FCC OKs spectrum swap by Nextel

SAN FRANCISCO - The U.S. Federal Communications Commission (FCC) on Thursday unanimously approved a plan to solve interference with public safety radio networks by moving some of Nextel Communications Inc.'s mobile phone spectrum to another band.

Under the plan, Nextel will give up frequencies it has used in the 800MHz band, where many police and fire radio systems operate, and the FCC will modify the carrier's licenses to grant it the right to two 5MHz blocks of spectrum in the 1900MHz band, the agency said in a statement.

The deal is intended to solve interference problems that were first reported in 1999 and are getting worse, the FCC said, but it has drawn fire from competitors such as Verizon Wireless Inc. who called it an unfair giveaway. The move is likely to be of great benefit to Nextel, according to IDC analyst Shiv Bakhshi. The company will be able to move from many slivers of spectrum, which gave it a disadvantage in introducing new services, to large bands.

"If they had a service which was larger than the slice available, they couldn't provide that service," Bakhshi said.

"Instead of Nextel being under siege ... now Nextel can build a strategy to really expand its market competitiveness. ... It's a great thing for them," he said. However, he expects the deal to face a legal challenge from competitors.

Because its new spectrum is in wider chunks and is in the 1900MHz band, which offers some technical advantages over 800MHz, Nextel will face lower costs to build out its network, Bakhshi said.

In a press release Thursday, Verizon attacked the move as a boon to a carrier that has caused interference to public safety agencies.

"Bypassing both Congress and the FCC's own spectrum auction process, and conferring a multibillion-dollar windfall on Nextel at taxpayer expense, Commissioners took the bizarre step of rewarding Nextel," the release said. The 1900MHz band is especially valuable because carriers now operating in that band could use the frequencies to upgrade their services without replacing base stations or phones, Verizon has said.

The FCC determined that Nextel's new spectrum is worth $4.8 billion, according to the agency's statement. It will credit Nextel the value of the spectrum the carrier is giving up, and Nextel will pay the cost of moving incumbent spectrum holders to other frequencies. If those figures fall short of $4.8 billion, Nextel will pay an "anti-windfall payment," the agency said. To ensure the moving costs are covered, Nextel has to establish escrow accounts and a letter of credit for $2.5 billion.

The move will make 4.5MHz of spectrum in the 800MHz band newly available to public safety, critical infrastructure and private wireless users, according to the FCC statement.

Public safety agencies and industry so far have addressed the interference problems through voluntary technical changes, called "Best Practices," but those steps are no longer enough, the FCC said. As part of the deal announced Thursday, to address interference before all the spectrum moves have been completed, the agency adopted "Enhanced Best Practices." The FCC adopted a technical standard for unacceptable interference and gave carriers the responsibility to fix it. A "Transition Administrator" will oversee the administrative and financial aspects of the spectrum move, the statement said.

Nextel, in Reston, Virginia, cautiously welcomed the move, saying the FCC has released few details about Nextel's obligations.

"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," the company said in a statement.

REFERENCES:
FCC to rule on billion-dollar spectrum giveaway, InfoWorld (US online), Apr. 9, 2004