When ex-Qualcomm executives founded NextWave Personal Communications in 1995, there was concern the company, like many 3G startups, would have to ante too much money in the 1996 auctions to deploy networks in a reasonable time. Sure enough, the '96 auctions were great for FCC revenues, but made it a problem for participants to deploy real networks.

NextWave filed for bankruptcy in 1998 but received pledges of financial support from the likes of Global Crossing, Liberty Media and Texas Pacific Group. We'll see whether those commitments survive in a down market.

How is this like DSL? The 1996 Telco Deregulation Act made it easy for startup carriers to deploy equipment in co-located racks in an incumbent's central office but did not specify how they should take part in the cost of loop conditioning and maintenance. The fly-by-nights simply stuffed access equipment into racks, passed on DSL orders to incumbent carriers, pointed fingers at the incumbents when orders were not met and dissolved when the downturn made it impossible to keep growing.

Market analysts note that the easiest path for the FCC-rather than snatching spectrum from Verizon, AT&T Wireless and Cingular-would be a settlement with NextWave that equals the least pain for all concerned. But Congress will pounce on the FCC if it awards NextWave and others who failed to make loan payments with anything resembling a government giveaway.

If so, we should all realize that the judicial branch is not the enemy here. Nor is the FCC. When Congress legislates deregulation, or encourages the FCC to free up spectrum, it must not encourage free-for-alls. Sure, startups should be encouraged to flower, and downturns do indeed lead to the pruning back that can remove some of the weaker players. But deregulation works best when Congress writes laws to ensure that startup carriers cannot enter the game unless they have a minimal capability to manage physical assets as they expand footprints.