FCC Changes Rebanding Order Saving Nextel $452 Million

The order, a major win for Nextel, effectively raises the value of the spectrum to more than $2 billion. The FCC also made more than 20 other changes to its original order, approved in July and released Aug. 6. The revisions passed 5-0, but Comr. Copps in a concurrence expressed concerns over how the Commission had handled valuation.

Wireless Bureau Chief John Muleta said Thurs. the order may not be the Commission’s final word. The FCC still must act on requests that it lift a freeze on the 900 MHz band. Besides, other parties made filings Wed. to meet an FCC deadline for petitions for reconsideration.

“My sense is that a number of petitions filed were sort of insurance policies,” Muleta said. “One of the things you need to be on the look out for is to see how many of the issues in the reconsiderations that were filed last night were dealt with as part of this order. We're talking about thousands of licensees. There could be a wide variety of issues that come up.” Muleta added that the order should resolve most concerns: “We think by this order we've addressed most of the issues that have been getting in the way of the process actually starting.”

Muleta stressed that the revisions in no way change Nextel’s responsibilities for paying public safety relocation costs: “Their obligation is they have to fix the problem, come what may.”

Nextel was still reviewing the order late Thurs. “Nextel is pleased the FCC acted to release on its own motion yesterday’s order in the 800 MHz proceeding,” a spokesman said. “The detailed supplemental order addresses numerous issues and Nextel will need to study it carefully so that we can fully understand the Commission’s decision. This is an important step in moving the 800 MHz proceeding forward.” The order appears to provide more clarity for Nextel as it pushes forward with its announced merger with Sprint, sources said.

“They're private actors,” Muleta said of the carrier. “They can do whatever they feel like. People can always come in and ask for more clarifications or errata. It’s never been my position to ask Nextel what they think.”

The order states that the FCC accepted the arguments Nextel made in an Aug. ex parte filing that the FCC miscalculated the value of spectrum it had to give up, by undercounting the total MHz POPs. FCC officials told us a key factor was that no parties had challenged this analysis by offering a substantial rebuttal. “We believe no commenting party has shown material errors in the Nextel analysis,” the order said.

The FCC said it decided to accept Nextel’s accounting. “We believe it is in the public interest to base our valuation on the granular data provided by Nextel, rather than on the less precise information available to us at the time of the 800 MHz” report and order, the FCC said. FCC noted that Nextel’s analysis “does not always work in its favor” and resulted in a lower valuation for some spectrum -- specifically 816-817/861-862 MHz contiguous spectrum and interleaved SMR channels.

But Copps said he was uncomfortable with the analysis that led to passage of the order. “While I believe that Nextel has demonstrated that its spectrum holdings are different than the assumption we made in the original order, I am concerned that the process that the Commission has used here to determine value has become too imprecise,” Copps said in a statement. “If we must reassess the value of Nextel’s spectrum, I would have preferred to reassess the MHz/POP multiplier that we employ in light of changes in the marketplace and transactions that occurred after we adopted our first order.”

Muleta said on a call with reporters it would have been difficult for the Commission to parse out the value of spectrum in recent deals. “What we did in our general order was take a look at comparable market transactions and effectively came up with our rationale there,” he said. “We don’t think the market has changed to such a degree that it required a recalibration.”

The FCC rejected some of Nextel’s arguments. For example, the Commission declined to adopt Nextel’s blanket request that it be allowed to operate on all vacant and vacated channels below 817 MHz/862 MHz during band reconfiguration. “We agree with those parties which argue that this request could provide Nextel an incentive to delay completing band reconfiguration for as long as possible,” the order said. “Thus we will entertain individual applications from Nextel for such channels on the same basis as applications from any other eligible entity seeking to acquire new channels prior to imposition of the freeze set out in the 800 MHz.”

Parties will have 30 days to challenge any changes the FCC has made to the 800 MHz order after it is published in The Federal Register. Parties had to challenge terms of the order not changed in the follow-up order by Dec. 22, under FCC rules.