Skip to main content

The FCC lifted a major burden from wireless shares by freeing companies from a $16 billion obligation to purchase spectrum in a failed government auction.

The decision to release bidders including


(VZ) - Get Verizon Communications Inc. Report

and Britain's


TheStreet Recommends

(VOD) - Get Vodafone Group Plc Report

was driven by the "serious economic difficulties" faced by the telecommunications industry over the year since the auction was held, the FCC said. Regulators hoped that the decision will "help consumers by promoting greater stability in the wireless sector," according to a statement posted on the FCC Web site.

For months a cloud of uncertainty over the obligations hung over the wireless and telecommunications sectors, complicating an already difficult situation in the companies' fundamentals.

The move ties up some -- but not all -- of the loose ends related to a failed saga that dates to 1996, when telco Nextwave submitted a successful bid for 63 licenses, worth $4.7 billion. But after Nextwave filed for bankruptcy, the FCC reauctioned the block in February 2001 to a group of companies including Verizon for about $16 billion.

A federal court ruling months after the second auction nullified the $16 billion auction and required the FCC to give Nextwave its licenses back. Nextwave, in turn, agreed to sell its licenses in a side deal with wireless carriers, but the agreement fell apart. In March, the FCC filed an appeal with the Supreme Court over the decision to return the Nextwave spectrum. The actions Thursday will not affect the Supreme Court case, according to published reports quoting FCC officials.

In March, the commission returned about $2.8 billion of a $3.3 billion deposit the coalition of bidders paid.

Industry groups hailed the decision as a major coup for the lumbering wireless sector. "This is a straightforward solution ... allowing those resources to be put to work creating jobs in the telecomm sector and increasing service levels for wireless consumers," said Cellular Telecommunications and Internet Association president Tom Wheeler in a prepared statement following the decision. "It is also a fair solution, releasing bidders from a transaction that never occurred. The commission's action will help bring long-overdue certainty and stability to the wireless marketplace."