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Spectrum Swap Plan Scrutinized

Nextel, Verizon Review Details of FCC Order

By Yuki Noguchi
Washington Post Staff Writer
Tuesday, August 10, 2004; Page E05

The major parties reacted cautiously yesterday to the Federal Communications Commission's plan to clear interference problems between police and fire department radios and Nextel Communications Inc.'s cellular systems.

The decision, approved by the commission in July but issued in full late Friday, clears the way for Reston-based Nextel to relocate public safety groups to new, clearer airwaves. The move will cost Nextel at least $3.25 billion, but in return the company stands to gain control of new airwaves that will allow it to roll out more advanced, high-speed Internet services.

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Nextel, which wanted to pay far less than the $4.86 billion price tag the FCC put on the deal, said it is still reviewing the 256-page order to determine whether it will accept the commission's decision. Verizon Wireless, which in the past threatened to sue if the FCC granted Nextel the airwaves it wanted, is still "reading the order and assessing our options," said Jeffrey Nelson, a spokesman for the cell phone company.

"Not many people have read it yet, but the first impressions are pretty positive," said Robert M. Gurss, director of legal and government affairs for the Association of Public-Safety Communications Officials International, which lobbied for the spectrum switch.

The decision orders Nextel to pay $2.18 billion to relocate itself, public safety organizations and other wireless carriers to new airwaves. Nextel occupies airwaves sandwiched between a host of other users, including public safety groups -- a setup that blocks or botches signals to police and emergency walkie-talkies.

In addition to the moving costs, Nextel will have to pay $1.07 billion to the U.S. Treasury to offset the difference between the value of the airwaves Nextel is receiving and the company's total payments. The FCC ordered Nextel to give back some existing airwave licenses it uses to carry cell phone calls, which are valued at $1.61 billion. If the cost of relocation proves higher than expected, Nextel will deduct that amount from its payment to the Treasury.

Nextel is reviewing everything, including the technical, procedural and financial details, said Leigh Horner, spokeswoman for Nextel.

Many analysts expect Nextel to accept the FCC's order, although the cell phone company's board of directors has not yet voted to approve it.

"I would expect that [Nextel's] going to go through the technical aspects of the order with a fine-toothed comb and come back to the agency with some tweaks, but given that the order tracks much of what Nextel sought, I would expect that Nextel will end up accepting it," said Rebecca Arbogast, an analyst with Legg Mason Wood Walker, a major institutional Nextel shareholder.

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