Cingular and NextWave filed applications with the FCC to assign licenses as part of a $1.4 billion proposed deal in which Cingular is buying spectrum from NextWave in 34 markets. The applications include a request that the FCC waive parts of its “unjust enrichment rules,” which require designated entities (DEs) to pay penalties if they sell a license to a non-DE during a restricted period to compensate for advantages such as bidding credits or installment payment plans. The U.S. Bankruptcy Court last week approved Cingular’s acquisition of 10 MHz of PCS spectrum in 32 markets and 20 MHz licenses in Tampa and El Paso. The companies filed 14 applications Fri. “Due to a complex set of circumstances, spectrum licensed to NextWave has not been used to deliver widespread commercial wireless communications to the public,” the applications said. “The proposed transaction will enable a portion of that spectrum to be put into immediate commercial use to benefit wireless consumers.” The companies said the transaction raised “no competitive concerns” for the FCC. It would cover the assignment by NextWave of all its interests in 10 or 20 MHz of spectrum to be disaggregated from 20 C-block PCS licenses and fourteen 10 MHz F-block licenses. The filings said the Justice Dept. had approved a term sheet allowed by the bankruptcy court, under which Cingular would pay the FCC $714 million for the licenses involved. Repayment terms for the rest of NextWave’s spectrum still must be worked out with the govt. The companies told the FCC the proposed deal would advance the public interest by: (1) Allowing spectrum that had been tied up in litigation for more than 5 years to be put into general commercial use. (2) Expanding the national footprint of Cingular by adding markets in which the carrier currently had no spectrum. (3) Allowing Cingular to expand network capacity in markets where it offered service. The companies’ applications cited unjust enrichment rules that applied to disaggregation of PCS spectrum. The unpaid principal associated with the licenses in this deal is about $687 million, they said. The term sheet spells out that in agreeing to accept the direct payment of $714 million, NextWave and the FCC relinquish all claims on the licenses. The filings said the govt. was agreeing to an amount that might differ from the sum it would otherwise receive under unjust enrichment rules “in less unique circumstances.” The payment to the FCC represents an amount greater than the aggregate unpaid balance of the original amounts NextWave bid for the spectrum, the filings said. The term sheet payment also “avoids the uncertainties” in having the claims related to those portions of the licenses resolved through bankruptcy proceedings, the companies said. As a result, partial waivers of unjust enrichment payment rules are justified, they said. They said “rigid application” of the unjust enrichment rules would prevent “rapid deployment” of services to the public over the spectrum covered by the designated licenses. Bidding credits weren’t an issue for most of the C-block licenses covered under this deal because the FCC hadn’t used bidding credits in the original C-block auctions, which were restricted to DE bidders.
Wireless Spectrum Auctions
The FCC manages and licenses the electromagnetic spectrum used by wireless, broadcast, satellite and other telecommunications services for government and commercial users. This activity includes organizing specific telecommunications modes to only use specific frequencies and maintaining the licensing systems for each frequency such that communications services and devices using different bands receive as little interference as possible.
What are spectrum auctions?
The FCC will periodically hold auctions of unused or newly available spectrum frequencies, in which potential licensees can bid to acquire the rights to use a specific frequency for a specific purpose. As an example, over the last few years the U.S. government has conducted periodic auctions of different GHz bands to support the growth of 5G services.
The Canadian govt. said it would hold a wireless communications spectrum auction in Jan. and would offer space for ordinary mobile phone spectrum in 2 bands, 2300 MHz and 3500 MHz. The new spectrum is intended for fixed wireless, which could be used as an alternative to current fixed-line telcos, so companies could offer another option for high- speed Internet or even a local phone connection. “Wireless has consistently outperformed the telecom sector over the past few years, which have proved to be challenging times,” Industry Minister Allan Rock said: “This auction will result in more communities with broadband access, more competition in telecommunications and greater choice for consumers in terms of service alternatives and service providers.” Five licenses in each of 172 service areas across Canada are available. The bid deadline is Nov. 17 and a Webcast in the next few weeks will describe the licensing process -- www.strategis.gc.ca/spectrumauctions.
NextWave told the U.S. Bankruptcy Court, White Plains, N.Y., this week that Cingular Wireless was the only company interested in buying certain PCS licenses for $1.4 billion. The bankruptcy court earlier had approved bidding procedures for the 34 licenses if other companies signaled a willingness to submit competing offers under certain conditions. Cingular said last month it planned to pay NextWave $1.4 billion in cash for 10 MHz of PCS spectrum in 32 markets, including Dallas and L.A., and 20 MHz licenses in Tampa and El Paso. Because no qualified bids were received by a bid deadline of Sept. 15, a court-overseen auction wasn’t held Sept. 23, NextWave told the court Mon.
The FCC Wireless Bureau scheduled an auction of 900 MHz specialized mobile radio service (SMR) licenses for Feb. 11 and sought comment on reserve prices or minimum opening bids. The auction covers 60 Major Trading Area licenses in the SMR bands at 896-901 MHz and 935-940 MHz. The spectrum up for bid previously was connected with licenses that had been cancelled or terminated. The bureau sought comment on minimum opening bids and other auction procedures. Comments are due Oct. 1,replies Oct. 8.
Verizon Wireless told the FCC that service rules for advanced wireless spectrum at 1.7 GHz and 2.1 GHz shouldn’t include restrictions on aggregation. The carrier outlined a need for paired spectrum with sufficient separation between an uplink at 1710-1755 MHz and a downlink at 2110-2155 MHz. Verizon Wireless said Part 24 rules, with some changes, would provide flexibility for licensees in this spectrum. It argued for a “substantial service” performance requirement, noting advanced wireless services could develop in any of several different directions, so flexibility is crucial. Verizon Wireless said rules should provide for an initial license term longer than 10 years. Citing similar FCC actions at 700 MHz, Verizon Wireless said 15 years would accommodate the extent to which spectrum couldn’t be used while still encumbered by military and other incumbents. Concerning clearing of Defense Dept. and other govt. users at 1.7 GHz, Verizon Wireless said a “detailed plan (including timelines) must be developed before FCC’s rules are finalized, because timing of availability may impact band configuration.” A plan to pay for relocation of govt. incumbents with auction proceeds is “key to efficient band clearing,” Verizon Wireless said. While congressional legislation has been pending that would create a trust fund for such spectrum clearing, it has become enmeshed in Northpoint riders. An amendment recently was added to spectrum relocation trust fund legislation (HR-1320) by the Senate Commerce Committee that would allow Northpoint Communications to bypass an FCC auction for spectrum in the Ku-band.
Fixed wireless operators differed in comments to the FCC last week on whether Instructional TV Fixed Service (ITFS) licensees should be able to sell their spectrum to commercial operators. Sprint recommended commercial operators be free to operate in ITFS bands and BellSouth urged the FCC to let DSL providers hold those bands. But smaller MMDS operators and ITFS licensees asked the Commission to keep educational use restrictions intact. Commenters on the proposed rule changes also disagreed on whether restrictions were needed for ownership by cable broadband and DSL providers.
With an eye on speeding the rollout of wireless services in rural areas, the FCC unanimously adopted a proposed rulemaking Wed. with a wide range of possible changes, asking how to make unused spectrum available to new users and provide access to capital and equipment. The proposal also raised the possibility of allowing wireless operations with higher power levels to enter less densely populated rural areas. It tentatively concluded the cellular cross-interest rule should remain in rural service areas (RSAs) with 3 or fewer competitors, but would remove the limit in other RSAs.
Mobile satellite service (MSS) providers were generally united in their opposition of petitions for reconsideration by wireless interests, requesting that the FCC move to dismiss them. Cingular and CTIA had asked the Commission in July to act on the order authorizing the use of ancillary terrestrial components (ATCs) with MSS systems, expressing concern that FCC-imposed gating criteria designed to ensure substantial satellite service weren’t adequate (CD July 9 p5).
The FCC said it had accepted applications to participate in a Sept. 24 auction for narrowband PCS licenses from Marco Polo Wireless and Space Data Spectrum Holdings. The bidding involves 6 regional PCS licenses for which upfront payments are due from bidders Aug. 26.
The FCC Wireless Bureau turned down as moot a request for grace periods by General Wireless Inc. (GWI), which sought additional time for the first round of quarterly installment payments due on its PCS licenses. GWI was an original C-block bidder that entered Chapter 11 bankruptcy protection after the PCS auctions and became involved in litigation similar to that of NextWave. In 2001, the U.S. Supreme Court turned down an FCC request to review a 5th U.S. Appeals Court, New Orleans, ruling that sided with GWI on the $166 million valuation of its licenses, which was just a fraction of its original bid. The carrier had bid $1.06 billion for the spectrum in 1996 for 14 PCS licenses. GWI submitted its down payments on time and received the licenses in 1997. As part of payment plan restructuring that the FCC undertook in 1997 and 1998 to help C-block licensees that ran into financial trouble after the auctions, the Commission had extended to 90 days an original 60-day nondelinquency period for payments due when obligations resumed. A letter to GWI from the bureau’s Auctions, Finance and Market Analysis Branch said the company had opted to resume payments for all of its spectrum under the terms set by an adversary proceeding in bankruptcy court. “The suspension of payment deadlines and the process of considering and adopting financial relief for all C-block licensees provided a period of well over a year in which no payment was required of GWI,” the branch said. “Given this suspension of the installment payment obligations that are the subject of the instant grace period requests, GWI’s grace period requests are moot.”