In a decision that could cost Sprint Nextel more than $1 billion, a federal appeals court last month upheld a 2007 FCC order requiring the wireless carrier to vacate by June 26 the interleaved channels that company officials had hoped would serve as the spectral foundation of its iDEN network services during 800 MHz rebanding.

The U.S. Court of Appeals for the D.C. Circuit found that the FCC acted reasonably last fall when it ordered Sprint Nextel to vacate interleaved spectrum by the June 26 deadline, the target date for the completion of rebanding. Of course, rebanding is well behind that schedule, with some NPSPAC licensees already seeking waiver extensions that would allow them to complete rebanding on their systems as late as mid-2012.

Losing the interleaved spectrum could “cripple” Sprint Nextel's iDEN network in some markets, particularly as it swaps its Channel 1-120 spectrum with NPSPAC licensees, the carrier stated in a filing with the court.

But Sprint Nextel never clearly raised its argument that it had agreed only to a synchronous swap of interleaved channels, wrote Judge Judith Brown in the majority opinion.

“Nextel insists it raised all of its arguments in the ex parte notices. We think not,” the opinion states. “Nextel's ex parte notice only argued — in quite general terms — that the commission unreasonably changed the rebanding process from a synchronized spectrum swap to an asynchronous exchange. Consequently, that is the only argument Nextel preserved for our review.”

As a result, Sprint Nextel must find alternatives for supporting its iDEN network. In its quarterly SEC filing, the company said its options include building additional sites and acquiring access to new spectrum, but the carrier acknowledged that neither may be possible in some markets. In those situations, Sprint Nextel may offer subscribers incentives to move to the company's CDMA network, as the performance of the iDEN network in those markets could degrade noticeably without adequate spectrum.

“Degradation in network performance in any market could result in higher subscriber churn in that market,” Sprint Nextel's quarterly filing states. “The loss of a significant number of subscribers could adversely affect our results of operations.”

Exactly how much FCC enforcement of the June 26 deadline for vacating the interleaved channels would cost Sprint Nextel is not clear, but the company stated in its annual SEC filing that the amount could be “material.” Based on that statement, analysts have projected the additional cost to be between $1 billion and $2.8 billion more than the $2.7-3.4 billion that Sprint Nextel previously expected to pay for rebanding.

While Sprint Nextel has sought a waiver seeking an extension to continue to use Channels 1-120 spectrum until NPSPAC licensees in a market are ready to swap spectrum with the carrier, it had not made any such waiver request regarding the interleaved channels as of press time.

Although the court reinforced the FCC's right to require that Sprint Nextel vacate the interleaved channels, the commission has yet to establish procedures for public safety entities to apply for the spectrum.

Mobile wireless consultant Andrew Seybold does not believe the FCC will force Sprint Nextel to vacate channels on June 26. Instead, FCC Chairman Kevin Martin may use the ruling as leverage to accelerate the rebanding effort, which some observers have claimed is behind schedule because of Sprint Nextel's tough negotiation stances with public safety entities, he said.

“The FCC now has a hammer over Sprint,” Seybold said.

For cities and counties that subscribe to iDEN services — which includes 3 million public safety subscribers — Sprint Nextel's loss in the case could have them re-examining their contracts with the company.

“There is a great deal of concern in the loss of capacity in iDEN and the possibility of our iDEN networks not working,” said Charles Werner, fire chief for the city of Charlottesville, Va.

Werner said his city uses Sprint Nextel's iDEN services as a “parallel network” that enables administrative interoperability between multiple jurisdictions and departments while offloading traffic from the mission-critical 800 MHz network. Werner said he believes his 800 MHz network could handle the additional traffic from a potential iDEN network stoppage but said that may not be the case with metropolitan networks already operating close to capacity.

If Sprint Nextel's iDEN network no longer can perform normally because it lacks sufficient spectrum, some subscribers may have to change commercial providers, but they probably would take such action reluctantly, Werner said.

“There's not many things that compare with the functionality of the iDEN network in terms of delay, capacity and talk groups, so it's not easy to jump off ship to go with something else,” he said.

In other rebanding news, the FCC adopted a band plan for 800 MHz licensees operating near the Canadian border, clearing the way for rebanding to proceed in those areas. However, no similar plan yet exists for the licensees in the band that operate near the Mexican border.

FLURRY OF 800 MHZ REBANDING ACTIVITY

April 15

Due date for non-border-area NPSPAC licensees to file waiver requests for extensions beyond June 26, the FCC's original date for the completion of rebanding. More than 565 of the 900 licensees filed extension waivers.

May 2

Federal appeals court upholds a 2007 FCC ruling that requires Sprint Nextel to vacate its interleaved channels by June 26.

May 6

FCC concurs with a Transition Administrator recommendation to reduce Sprint Nextel's rebanding letter of credit from $2.5 billion to $2.2 billion.

May 9

FCC adopts new 800 MHz band plan for licensees operating near the Canadian border.

June 26

Original completion date for rebanding, and the date for Sprint to vacate its interleaved channels.

April 15

Due date for non-border-area NPSPAC licensees to file waiver requests for extensions beyond June 26, the FCC's original date for the completion of rebanding. More than 565 of the 900 licensees filed extension waivers.

May 2

Federal appeals court upholds a 2007 FCC ruling that requires Sprint Nextel to vacate its interleaved channels by June 26.

May 6

FCC concurs with a Transition Administrator recommendation to reduce Sprint Nextel's rebanding letter of credit from $2.5 billion to $2.2 billion.

May 9

FCC adopts new 800 MHz band plan for licensees operating near the Canadian border.

June 26

Original completion date for rebanding, and the date for Sprint to vacate its interleaved channels.

Sources: FCC, Transition Administrator, Sprint Nextel