NextWave Telecom Inc. announced plans to purchase wireless networking equipment from Lucent Technologies Inc., signaling its intention to offer services over airwaves that are the subject of a heated dispute between the wireless company and the U.S. Federal Communications Commission (FCC).
NextWave, of Hawthorne, N.Y., committed to purchasing Lucent equipment that will be the basis of the company's third-generation wireless network. Voice and data services on this network will initially be offered in Detroit and Madison, Wisconsin, with data-only services rolling out in 93 additional areas. Construction of the network is to be completed in the next 10 months, according to a NextWave statement. Company officials did not respond to inquiries about the amount of the deal, but published reports put it at the US$100 million mark. Lucent officials confirmed the deal, but would not comment on the dollar amount.
The wireless company secured the spectrum licenses for these services during an FCC auction in 1996, and agreed to pay the commission US$4.74 billion in installments. Following its initial down payment of US$474 million, NextWave failed to pay any additional installments to the FCC, and in 1998 the company filed for bankruptcy protection.
The FCC re-auctioned NextWave's spectrum in late 2000 and early 2001, having concluded that NextWave's licenses were automatically cancelled following the first missed payment. NextWave maintained that bankruptcy laws protected it from ramifications from missed payments, and therefore still owns the spectrum. Late last month, the U.S. Court of Appeals for the District of Columbia said that the FCC violated U.S. Bankruptcy Code in canceling NextWave's spectrum licenses.
That NextWave would begin building a wireless network now comes as something of a surprise, since the company would be a brand-new player in an already crowded market characterized by significant up-front expenses in infrastructure. One observer believes that NextWave's announcement on Monday was designed to put the company in a better negotiating position, in the event that the FCC decides to settle the dispute with a cash payment instead of returning the licenses to NextWave. "They are bumping up their negotiating strategy," said Rudy Baca, an analyst with Precursor Group in Washington, D.C. "They need to do everything they can to convince the FCC they intent to build out a network, so that they can reach a settlement on favorable terms."
An FCC spokeswoman on Tuesday said that the commission is still reviewing the Court of Appeals' decision.
A total of $15.85 billion was spent on NextWave's re-auctioned spectrum licenses by Verizon Wireless Inc., Cingular Wireless Inc. -- which bid through a small wireless company that it holds a large stake in called Salmon PCS -- and AT&T Corp.'s AT&T Wireless Group through one of its investments called Alaska Native Wireless LLC. Those companies planned to use NextWave's re-auctioned spectrum to fill coverage holes in densely populated urban areas and to begin testing new and improved wireless services.