In brief filed with U.S. Supreme Court late Mon., FCC argued that...

D.C. Circuit last June overturned FCC decision to cancel NextWave’s licenses for missed payment. Agency told court that D.C. Circuit’s ruling “needlessly places” Sec. 525 of U.S. Bankruptcy Code in conflict with Sec. 309(j) of Communications Act. Sec. 525 prevents govt. units from revoking license of debtor or bankrupt entity solely because it hasn’t paid dischargeable debt. Sec. 309 of Communications Act covers market-based mechanisms -- such as auctions -- that FCC can use to allocate spectrum. D.C. Circuit held that Sec. 525 barred cancellation of FCC license for failure to make timely payment of successful bid. “Because a winning bidder’s willingness and ability to pay more than others is the principal basis for the FCC’s decision to select it as the best licensee in the public interest, a licensee’s failure to meet that undertaking fatally undermines the regulatory judgment underlying the award of spectrum,” FCC said in brief. Auction rules and FCC licenses are conditioned on full and timely payments, Commission said. “Yet, under the Court of Appeals’ decision, the FCC cannot enforce that regulatory condition.” Sec. 525 of Bankruptcy Code doesn’t compel that result, agency argued. “The full and timely payment condition in FCC licenses does not discriminate against licensees that have been bankrupt or enter bankruptcy,” FCC told court. “It merely establishes a neutral regulatory requirement.” Agency said condition of FCC license that required licensee to meet regulatory bid obligations wasn’t debt that was dischargeable in bankruptcy. “To the contrary, the license condition is not even properly construed as a debt,” FCC said. “So long as the licensee holds its license, the terms of the license (including payment requirements) are beyond the authority of bankruptcy courts to modify or discharge.” Commission pointed to 2nd U.S. Appeals Court, N.Y., ruling on NextWave that held that bankruptcy courts lacked authority to modify or displace “full and timely payment” conditions that are part of FCC licenses. Bankruptcy courts haven’t “authority (let alone expertise)” to “second-guess” regulatory determinations that FCC makes on whether licensees have met payment obligations, brief said. Under D.C. Circuit’s ruling, Commission contended that “the use of competitive bidding would eliminate the FCC’s right to reclaim licenses for failure to meet fundamental license conditions specifically because the auction mechanism was used, i.e., because the regulatory decision to issue the licenses necessarily had a financial component.” Based on congressional decision to allow Commission to use market-based systems to allocate spectrum, that reading “represents a significant intrusion on the FCC’s ability ’to reclaim licenses.'”