Wireless carriers can opt out of auction

    Date14 Nov 2002
    CategoryGovernment
    2774
    Posted ByAnthony Pell
    The Federal Communications Commission said Thursday it will let Verizon Wireless and other mobile telephone carriers off the hook for the $15.9 billion they bid for contested wireless licenses, eliminating a massive financial burden hanging over the companies. . . The Federal Communications Commission said Thursday it will let Verizon Wireless and other mobile telephone carriers off the hook for the $15.9 billion they bid for contested wireless licenses, eliminating a massive financial burden hanging over the companies.

    At the behest of the carriers, who want to use the cash instead for paying debt or improving services, the agency agreed to allow them to walk away from their bids made in January 2001 without penalty for licenses that have been caught up in a legal tussle involving bankrupt NextWave Telecom.

    Bidders in the auction who have never received the licenses, including the No. 1 mobile telephone carrier Verizon Wireless, were quick to say they would likely withdraw from the sale, which could brighten their financial outlook.

    "It will allow carriers to use deposit money more productively and enhance their ability to attract additional capital, thus ultimately benefiting consumers," FCC Commissioner Kathleen Abernathy said in a statement.

    The agency originally sold the licenses to NextWave in 1996 but then tried to repossess them because the company failed to pay for them on time. The agency then re-auctioned the airwaves for $15.9 billion to Verizon Wireless and other carriers that needed additional airwaves to expand and improve services.

    A federal appeals court ruled in June 2001 that the FCC could not take the licenses back from NextWave solely because of nonpayment, but the FCC appealed to the U.S. Supreme Court, which is now considering the matter.

    As the legal wrangling dragged out, the FCC grudgingly agreed to return $2.8 billion in down payments made to the agency in the 2001 auction but refused to let carriers off unless they surrendered a 3 percent penalty.

    The FCC, which is still holding about $500 million in down payments, had considered letting companies opt out of buying individual licenses, a concept that was endorsed by FCC Commissioner Kevin Martin. But in the end, the agency decided that was too complicated and could be unfair.

    The wireless industry has been suffering of late, particularly with a steep slowdown in customer growth after years of double-digit gains. Plus, fears about the industry have been exacerbated by a string of bad corporate news and concerns over heavy debt loads.

    Verizon Wireless, which had pressed hard for the FCC to let them out of the auction, said immediately it would withdraw from the auction. It bid $8.5 billion for 67 licenses and used the $1.5 billion down payment it received back to repay debt.

    "We will be opting out of the auction," said Verizon Wireless spokesman Jeffrey Nelson. "We now have the ability to use the resources in a number of ways to get on with doing our business."

    The companies will have 45 days to request permission to withdraw from the auction and they will not be limited from participating in future sales, the FCC said.

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