FCC EYES DRAFT GIVING NEXTEL 1.9 GHZ, BUT AT HIGHER PRICETAG
An FCC staff proposal on how to correct public safety interference at 800 MHz -- now circulating on the 8th floor - - would give Nextel some, but not all, of what it has sought on rebanding. The proposal covers 800 MHz and 1.9 GHz, but not blocks at 700 and 900 MHz that were part of the “consensus plan” backed by Nextel and others, a source familiar with the draft item said. Under the draft, Nextel would pay for incumbent retuning at 800 MHz and would pay the difference between that and the value of 10 MHz at 1.9 GHz. But exactly how high that final price tag would be wasn’t clear Wed.
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The draft proposal was released from FCC Chmn. Powell’s office and began circulating on the 8th floor Tues. (CD March 10 p15). The proceeding is widely seen as among the most complicated spectrum issues now pending before the FCC. A source said that, due to the large number of “moving parts” entailed in the plan, a number of details are still in flux and will be worked through as the item circulates. Nextel would be required under the draft to pay all the costs of public safety relocation.
The FCC draft item would require Nextel to pay the govt. the difference between relocation costs at 800 MHz and the valuation of 10 MHz at 1.9 GHz, the source said. “The value has to work out, which is to say that we are not leaving any money on the table.” Among the remaining questions is how amenable offices on the 8th floor would be to Nextel receiving a full 10 MHz at 1.9 GHz. APCO told the FCC late last year that while it still backed the consensus plan, it would also support an FCC decision that the entire cost of retuning be covered. The consensus plan would have set a capped amount of $850 million for Nextel to pay for private wireless and public safety relocation costs. It wouldn’t have the carrier pay for spectrum at 1.9 GHz because it would be part of a swap. CTIA and other critics of the plan have lambasted that as providing an unfair spectrum “windfall” for Nextel.
The valuation aspect of the 1.9 GHz spectrum that Nextel has sought has been among the most controversial aspects of the proceeding. Verizon Wireless submitted estimates to the FCC that place the value of the 10 MHz Nextel would receive at 1.9 GHz at $5.3 billion. Nextel has countered those figures, telling the Commission last week it would contribute $5.4 billion under the “consensus plan” to help solve interference, while a 1.9 GHz license is worth $3.5 billion (CD March 8 p8). Legg Mason has estimated the incremental value to Nextel of the spectrum swap would be $2.8 billion. The plan backed by Nextel, the Assn. of Public Safety Communications Officials and others would involve spectrum reconfigurations at 700, 800 and 900 MHz and 1.9 GHz. Nextel would pay for public safety and private wireless relocation expenses up to $850 million under the plan and would receive the 10 MHz at 1.9 GHz spectrum in return for bands it was giving up elsewhere.
The source familiar with the FCC’s draft item said it focuses on goals like solving public safety interference. A proposal that doesn’t include a “start-to-finish solution with the resources to do it is a non-starter,” the source said. Other policy goals include making sure all licensees are treated equitably and ensuring sound spectrum management. The draft item includes elements of various plans that have been floated before the Commission on how to mitigate public safety interference at 800 MHz, including parts of the consensus plan and aspects of the “balanced” plan backed by CTIA and the United Telecom Council. The balanced plan doesn’t advocate rebanding but focuses instead on best practices for fixing interference problems. To that end, the draft also addresses the current regime for handling interference issues, the source said.
Last month, Verizon Wireless told the FCC that if it opted for rebanding, it should focus on just 800 MHz and hold an auction for 1.9 GHz, for which Verizon Wireless said it would bid (CD Feb 27 p1). Speculation has persisted that the FCC might consider an auction voucher for Nextel to vie for 1.9 GHz if it were put up for bidding. That doesn’t appear to be part of the draft item now circulating, although several industry sources said it remained to be seen how interested other 8th floor offices might be in pursuing an auction approach. A Nextel spokesman declined comment on the draft item, saying the company hadn’t seen it.
One industry source noted the draft item appeared to be a “starting point” and several aspects could change depending on where different commissioners stand on issues such as whether 1.9 GHz should be auctioned. “Now the game begins,” the source said.
The staff-written draft allows Nextel “to save face and it gives them what they desperately need, which is the opportunity to get more spectrum,” said Precursor Group analyst Rudy Baca. “On the other hand, they are not going to get it for free, which is what they wanted.” The ability to get contiguous spectrum at 800 MHz, however, offsets the $850 million Nextel says it would pay to relocate incumbents in this band, Baca said. If the plan ultimately adopted by the Commission let Nextel pay for spectrum at 1.9 GHz without an auction, Baca said that might be ripe for a court challenge under Sec. 309(j). That provision of the Communications Act requires the FCC to use competitive bidding for mutually exclusive applications. Carriers such as Verizon Wireless already have told the FCC they would participate in a 1.9 GHz auction if the FCC held one, Baca noted.
UBS said in a research note Wed. that reports of the draft item appeared to be a positive development, “since it appears that this drawn out issue is finally coming to a head.” UBS said: “We believe that Nextel will only agree to the terms of this proposal if the valuation of the spectrum that Nextel will receive (net of reasonable valuation of the spectrum it will give up) is fair.”
Another industry source said the FCC faces a delicate balancing act between the amount of spectrum Nextel could have at 1.9 GHz and how much it would have to pay. To use 1.9 GHz, Nextel would still face costs involving relocation of Broadcast Auxiliary Service and microwave incumbents, the source said. Meanwhile, Nextel has been evaluating uses of 1.9 GHz spectrum. Nextel said last month it was conducting a trial of a wireless broadband service in Raleigh-Durham using Flarion Technology’s Flash-Orthogonal Frequency Division Multiplexing (OFDM) technology. The test system would offer some customers high-speed, IP-based broadband access through a mobile service using spectrum at 1.9 GHz leased from another company.