Amid dire warnings of economic fallout for U.S. wireless industry...

current policy toward Auction 35 is a negative stimulus package for a wireless industry desperately in need of a recovery,” they wrote. Letter came within days of similar missive from CTIA Pres. Tom Wheeler, who urged Commission to pull pending NextWave re-auction obligations of carriers out of “legal limbo” (CD Aug 15 p5). Verizon Wireless and other carriers have urged FCC to return small portion of deposits from NextWave re-auction that brought in $16 billion in bids and to release carriers from bid obligations. FCC hasn’t taken that course pending U.S. Supreme Court case, for which oral argument will be heard in Oct. Commission is challenging U.S. Appeals Court, D.C., ruling that led to return of disputed PCS licenses to NextWave and overturned results of re-auction. Carriers have complained overhang of those bid obligations as litigation plays out has created credit problems and financial uncertainty because they could be obligated to pay for spectrum if govt. ultimately prevailed in court on issue. Letter from economists, some of whom are wireless industry consultants, told FCC that costs of policy outweighed benefits. That worsens financial problems already facing industry, they said, particularly because economy has faltered since bidding closed in Jan. 2001. Equipment makers have laid off “tens of thousands” of workers and have lost substantial market capitalization, they said. Even if FCC won Supreme Court case and prevailed in further litigation over licenses, Treasury Dept. isn’t likely to collect winning bids until 2005 at earliest, economists said. That would leave carriers without access to spectrum on which they bid, letter said. Problem is that winning bidders have to treat obligations involving licenses as contingent liabilities, without being able to use spectrum, economists said. That has raised cost of capital for carriers, hurt credit ratings and led to conclusions by investment bankers that auction had increased uncertainty in sector. “The Commission has said that its current policy toward Auction 35 seeks to ‘protect the integrity’ of the spectrum auction process,” letter said. “We, however, believe that the opposite is already occurring. The Commission increases uncertainty in the wireless market if it holds carriers accountable for winning bids for licenses that the agency cannot deliver.” Letter was signed by Peter Cramton, U. of Md.; Robert Crandall, Brookings Institution; Robert Hahn, AEI-Brookings Joint Center for Regulatory Studies; Robert Harris and David Teece, U. of Cal., Berkeley; Jerry Hausman and Robert Schmalensee, Mass. Institute of Technology; Thomas Hazlett, Manhattan Institute; Douglas Lichtman, U. of Chicago; Paul MacAvoy, Yale U.; Gregory Sidak, American Enterprise Institute; Hal Singer, Criterion Economics; Vernon Smith, George Mason U.; William Taylor, National Economic Research Assoc.