FCC v. NextWave Personal Communications
The Federal Communications Commision revoked the licenses of NextWave Personal Communications Inc. and NextWave Power Partners Inc. (NextWave) after they filed for Chapter 11 bankruptcy protection and failed to make timely installment payments on their licenses. Seeking to comply with its statutory duty to ensure small business participation in auctions of broadband PCS licenses, the FCC had allowed winning bidders to pay for their licenses in installments. The FCC took and perfected security interests in the licenses and provided for license cancellation should a bidder fail to make timely payments. After several rounds in bankruptcy court and the Second Circuit, NextWave challenged the FCC’s cancellation of its licenses in administrative proceedings. The District of Columbia Circuit reversed the FCC’s cancellation, applying the principle that federal agencies must obey all federal laws, not just those they administer. It held that the FCC is bound by the usual rules governing the treatment of standard debt obligations in bankruptcy, and that it violated the provision of the Bankruptcy Code that prohibits governmental entities from revoking debtors' licenses solely for failure to pay debts dischargeable in bankruptcy.
Question Presented:
Whether Section 525 of the Bankruptcy Code conflicts with and displaces the FCC's rules for congressionally authorized spectrum auctions, which provide that wireless telecommunications licenses
obtained at auction automatically cancel upon the winning bidder's failure to make timely payments to fulfill its winning bid.
