Nextel should play ball

Jun 1, 2004 12:00 PM, Glenn Bischoff gbischoff@primediabusiness.com

In this edition's cover story, MRT Senior Writer Donny Jackson provides in-depth coverage of the latest chapter in the 800 MHz interference saga: the Cellular Telecommunications & Internet Association's “compromise” proposal that would reband the airwaves, generate the money needed to pay for the project and prevent Nextel Communications — which is causing most of the interference that disrupts public-safety communications nationwide — from gaining a competitive advantage.

It's an interesting proposal, and one the Federal Communications Commission should seriously consider. Under the plan, both Nextel and its main combatant — Verizon Wireless — would have to budge more than a little. Nextel would have to agree to pay considerably more than the $850 million it has pledged to execute the rebanding and accept replacement spectrum at 2.1 GHz instead of the 1.9 GHz airwaves it covets. Verizon Wireless would have to back off its assertion that current telecom law prevents the FCC from awarding spectrum outside an auction and agree not to litigate a one-time award of the 2.1 GHz spectrum.

While Verizon Wireless has publicly stated it will play ball, Nextel has balked. In a letter to FCC Chairman Michael Powell, Nextel CEO Tim Donahue said accepting the 2.1 GHz spectrum in lieu of the more valuable 1.9 GHz spectrum wouldn't be in the best interests of the company's shareholders.

No one should blame Donahue for this position. CEOs tend to find it difficult to hold on to their gigs when they make shareholders angry, and this is one job Donahue wants to retain, having pulled down a tidy salary of $26.3 million last year. He also holds 1.8 million shares of the company's stock and understands intuitively that Wall Street will react better to a 1.9 GHz award.

But Donahue is taking a short-term view. It's a miracle that a first responder or civilian hasn't been killed or seriously injured as a result of 800 MHz interference. A few months ago, the families of 12 New York City firefighters filed a $5 billion lawsuit alleging their relatives died because their radios failed to receive evacuation orders before the World Trade Center towers collapsed. Eventually, a judge blocked the suit, but only because the families had applied for awards from the Victim's Compensation Fund; one of the stipulations of receiving compensation from the fund is a waiver of civil litigation.

Given this, it is a virtual certainty that the survivors of any first responder(s) killed in the line of duty as a direct result of radio failure due to 800 MHz interference would file a multimillion-dollar — perhaps multibillion-dollar — lawsuit against Nextel. I wonder what Donahue's shareholders would think about that?