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NEXTEL GETS 1.9 GHz SPECTRUM BUT MUST PAY BILLIONS

The FCC agreed 5-0 Thurs., after months of arguments, to adopt an 800 MHz rebanding plan, which will give Nextel much of what it wanted, including 10 MHz of spectrum in the valuable 1.9 GHz band. But Nextel may have to pay more than $3 billion, beyond the spectrum it agreed to contribute. The FCC is also requiring that Nextel sign a letter of credit for $2.5 billion to cover all public safety transition costs.

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Nextel released a statement saying it was reserving judgment on the plan. “The information released today by the Commission contains few details regarding the obligations its decision would impose on Nextel,” the carrier said. “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.”

FCC set the value of the spectrum Nextel will receive at $4.8 billion and the value of spectrum Nextel will contribute at $1.6 billion. That leaves $3.2 billion in costs Nextel may have to cover. In an agreement clearing the way for a 5- 0 vote, the order will require that Nextel pay the full assessed cost of the spectrum through a kind of windfall charge. But parts of the order could be stayed if the Comptroller Gen. holds that part of the order is illegal under federal law, a question raised last week by Verizon.

A source with an opposing carrier said Nextel’s opponents may end up less agitated by the order than expected, depending on the final details. The source said his side was pleased that Nextel will be accountable for all public safety retuning costs and that the Commission will appoint a “transition administrator” in part to guarantee that costs are fairly evaluated and paid. One FCC source said all 5 comrs. wanted windfall protections in the order. The source said that in many ways the final version was close to the original Nextel order, which Chmn. Powell voted for before pulling his vote.

Comr. Copps, who highlighted the windfall protections in his comments, told us he was comfortable with the compromise. “We did the best job, as several of us said, that we could do under the circumstances,” he said. “I think we have addressed [the windfall issue] hopefully in an effective manner.” Copps said from his standpoint “that had been a concern, from day one, throughout the proceeding, to ensure that there was not a windfall.”

Powell said the decision was one of the most difficult the FCC had reached in his Commission tenure. He told reporters he hoped Nextel would agree to the proposal. Powell said after the meeting: “When you all open up and start reading the order you'll get a better appreciation for how mind-numbingly complex it was. It was really hard. It’s hard technically. It took us a long time to really understand the interference problem… There are a lot of complexities about the use of the spectrum and what’s it valued at.”

Powell stressed that Nextel had received only part of what it asked for under the “consensus plan” it had developed with several key law enforcement groups. “In many ways we have adopted a plan along the lines that [Nextel officials] have aggressively urged for 2-1/2 years,” he said. “We have not, however, approved their plan outright. We always remain cognizant our allegiance is only to the public good, not the private good. But it is a fair balance of the issues and it’s the best solution this Commission can find.”

Comr. Abernathy commented on the complexity of the decision: “I embrace today’s decision because it puts public safety’s interests first. While I recognize that the rebanding plan is costly, complex and, in some respects, controversial, it is the only the solution that adequately addresses the needs of public safety while realigning other uses of the 800 MHz band.”

Opponents of giving Nextel 1.9 GHz spectrum slammed the order. CTIA Pres. Steve Largent said: “The FCC clearly didn’t keep its eye on the ball. Its primary responsibility in this case is to look out for Public Safety and the American public and that didn’t happen. It is unfortunate that the Commission’s plan does less to solve the Public Safety interference problem than other alternatives that were available. Among all of the FCC’s choices, this one provides Public Safety with the fewest assurances of success.”

Verizon Wireless called for congressional action to overturn the FCC decision. “The FCC has failed to provide a lawful solution to the challenge presented by Nextel’s interference with communications vital to the nation’s first responders. Now Congress must step in to fix this mess,” Verizon said. “Only Congress has the Constitutional authority to spend taxpayer dollars.”

Verizon Wireless charged that despite questions raised about the plan FCC pushed forward on giving Nextel 1.9 GHz spectrum. “Instead of seeking a lawful appropriation from Congress to finance the work of untangling public safety’s frequencies from Nextel’s interference, the FCC has pushed ahead, while serious legal questions raised by senior Congressional leaders remain unanswered,” the carrier said. “Has the FCC financed this project illegally by bypassing both the Congress and the auction process?”

MSTV called the decision a “major step” in meeting the spectrum demands for public safety by reducing interference in the 800 MHz band. MSTV also said the decision appears to incorporate key elements of the relocation and compensation plan filed previously with the FCC by MSTV, Nextel and the NAB. “Today’s decision helps insure that local stations can continue to provide coverage of live local events from remote locations,” said MSTV Pres. David Donovan.

Anti-tax group Citizens Against Government Waste (CAGW) named FCC commissioners “porkers of the month” for approving the 800 MHz rebanding order. “In a time of record budget deficits, the FCC is clueless as to how much money an auction would bring in for taxpayers,” CAGW said. “The swap is a clear example of corporate welfare -- a sweetheart deal that puts rival carriers at a disadvantage by giving Nextel a valuable public resource for practically nothing.”