VERIZON EXPECTS NEXTWAVE LEGISLATION TO PASS AS HEARING IS SET

Meanwhile, House Judiciary subcommittees on commercial & administrative law and on courts, Internet & intellectual property are holding hearing at 10 a.m. Thurs. on settlement by govt., NextWave and carriers such as Verizon Wireless and AT&T Wireless-financed Alaska Native Wireless.

Some panelists Fri. were somewhat less bullish than Thorne on congressional approval of implementing legislation by year-end, which is among key sticking points of settlement being finalized. Washington Analysis Senior Vp George Reed- Dellinger suggested there was a 52.5% chance that winners of Jan. reauction, which bid nearly $16 billion, actually would have the licenses in hand. “I still have problems betting that the deal will be signed off,” he said. In particular, Reed-Dellinger said he didn’t understand why large wireless carriers didn’t stop pursuing litigation strategy and just sign lease agreements for NextWave spectrum. “It would have made sense to lease this spectrum and not lay out billions and not litigate,” he said.

Precursor Group wireless analyst Rudy Baca said he was still optimistic about deal’s being finalized, saying he agreed with Thorne’s expectation that Congress would act in time. “The FCC wanted to do this in the fastest way it saw possible,” Baca said. Even if settlement hadn’t been reached, several regulatory issues still would have faced NextWave’s ownership of licenses, including designated entity restrictions and foreign ownership requirements, Baca said. “What we end up with is a resolution that doesn’t satisfy everybody but that satisfies more people than it doesn’t.”

This week’s House hearing marks first airing of settlement terms on Capitol Hill since agreement was reached. One source said that didn’t mean Judiciary Committee was going to assert jurisdiction over how implementing legislation for settlement moved on Hill. Another source said hearing was expected to touch on relatively narrow question of which law would be relied on by appeals court if someone sought review of U.S. Bankruptcy Court, White Plains, N.Y., decision that ultimately signed off on settlement.

Some of harshest criticism of “debacle” on NextWave license saga came from former FCC Comr. Harold Furchtgott- Roth, who said he shared some of blame for decisions that occurred during his tenure. Furchtgott-Roth, a visiting AEI fellow, repeatedly referred to original 1996 PCS auction and Jan. 2001 re-auction of NextWave’s licenses as “cursed.” He said: “With cursed auctions, every action the government takes will be exactly, precisely and unmistakably wrong.” He castigated “selective, arbitrary and capricious” litigation strategy of govt. Furchtgott-Roth also hit hard on theme he sounded frequently as commissioner -- that companies shouldn’t have “secret” negotiations with FCC. In case of NextWave settlement, he said: “The federal government meets behind closed doors with a group of hand-picked businesses over the course of several months to negotiate the transfer of several licenses from one company to a group of other companies, with a side payment of $10 billion to the government for having brokered the deal.” He went back and forth with Thorne over what Furchtgott-Roth said was exclusion of small bidders in Jan. re-auction from negotiating table. Thorne disagreed, saying any company that wanted seat in talks was given one. Reed-Dellinger questioned why companies such as Alltel, Sprint PCS and Nextel, which had participated in early part of auction and then dropped out of bidding, also weren’t part of settlement talks.

Meanwhile, Eldorado Communications, which vied with NextWave for PCS licenses in 1996 C-block auction, wrote Nov. 29 to House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (D-Mich.) to express concerns on how implementing legislation was being presented to lawmakers. Eldorado has opposed settlement at FCC, saying it hadn’t ruled out litigation. It zeroed in on settlement requirement that Congress pass legislation by Dec. 31, saying timeline wouldn’t allow adequate public scrutiny. “[This] proposed legislation is being presented to Congress on a take-it-or- leave-it basis,” wrote Eldorado CEO William Yandell and Managing Dir. Stephen Roberts. “NextWave’s preferred approach is to have no review by the telecommunications and judiciary committees of the House or Senate. Rather, they want a fast-track appropriations process, perhaps bringing their bill directly to the floor in the form of an appropriations rider.” Company said that if Congress passed implementing legislation, settlement terms didn’t allow room for “meaningful court review.” Only U.S. Appeals Court, D.C., would be able to review challenges to FCC action, company said. D.C. Circuit and Supreme Court would be required to clear their dockets and deal with challenges immediately, letter said. “We urge you to reject this attempt to dictate to the Congress and to shield the settlement from rigorous scrutiny by your committees,” company said.

“This is a problem that doesn’t go away with this settlement,” Thorne said in panel discussion. “This is a problem that is going to recur.” Every time FCC completes auction, “as soon as it is ready to grant a license to a winning bidder, that bidder could go into bankruptcy and under the interpretation of the D.C. Circuit of the Bankruptcy Code, that bidder doesn’t have to pay the full amount,” he said. FCC has to be able to enforce conditions that come out of auctions to get spectrum to best users, he said. After implementing legislation is enacted, Verizon plans to advocate bankruptcy law reform, Thorne said, meaning such efforts wouldn’t take place until next year. Point is to make clear that D.C. Circuit ruling in NextWave case “will not apply to future auctions,” he said. He stressed formidable task settlement negotiators overcame in reconciling views of Justice and Treasury departments, FCC, Office of Management & Budget and even different factions of investors linked to NextWave. “There’s a substantial component of NextWave, as I understand it, that actually wants to build a network,” he said.