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Confusion reigns as wireless auction approaches

Dozens of wireless carriers will bid on airwaves worth tens of billions of dollars in a government-run auction next month--unless politics or the courts get in the way.

WASHINGTON--Dozens of wireless carriers will bid on airwaves worth tens of billions of dollars in a government-run auction next month--unless politics or the courts get in the way.

The Federal Communications Commission could announce as soon as Friday which companies have been approved to bid in the Dec. 12 auction.

The U.S. Court of Appeals for the District of Columbia Circuit refused a stay request Monday by NextWave Telecom, a troubled wireless network provider that forfeited nearly a hundred licenses when it entered bankruptcy protection. That followed an October decision by the U.S. Supreme Court that cleared the way for the auctions.

But some lawmakers on Capitol Hill are looking to postpone the auction, and the D.C. appeals court has yet to rule on the legality of the FCC's seizure of NextWave's licenses, meaning auction winners of those licenses might have to give them back. The bottom line is that potential bidders aren't entirely confident the auction will occur as scheduled, nor are they sure they'll even get to keep the airwaves they purchase.

The FCC's Wireless Bureau is reviewing applications filed last week, and any company approved to bid on the NextWave licenses or about 400 others also in the auction would have to make a significant down payment by Nov. 27.

Among the larger companies expected to participate in the auction are Cingular Wireless (a partnership between BellSouth and SBC Communications), Verizon Wireless, AT&T Wireless, Sprint PCS, Nextel Communications and VoiceStream Wireless.

Clear airwaves are growing increasingly scarce, and wireless providers big and small want to get in on bidding next month. However, some in Congress want to block the auction until all the legal issues surrounding the forfeited licenses are resolved, and Monday's court decision did not resolve all those issues.

Bankrupt but unbowed
Nearly a hundred of the licenses to be auctioned belonged to NextWave, which has waged a vigorous legal and lobbying effort to prevent those licenses from being auctioned to others. The company defaulted on $4.2 billion of the $4.6 billion it pledged to pay for the licenses when it entered bankruptcy protection in 1998, and the FCC reclaimed them.

Following the initial bankruptcy court ruling that said NextWave could keep its licenses if it paid the FCC a reduced amount, each subsequent court ruling has been in the commission's favor.

NextWave on Monday lost its request for a court stay of the auction, but the appeals court said it will continue to examine whether the FCC was within its rights to take back the licenses when NextWave defaulted.

Any decision will come after the auction, as the court set a calendar that extends into late January just for the filing of briefs. If NextWave were to prevail after other carriers won its former licenses at auction, that likely would mean more legal wrangling.

"It is unnatural to overlay the auction with a legal cloud on the licenses," NextWave said in a statement Monday calling for the FCC to voluntarily stay the auction.

"We're proceeding as if the auction will go forward," a high-ranking FCC official said.

NextWave's lobbying efforts on the Hill to attach a rider to a spending bill staying the auction became hopeless a few weeks ago, as no such rider was attached to any spending bills. However, Congress will be going back into a postelection session soon to pass two spending bills, and Hill observers say that any rider once considered dead now has new life.

Senate Majority Leader Trent Lott, R-Miss., told reporters recently that given that NextWave's legal appeals have not been exhausted, a case could be made for postponing the auctions.

Congressional leaders have worked out a schedule with the White House that won't have any action on spending bills occur until at least Dec. 5, meaning the uncertainty over these auctions could continue for some time.

License to communicate
The airwaves to be auctioned are premium PCS licenses across the United States, many of them in major markets. Unlike some airwaves sold in recent auctions, these airwaves are not occupied by any other provider.

The FCC has made several changes to the way these licenses will be auctioned. To begin with, full payment will be due upon winning the license. The installment plan adopted for these licenses the last time around led to many defaults, resulting in the re-auction.

In addition, see related story: Congressmen press for 3G wirelesssome of the licenses had a restriction removed from them that limited their sale to small companies. Combine that with the splitting of some licenses into smaller pieces, which opens the auction to large providers near the so-called spectrum cap in some markets, and large companies can bid on smaller slices of airwaves without worrying about exceeding the ownership cap.

Still, many large providers have complained about that cap, as it not only makes it difficult for them to accommodate their existing growth but also severely limits their ability to plan ahead for next-generation services such as high-speed Internet access and streaming video, aided by emerging wireless technologies known as 3G.

FCC Wireless Bureau Chief Tom Sugrue recently said the commission, as part of its biennial review, will consider the future of the spectrum cap before the end of the year.