Wireless Spectrum Auctions

House Commerce Committee Chm. Tauzin (R-La.) is co- sponsoring standalone bill that contains language for implementing NextWave settlement agreement. Bill, filed Wed. afternoon, also is co-sponsored by Reps. Conyers (D-Mich.), Sensenbrenner (R-Wis.), Thomas (R-Cal.). “It is consistent with [FCC] Chairman Powell’s recommended settlement,” said Tauzin spokesman Ken Johnson. Legislation, which wasn’t available by our deadline, is expected to include virtually all of settlement’s provisions. One caveat is that language remain intact as part of implementing legislation or deal could be renegotiated. However, several sources have indicated that if only minor changes are made, that isn’t likely to happen. Bill is standalone proposal that’s expected to reach House floor as early as today (Fri.). Speculation earlier Thurs. had been that language could be tacked onto economic stimulus bill, which also is heading to House floor. Prospects are less clear in Senate, where Commerce Committee’s ranking Republican McCain (Ariz.) and Chmn. Hollings (D-S.C.) have raised concerns about timing of deal’s needing to be approved by Congress by year-end and other issues. Standalone bill in House comes within days of joint hearings by Judiciary and Commerce subcommittees at which some members raised concerns, although Tauzin said he expected it to be passed this year. Settlement, if finalized, would provide $6 billion to NextWave for relinquishing licenses and $10 billion to U.S. Treasury, to be paid by winners of FCC’s Jan. re-auction of C-block licenses, such as Verizon Wireless. Johnson said there still were several options for how NextWave legislation could move in House now that bill had been introduced. One was that it could be attached to “must-move” legislation, he said. Legislation, “Prompt Utilization of Wireless Spectrum Act,” said it “authorizes and approves” decision by FCC and Justice Dept. to settle NextWave case. Bill would appropriate $9.5 billion to carry out settlement and contains provisions to ensure that govt. would receive its payment before NextWave. After final settlement approval, bill says NextWave would “completely relinquish” all claims to licenses and covered spectrum. It also would provide for expedited judicial review of challenges to settlement agreement and other issues.

FCC at its agenda meeting Wed. unanimously adopted allocation and service rules for 48 MHz of spectrum in lower 700 MHz band now occupied by Ch. 52-59 TV broadcasters. Order paves way for introducing new fixed and mobile wireless operations in band as well as new broadcasting services, Commission said. Order, which covers spectrum that Congress required to be auctioned by Sept. 30, 2002, reallocates that part of band to fixed and mobile services and keeps existing broadcast allocation for new and incumbent services during transition to DTV. Spectrum being reallocated is subject to same digital TV transition target of 2006 as upper channels in 700 MHz. But because lower channels don’t have additional public safety allocation like Ch. 60-69, Commission said it wasn’t putting in place same presumptive guidelines used to expedite clearing in upper bands. Order doesn’t contain specific band-clearing rules, instead providing that regulatory requests for voluntary band clearing be considered on “case-by-case basis.”

House Telecom Subcommittee Chmn. Upton (R-Mich.) blasted negotiators of proposed NextWave settlement for asking Congress “to clean up a judicial train wreck.” Proposed deal would require bankrupt NextWave to return wireless C- and F- block licenses in exchange for nearly $6 billion after taxes, while govt. would gain $10 billion (CD Nov 19 p1) from spectrum that was re-auctioned earlier this year. Although Upton agreed with supporters of settlement that “taxpayers have been starved of proceeds” from auctions, he said he was “not happy that NextWave gets $6 billion from this.” He said he planned to introduce legislation to prevent future conflicts between spectrum policy and bankruptcy laws, although he didn’t disclose details. In meantime, he said, he not only hopes Supreme Court will review the case but will overturn D.C. Circuit decision that ruled for NextWave.

Ranking House Commerce Committee Democrat Dingell (Mich.) and Rep. Markey (D-Mass.) asked FCC for more details on proposed NextWave settlement, which will be focus of House Telecom Subcommittee hearing today (Tues.) Dingell and Markey, who is ranking subcommittee member, asked Commission to furnish details by 6 p.m. Mon. on settlement reached among U.S., Jan. re-auction winners in C-block auction and NextWave. In letter written Fri. to FCC Chmn. Powell, Dingell and Markey said settlement and implementing legislation would “have profound implications for the American taxpayer and for future telecommunications and spectrum management policy.” They said they were seeking more information as part of settlement parties’ request for “expedited consideration” of implementing legislation. Key caveat of NextWave settlement, which would provide $10 billion to U.S. Treasury, is that implementing legislation be passed by Dec. 31. Among 18 questions that Markey and Dingell posed to FCC were: (1) How much money NextWave would receive from settlement before and after federal taxes. (2) Which rules FCC would need to waive to put settlement agreement into effect. (3) What steps FCC has taken on petition filed over summer by Alaska Native Wireless, Verizon and VoiceStream, which sought probe of eligibility of NextWave to hold C- and F-block licenses. (4) Whether FCC was satisfied that NextWave now was qualified licensee under designated entity and foreign ownership rules at FCC. (5) Whether FCC had evaluated NextWave’s financial structure submitted to U.S. Bankruptcy Court, White Plains, N.Y., in Aug. (6) Whether Commission had examined how proceeds of settlement that NextWave would receive would be distributed between its control group and noncontrol group investors. Dingell and Markey noted that Powell had described settlement as resolution that would maximize public interest. “We, too, support a public interest resolution to this matter and are curious as to what public interest conditions the Commission sought to obtain in the settlement agreement with the parties,” letter said. It asked whether settlement would impose conditions on carriers that would receive NextWave licenses, such as whether they would expedite deployment of Enhanced 911 technology. Senate Commerce Committee Chmn. Hollings (D-S.C.) released “Dear Colleague letter Mon. expressing his opposition to the proposed resolution of NextWave spectrum auction case. Hollings described arrangement as “private, back-room settlement [that] is fundamentally at odds with telecommunications and has been presented to us at the eleventh hour.” He urged members not to “legislate a scam,” which he said would happen if Congress acted hastily on matter: “There is no reason for Congress to legislate this settlement. Congress doesn’t legislate FCC decisions. Regardless, since the 2nd Circuit Court found for the FCC and the D.C. Circuit found for NextWave, why should we legislate the wrong result?” Meanwhile, House Telecom Subcommittee released witness list for Tues. NextWave hearing, 3 p.m., Rm. 2123, Rayburn Bldg.,: FCC Chmn. Michael Powell, Verizon Wireless CEO Denny Strigl, NextWave Gen. Counsel Frank Cassou, Urban Communicators Corp. Secy. James Winston.

Correction: Quote attributed to FCC Comr. Copps (CD Dec 6 p2) should have been attributed to Dan Meyer, Public Employees for Environmental Responsibility Gen. Counsel. Meyer said potential cumulative environmental risk of wireless towers was that “actual spectrum auction will have to be reviewed.”

Two House Judiciary subcommittee panels expressed doubt Congress could move NextWave legislation by year-end, as required by recent settlement on bankrupt company’s return of wireless licenses to the govt. Senate Commerce Committee leaders went step further, declaring that panel won’t touch NextWave case until next year. NextWave has agreed (CD Nov 19 p1) to surrender its C- and F-block licenses for $5.85 billion after taxes, while govt. will get $10 billion from spectrum re-auctioned in Jan.

FCC Wed. turned back petition for rulemaking filed by Public Employees for Environmental Responsibility (PEER) that had sparked strong opposition from wireless, wireline and undersea cable operators. Commission unanimously adopted order, although Comr. Copps issued separate statement saying PEER had raised “important questions” about how FCC carried out environmental duties mandated by Congress. PEER had asked FCC to change how environmental rules were applied to undersea cables, fiber lines, wireless towers. Group of govt. employees concerned about environment wanted agency to conduct rulemaking to ascertain whether it needed to create Office of Environmental Compliance and separate joint rulemaking with other agencies. Companies ranging from Verizon to Global Crossing had balked at PEER petition, telling FCC such action wasn’t needed and unjustifiably would add to regulatory burdens. Commission rejected PEER arguments that due to explosive growth in wireless and wireline infrastructure since Telecom Act, agency should take fresh look at cumulative impacts of spectrum auctions, tower registrations, undersea cable landing licenses, Sec. 214 authorizations. PEER doesn’t offer “rationale for treating all actions as actually or potentially damaging to the environment,” FCC said. “We do not believe that the evidence of environmental harm proffered by PEER reflects any environmental processing failings by the Commission.” Even if PEER successfully pointed to such shortfalls, “a few examples in no way justify the complete overhaul of the Commission’s long-standing environmental rules across all service areas,” it said. PEER had challenged FCC environmental rules that implemented National Environmental Policy Act (NEPA), which required federal agencies to account for environmental impact of projects they oversaw. PEER had urged FCC to require applications for all Commission actions involving submarine cables, fiber lines and spectrum requiring communications towers to file environmental assessment for public utility facility. Private utility would have to file environmental impact statement. PEER defined public utilities as supplying last-mile connections while private utilities would be parts of network needed to transmit over long distances. FCC said its regulations implementing NEPA already identified 9 types of actions that could have significant environmental impact and evaluate through environmental assessment all actions that involved projects that fit into those categories. In its May 2000 petition, PEER had cited growing number of cases in which laying of fiber cable had damaged coral beds and harmed habitat of endangered marine species. PEER said that in other cases, buildings and towers could have significant effect on environment and historic areas. Copps said that “while this proceeding did not provide adequate record evidence for a restructuring of our policies at this time, the Commission should undertake a thorough review of our obligations under the National Environmental Policy Act and the National Historic Preservation Act.” He said that as part of Chmn. Powell’s recently launched review of FCC procedures, assessment of agency’s responsibilities under NEPA and National Historic Preservation Act should be included. Copps said FCC should: (1) Determine whether it had devoted enough resources to meet its environmental responsibilities under those laws. (2) Examine how accessible such proceedings were to “nontraditional stakeholders” such as small businesses. PEER Gen. Counsel Daniel Meyer told us group planned to file petition for reconsideration at FCC by early Jan. “I do take Commissioner Copps’s separate statement as an indication the Commission knows it’s not addressing environmental concerns from environmentalists in an appropriate manner,” Meyer said. He said one example of types of cumulative environmental impacts that FCC must consider involved wireless towers that hadn’t complied with Sec. 106 review under National Historic Preservation Act. Assessing cumulative impacts of towers, Copps said, “the danger is the actual spectrum auction will have to be environmentally reviewed. That would be a nightmare for industry.” Lack of uniformity in compliance and enforcement means that most of industry has been erecting towers without environmental review, he said.

Legislation implementing NextWave settlement agreement has 100% chance of passing Congress by year-end, Verizon Senior Vp-Deputy Gen. Counsel John Thorne told American Enterprise Institute (AEI)-Brookings Joint Center panel Fri. In occasionally heated discussion about what went wrong with FCC’s PCS policies and policy implications of NextWave accord, Thorne defended decision by govt. agencies and carriers to settle rather than continue to litigate. “We looked at alternatives to settlement,” he said. “I actually think we might have won in the Supreme Court,” he said, referring to petition for certiorari filed by FCC seeking review of U.S. Appeals Court, D.C., decision this summer that overturned Commission’s decision to cancel NextWave’s PCS licenses for nonpayment. Even if high court ultimately sided with FCC, lower court hadn’t addressed all outstanding NextWave issues and legal proceedings to wrap those up could take 2 or 3 years until licenses were free, he said.

FCC should end industrial policy that favors satellites and begin to regulate all similar services seeking to use same spectrum from same rulebook, Northpoint CEO Sophia Collier wrote in Wed. letter to Chmn. Powell. Collier said single rulebook system would simplify proceedings: “It would allow the Commission to stop being in the business of picking a winner and start to license companies in a technology- neutral manner.” She said ending that regulatory disparity was particularly important given reduced competitive environment that would result if EchoStar-DirecTV merger were approved. In DBS-Northpoint debate, she said, “preference given to the satellite industry has resulted in extraordinary market distortion.” Northpoint said it applied for license on same day as 8 satellite companies that sought 25,400 MHz of spectrum and would receive licenses without auction. Collier said FCC granted 10,259 wireless licenses in 2001 for mobile and fixed microwave services without auction. Process of spectrum allocation seems arbitrary and discriminates against small companies and new technologies, Collier said: “It cannot be considered desirable for the government to allow one company free use of a federal resource and then expect a new entrant and future competitor to pay to use the same resources.”

Justice Dept., ending what FCC Chmn. Powell called “a long and tortuous event,” signed settlement agreement Tues. on NextWave’s disputed PCS licenses. Final govt. signatures were affixed to settlement after Justice ratified agreement, which was unveiled earlier this month (CD Nov. 19 p3). Under settlement, which still faces ratification by Congress, U.S. govt. will receive $10 billion and NextWave will receive $5.85 billion after taxes. Company relinquishes its claim to licenses, which then can go to winners of FCC’s re-auction last Jan., including Verizon Wireless, Alaska Native Wireless, which has financial backing of AT&T Wireless, and Salmon PCS, which has financing from Cingular Wireless. In statement late Tues., Powell said that “regrettably,” U.S. Appeals Court, D.C., last summer had reversed FCC decision to cancel NextWave’s licenses for nonpayment, clearing the way for company to repay $4.7 billion owed to govt. for licenses. “This settlement offered a better alternative,” Powell said. “It reclaims the licenses and puts them in the hands of companies that can put them to use quickly for consumers.” Rather than nearly $5 billion that U.S. would have collected under D.C. Circuit ruling, “the American people will receive $10 billion,” he said. Noting that settlement required implementing legislation, Powell said he hoped Congress “turns to the matter promptly in order to put this matter behind us and to ensure a resolution that maximizes the public interest.” He said it would have been “preferable” to have carried results of reauction to completion and have kept nearly $16 billion in bids intact: “That option was extinguished by the court and I believe this settlement is the best outcome under the circumstances.” Justice Dept. said settlement also must be approved by U.S. Bankruptcy Court, White Plains, N.Y., which has been overseeing NextWave’s reorganization plan. DoJ said: “The settlement agreement ends years of litigation concerning the right to use wireless spectrum covered by the licenses previously issued to NextWave and it also avoids the prospect of years of additional litigation during which the wireless spectrum covered by the licenses could not be put to public use.” Agreement itself can’t be implemented until implementing legislation is in place and bankruptcy court provides approval, DoJ said. “In the meantime, the government’s petition for a writ of certiorari is pending before the Supreme Court,” it said.