[Congressional Record (Bound Edition), Volume 148 (2002), Part 12]
[House]
[Pages 16338-16339]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         NEXTWAVE AUCTION BILL

  The SPEAKER pro tempore. Pursuant to the order of the House of 
January 23, 2002, the gentleman from Florida (Mr. Stearns) is 
recognized during morning hour debates for 5 minutes.
  Mr. STEARNS. Mr. Speaker, I want to thank my colleague from 
California (Mr. Rohrabacher) for his continuing support in recognizing 
this anniversary. NPR had a great tribute to the general this morning 
which I listened to. I think it is altogether appropriate that the 
gentleman do this on the House floor, of course, and I want to thank 
him.
  Mr. Speaker, on another matter, I rise to deal with something that is 
more close to home, and that is dealing with something I am involved 
with in telecommunications. I am urging my colleagues to support a bill 
that I introduced to eliminate impediments that restrict the ability of 
certain wireless telecommunication providers to, I think, meet the 
urgent need of the consumers. The bill has bipartisan support and the 
support of the Subcommittee on Telecommunications and the Internet on 
which I serve.
  I am pleased, Mr. Speaker, that a recent editorial in the Wall Street 
Journal supports my actions on this matter, and I will be providing the 
Wall Street editorial to be made a part of the Record and part of my 
speech.
  The affected providers are the successful bidders for wireless 
spectrum that the Federal Communications Commission auctioned off in 
Auction No. 35. Some of the spectrum had previously been licensed to 
companies, including NextWave Personal Communications, whose bankruptcy 
filings, and subsequent failure to pay amounts due to the FCC for their 
licenses, led to the cancellation of those licenses. The FCC 
subsequently reclaimed the licenses and reauctioned them off in Auction 
No. 35 for about $16 billion.
  In June 2001, the D.C. Circuit held that ``the Commission violated 
the provision of the Bankruptcy Code that prohibits governmental 
entities from revoking debtors' licenses solely for failure to pay 
debts dischargeable in bankruptcy.'' In August 2001, after the issuance 
of that court's mandate, the FCC restored the NextWave licenses to 
active status. More recently, the Supreme Court granted the FCC's 
petition for a writ of certiorari to review the D.C. Circuit's 
judgment. The Supreme Court will not hear argument in the case until 
the fall of 2002 and is unlikely to announce a decision until the 
spring of 2003. If the Court reverses the D.C. Circuit's decision, 
there will be further litigation on remand in D.C. Circuit to resolve 
issues that court did not reach in its first decision. As a result, 
there is not likely to be a final resolution of the status of the 
NextWave licenses any time soon, and the FCC therefore will not be in a 
position to deliver licenses to the winners of Auction No. 35, until 
three or more years from the time the auction was concluded.
  Now, the status of NextWave's license has been the subject of 
extended litigation in not only the bankruptcy court, but the United 
States Court of Appeals for the Second Circuit, the United States Court 
of Appeals for the District of Columbia Circuit, and soon to be, the 
Supreme Court of the United States.
  Although the FCC recently returned most of the downpayment funds 
previously deposited by all these successful bidders, it continues to 
hold, without interest, Mr. Speaker, substantial sums, equal to 3 
percent of the total amount of the winning bids. It apparently intends 
to hold these sums indefinitely.
  Despite the lengthy delay in delivering the licenses, moreover, the 
FCC takes the position that the successful bidders remain obligated, on 
a mere 10-day notice, to pay the full amount of their successful bids 
if and when the FCC, at some unknown future date, establishes its right 
to deliver those licenses.
  Now, I think, as the Wall Street Journal points out, this is grossly 
unfair to those who bid on these licenses and did so in good faith. 
Companies calibrate their bids on the understanding of the auction, 
implicit in any commercial arrangement, that the delivery of the 
licenses will occur in a reasonable time following these auctions. That 
expectation is especially crucial in the context of spectrum licenses. 
Given the recent volatility we have seen in the market prices for 
spectrum, we can understand that there would be some action by the FCC 
after the auction.
  Moreover, it is particularly burdensome to some companies to have the 
FCC hold even a small portion of their enormous downpayment without any 
interest on these amounts. It is not done in the private sector; it 
should not be done in the government. They are paying no interest on 
these deposits for extended periods of time.
  In addition, winning bidders are obligated, as I mentioned, on very 
short notice to pay the remaining $16 billion they bid for the license 
at issue. Obviously, this adversely affects their capacity to serve the 
needs of their customers, because they must have this capital always on 
hand and they cannot use it for long-term benefits for business. This 
need to keep itself in a position to fulfill that obligation at an 
indefinite future date impedes its ability to take, as I mentioned, 
interim steps for building their own businesses.
  The FCC's failure to respond appropriately to alleviate these serious 
burdens, I believe, deserves the public interest. That is why I have 
dropped bill H.R. 4738. It addresses this problem in two ways, Mr. 
Speaker.
  First, it requires the FCC promptly to refund to the winning bidders 
the full remaining amount of their deposits and their downpayments. 
Second, it gives each winning bidder an opportunity to elect, within 15 
days after enactment, to relinquish its rights and to be relieved of 
all further obligations under Auction No. 35. Those who choose to 
retain their rights and obligations under Auction No. 35 will 
nonetheless be entitled to a return of their deposits and downpayments 
in the interim period. If and when the FCC is in a position to deliver 
the license at issue to those who remain obligated, they will be 
required to pay the full amount of their bid in accordance with the 
FCC's existing regulations. Those who elect to terminate their rights 
and obligations under this auction will be free to pursue their 
business interests without the burdens under which they must labor.
  Mr. Speaker, I urge my colleagues to support this timely and much-
needed legislation, and I appreciate the Wall Street Journal bringing 
to the attention of the Nation this very important problem, and I also 
hereby submit for the Record the article I have referred to.

             [From the Wall Street Journal, Aug. 21, 2002]

                         Another Telecom Fiasco

       The telecom shakeout (or meltdown) continues, with Qwest 
     ditching assets to stay solvent, and VoiceStream pursuing a 
     merger in wireless with Cingular. The market will sort all of 
     this out, though it sure would help if the Federal 
     Communications Commission stopped making things worse.
       Consider the FCC's ongoing NextWave spectrum fiasco. That 
     small wireless carrier won spectrum licenses in a 1997 FCC 
     auction, but later defaulted on its payments. The FCC revoked 
     the licenses and reauctioned them--even as NextWave was suing 
     to get them back. NextWave won its case, and a red-faced FCC 
     had to tell the other carriers that had just bid $16 billion 
     that it had nothing to give them.
       In the real business world, the FCC would have cancelled 
     the reauction once it couldn't deliver the licenses. But 
     rules are different in FCC-land. The agency may not have 
     delivered any licenses, but it has nonetheless held on to the 
     hefty deposits the second batch of carriers gave it. And, by 
     the way, the FCC has informed those carriers that when it 
     does finally turn over the spectrum (in 2004, optimistically, 
     if ever), it expects them to cough up the entire $16 billion 
     within 10 business days.
       All of this is playing havoc with an industry already in 
     chaos. Verizon Wireless, for instance, bid $8.7 billion for 
     its share of the spectrum. The FCC took a deposit from the 
     company of $1.7 billion, and then sat on it--

[[Page 16339]]

     interest free--for 14 months. The FCC finally gave back some 
     of the deposit earlier this year, though it still holds the 
     bureaucratic pocket-change of $261 million.
       Verizon is also stuck with a large liability--money it 
     can't effectively touch because of the 10-day future payment 
     obligation. Credit agencies say they may downgrade its debt 
     because of the $8.7 billion overhang. Meantime, the company 
     can't afford to run in place for years while the FCC fiddles, 
     so it has redrawn its business strategy around the lost 
     spectrum--which means it may not need it even if it comes 
     free.
       The FCC usually hands over licenses within three months, 
     and for good reason: The industry changes faster than a 
     politician's mind. Since January 2001 when the reauction 
     ended, wireless and equipment companies have laid off tens of 
     thousands of workers and lost $850 billion, or 65%, in market 
     value. (Would that the FCC shrank 65% in size.) Wireless 
     officials estimate that if the reauction were held today, the 
     bids would be about 40% of the original $16 billion.
       But that gets to the heart of the FCC matter: money, and 
     creative accounting. It turns out that when NextWave bid its 
     $4.8 billion in 1997, the FCC booked the entire amount in the 
     federal budget. Then, when the reauction happened in 2001, it 
     booked that $16 billion as well--adjusted for what it had 
     lost from NextWave.
       Chairman Michael Powell keeps promising a telecom revival, 
     but this FCC money-grubbing doesn't help. The reauction is 
     tying up much-needed investment capital: According to a 
     recent study from AEI economist Gregory Sidak, the frozen $16 
     billion, if released, would increase GDP between $19 billion 
     and $52 billion. Consumers are also losing out, as new 
     services such as mobile videophones are delayed.
       The FCC isn't even helping itself, if it cares. Reputation 
     counts, even in government, and the agency has important 
     auctions to come. Carriers may discount future bids because 
     of uncertainty of ever receiving licenses. Several big 
     players may not be able to bid at all, since the FCC is 
     already sitting on their capital.
       We still believe FCC auctions are the most efficient way of 
     allocating spectrum. But their purpose is defeated when the 
     government keeps the cash but won't deliver the goods.

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