Lessons from the Nextwave Saga: The Federal Communications Commission, the Courts, and the Use of Market Forms to Perform Public Functions

Abstract

Since the enactment of the Telecommunications Act of 1996, the Federal Communications Commission has been involved in some of the most challenging and compelling legal disputes involving a federal agency. Recent efforts by the Commission to rework its rules for promoting competition in local telephone markets and to modify its media ownership rules have resulted in extremely controversial and closely watched cases.

A strong argument can be made that the most significant case involving the Commission in recent history is FCC v. NextWave Personal Communications Inc. The Supreme Court held in NextWave that § 525(a) of the Bankruptcy Code prevented the FCC from revoking wireless communications licenses held by NextWave after the company had bid successfully for the licenses at an agency auction and agreed to make “full and timely payment of all monies due” to the agency, but then defaulted on its obligation to pay. This Article discusses the extensive litigation over the licenses issued to NextWave as the high bidder at spectrum auctions conducted in 1996, in which the Supreme Court ultimately held that the FCC -- despite its special governmental role of allocating spectrum licenses -- should be treated in the same way as any other creditor in bankruptcy, given the way it structured its dealings with NextWave.

Keywords: Nextwave, FCC, Federal Communications Commission, market forms, licenses, Rodger Citron, Citron, Private-Public, communications, Bankruptcy