The Federal Communications Commission ordered Nextel Communications Inc. to pay at least $3.2 billion as part of a complex compromise that gives the wireless phone company a slice of valuable airwaves while freeing up crowded frequencies for public safety agencies.
The plan, approved unanimously by the FCC yesterday, requires Reston-based Nextel to give up airwaves it currently uses in exchange for other, more valuable spectrum.
In addition, Nextel must cover the cost of moving communications systems for thousands of police, fire and other emergency workers to new frequencies.
The compromise was not immediately embraced by either side in a 21/2-year dispute over the airwaves. Nextel, which would have to pay $1.5 billion to $1.7 billion more than it had proposed for the airwaves exchange, said only that it would have to study the details.
Rival Verizon Wireless, which led opposition to the deal, said in a written statement that the outcome was "a spectrum giveaway worth billions of dollars in lost revenues to the U.S. Treasury."
Nextel has estimated the cost of moving public safety operations and a small group of private users at $850 million. Verizon Wireless and other rivals say the cost will be much higher. As part of the deal, the FCC is also requiring the company to post a $2.5 billion letter of credit that can be tapped to pay costs of the frequency swap.
In a compromise worked out among commissioners late Wednesday night, Nextel will be required to make what the FCC called an "anti-windfall" payment to the federal Treasury to cover the difference if the total cost of moving itself and others to new frequencies is less than the estimated $4.8 billion value of the spectrum it would get in the deal.
Nextel would get credit for giving up its current airwaves, which the FCC estimates to be worth $1.6 billion, effectively leaving Nextel with a bill for at least $3.2 billion.
Public safety officials from across the country say they need the new frequencies because the ones used by Nextel customers often interfere with their emergency communications.
The plan put forward yesterday comes after a heated lobbying battle waged to sway public opinion and win allies at the FCC and in Congress.
Nextel's rivals in the cell phone industry argued that the mobile phone company was trying to take advantage of taxpayers by swapping the wireless licenses it now uses for more valuable spectrum.
FCC Chairman Michael K. Powell said yesterday that the intense lobbying has focused on financial considerations for large telecommunications companies, but that the stakes for public safety officials are much higher.
"An enormous amount of time and commitment has been spent on valuations, the nickel-and-diming of what things are worth," Powell said. "But you cannot put a dollar value on the life of the men and women who wear the shield."
Despite the FCC's last-minute revision, Verizon Wireless argued that Nextel should be required to buy the airwaves at an auction, as other wireless carriers have done for the past decade.
Although Verizon has threatened a lawsuit, its statement yesterday urged Congress to intervene to block the spectrum deal.
Nextel said it wanted to see the FCC's formal decision, which may not be published for several weeks, before it takes a position on the plan.
"Nextel has been urging the Commission to do this for nearly three years," the company said in a statement. "However, the information released today by the Commission contains few details regarding the obligations its decision would impose on Nextel."
Shares of Nextel fell a little more than 3 percent yesterday, 88 cents, to close at $25.52.
Jessica Zufolo, a telecommunications analyst with Medley Global Advisors, said yesterday that Nextel is likely to accept a deal that has received unanimous support from the agency. "I think that Nextel was fully aware that this was going to cost more for them," Zufolo said, adding the FCC's plan could be derailed or delayed indefinitely if companies such as Verizon Wireless decide to challenge it in court.
The deal also could run into trouble in Congress, where some legislators have said they are concerned about Nextel getting the frequencies without an auction.
The General Accounting Office launched a review of the FCC's plans earlier this week at the request of Sen. Frank Lautenberg (D-N. J.). House Judiciary Chairman F. James Sensenbrenner Jr. (R-Wis.) wrote to Powell this week, asking him to delay any action on the matter until the GAO files its report.
With the new airwaves, Nextel would be able to expand its current wireless phone business and offer new data services. Nextel is the only major wireless carrier that is not affiliated with a larger telecommunications company. It also owns the rights to a much smaller slice of airwaves than rivals such as Verizon Wireless, AT&T Wireless Services Inc. or Cingular Wireless.
The FCC plan, if implemented, would have no direct impact on Nextel subscribers, said company spokesman Timothy O'Regan. Any network upgrades or other technical alterations likely would not be noticed by subscribers, O'Regan said.