FCC RETURNS $2.8 BILLION OF NEXTWAVE RE-AUCTION DEPOSITS
FCC returned $2.8 billion (85%) of deposits from Jan. 2001 NextWave re-auction but concluded bidders should continue to be held to nearly $16 billion in bid obligations. “This action will give the bidders access to the bulk of their money while at the same time preserving the results and integrity” of re-auction of PCS licenses that U.S. Appeals Court, D.C., overturned last summer. Verizon Wireless, which has largest deposit of $1.7 billion, had argued to FCC that to extent it had right to void auction contract on NextWave licenses, it chose to do so. Commission said late Wed. it struck “public interest balance between hardship that would be imposed by continued retention of the down payments and the need to protect the integrity of the auction by authorizing refund of a substantial portion of the down payments.” But FCC order specifically turned back Verizon Wireless claim that delay in licensing “entitles it to avoid its obligation to pay the full amount of its winning bids.” Earlier this year, Supreme Court granted FCC request that it hear challenge of D.C. Circuit decision, which had reversed Commission decision to cancel NextWave licenses for missed payment. Result of latest FCC order is that if Supreme Court decision has effect of upholding Jan. 2001 re-auction results, those bidders then could be held to original amounts they agreed to pay for licenses.
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FCC said it concluded that carriers that made down payments for re-auctioned licenses of NextWave and Urban Communicators included many small businesses and “may require access to their funds to continue to operate their businesses.” Commission said at same time it “must protect the integrity of Auction No. 35 in the event the Commission is ultimately successful in its litigation and a bidder subsequently defaults on its payment obligations.” FCC said that to put partial refund in place, it had waived rules requiring that down payments equal to 20% of winning bidders’ total net bids be held by Commission until licensing process was resolved. Agency said 3% represented “the minimum amount of money a bidder must pay if it defaults on its bid obligation.” It said it set out specific procedures companies must follow to receive refunds.
Order, unanimously approved by FCC, spelled out that if agency prevailed in NextWave litigation, winning bidders in re-auction would be required “to pay the full amount of their winning bids or be subject to default under the Commission’s rules.” As for rejection of Verizon claim that company should be able to void auction contract, FCC said “by participating in the auction, Verizon assumed a known risk of litigation-related delay and thus continues to be bound by the auction rules… Those rules require all bidders to pay their full bid in the event the Commission is ultimately successful in its litigation and the licenses are issued.” Verizon also had sought return of full $1.7 billion in down payments it made for NextWave licenses. D.C. Circuit earlier this month turned down Verizon petition asking that court compel full compliance with its June 2001 ruling, meaning auction was void and all down payments should be returned (CD March 5 p2).
Re-auction winners had asked FCC earlier this year to return down payments, arguing agency had held total of $3.1 billion without interest since Feb. 2001. Carriers cited negative impact that frozen funds were having on their business plans. Analysts have noted in recent weeks that if Commission didn’t also release winners from obligations under re-auction bids, it would tie up nearly $16 billion from being used on other expenditures.
Aside from Verizon, other re-auction winners awaiting down payment decision included Alaska Native Wireless, which has AT&T Wireless backing and made down payment of $544.7 million. Salmon PCS, which has financial backing from Cingular Wireless, had made $416.2 million down payment. Re- auction winners also sought $93 million in refunds on licenses previously controlled by Urban Communicators. Like NextWave, Urban Communicators also had bid for C-block licenses in 1996 and subsequently filed for bankruptcy, facing similar license cancellation for missed payment.