Spectrum is a nonrivalrous, excludable good. Like any other wireless carrier, Sprint’s cell towers, cell phones, heck even their customers generate that electromagnetic field we call spectrum. Just like Sprint bids for access to spectrum from the Federal Communications Commission, we “bid”, usually on a monthly basis, for access to Sprint’s cell towers.

Our little hand held radios that we call cell phones and smart phones emit signals that eventually clog the highways and channels we refer to as frequencies. The greater the demand to access spectrum, the greater the cost to use it.

Sprint, like every other carrier, faces not just a spectrum crunch, but a cash crunch. Telling investors that roaming agreements are its best bet to conserving cash should put investors on edge. Also buying 30 million smart phones when your network isn’t ready for all that capacity doesn’t set well with me either.

I also have to wonder how Clearwire’s spectrum squatting is impacting Sprint’s decision to rely more on roaming agreements to service its customers versus building out its network? According to Sprint’s 10-K, Sprint has a wholesale agreement with Clearwire where Sprint resells Clearwire’s 4G service. Maybe Clearwire hasn’t built out to the areas where Sprint is relying on roaming agreements or Clearwire wants more money. I don’t know.

I do know that investing in your network and building it out puts your subscribers at ease. They do care that the carrier who says they are providing national service is the carrier that is actually carrying their national service.

Yesterday, the United States Court of Appeals for the Ninth Circuit asked the Washington Supreme Court to clarify whether Washington state law treats early termination fees assessed by Clearwire US LLC as an alternative performance provision or as liquidated damages for its wireless Internet and telephone services. In other words are we comparing apples to apples.

Get it. Washington state. Apples….okay. Bad joke.

But I needed some type of stimulant to get me through the quick refresher on liquidated damages that I had to put myself through.

Bottom line, the plaintiffs are arguing that Clearwire’s early termination fees are invalid liquidated damages clauses because they act to penalize subscribers for terminating their wireless service contracts early versus merely bringing into balance the expectations both parties had in terms of service and fees received.

The appellate court admitted that the outcome of the current case was “unclear” under Washington case law.

Washington state law lays out a three-pronged test for determining whether a termination clause is invalid as a penalty. First, damages must be a reasonable forecast of just compensation for the breach that may occur. Second, damages caused by the breach must be incapable or very difficult to determine with an accurate estimation. Finally, there is a substantial deposit and the actual loss is minimal or nonexistent.

With this recitation of the law by the appellate court, it sounded more like a remand versus just a clarification question. I can’t predict what the outcome is going to be, but it sounds like Clearwire may be rewriting its clauses in order to avoid the expense of taking another bite at this litigation apple.

Yeah, yeah. I know. That was bad, too.