NEW YORK -- Over the sharp objections of its chairman, the Federal Communications Commission approved a plan yesterday to help bidders who say they cannot pay for billions of dollars of wireless-communications licenses.
By a 3-1 vote, the FCC offered the companies a menu of options by which they could simply return their licenses, give back a portion of the licenses, or use a percentage of their down payments to buy as many licenses as they could afford immediately.
Reed Hundt, the FCC chairman, voted against the entire package because he said the last option would unfairly penalize the largest wireless bidders and drive them into bankruptcy.
Hundt, however, was under keen political pressure to resolve this issue before new FCC officers take over. And he was outvoted by the other three commissioners: Rachelle Chong, James Quello and Susan Ness. Their clash with Hundt at yesterday's FCC meeting underscored why these troubled wireless auctions have become the most divisive issue facing the commission.
"The commission's choice was to push these companies toward bankruptcy or to get them to return their licenses," Hundt said after the meeting. "I wanted to make them an offer that would get them to return their licenses, and the majority wanted to punish them."
But Ness said in a statement, "To grant overly generous accommodations, after the auction, to any C-block licensee would be unfair to those C-block licensees who counted on us to enforce our rules."
The term C-block refers to a round of auctions held by the FCC in which dozens of companies bid $10.2 billion for licenses to offer a new generation of wireless service, called Personal Communications Service. Most of the companies ran into financial trouble soon after the auction ended, and several of them threatened to file for bankruptcy protection if the FCC held them to the terms of their bids.
Yesterday's vote ended months of tortured debate between Hundt and his fellow commissioners over how the government should treat the companies. The chairman favored a softer approach, under which the bidders would be forgiven some of their debts and allowed to bid in a reauction of the licenses. But the other commissioners took a harder line toward the bidders even if that resulted in some of them filing for bankruptcy protection.
Under the options in the FCC's package, the bidders for PCS licenses have four choices:
They can continue to pay for their licenses under the commission's current arrangement. The FCC agreed to delay its collection of installment payments until March 1998, by which time the companies may have access to fresh capital from foreign investors.
They can return the licenses, forfeiting a 10 percent down payment but winning forgiveness of their debt. Hundt said this option would not appeal to the creditors of the bidders, because they would lose hundreds of millions of dollars of down payments.
They can return half of their licenses, and have their debt reduced proportionately. That option may appeal to smaller PCS bidders who are able to offer wireless service with fewer frequencies. Larger bidders, however, are likely to need a full range of frequencies.
They can take 70 percent of their down payment and use it to buy as many licenses as they can afford upfront. That option would leave bidders with far fewer licenses than they held originally.
Pub Date: 9/26/97