Nextel sweetens Consensus Plan
Nextel Communications’ recent enhancement to the Consensus Plan, which calls for the carrier to assume the legal risks associated with expected litigation regarding 1.9 GHz replacement spectrum, may allow the Federal Communications Commission to issue the much-anticipated order by its July meeting, according to analysts.
For months, the FCC has been prepared to approve an order that would reband wireless operators using 800 MHz frequencies in a manner designed to alleviate Nextel’s interference with public-safety communications. However, the issue of replacement spectrum has been a point of contention. Nextel wants 10 MHz of 1.9 GHz spectrum — an award that Verizon Wireless said it will challenge in court — and has indicated it will refuse any deal involving the 2.1 GHz spectrum its wireless competitors have pledged not to litigate.
With the FCC fearful that the long-delayed rebanding would be postponed further if tied up in court, many reports in May indicated commissioners were leaning toward a plan that would award 2.1 GHz to Nextel. However, Nextel’s June 9 filing with the FCC stating it would reband at 800 MHz regardless of the legal challenges involving 1.9 GHz spectrum have shifted momentum back to the Consensus Plan, according to Precursor wireless strategist Rudy Baca. Indeed, several published reports in late June indicated FCC Chairman Michael Powell had decided to grant Nextel the 1.9 GHz airwaves as replacement spectrum.
Baca said he believes Nextel will get the 1.9 GHz airwaves but will have to pay $3 billion cash, which is significantly more than the $850 million Nextel had volunteered to spend to fund rebanding.
“Nextel will get 1.9 [GHz spectrum], but it’ll cost them,” Baca said. “I think the FCC’s attitude is, ‘We’ll give them 1.9 and then let them lose in court. We’ll figure out where to go from there.’”
Patrick Comack, telecom analyst at Guzman and Co., said he believes Nextel will get the 1.9 GHz airwaves it desires for much less money than Baca predicts. By including an additional 2 MHz of 800 MHz spectrum for public safety in its latest package, Nextel might not have to pay more than its $850 million commitment. That would be good news for Nextel, because any cash outlay of more than $2 billion would be “disastrous” to the wireless carrier in the eyes of Wall Street, Comack said.
“Nextel is quite wary of a market concern that goes with writing a large check,” Comack said. “That is what people are afraid of.”
Both Nextel enhancements were welcomed by public-safety officials. Bob Gurss, director of legal and public affairs for the Association of Public-Safety Communications Officials International, said Nextel’s willingness to assume the legal risk is an important detail, because it would assure that rebanding would occur except in the unlikely event that the order was stayed.
Harlin McEwen, communication and technology committee chairman for the International Association of Chiefs of Police, said Nextel had made the legal-risk commitment verbally before but was glad to have the assurance in writing. In addition, the 2 MHz of spectrum for public safety in the 800 MHz band that would provide 40 new channels would be very beneficial, he said.
“The added spectrum is very good for us,” McEwen said. “We desperately needed to add spectrum, especially in the major markets.”
Verizon Wireless continued its criticism of the Consensus Plan, even with Nextel’s alterations.
In filings with the FCC, Verizon Wireless said Nextel significantly overvalued its proposed spectral contributions and actually reduced the value of its outlay by removing 4 MHz of 900 MHz spectrum from the package.
“[Nextel’s latest proposal] looked lovely,” Verizon Wireless spokesman Jeffrey Nelson said. “But when we got under it, it barked back — like a dog. This doesn’t do anything to move the process forward. It makes it appear that Nextel is sweetening the pot when, actually, it is not.”
However, Baca said pressure continues to build on the FCC to resolve the issue, because the Bush Administration wants public-safety officials’ support during a critical juncture in the president’s re-election campaign. In fact, published reports indicated that the FCC could issue its order within days of the press deadline of this publication.
“What I’m hearing is they want to get this done before the political conventions,” Baca said.
In addition to the question about Nextel’s cash contribution, another potential hangup emerged on July 28. William Barr, general counsel for Verizon Communications — the parent company of Verizon Wireless — wrote a letter stating that the FCC lacked the authority to execute the rebanding plan and that commissioners risk criminal prosecution under three different laws if they approve such an order.
“Broadly, these laws 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.”
Charles Werner, deputy fire chief in Charlottesville, Va., said he was not surprised that Verizon would pursue a tactic such as the Barr letter. If a civilian or public-safety officer is injured or killed as a result of any delay caused by the letter, “let the blame be clearly and directly pointed to Verizon,” he said.
“Verizon, through their repeated actions with at least 10 changes in position on this serious problem, has repeatedly shown total disregard for public-safety responders and — ultimately — the citizens that are served,” Werner said.
Baca said he believes Barr’s criminal arguments are incorrect and that no government prosecutor would pursue charges in a case with so many political implications. For Verizon, the letter is an example of “how not to lobby” regulators and could damage the carrier’s future relationship with the FCC, he said.
In the near future, Baca said he does not believe the Barr letter will cause the FCC to delay its 800 MHz decision further, predicting approval of the order during the commission’s 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.
June swoon
800 MHz debate heats up with weather
June 4: Nextel Communications alters the “Consensus Plan” by agreeing to contribute an additional 2 MHz of spectrum at 800 MHz for public safety.
June 10: Nextel tells the FCC it will proceed with rebanding regardless of litigation regarding 1.9 GHz spectrum.
June 16: Verizon Wireless argues that Nextel has significantly overvalued its proposed spectrum contributions.
June 24: FCC Chairman Michael Powell (right) reportedly decides to award Nextel 1.9 GHz spectrum.
June 25: The Cellular Telecommunications and Internet Association writes a letter stating that reserve prices set for the auction of 1.9 GHz spectrum formerly owned by NextWave Telecom place a value on the spectrum Nextel wants in the Consensus Plan at $10.7 billion.
June 28: Verizon Wireless submits a filing that claims FCC commissioners would violate criminal laws should they award replacement spectrum without an auction.
Source: FCC filings
