FCC, Alpine PCS Clash at Appeals Court over Licenses from 1996 Auction
Alpine PCS asked federal appeals judges to reverse the denial by the FCC of a waiver of its license-cancellation rule and overturn the commission’s later finding that the company was in default of its payment obligations from a 1996 auction. Alpine questioned why it was treated differently from NextWave, a huge player in the auction that was allowed to sell its licenses at a profit. Alpine said unless the FCC order is reversed, the company might owe the government $39 million. The FCC countered that it had followed its rules and asked the U.S. Court of Appeals for the District of Columbia Circuit to reject the challenge. Oral argument hasn’t been scheduled.
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Alpine, a small, closely held company, bought two PCS licenses, covering Santa Barbara and San Luis Obispo, Calif., in the auction for $29 million, and spent $90 million building a network. But in 2001 the telecom industry’s fortunes headed south and Lucent Technologies “unexpectedly reneged on a multi-million dollar financing commitment to Alpine,” said a brief that the company filed with the court. In July 2002, “Alpine (and many other C Block licensees) was forced to ask the FCC for an extension of its loan installment deadlines and renegotiation of the debt terms, in compliance with applicable federal regulations and the express terms of the Loan Agreements.”
Alpine said it wasn’t treated fairly. “At approximately the same time that the FCC ceased communicating with Alpine over Alpine’s debt restructuring and rule waiver request, that agency was engaged in closed door negotiations to grant precisely that relief to an entity named NextWave Communications,” Alpine said. NextWave “was given the following favorable terms: a waiver of the automatic license cancellation rules, reinstatement of scores of PCS licenses without penalty, a voluntary return of un-constructed licenses without penalty, and clearance to sell the balance of its C Block licenses to the two largest wireless carriers in the Nation for a windfall profit estimated in the range of $3 to $5 billion.” Alpine, meanwhile, “was forced to discontinue service to the public, shut down and sell off its network assets, and approach the brink of financial ruin.” Meanwhile, the FCC reauctioned the licenses Alpine had purchased in 2008. Alpine filed for bankruptcy protection that year.
Alpine said the FCC’s decision “denying Alpine’s request for waiver of the installment payment rules, suspension of the automatic license termination rule, and, renegotiation of Alpine’s license debt obligation was arbitrary, capricious, and otherwise contrary to law.” The commission “breached its duties as a lender” and “violated Alpine’s procedural due process rights by failing to grant it similar treatment to similarly-situated parties,” the company said.
The FCC countered that the case is based on bankruptcy law and the commission was within its rights to reauction the licenses. “Alpine’s licenses automatically canceled on August 1, 2002, six years before Alpine filed its bankruptcy petition and, as such, the licenses are not part of Alpine’s bankruptcy estate,” the commission said in a brief. “When Alpine received its licenses in 1996, it agreed to pay most of its winning auction bids in installments. FCC rules have always conditioned the grant of licenses upon the full and timely performance of payment obligations, and have provided that, upon a licensee’s failure to make a required installment payment, the license will automatically cancel.”
Alpine’s main argument is that it still held the licenses when it filed its bankruptcy petition, because the company prevented their cancellation “by merely filing a request on the day before cancellation was to occur asking the FCC to waive operation of the automatic cancellation rule,” the commission said. “That argument is unsupportable. FCC precedent is clear that the pendency of a waiver request does not toll automatic cancellation.”