ANOTHER WAITING GAME BEGINS FOR NEXTEL SPECTRUM SWAP

It took the FCC two years to approve a rebanding design that mitigates interference with public safety communications operating at 800 MHz. But several more months likely will pass before the plan can be implemented in the face of multiple economic, legal and political hurdles.

Last week, the commission unanimously approved an order that calls for Nextel Communications to receive a 10 MHz swath of nationwide spectrum at 1.9 GHz valued at $4.8 billion. In return, the carrier would donate spectrum at 700 MHz and 800 MHz valued at an estimated $1.6 billion and pay at least $3.2 billion cash.

Under the plan, most of the cash commitment would be used to fund the relocation costs of licensees in the 800 MHz and 1.9 GHz bands affected by the plan. If rebanding requires more than $3.2 billion, Nextel assumes those costs. If rebanding costs less than $3.2 billion, Nextel would pay the difference to the U.S. Treasury.

During the FCC's meeting, FCC Chairman Michael Powell called the proceeding the most difficult, complex and challenging issue he has ever worked on. “I am confident Nextel will make the best choice for its shareholders, as it must, but we urge them to make the best choice for the good of the American people, as it should,” Powell said.

As of last week, Nextel had not commented on its support for the plan. The company indicated it would not take a position until its responsibilities are detailed in the final order, which some analysts believe will take more than a month to finalize.

“Once the commission's order is released, we have an obligation to review all aspects of the decision to fully understand the implications to Nextel's shareholders,” Nextel said in a statement.

It could be an extremely difficult choice. The cash obligations are about 50% more than most analysts predicted, and the lack of a cap on rebanding costs likely will be more troubling to shareholders. But walking away from the deal would leave Nextel with no contiguous spectrum to offer advanced services and a potential public-relations nightmare after trumpeting the interference problems its operations create for public safety entities.

Even if Nextel agrees to the plan, there's no guarantee it will receive the 1.9 GHz band it covets. At the request of Congress, the U.S. Controller General will investigate the matter to determine whether the order violates laws prohibiting anyone other than Congress from appropriating federal funds. The FCC reserved the right to stay portions of its order based on the Controller General's findings in a decision Precursor wireless strategist Rudy Baca characterized as “acknowledging reality.”

Additionally, there is the threat of litigation from other licensees. Nextel forged a tentative agreement with one key 800 MHz band operator, Southern Communications Services, just before the item was put on the FCC's agenda.

But the most likely litigant remains Verizon Wireless, which has indicated it would challenge any award of 1.9 GHz spectrum without an auction. However, Verizon Wireless spokesman Jeffrey Nelson said the carrier would wait until the final order is published before it made a litigation decision.

Public-safety officials hailed the order, which would provide significantly more funding for rebanding than the so-called “Consensus Plan” favored by Nextel. Because the order resolves a key problem for public safety, Powell said he believe the plan is appropriate, despite the many potential pitfalls.

“Yes, we admit there are risks in the action we take today,” Powell said. “But they seem to me to pale in comparison to the risks that our first responders face each and every day.

“An enormous amount of time and commitment has been spent on valuations; the nickel and diming of what things are worth. But you cannot put a dollar value on the life of the men and women who wear the shield.”