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NextWave court win frees up airwaves

A high court rules that the FCC acted wrongly in seizing wireless licenses held by bankrupt phone company NextWave, releasing the valuable disputed spectrum from legal limbo.

The U.S. Supreme Court on Monday cut through a "Gordian legal knot" that has kept swaths of wireless spectrum in crowded metropolitan markets out of the hands of carriers.

The high court voted 8-1 to uphold a U.S. appeals court decision that the Federal Communications Commission had violated bankruptcy law when it repossessed wireless licenses awarded to NextWave Telecom.

The decision ended six years of legal battles that have left unused licenses for wireless spectrum in New York, Los Angeles, Chicago, San Francisco, Seattle and several other markets where a majority of people own cell phones, said Tom Wheeler, president of the Cellular Telecommunications and Internet Association.

"Finally, this Gordian legal knot has been cut," Wheeler said. "This valuable spectrum, tied up in the courts and thus left fallow for far too long, can now be put to use delivering wireless service to America's consumers."

New York-based NextWave bought the licenses for wireless spectrum in those major cities for about $4.7 billion, at an auction in 1996. The company made $500 million in payments before entering bankruptcy protection in 1998. The FCC seized the airwaves and reauctioned the licenses last year after NextWave did not pay for them on time. At the second auction, wireless carriers paid about $16 billion for the licenses--almost four times what NextWave had promised to pay.

However, the U.S. Court of Appeals for the District of Columbia ruled last June that the repossessing the licenses was a violation of bankruptcy law. The FCC in March asked the Supreme Court to hear an appeal.

As a result of Monday's decision, bankrupt NextWave will continue to own the spectrum licenses. The carrier can now either build out its own wireless network or, as company Chairman and CEO Allen Salmasi suggested in October, sell or share the airwaves to other carriers.

A statement from Salmasi released Monday did not indicate which of the two options the wireless phone company would take. A NextWave representative was not immediately available for comment.

Industry observers believe NextWave may be more willing to sell the licenses than undergo what would be the difficult task of securing funding to complete the cell phone network it began building in 1995.

The FCC last year canceled the results of the second auction, a move that entitled the license winners--Verizon Wireless, Sprint PCS, Cingular Wireless and AT&T Wireless--to get their fees back.

Verizon had been the biggest bidder, agreeing to pay an estimated $8.8 billion for 45 of the 200 licenses. A representative for Verizon had no comment when reached Monday.

Sprint, which bid $280 million for spectrum in a handful of markets, "is still reviewing the decision" and has no comment, representative Dan Wilinsky said. Representatives for Cingular and AT&T Wireless could not be immediately reached for comment.