Nextel’s wish came true

Back in August of 2004, I read the FCC’s 800 MHz rebanding order. Actually, I read it about six times because I knew what the implications would be for my clients. And when I finished, I said to myself (and others), “be careful what you wish for.”

Nextel managed to convince the FCC and others to support a reshuffling of the 800 MHz band that would create upheaval for public safety entities from sea to sea while the projected benefits to Nextel were questionable at best. As MRT Senior Writer Donny Jackson noted in this space last week–“Rebanding doesn’t look like a ‘sweetheart’ deal anymore”– many of us knew in 2004 that the deal was likely to lose value over time.

But Nextel finessed that problem by merging with Sprint and that’s what rebanding was truly all about. Nextel was built to sell. From its beginning in 1991, nearly every step taken by the company could be understood if one simply said to oneself, “what would I do if I wanted to sell this company?” Rebanding was simply an extension of that singular corporate strategy.

Consider that Nextel could have revised its system for less money and achieved non-interference. Yet, Nextel chose the more expensive route that enabled it to obtain the rights to the 1.9 GHz spectrum that created the glue for binding it to Sprint. Nextel’s reasoning was dead on. By accepting the obligation of financing the rebanding effort, Nextel would finally obtain spectrum that was vital to any merger with a major broadband carrier. It was, at last, salable.

Now Sprint Nextel is saddled with the orphan technology iDEN and the millions of customers that are exiting the network, enticed by the more feature-rich devices marketed by AT&T and Verizon. Sprint Nextel’s 800 MHz infrastructure is old, its site leases are expensive, its channel depth is weak — particularly during rebanding — and its operating costs are comparatively high. Meanwhile, the right to commence building out at 1.9 GHz moves farther into the future as Sprint Nextel is unable to deliver on the rebanding timetables set forth by the FCC.

So, what can Sprint Nextel do to spare itself additional financial bleeding? It could take a page from Nextel’s old strategy and position itself to sell all or part of its assets. I am convinced that Nextel’s original rebanding strategy included a failsafe: If Nextel found itself in financial straits at the end of the rebanding project, it would flip its 800 MHz spectrum to the adjacent cellular carrier.

A few years from now Sprint Nextel will be in even greater financial difficulty than it is today. It will be trying to salvage its shrinking telephony customer base while confronting a very expensive build-out of its 1.9 GHz and 2.5 GHz systems. It will need cash and the credit markets may or may not welcome Sprint Nextel’s entreaties. It will then be time to sell the 800 MHz block and kill off the iDEN white elephant.

When Sprint dumps the 800 MHz spectrum block, it also will dump the Nextel name. The distinctive Nextel “chirp” will become a quaint reference to times past, like the sound of a trolley bell. Old timers will remember with pride — and horror — the 800 MHz wars. And public safety entities will long distrust broadband carriers as a vestige of these turbulent times.

In 2004, I thought that Nextel should be careful what it wished for. But Nextel’s wish came true. It finally sold itself to another broadband carrier. Only time will tell whether, in the aftermath of that merger, Sprint will adopt the Nextel business culture. We will know that it did if Sprint announces its merger with AT&T.

Attorney Robert H. Schwaninger Jr. is the president of Schwaninger & Associates, a Washington, D.C., law firm that is representing numerous public safety licensees in 800 MHz rebanding negotiations. He can be reached at [email protected].