FCC heeds industry pressure on wireless auctions

Mere days after concluding a wireless PCS auction that raised nearly $17 billion, the Federal Communications Commission announced the fourth postponement of the next wireless auction, from March 6 to Sept. 12.

The spectrum available in the wireless auction is more cluttered than the PCS spectrum, and many carriers had requested more time to assess their bidding strategies and spectrum needs. Meanwhile, NextWave Telecom, the bankrupt one-time owner of much of the spectrum just sold by the FCC, filed its latest court brief to win its airwaves back.

The instability in the government's distribution of spectrum comes at an awkward time, as wireless carriers are seeking not only to establish nationwide networks that don't rely on frequent roaming agreements but also to prepare for next-generation, or 3G, services that include high-speed Internet access and video streaming. The FCC finds itself facing conflicts among large and small carriers, pressure from Congress for more auction revenue, as well as the thorny issue of the transition to digital television; many broadcasters already occupy the spectrum that will be sold at auction later this year.

Commissioner Harold Furchtgott-Roth--who just announced he is leaving the FCC--decried the fourth postponement.

"There was no legal or logistical basis for delaying the auction in the first place," he said. "Each delay only brings the agency further out of compliance with the law," meaning the FCC was obligated to provide the U.S. Treasury with revenues from this auction by last September.

However, Commissioner Gloria Tristani said that "the timing of back-to-back auctions, with overlapping 'quiet periods' that prohibit bidders from engaging in discussions with others not previously disclosed, provides only limited opportunity to assess spectrum needs and no time between auctions to consider new marketplace realities." She supported the postponement.

The FCC decided to postpone yet again the March auction of the wireless spectrum after receiving a request for postponement from Verizon Wireless then hearing further comment from AT&T Wireless, Cingular Wireless, VoiceStream Wireless and the Cellular Telecommunications & Internet Association (CTIA), all bidders that wanted more time to assess their spectrum needs after the auction.

Another unstated issue is that the wireless spectrum is where TV channels 60 to 69 are located. Eventually those channels will be abandoned by broadcasters as they make their transition to digital television, but that transition is years away.

Earlier this month, the FCC said it would not force broadcasters to abandon that spectrum. Instead, winners of the wireless auction would have to negotiate with broadcasters to encourage them to move, an idea carriers don't exactly relish.

The wireless PCS licenses were designed to be used specifically for digital wireless service, while the FCC has been less restrictive in how spectrum purchasers could use the general wireless frequencies currently occupied by broadcasters.

Should NextWave succeed in its admitted long-shot effort to reclaim its licenses, nearly all of the $17 billion earned in the recent auction would be returned to the winning bidders and their claimed licenses taken back and given to NextWave.

"The FCC decided it could raise more money by seizing the licenses and reselling them to large, incumbent telecommunications companies that had taken none of the financial and business risks assumed by NextWave," said NextWave attorney Theodore Olson of Gibson, Dunn & Crutcher in Washington. He was referring to the fact that unlike the first time these PCS licenses were sold in 1996, as a reserved auction for small providers, this time the commission opened the auction to major players, who in concert with small partners purchased nearly all of the licenses.

Olson argued that the recent auction confirmed NextWave's assessment as to the high value of the licenses, and had the FCC cooperated with the bankruptcy court, the agency would have paid. NextWare bid $4.8 billion for the licenses. The bankruptcy court said they would only have to pay about $1 billion. With their down payment, NextWave later offered to pay about $2 billion total.

NextWave already has seen numerous appeals of the FCC's actions rejected, including two dismissals by the U.S. Supreme Court. The U.S. Court of Appeals in Washington, D.C. has scheduled oral arguments for NextWave's latest petition for March 15. But considering the licenses sold in the upper range of estimates at the recently concluded auction, most carriers didn't appear concerned they'd have to forfeit the license to NextWave.