC had suggested giving back 75 percent. The FCC does not need congressional approval to return the deposits on $15.85 billion in bids, FCC spokesman David Fisk said. But the difficulty is that the money has been disbursed and the funds would have to be reconstituted from other sources. With the government fighting a war against terrorism, it is reluctant to relinquish nearly $2.5 billion. But to expedite a settlement in the five-year-old dispute, the FCC appears willing to give the carriers back most of the money they paid the government in February 2001. The FCC has yet to respond to the carriers’ request. “That is still under review,” Fisk said. As the agency scrambled to arrange a repayment, a move by the U.S. Supreme Court has increased the likelihood for a negotiated settlement. A previously signed deal failed to receive Congressional approval before it expired Dec. 31. Under the agreement NextWave would have been paid about $5.85 billion and the government roughly $10 billion in exchange for the licenses. Earlier last week, the Supreme Court gave NextWave a two-week extension until Feb. 1 to file a response to the government’s appeal of a June lower court ruling that handed ownership of the disputed licenses to the Hawthorne, N.Y.-based company. Both the FCC and the wireless carriers backed NextWave’s extension request because all three parties would prefer to hammer out a settlement rather than continue litigating. The government and the country’s wireless operators have been trying for more than four years to wrest the licenses from NextWave. Launched by a former Qualcomm Inc. executive, NextWave won licenses at a 1996 FCC auction for $4.7 billion but declared bankruptcy two years later after paying only $500 million. The big carriers then bought the licenses in a 2001 re-auction. Sources say a negotiated settlement remains a possibility even though Verizon Wireless, the largest bidder in the re-auction, has announced that it would not participate in a settlement until it received back its $1.7 billion deposit. Though Verizon has publicly said it would refuse to participate in a negotiated settlement unless the deposit money is returned, the company plans to continue to talk with the FCC — and indirectly with NextWave officials — in hopes of promptly settling, a source said. Verizon spokesman Jeffrey Nelson denied the company was interested in a settlement. “We are focused solely on getting our deposit back,” Nelson said. On Jan. 4, Verizon and 12 other carriers petitioned the FCC to return $3.1 billion in down payments. The carriers, led by Verizon, AT&T Wireless and Cingular Wireless, are frustrated that the deposits they made a year ago have failed to bring them the licenses. Making matters worse, those deposits were never intended to earn interest. That’s because the deposits that the FCC collects as part of any auction are placed into the government’s general fund rather than a separate account. Instead, the Department of Treasury records the receipt of any deposit monies and promptly uses it for immediate expenditures. “There is no pool of cash representing that money actually sitting in a bank somewhere,” a government official said. “The carriers knew that when they made their bids.” If the FCC decided to reimburse that money, it would issue disbursements for that money which the Treasury department would then have to cover either through cash on hand and through any number of borrowing mechanisms. As in every auction that the FCC holds, prospective bidders are required to send their deposits to the Mellon Bank in Pittsburgh, which acts as a clearinghouse for the FCC. The money is then sent to the Department of the Treasury. Copyright (c)2002 TDD, LLC. All rights reserved.

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