Nextwave Case Drags On, Drags 3G Down

In the latest twist in the saga of NextWave Telecom Inc., the U.S. Federal Communications Commission (FCC) has said that it will return $2.8 billion in downpayments to the thirteen carriers that bid for spectrum licenses the regulator had attempted to take from the bankrupt operator. The carriers have been calling for the return of their downpayments since January, after an appeals court ruling went against the FCC and NextWave repossessed its licenses.

The significance of the NextWave case is that the licenses the carriers had sought from the FCC would have freed up more bandwidth to allow them to offer third-generation (3G) voice and data wireless services. The longer the case drags on, the more delay many U.S. carriers face before they can offer full 3G services.

Sprint Corp.’s (NYSE: FON) PCS subsidiary is the only carrier to claim to have enough spectrum to offer extensive 3G services. Carriers that bid for more spectrum in the NextWave auction include Verizon Wireless, Voicestream, and partners of AT&T Wireless and Cingular Wireless.

The FCC sold the NextWave licenses in January 2001 for $16.3 billion. The carriers that won the licenses paid up $3.3 billion in downpayments. The next stage is the Supreme Court, which has agreed to review the dispute.

All this will take time, in a market where time is short. Most analysts and industry figures expect that true 3G services, offering multimedia downloads, are at least a year or two away in the U.S. With the return of most their deposit money, carriers may be able to buy some spectrum to relieve the bandwidth crunch. However, the NextWave case could be a factor in delaying the rollout of true 3G services in the U.S. It may even provoke some carriers into looking at alternative or supplementary methods of providing high-speed data services, such as wireless LAN, public-access "hotspots."

Meanwhile, NextWave has its licenses and has activated its network. The company, still in bankruptcy proceedings, says it plans to operate a high-speed wireless data network.

— Dan Jones, Senior Editor, Unstrung
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