In a ruling by the U.S. Court of Appeals for the District of Columbia Circuit, a three-judge panel ruled the Federal Communications Commission violated bankruptcy laws when it recovered wireless spectrum licenses from NextWave and re-auctioned them to rival carriers.
"We conclude that the (FCC) 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 judges wrote in their opinion.
In 1996, NextWave successfully bid $4.74 billion in a FCC spectrum auction to acquire 63 licenses. The company made a $474 million down payment, but later had difficulty obtaining additional financing and filed for Ch. 11 bankruptcy protection in 1998. Under Ch. 11, a company continues to operate while it draws up a debt-restructuring plan.
The FCC revoked NextWave's licenses and re-auctioned them to other service providers. A spokeswoman for the FCC said the agency is "at this point reviewing the court decision."
Representatives for Verizon Wireless, the nation's largest wireless carrier and one of the service providers that bid on reclaimed NextWave spectrum, said the company will push for NextWave and the FCC to work out an agreement under which the recent auction winners can acquire this disputed spectrum.
"We are disappointed by the Court's decision. 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," Verizon Wireless Chief Executive Denny Strigl said in a statement.
Earlier this year, Verizon bid about $8.3 billion on roughly 60 one-time NextWave licenses, according to a spokesman.