Court ruling threatens Native corp. wireless deal

Sealaska, partners bid on licenses in mismanaged auction

Posted: Friday, June 29, 2001

ANCHORAGE - A ruling by a federal appeals court has turned the future of a telecommunications investment by three Alaska Native corporations fuzzy.

Last week a federal appeals court in Washington, D.C., found that the Federal Communications Commission this year wrongly auctioned billions of dollars worth of wireless-spectrum licenses held by a bankrupt company.

The licenses are to use portions of the airwave spectrum for communications such as cell phones and pagers.

Among the bidders for the licenses: the Arctic Slope Regional Corp. of Barrow, Doyon Ltd. of Fairbanks, and Sealaska Corp. of Juneau. Under their joint venture, Alaska Native Wireless, the three Native corporations with communications giant AT&T Wireless Group bid $2.9 billion for 44 licenses that give the group the right to sell wireless service in places such as New York City, Los Angeles, Portland, Denver, Minneapolis, Tampa, and Southeast and Interior Alaska.

In the June 22 ruling, the appellate judges found that the government illegally confiscated the licenses from NextWave Communications in January 2000. The company was in bankruptcy and not making required payments on the licenses. The government repossessed the licenses.

In January of this year, the government re-auctioned the leases for almost $17 billion.

The winners of the leases are now wondering if they may end as losers in the deal.

"Certainly, it calls into question the legitimacy of the entire auction," said Allen Todd, Doyon's general counsel. Because of provisions in the bids, the companies would be able to recover their investment but the loss of opportunity would be a blow, said Conrad Bagne, chief operating officer of ASRC.

Doyon invested $25.5 million. ASRC invested $25 million. Sealaska invested $40 million. Partner AT&T invested $2.6 billion and owns 39.9 percent of the joint venture. Other investors provided the rest.

According to the Wall Street Journal, the FCC is contemplating several courses.

The FCC could orchestrate a deal under which the bidders would pay NextWave possibly several billion dollars to relinquish rights to the licenses. A second option: the FCC could appeal the ruling to the U.S. Supreme Court. Third, NextWave could attempt strike out on its own, building a wireless network.

Alaska Native Wireless has sent a letter to the FCC urging the commission to appeal the ruling to the Supreme Court.

NextWave was not making the required payments to the government for the licenses. A ruling affirming the rights of a company to the licenses even though it neglected its obligations "opens a huge loophole for mischief," Todd said.

Alaska Native Wireless is facing a second, unrelated challenge. TPS Utilicom filed a complaint with the FCC that the Native joint venture with AT&T should not win the licenses because the company is not a small, disadvantaged business. Such business were given first shot at some licenses.

Todd said the argument is empty because the Native corporations retain majority control. ASRC is the managing partner of the group.

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