Supreme Court reverses FCC on NextWave case

January 31, 2003

The U.S. Supreme Court has rebuked the FCC for canceling the spectrum licenses of NextWave Telecom because the wireless company was unable to pay its fee from a 1996 government auction.

Using a $500 million down payment, NextWave won an auction to license the spectrum for broadband communications services. Later it filed for bankruptcy, claiming it could not afford to pay for its $4.74 billion bid. The court, in an 8-to-1 decision, ruled that the government couldn’t revoke a license for nonpayment while a business is under the protection of bankruptcy laws.

Though NextWave, still in bankruptcy, won the five-year court case, it is unclear whether the decision will allow it to thrive in a tough economy. There is now far less demand for the spectrum from wireless telecom carriers, who are suffering their own economic problems.

However, the case itself is considered important for all government-licensed spectrum holders—including broadcasters—because it determined that an agency such as the FCC may not revoke a license ”solely because” a bankrupt license holder has not paid a debt that would ordinarily be covered by the bankruptcy law.

“We think Congress meant what it said: The government is not to revoke a bankruptcy debtor's license solely because of a failure to pay his debts,“ wrote Justice Antonin Scalia in the decision.

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