NEXTEL ASKS FCC TO RECONSIDER CREDIT GIVEN IN 800 MHZ ORDER

Nextel Communications last week confirmed reports that it has asked the FCC to alter the terms of its 800 MHz rebanding order to grant the carrier an additional credit of $452 million to $740 million for its spectrum contributions to the rebanding process.

In an FCC filing dated Sept. 21, Nextel said some of its top officials — most notably, President and CEO Tim Donahue — spoke with four of the five FCC commissioners during the previous two days to outline the wireless carrier's concerns. In the order, Nextel would be required to contribute $4.8 billion in cash and spectrum to pay for rebanding in return for contiguous spectrum blocks in the 800 MHz and 1.9 GHz bands.

Approved in July, the order gives Nextel a $1.6 billion credit for its spectrum contributions in the 700 MHz and 800 MHz blocks, but Nextel's filing indicates that the FCC undervalued its spectrum by not recognizing that its nationwide airwaves serve 286 million pops instead of the 234 million included in the agency's calculation.

Based on the FCC formula used in the order — using extrapolations from 2002 data in 11 markets — the order undervalued Nextel's spectrum contribution by $740 million, according to a Nextel spokesman. If actual data from the FCC's September spectrum records are used, Nextel should be given an additional credit of $452 million, he said.

If the FCC changes the 800 MHz order to reflect Nextel's request, Nextel would be much more likely to bid aggressively in the January auction of former NextWave Telecom licenses and in an H-block auction that could be conducted next year, according to Precursor wireless strategist Rudy Baca.

“I'm sure that Nextel and the government are looking at the overall benefits,” Baca said. “Cutting [Nextel] a break on how much they're likely going to have to pay means they'll be able to spend it on future auctions.”

But reducing the minimum amount of cash Nextel would pay for rebanding from the $3.2 billion in the order to $2.7 billion or $2.4 billion could create further delays in the 3-year-old proceeding, Baca said. Rival wireless carrier Verizon Wireless already has complained to the FCC that Nextel officials are re-negotiating terms of the order without making appropriate ex parte filings.

If the FCC does not change the spectrum-credit portion of the order, the matter is not a problem, Baca said. However, if the FCC wants to make such a change in the order, the commission may decide to reopen this portion of the proceeding in a condensed timeline instead of handling the matter administratively.

“If I were [the FCC commissioners'] general counsel, my advice to them would be to reopen it,” Baca said, discussing the possibility of altering the credit amount. “Otherwise, you're opening another door for this to be challenged in court.”

Indeed, possible challenges to the ruling include litigation from Verizon Wireless and an investigation by the U.S. Government Accountability Office, which has been asked to determine whether the FCC overstepped its jurisdiction in targeting the disbursement of funds that are part of a spectrum deal.

Of course, those issues will be moot if Nextel declines to accept the terms of the rebanding order, which is designed to mitigate interference to public-safety communications caused primarily by Nextel operations over interleaved channels. Nextel must decide whether to accept the order within 30 days after it is published in the Federal Register. However, because the FCC wants to clarify questions about the order, the item approved in July still hasn't been sent to the Federal Register.