FCC Mulls Spectrum Withdrawal

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According to reports, the Federal Communications Commission (FCC) is apparently getting ready to release wireless carriers from $15.85 billion in spectrum obligations.

Wireless carriers would not comment at press time, but it's certain some would take the FCC up on its offer to back out of spectrum once owned by NextWave and Urban Comm-North Carolina, who have since gone bankrupt. Since the auction, the demand and popularity for 3G phones has diminished, with carriers delaying rollout and offering a service that's considered 2.5G by many in the industry.

A report from CNNmoney states the FCC might soon consider letting wireless carriers opt out entirely from the spectrum auction, or seek public comment for an answer to the current dilemma.

The FCC has already returned the deposit each winning bidder paid for the spectrum, $2.8 billion, after carriers petitioned the FCC to refund more than $3.1 billion. Because FCC rules forbid waiving the entire down payment, regulators decided to assess a three percent down payment ($500 million).

The problems began in 1996, when NextWave defaulted on its $4.7 billion lease to the FCC; the cellular phone company subsequently filed for bankruptcy. The FCC then moved forward with a spectrum auction and raised $15.85 billion from bids by Verizon Wireless (Quote, Company Info), Northcoast Communications, Salmon PCS and others.

NextWave sued the FCC, saying the spectrum is considered an asset to be used in its bankruptcy proceedings. The U.S. Court of Appeals in the District of Columbia agreed and the FCC took the case to the Supreme Court.

According to reports, the Bush Administration has been lobbying the Supreme Court to set precedence in the case to avoid a repeat of the situation. Since the NextWave ruckus began, wireless business leaders have blamed the FCC and federal government for the mess, saying the U.S. spectrum policy is "flawed."

NextWave lawyers have already said they will appeal a Supreme Court ruling on different grounds if it loses the current match, which suggests the spectrum could be held up for years.

Many wireless carriers can ill afford to tie up its money in spectrum that can't be used. Many, like Verizon Wireless, are spending a great deal of cash to support its 3G push throughout the U.S.