WASHINGTON – The Supreme Court ruled Monday that the government wrongly seized more than 200 lucrative wireless licenses from a bankrupt telecommunications company.
The ruling was a victory for NextWave Telecom, a young company that won the licenses at a 1996 auction but filed for bankruptcy protection before paying for them.
The airwaves slices have been unused during the protracted fight between NextWave and the Federal Communications Commission, which confiscated the licenses and resold them at a huge profit to larger telecommunications companies.
Now NextWave can finish building a network or sell the licenses to other companies. It will free up wireless spectrum in dozens of crowded markets, including Chicago, Los Angeles, New York, Philadelphia, San Francisco, Seattle and Washington.
The court, on an 8-1 vote, rejected arguments that the FCC had a regulatory interest in taking licenses from a company that is reorganizing its finances.
The Hawthorne, N.Y.-based NextWave's $4.7 billion bid for the frequencies was the highest in 1996. After taking them back, the FCC sold the licenses in 2001 to Verizon Wireless, VoiceStream Wireless and other companies at a second auction for nearly $16 billion.
An appeals court nullified the second sale, and the Supreme Court affirmed that decision.
Justice Antonin Scalia, writing for the court, said the government could not justify intervening in the bankruptcy proceeding by claiming a "valid regulatory motive."
"In our view, that factor is irrelevant," he wrote. But in a dissent, Justice Stephen Breyer said that the ruling makes it harder for the government to collect debts than it is for private businesses like car dealers, appliance companies and home developers.
"Why should the government (state or federal), and the government alone, find it impossible to repossess a product, namely, a license, when the buyer fails to make installment products?" Breyer wrote.
It's unclear how much the licenses are worth now, with the decline in the telecommunications industry.
The FCC decided last year to let companies cancel licenses purchased at the second auction. The government had been holding about $490 million as a deposit.
NextWave was formed in 1995 and promoted a nationwide cellular calling plan and 10-cent-a-minute service, far cheaper than what was offered by large wireless companies at the time.
At one point the company reached a settlement with the FCC, but Congress refused to endorse it and the legal fight continued.
The ruling will affect other companies that seek shelter in bankruptcy court. The cases are FCC v. NextWave Personal Communications, 01-653, and Arctic Slope Corp. v. NextWave, 01-657.
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