Opinion ID: 152242
Heading Depth: 2
Heading Rank: 1

Heading: Airadigm, its Licenses, and the 1999 Bankruptcy

Text: Airadigm is a telecommunications company whose principal assets are fifteen mobile phone service licenses that it won at auction in the late 1990s. The FCC issued the licenses and retained a security interest in them. In the FCC's argot, the licenses were C-block and F-block licenses. The C-block licenses were 30 megahertz each and the F-block licenses were 10 megahertz each. With the licenses in hand, Airadigm had the capacity to provide mobile phone service in Wisconsin, Iowa, and Michigan. The licensing scheme and its nomenclature come from an amendment to the Communications Act of 1934; the amendment set aside 120 megahertz of the electromagnetic spectrum for mobile communications devices. We described the scheme and its attendant regulations in some detail the last time that the parties were here. In re Airadigm Communications, Inc. (Airadigm II), 547 F.3d 763, 765 (7th Cir.2008). The C- and F-blocks were set aside for small businesses and rural telephone companies (among others). Unlike licenses that could be purchased by the large telecommunications companies, these licenses could be purchased on installment plans with favorable interest rates. See Federal Communications Commission v. NextWave Personal Communications, Inc., 537 U.S. 293, 296, 123 S.Ct. 832, 154 L.Ed.2d 863 (2003) (detailing the statutory and regulatory regime applying to C- and F-block licenses). The favorable licensing scheme, however, was not without shoals: the Congressional Budget Office (CBO) predicted that many successful license-bidders would be forced into bankruptcy unless the debt owed to the government by the    licensees is sharply reduced. Congressional Budget Office, IMPENDING DEFAULTS BY WINNING BIDDERS IN THE FCC's C BLOCK AUCTION: ISSUES AND OPTIONS 4 (1997), http://www.cbo.gov/ftpdocs/0xx/doc37/cblock.pdf. In 1999, Airadigm unintentionally proved the CBO's prescience by defaulting on its obligation to make payments on the licenses and filing a Chapter 11 bankruptcy petition in the United States District Court for the Western District of Wisconsin. At that time, and pursuant to FCC regulations, the FCC revoked the licenses. See 47 C.F.R. § 1.2110(g)(4)(iv). The decision to revoke the licenses made waves, because a bankruptcy estate springs into existence by operation of law whenever a bankruptcy petition is filed. The estate consists of all property of the debtor wherever located and by whomever held. 11 U.S.C. § 541(a). So revoking the licenses issued to Airadigm had two major effects: (1) it removed (at first blush) the licenses from the estate, and (2) it made (again, at first blush) the FCC an unsecured creditor. See also Airadigm II, 547 F.3d at 766 (describing the FCC's early litigation position). In keeping with the FCC's license revocation, the plan of reorganization (2000 Plan) that Airadigm proposed treated the licenses as if they were not part of the bankruptcy estate. The bankruptcy court confirmed the 2000 Plan over the FCC's objections. The linchpin of the plan was Airadigm's petition to the FCC for reinstatement of the licenses; treatment of various claims in the 2000 Plan depended on how and when the FCC acted on Airadigm's petition.