Verizon says 800 MHz plan may be criminal

Jun 29, 2004 12:00 PM, Donny Jackson

FCC commissioners risk criminal prosecution for improper disposition of federal funds and public resources if they award Nextel Communications spectrum without conducting an auction as part of the 800 MHz rebanding proposal, according to Verizon Communications’ general counsel.

William Barr, general counsel for Verizon Communications—parent company of Nextel rival Verizon Wireless—reiterated his company’s oft-stated position that the FCC cannot award spectrum without conducting an auction. More important, Barr’s letter also states the FCC lacks the authority to execute the proposed rebanding plan, which calls for Nextel to received replacement spectrum in return for paying to relocate 800 MHz users to contiguous bands to alleviate interference that affects public-safety communications nationwide.

In fact, doing so would put FCC commissioners in “direct violation” of the Anti-Deficiency Act (ADA), the Miscellaneous Receipts Act (MRA) and Section 641 of the criminal code, according to Barr.

“Broadly, these law are animated by one essential constitutional principle: Congress, and Congress alone, possesses the power to determine how public resources are to be expended or applied,” the letter states. “It is for Congress, not a given official, to define the legitimate government interests that warrant the expenditure of public funds or the disposition of federal resources.”

Under the plan, Nextel would receive 10 MHz of replacement spectrum at 1.9 GHz or 2.1 GHz in return for spectrum at 700 MHz and 800 MHz, as well as cash considerations. The cash contribution to the package—Nextel has volunteered $850 million, but most analysts expect the amount to be greater—is earmarked to pay for the cost of rebanding. Technically, rebanding payment obligations would be handled through Nextel, because the FCC has no authority to disburse such funds.

However, Barr said the ADA does not allow even indirect disbursements such as those contemplated in the rebanding proposal.

“It is critical for the commission to understand that the ADA not only prohibits the agency from making such payments directly but also condemns any transaction that, in substance, accomplishes the same result,” Barr’s letter states.

As support for his argument, Barr cited a June 28 memorandum from former U.S. Comptroller General Charles Cooper, who noted violations of the ADA and the MRA. Conviction under the ADA is a felony, and an MRA violation can cause a government official to be removed from office, according to Barr.

“At the end of the day, I believe that the FCC cannot unilaterally take the steps proposed,” Barr’s letter states. “This matter belongs in Congress, which alone can make provision for the proper, adequate and secure funding for the needs of public safety. Apart from the needs to cure the legal flaws present on this record, public-policy concerns dictate a congressionally-fashioned solution.”

Nextel criticized Barr’s letter.

“It’s shameful that Verizon is so self-interested and anticompetitive that it would threaten FCC commissioners with personal criminal liability while the needs of public safety hang in the balance,” a Nextel spokesman said in a prepared statement. “Verizon is resorting to scare tactics because it is clear that the FCC has the full authority to adopt the Consensus Plan and solve the critical problem of public-safety radio interference.”

A Verizon Wireless spokesman said the company would not issue any additional statements regarding Barr’s letter.

Barr’s letter was delivered to the FCC on Monday, just two business days after published reports indicated the FCC would award Nextel with replacement spectrum at 1.9 GHz instead of the 2.1 GHz airwaves that Verizon Wireless wanted Nextel to receive. Several Washington sources indicated the FCC was prepared to issue the long-awaited order late this week or sometime next week.

Precursor wireless strategist Rudy Baca said he was surprised by the Verizon filing, which he called “over the top.” He said Barr’s letter could damage Verizon’s future relationship with this commission.

“This is how not to lobby,” Baca said. “This seriously kicked up the ante, but I don’t think it’s going to have the effect that Verizon wants. You don’t threaten regulators with criminal prosecution … This is not going to help.”

Baca said he doesn’t believe the commissioners are criminally liable and seriously doubts that a government prosecutor would pursue such a politically volatile case. Meanwhile, Baca predicted the FCC would issue its long-awaited order at its July 8 meeting to maximize media coverage of the event.

“I think [the Barr letter] will have the perverse effect of actually stimulating a decision,” he said.