MetroPCS trumps FCC, moves ahead with wireless plans
Dallas Business Journal - by Jeff Bounds Staff Writer
NORTH DALLAS -- The U.S. Supreme Court has declined to hear an appeal by federal regulators in a battle with a Dallas company, clearing the last legal hurdle in the firm's fight to supply wireless-phone service in 14 markets covering 22 million people.
The justices, without comment, refused to intervene in litigation between the Federal Communications Commission and MetroPCS Inc., which in 1996 won 14 licenses to provide wireless-phone service in markets in and around San Francisco, Miami and Atlanta.
The court's decision marks the end of nearly four years of legal wrangling and frees MetroPCS from the prospect of having the licenses repossessed by the FCC.
Though company officials are tight-lipped about their plans, MetroPCS has tentatively scheduled the early part of next year for the launch of its wireless-phone offerings.
MetroPCS paid $1.06 billion for the licenses in what was known as the "C-block" auction, which was aimed at giving small companies the chance to compete with established players like AT&T Wireless.
The auction came on the heels of federal deregulation of the telecommunications industry, and at the time the capital markets were gung-ho about funding upstarts that wanted to compete with older, more established companies. However, MetroPCS and a number of other C-blocks were soon overwhelmed by their debt payments, and in 1997 MetroPCS filed for Chapter 11 bankruptcy protection.
MetroPCS persuaded a Dallas bankruptcy judge to reduce the cost of its licenses to $166 million. It argued that the FCC flooded the market with spectrum after the C-block auction closed, and that by the time it actually received its licenses from the agency their market value had dropped precipitously.
The Fifth Circuit U.S. Court of Appeals in New Orleans later upheld the Dallas judge's ruling. By declining to hear the case, the Supreme Court in effect upheld the lower court's ruling.
With the courts' blessings, MetroPCS is now moving forward on building its network.
Company officials declined to comment, citing a desire to remain under the radar while they get their network built and operating.
However, MetroPCS recently leased space in the Miami suburb of Sunrise for a regional headquarters. And several months ago a group of venture capital firms -- including several that backed the company in 1996 -- committed a two-year, $350 million investment in the company.
The money is coming in "tranches," or chunks. Since the fourth quarter of last year, investors have put in a total of nearly $104 million, including $15 million in the second quarter of this year. MetroPCS' backers include Accel Partners, Battery Ventures and Dallas-based Silver Creek Technology Investors.
It's not clear what impact the MetroPCS case will have on similar litigation filed by another C-block auction winner, NextWave Telecom, which also is fighting to keep its licenses.
Unlike MetroPCS, NextWave turned over its licenses to the FCC, which re-auctioned them earlier this year. In an odd twist, an affiliate of MetroPCS, called MPCS Wireless Inc., registered to bid in that auction and submitted $30 million for that purpose. However, it later got its money back after failing to bid in the auction.
The U.S. Court of Appeals in Washington, however, ordered the FCC to return the licenses to NextWave. The FCC is reportedly mulling an appeal of that order to the Supreme Court, and has until October to do so.
Eric Brunstad, a Connecticut attorney who represents both MetroPCS and NextWave, does not believe Supreme Court justices will hear the NextWave matter. He adds that "there really is no connection" between the two companies' cases that would create a legal conflict the Supreme Court would want to resolve.
Contact DBJ writer Jeff Bounds at jbounds@bizjournals.com or (214) 706-7122.
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