Wireless Spectrum Auctions

NextWave sought approval from a bankruptcy court Fri. for a $150 million partnership agreement with investment firm Clarity Partners to work on new spectrum acquisitions. The proposed acquisition venture, called IPCom, which Clarity would form and fund, came amid continued speculation that NextWave was nearing a deal to sell Cingular Wireless 20% of its PCS licenses for nearly $1.4 billion. Clarity is a Beverly Hills-based private equity firm that focuses on media and telecom investments and has holdings in Oxygen, PrimeCo and MetroPCS.

NextWave and Cingular Wireless reportedly are in talks for latter to acquire 20% of NextWave’s PCS licenses in a deal that’s still coming together but is expected to be close to $1.4 billion. Reuters reported Tues. the transaction wouldn’t include NextWave’s valuable N.Y.C. spectrum. The deal apparently would allow NextWave to keep a national wireless footprint by offering for sale 10 MHz of the bankrupt carrier’s 30 MHz C-block licenses in more than 30 markets, a source said. In Jan., the U.S. Supreme Court upheld a U.S. Appeals Court, D.C., ruling that reversed the FCC’s cancellation of NextWave’s PCS licenses for nonpayment. NextWave has been expected since that ruling to file another plan of reorganization with the U.S. Bankruptcy Court, White Plains, N.Y., and it told the court earlier this year that it was in discussions with 3rd parties on financing and strategic relationships. The potential $1.4 billion price tag would be the latest indication of what NextWave’s spectrum was worth now. A Jan. 2001 re-auction of the NextWave spectrum generated nearly $16 billion from carriers such as Verizon Wireless for licenses for which the carrier originally had bid $4.7 billion. The Commission had returned the licenses to NextWave after the D.C. Appeals Court in June 2001 reversed the agency’s decision to cancel those PCS licenses for nonpayment. Some analysts had estimated earlier this year that the spectrum could be worth close to $6.45 billion based on recent wireless transactions such as the Verizon Wireless-NorthCoast PCS deal. NextWave Deputy Gen. Counsel Michael Wack declined comment and a Cingular spokesman wasn’t available for comment.

The FCC denied Banks Bcstg.’s request for a waiver allowing it to receive 4 Boise area licenses it said it should have received after Vulcan Spectrum dropped out of the lower 700 MHz C- and D-block auction that ended in Sept. Banks had withdrawn from bidding on the Boise-area licenses after Vulcan became the high bidder. Banks eventually won 2 other licenses, one in Wichita and a Boise-area license not among the 4 subject to the waiver request. Vulcan later also withdrew from the bidding and the 4 Boise licenses were unsold at the end of the auction. In a May 16 letter to Banks Vp Gregory Schmidt, Margaret Wiener, chief of the FCC Wireless Bureau’s Auctions & Industry Analysis Div., concluded: “We do not agree with Banks’ claims that the public interest would be served by granting Banks’ request and offering the Boise licenses to Banks.” She said the Commission’s rules permit the award of a license to a next- highest bidder only in “a narrow circumstance that is not present here -- namely a bidder’s default after the close of the auction.” She said the agency also has stated “as a general rule that the best course of action would be to reauction the spectrum.” Licenses that remained unsold in the earlier auction will be on the block again in Auction 49, set to start May 28. The FCC also denied as moot Banks’ request that the 4 Boise licenses be removed from that auction.

The FCC Wireless Bureau announced an additional delay in the multichannel video distribution & data services (MVDDS) auction (Auction No. 53), with the new date not announced. The auction will follow resolution of 2 issues presented in the 2nd further notice of proposed rulemaking, a spokeswoman confirmed: (1) The duration of the build-out requirement for MVDDS. (2) Whether the use of designated market areas (DMAs) or component economic areas (CEAs) was better for defining the geographic service areas (GSAs). The auction, originally scheduled for Feb. 12, has been rescheduled twice -- for Aug. 6 and June 25. Northpoint Vp Toni Cook-Bush said the latest delay made sense because “you can’t have an auction until you know what the license areas are. We're a big supporter of using DMAs, so we're so happy to know the Commission will be making this decision.” Northpoint has lobbied Congress heavily on providing MVDDS exclusively and a bill was introduced recently proposing a licensing process for the spectrum instead of an auction. It was unclear how the auction delay would affect the legislation (S-564), introduced by Sen. Landrieu (D-La.). An industry official said the delay might give Northpoint additional lobbying time, but it might not gain enough momentum to overturn the FCC’s decision. Satellite Bcstg, & Communications Assn. (SBCA) Pres. Andrew Wright said the decision didn’t change the organization’s position, “which is that terrestrial sharing of the DBS band should not be permitted because of harmful interference.”

The FCC said Thurs. it had adopted an exemption for rural telephone cooperatives from a revenue attribution requirement for small business preferences in Commission auctions. Chmn. Powell and Comr. Adelstein said the changes were designed to cure the “mistake” of rural cooperatives’ not being carved out from the auction attribution rules. Those rules were designed to bar large companies from manipulations so they could qualify as small entities for certain benefits, such as bidding credits. The agency said the step was designed to “increase the ability of rural telephone cooperatives to participate in spectrum auctions and provide service in rural areas.” The exemption involves the requirement that the gross revenue of entities controlled by an applicant’s officers and directors be attributed to the applicant when determining eligibility for small business preferences, such as bidding credits. The exemption is available to prospective auction participants under certain conditions: (1) The applicant is “validly organized” as a cooperative under state law. (2) The gross revenue and other financial and management resources of the affiliates of the applicant’s officers and directors aren’t available to the applicant. (3) The applicant is a rural telephone company as defined by the Communications Act. (4) The applicant is eligible for tax-exempt status under the tax code. Powell and Adelstein said: “Unfortunately, our rules have not always appreciated their unique structures and roles.” They said the FCC’s attribution rules, which require that gross revenue of entities controlled by an applicant’s officers and directors be attributed to the applicant, are important. Those rules bar applicants from obtaining bidding credits that are more favorable than justified, they said. “The rule as crafted, however, had the unintended consequence of attributing to rural telephone cooperatives the gross revenues of the outside business interests of its officers and directors even though these officers and directors do not control the cooperatives,” they wrote. Such cooperatives usually are controlled by member-subscribers and are nonprofit entities, Powell and Abernathy said. Comr. Martin in a separate statement said: “I am hopeful that this will enable greater participation in spectrum auctions by rural cooperatives and will provide greater rural deployment of wireless services.”

The Office of Communication of the United Church of Christ (UCC) opposed a recent request to the FCC by WorldCom for a ruling that SkyTel and its other wireless affiliates could participate in May 13 spectrum auctions. At issue is whether SkyTel qualifies to compete in a paging band auction amid questions over the default status of 2 Multipoint Distribution Service licenses held by Wireless One, which is another WorldCom affiliate. FCC rules say that bidders are eligible to take part in an auction only if they have satisfied outstanding installment payment defaults. WorldCom sought a ruling that its wireless subsidiaries were in compliance with the auction eligibility rules or a waiver of those rules. UCC told the FCC Fri. that WorldCom “committed massive fraud resulting in the largest bankruptcy in U.S. history. It would be simply unfair to allow WorldCom, a company known to operate fraudulently, to participate in future FCC auctions without fully complying with the FCC’s auction eligibility rules. To do so would eviscerate the purpose of the FCC’s auction eligibility rules, which in part are to deter speculation and insincere bidding as well as to ensure that a particular authorization goes to the auction participant that values the authorization most.”

The House Commerce Committee approved legislation Wed. to streamline the transfer of spectrum from govt. to commercial use. HR-1320, the proposed Commercial Spectrum Enhancement Act, was passed on voice vote with one amendment that House leaders said had the support of both parties and the Administration. The bill would establish a trust fund to compensate govt. users who vacated spectrum and relocated for commercial uses.

MONTEREY, Cal. -- The DBS industry is looking to sweeten slightly its position under the Satellite Home Viewer Improvement Act when it comes up for review next year, Satellite Bcstg. & Communications Assn. Pres. Andrew Wright said Wed. “We're looking for reauthorization with just a few little technical improvements, to make us a little more competitive with cable,” he said in an address to a Satellite Entertainment conference here. He said he wasn’t ready to disclose the changes.

The Wireless Communications Assn. (WCA) told the FCC an application freeze in a recent order on changes in the Instructional TV Fixed Service (ITFS) and Multipoint Distribution Service (MDS) could bar 30,000 system operators from rolling out wireless broadband to at least 80 markets in the next year. Most of those 80 are beyond the 100 largest markets “and include homes and businesses that do not have access to cable modem or DSL service,” it said. WCA petitioned the FCC earlier this month to reconsider a recent proposal that would move away from a broadcast-style regulatory approach for ITFS and MDS. The changes are designed to update the regulations for those services in a way that more easily would accommodate the rollout of wireless broadband and other new services. WCA asked the Commission to roll back its decision that immediately froze the filing of applications for new or modified ITFS and MDS facilities. The group urged that the freeze be limited to ITFS stations located outside existing protected service areas that essentially would be seeking licenses for ITFS “white space” or unassigned spectrum. WCA said in a filing Wed. it was responding to an informal inquiry by FCC Wireless Bureau staff on the freeze’s impact. The association said a more limited freeze would let current licensees deploy new wireless broadband system while protecting the FCC’s interest in preserving auctionable ITFS “white space” from encroachment. WCA said it polled its members on the impact of the filing freeze on wireless broadband systems planned in the next year, although it said the freeze could last longer. It said the markets affected by the filing freeze included: (1) 28 where the existing wireless broadband system operator wouldn’t be able to carry out plans to add the cells needed to expand network capacity in its current service area or expand its service area to cover those not now served. (2) Several where MDS/ITFS-based wireless broadband wasn’t publicly available now, although operators already had invested in “preapplication” activities. (3) 2 in which ITFS licensees had been frustrated in plans to deploy noncommercial 2-way broadband systems for their own use. WCA also rejected the idea that liberal grants of waiver requests would get around the problems posed by the broad freeze. “The public interest is not served by requiring licensees to spend resources on preparing waiver requests and suffer the delays in application processing that will inevitably result,” it said.

WorldCom asked the FCC Wireless Bureau to rule that SkyTel and its other wireless affiliates were eligible to participate in Commission auctions. In dispute is whether SkyTel qualifies to compete in a May 13 paging band auction amid questions over the default status of 2 Multipoint Distribution Services (MDS) licenses held by Wireless One, another WorldCom affiliate. FCC rules stipulate bidders are eligible to take part in an auction only if they have satisfied outstanding installment payment defaults.