U.S. Supreme Court Fri. turned down FCC request to review 5th U.S...

bid. After D.C. Circuit decision overturning $17 billion PCS auction results in NextWave case (CD June 25 p1), industry has been closely watching whether high court would agree to review GWI case because some -- but not all -- of same issues were at stake involving valuation of original C-block licenses by bidder that later entered bankruptcy. Supreme Court’s decision lets stand 5th Circuit ruling that sided with bankruptcy court valuation of GWI’s licenses at $166 million, versus $1.06 billion that carrier had bid in 1996. Unlike NextWave case, GWI’s 14 PCS licenses weren’t part of FCC re-auction late last year of C- and F-block licenses reclaimed from bankrupt bidders. Fifth Circuit ruling in Oct. didn’t come to all of same conclusions as 2nd Circuit in NextWave case. Specifically, 5th Circuit differed from 2nd Circuit conclusion that courts should defer to FCC’s interpretation of its regulations when payment obligations of winning bidders arose. FCC had said that obligation came up on date that auction closed. GWI contended bankruptcy court was correct in fixing later date of Jan. 27, 1997, as point when those obligations kicked in because that was when Commission actually transferred licenses. At point when licenses were transferred, bankruptcy court ruled they had dropped in value to $166 million, versus original bid by Dallas- based GWI, which now does business as Metro PCS. In GWI case, bankruptcy court prevented Commission from cancelling licenses. Brief filed with Supreme Court by U.S. Solicitor Gen. contended 5th Circuit’s ruling, which allowed bankruptcy courts to offer relief that FCC had chosen not to do as regulator, would create incentives that Commission had tried to avoid. Solicitor Gen. argued that reducing payments could foster speculative bidding in future auctions because bidders could hang on to spectrum even if financing didn’t work out. Not surprisingly, Metro PCS contended that FCC was responsible for company’s tough financial straits in first place by delaying issuing licenses. U.S. Supreme Court’s decision to not grant certiorari in GWI case came as FCC was debating options in NextWave case, in which D.C. Circuit said Commission had violated bankruptcy law when cancelling NextWave’s licenses for missed payment -- ruling that reversed agency and returned licenses to NextWave. FCC must decide whether to seek review before full D.C. Circuit or by Supreme Court. “If the High Court had taken the GWI case, that would have increased the FCC’s prospects for gaining a hearing of the D.C. Circuit decision on NextWave,” said research note issued Fri. by Legg Mason. “One of the questions about the NextWave case is whether the Supreme Court would consider the spectrum-bankruptcy issues serious enough to warrant review. The denial hints at, but does not provide, an answer to that question.”