Nextel Lobbies For Bigger Share Of Cellular Space
By Jeffrey H. Birnbaum and Yuki Noguchi
Washington Post Staff Writers
Monday, May 24, 2004; Page A01
A bid by Nextel Communications Inc. to persuade regulators to grant it a broader slice of the airwaves is becoming one of Washington's most intense lobbying clashes, with the company's future and the shape of the cellular phone industry in the balance.
Reston-based Nextel, the nation's sixth-largest cellular phone company, has offered to relinquish part of the airwaves it uses for its walkie-talkie-like wireless service to remedy interference with emergency calls placed by police officers and firefighters. It would pay $850 million to move the public safety groups to less-crowded airwaves and gain a new slice of spectrum.
Nextel calls the transaction a fair trade. Its opponents complain that Nextel would be underpaying by more than $1 billion and tipping the industry's competitive balance in its favor. The Federal Communications Commission, which oversees the cell-phone industry, appeared receptive to Nextel's plan. In April, three of the five commissioners voted in favor of the proposal. But last week Nextel was set back when FCC Chairman Michael K. Powell rescinded his vote, effectively buying time for negotiations on a compromise that Nextel's rivals support, sources close to the commission confirmed. The FCC could still decide the issue by the end of the month.
The battle over the airwaves comes at a critical time for the industry. After consolidation, the nation's remaining wireless phone companies have been slashing prices to win customers for the long term. Nextel, the smallest national wireless operator, is the only one that does not have a large, deep-pocketed phone company for a parent.
In the early days, the FCC gave away the public airwaves for free. No longer. The popularity of cell phones turned airwaves into a scarce and therefore extremely valuable resource. Lawmakers and regulators recognized a potential for government revenue and have auctioned them off for billions of dollars.
Nextel, a scrappy latecomer, built its business by buying up a national hodge-podge of walkie-talkie businesses. It then adopted a technology developed by Motorola Inc. to carry cellular phone service over the airwaves it had bought. If Nextel's plan is adopted, its cell phones could operate much more like those of other companies. Nextel would be able to compete -- for the first time -- on an equal footing with the rest of the industry and would be able to hold onto high-paying business customers its rivals covet.
Just a year ago, Nextel was ill-prepared for a major regulatory showdown. The $10.8 billion-a-year company, headquartered on the doorstep of the nation's capital, did not have the usual complement of lobbyists pressing its interests among Washington's decision makers.
Now, after a flurry of K Street hiring, it finally has the firepower to fight its more established rivals in the cellular telephone business.
Nextel's plan, devised by senior company officials 2 1/2 years ago, asks the FCC to give it the right to use valuable public airwaves to expand its data and voice services. Nextel would give up its existing rights to some airwaves and pay to help fix the cell-phone interference problems.
The plan sparked protests from its much larger competitors: Verizon Wireless, Cingular Wireless and others. The opponents say Nextel is trying to grab a coveted resource on the cheap. And their complaints have strong financial backing. Verizon and Cingular, along with their regional parent companies, spent more than $23.5 million on lobbying last year, according to disclosure statements.
Nextel spent only about $1.1 million in 2003, which is a sharp increase from the relatively minuscule $280,000 dispensed the year before.
"We didn't think a heavy presence in Washington was necessary," said Leigh Horner, a spokeswoman for Nextel. "We were just focused on our business and on our customers."
Neither side was ever shy about bringing in big names to push its cause. Nextel has worked closely with police, firefighters and emergency rescue organizations on the issue of phone-call interference. For a while, it retained former New York City mayor Rudolph W. Giuliani and his consulting firm to promote its efforts to trade the offending airwaves for better ones. Giuliani, who has not worked for Nextel for a year, was paid in stock options that now are potentially worth millions. Also, the powerful Senate Appropriations Committee Chairman, Ted Stevens (R-Alaska), wrote the FCC a letter supportive of Nextel's proposal.
Nextel's rivals also enlisted a range of advocates. From New York, Democratic Sen. Charles E. Schumer and Attorney General Eliot L. Spitzer have written to the FCC saying that Nextel would hugely underpay for its new airwaves under its proposal.
© 2004 The Washington Post Company
Nextel, the nation's sixth-largest cell phone company, would pay $850 million to put public safety groups on less-crowded airwaves to gain more spectrum.
(Daniel Acker -- Bloomberg News)