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Nextel Contemplates Movin’ on Up

The FCC says a spectrum swap will ease the airwave static that Nextel’s cell-phone traffic is causing. Others say Nextel should fix the problem. Who’s right?
August 24, 2004

Talk about making waves. Public-safety officials have complained for years that Nextel Communications’ cell-phone network has generated dangerous levels of radio-wave interference with police, fire, and medical communications. Now the Federal Communications Commission’s proposed solution has triggered a barrage of pops and crackles across the wireless landscape.

Two weeks ago, the FCC unveiled the details of the plan in a 255-page report. The essence of the deal is a spectrum swap: In exchange for $4.8 billion, Nextel will be permitted to move some of its services from the 800-megahertz band to 1.9 gigahertz, a portion of the spectrum where fewer public-safety licensees reside. Feedback from other wireless carriers, however, has been loud and clear. They claim the plan is a sweetheart deal that sidesteps the spectrum auction process and grants Nextel a financial windfall. Nextel has not yet indicated whether it will sign off on the plan. Meanwhile, the policy debate rages on over whether the FCC should have required Nextel to fix the interference problems instead of assigning the company new spectrum space.

On one side is a coalition of public-safety organizations that drafted the original spectrum-swap plan in 2001 and enlisted Nextel’s support for it. This group praises the FCC’s airwave reassignment, which incorporates many of its suggestions. “We’re pretty confident that this is going to be a major fix,” says Harlin McEwen of the International Association of Chiefs of Police. McEwen, who was instrumental in drafting the Nextel-supported plan, called the Consensus Plan, says the company’s interference problems have dragged on since 1999. The website of the Association of Public-Safety Communications Officials has logged complaints of more than 1,000 interference incidents. The FCC says the rebanding process will free the airwaves up for public-safety licenseesmaking available enough spectrum to add 90 new two-way channels.

Opponents advocate fixing the garbled communications, not reassigning airwaves. Working from a document known as the Compromise Plan, they say private wireless carriers should heed the axiom of caveat emptor: spectrum buyer beware. In a letter to the FCC, Stephen Kappa, director of the West Virginia Department of Military Affairs and Public Safety, wrote “operators and licensees who cause interference should be held responsible for fixing the problem.” He predicted the reshuffling would cause “unnecessary disruption and expense.”

Then there are the plan’s financial details. The FCC placed the value of Nextel’s proposed new real estate at $4.8 billion. To carry out the deal, Nextel must secure a $2.5 billion letter of credit and pay for all transition costs. Nextel will be permitted to credit those expenses against the total value of the spectrum, and then pay any remaining balance to the U.S. Department of Treasury.

To other wireless carriers, Nextel’s spectrum swap sounds like a badly conceived reality show in which they’re the foils. The premise is always the same: Someone wins big; everyone else loses big, frequently unfairly. Verizon Wireless, the largest U.S. cellular carrier, has been the most vociferous opponent. It has pegged the swath of 1.9 GHz spectrum offered to Nextel to be worth $7 billion. In a scathing official statement issued shortly after the FCC made its decision, Verizon said the agency was “conferring a multi-billion dollar windfall on Nextel at taxpayer expense.” It called the decision a “bizarre step of rewarding Nextel” for causing interference.

Agreeing that the deal is a plum for Nextel is the Cellular Telecommunications and Internet Association, a Washington, D.C.-based group for the wireless industry. “We thought there should be a fair value on the spectrum, and we think it’s still undervalued,” says John Walls, vice president of public affairs for the organization. “They got quite a bargain.”

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