FCC suspends collecting on licenses $10 billion revenue source in doubt as bidders falter

April 03, 1997|By NEW YORK TIMES NEWS SERVICE

The Federal Communications Commission has announced that it will temporarily stop collecting payments on more than $10 billion worth of wireless communications licenses sold at auction last year, raising doubts about the government's most favored new method for pouring money into the Treasury.

The decision by the FCC, which has championed the concept of selling the public airwaves to the highest bidder, comes in the same week that one of last year's largest bidders filed for bankruptcy and others are reportedly in danger of default.

So now, even though Congress has already committed at least $1 billion of the money, it is not clear whether the FCC will ever collect the full $10.1 billion the government thought it had raised in this, the largest airwave auction yet.

And though the FCC, on paper at least, has raised nearly $23 billion since it began holding auctions in 1994, it now seems doubtful that future auctions will produce the huge windfall the government has been counting on to help balance the budget.

"We have to be careful about assessing the revenue to be gained from auctions," said Rep. Thomas J. Bliley Jr., the Virginia Republican who chairs the House Commerce Committee. "If not, it can become fool's gold in the hands of budgeteers."

The FCC announced Monday that it would suspend the installment plan by which a group of communications companies were paying the government for licenses auctioned off last year for a new class of wireless telephone technology known as Personal Communications Services, or PCS. The new PCS networks will offer conventional cellular service, plus advanced data features, through a single hand-held phone.

One of the largest bidders, Pocket Communications, filed for bankruptcy protection Tuesday and analysts said others looked unlikely to meet the next payment.

For their part, FCC officials insisted yesterday that they were suspending the payments only so they could determine whether the Treasury Department or another government agency should be put in charge of collecting the rest of the $10.1 billion.

"In no way is this order intended to state the commission's views on the financial health of the license holders," said Dan Phythyon, who was recently named chief of the FCC's wireless bureau.

But stock analysts said several of the most prominent and aggressive bidders for PCS licenses had been unable to line up financing to pay for the licenses. And with the atmosphere on Wall Street turning sharply against all wireless telephone providers lately, they said at least a few of these companies were likely to follow Pocket into insolvency.

If that were to happen, the FCC would have to take back the licenses and auction them a second time -- a prospect that is expected to radically reduce the amount of money raised.

"What the government has done here is a disaster," said George F. Schmitt, the president and chief executive of Omnipoint Communications, a small PCS company that paid $347 million for its New York City PCS license.

Omnipoint's stock price has plunged 73 percent since October on fears of ruinous competition in New York and other big markets.

One reason the FCC has been taking up the gavel so often is that airwave auctions are perceived as a mother lode on Capitol Hill. Since Congress directed the FCC to begin auctioning the airwaves in 1993, the commission has held 13 auctions and raised nearly $23 billion.

The commission also has sold licenses to offer wireless cable television, digital audio radio and specialized mobile radio used by taxi dispatchers.

As the auction money owed has piled up, the Congressional Budget Office has increased its estimates of the revenue to be raised from future auctions. And these bullish numbers have often been factored into the federal budget.

Pub Date: 4/03/97

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.