It may only be a few months before big carriers get their hands on big chunks of spectrum in major markets like NYC & LA

January 28, 2003

3 Min Read
NextWave Recoups Licenses

Following yesterday's 8-1 Supreme Court ruling that NextWave Telecom Inc. may keep the licenses it bought at auction from the Federal Communications Commission (FCC), it may only be a couple of months before the company is able to sell the bandwidth to larger carriers in need of spectrum for third-generation voice and data services.

The decision draws to a close the sorry seven-year saga of the NextWave 3G spectrum licenses. The New-York-based operator originally paid around $4.7 billion for the licenses in 1996. However, by 1998 NextWave filed for Chapter 11 bankruptcy protection.

Last year, the FCC seized the licenses after NextWave had defaulted on its payments. In a second round of auctions, the Commission sold the licenses to major carriers like Verizon Wireless and AT&T Wireless Services Inc. (NYSE: AWE). The operators hoped to use the spectrum to rollout 3G voice and data services in markets like New York, Los Angeles, and San Francisco.

However, the U.S. Court of Appeals for the District of Columbia ruled in June that revoking the licenses violated bankruptcy law, and NextWave got them back. In March, the FCC asked the Supreme Court to hear an appeal against that ruling (see US: 3G or Not 3G? and Nextwave Case Drags On, Drags 3G Down).

Now, this latest Supreme Court ruling means that NextWave will soon be able to sell these licenses back to the major carriers that bid for them in the second round of auctions. However, before it can do that, the company will probably have to build out a little network first. This is because the FCC has rules against any company buying up and selling spectrum for pure speculative gain.

Plans for this are already in hand: Lucent Technologies Inc. (NYSE: LU) is slated to build a high-wireless data network for NextWave. The undertaking is expected to cost $400 million.

Some commentators say that once NextWave and Lucent have built the network, that should be enough to satisfy the FCC rules, leaving the company in the clear to resell its spectrum licenses to other carriers. "They have to follow the rules, but then they can take the money and run," says Roger Entner, program manager of the wireless/mobile services research group at the Yankee Group.

If the network rollout goes to plan, it might be possible for Verizon, AT&T, and others to start buying spectrum from NextWave in a couple of months, Entner reckons. However, he says that such major carriers probably have a year or two before they start to face actual spectrum shortages.

Like the lone judge that voted against the ruling, Justice Stephen Breyer, Entner is not 100 percent happy with the way things have gone down. Breyer claims the ruling will make it harder for the government to collect debts than it is for private businesses.

"Still," Entner concedes, "it's better to have the spectrum freely available than stuck in the ether like it was, I suppose."

— Dan Jones, Senior Editor, Unstrung

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