Nextel Spectrum Swap Nears FCC Decision
Firm's Plan Already Has Votes of 2 Commissioners
By Yuki Noguchi
Washington Post Staff Writer
Wednesday, July 7, 2004; Page E01
Two of the five members of the Federal Communications Commission have voted in favor of a controversial proposal to give Nextel Communications Inc. the right to use the cellular airwaves it wants at the price it wants to pay, according to people close to the commission and the industry.
Those people said they expect the deal to get the additional vote it needs to pass.
Reston-based Nextel's future depends on moving to less cluttered airwaves than those it now shares with police and fire emergency communications across the country. But Nextel's competitors have lobbied vigorously against the company's plan, and Verizon Wireless has laid the groundwork to challenge it in court.
FCC Chairman Michael K. Powell and Commissioner Kathleen Q. Abernathy have cast votes in favor of the Nextel proposal, according to sources. Sources at the FCC and companies involved in the dispute said they would comment publicly only after the FCC completes its vote.
The commissioners vote through a secret electronic system, so commissioners Kevin J. Martin, Michael J. Copps and Jonathan S. Adelstein could vote before the FCC's Thursday public meeting. The issue won't be taken up at the meeting if all five commissioners vote before then.
Nextel has proposed exchanging some of its existing airwaves and paying $850 million to relocate public-safety groups and other, smaller private carriers to clearer spectrum where cellular traffic won't interfere with emergency-dispatch calls.
Additionally, the company would be required to set aside about $3 billion in case moving public-safety communications costs more than $850 million. Any amount not used by public safety would be returned to Nextel.
The FCC has struggled to put a price tag on the Nextel deal. The company's rivals have attacked Nextel's plan as a giveaway of airwaves worth billions of dollars -- a concern shared by some of the commissioners, according to sources at the FCC. But charging Nextel more could strengthen Verizon's argument that the plan amounts to a private sale of airwaves that should be put up for a public auction.
In April, a three-member majority of the commission approved a plan, later abandoned, that would have required Nextel to pay an additional $1.3 billion to $1.5 billion to the U.S. Treasury as payment for the new airwave licenses.
The General Accounting Office decided yesterday to review whether the FCC's spectrum-exchange proposal violates federal laws against the private sale of public resources. The watchdog agency responded to a request last week from Sen. Frank Lautenberg (D-N.J.), according to Gary L. Kepplinger, deputy general counsel for the GAO.
Nextel spokeswoman Leigh Horner and FCC spokeswoman Lauren Patrich declined to comment yesterday.
The interference problem first arose in 1999, when police and fire stations around the country started reporting outages with their walkie-talkie radios in areas near cell phone towers. Nextel eventually acknowledged that its cell phone traffic was causing most of the problem.
The 2 1/2-year-old debate over an airwave exchange has been particularly thorny for the FCC. The commission wanted a swift resolution of interference problems for fire and police groups. At the same time, the commission has been under heavy pressure from Verizon Wireless and some prominent members of Congress not to give away valuable spectrum to Nextel at a low price.
Verizon Wireless and Nextel have spent millions of dollars lobbying the FCC and Congress to push their agendas.
Verizon Wireless contends that the frequencies Nextel would receive in the 1.9 gigahertz range would fetch well over $5 billion in an auction, arguing the FCC has typically held such competitive sales over the last decade.
Auctions can be lucrative: In 2001, bankrupt NextWave Telecom Inc.'s cellular frequencies attracted bids that were originally valued at about $16.9 billion. (The bids were overturned on technical grounds by the Supreme Court. Some of those licenses are being auctioned again tomorrow.)
Nextel says the aggregate value of the airwaves it is exchanging, combined with the money it will put up to clear various airwaves, amounts to more than $5 billion.
The cellular industry trade group, the Cellular Telecommunications & Internet Association, backs a plan to give Nextel less desirable airwaves in the 2.1 gigahertz frequency at a price of $3 billion.
But the industry's unanimity could fray. Cingular Wireless LLC, which has opposed Nextel's plan, would not join any lawsuit against an FCC decision, spokesman Clay Owen said yesterday.
© 2004 The Washington Post Company