Safety Or Profits: Nextel, Verizon Wireless And The FCC
By Mike Masnick, Thu Jul 08 18:00:00 GMT 2004

After a lengthy (and way too public) argument over spectrum reallocation to get Nextel customers off of spectrum that interferes with public safety radios, Verizon Wireless threatens to sue to keep the interference problem even longer.

For a long time, public safety officials have been complaining about the interference problems caused by Nextel phones on the the 800 MHz and 700 MHz band. This is a real problem, right now, where lives are at stake. Everyone agrees that Nextel needs to move away from that spectrum. The big disagreement is about where they should move -- and how much they should pay.

Nextel, with the support of various public safety groups, proposed a plan whereby it would exchange its spectrum while paying $850 million for public safety groups to move into the space vacated and another $512 million to move TV broadcasters out of the new spectrum in exchange for spectrum in the 1.9 GHz range. Nextel would also put another $3 billion in reserve, in case the moves turned out to be more costly for public safety groups. The CTIA, mostly under the direction of Verizon Wireless, immediately complained that this was an unfair windfall to Nextel, giving up valuable spectrum at below market rates. To back that up, Verizon Wireless said it would be willing to pay somewhere in the range of $5 billion for the spectrum if it were put to auction. Verizon Wireless and the CTIA then suggested that Nextel be moved to the less valuable 2.1 GHz band -- a proposal that both the public safety groups and Nextel quickly pointed out was unacceptable. The public safety groups sided with Nextel because they realize the fastest plan to get implemented, and thus, the safest bet, is in moving Nextel to the 1.9 GHz band. Verizon Wireless's stance, in response, has been an effort to make it clear they will do anything and everything, including suing the FCC commissioners personally, to slow down the process of awarding Nextel the 1.9 GHz spectrum.

After a series very public arguments and leaks about how the FCC was leaning on the various proposals, they finally announced their approval of a slightly modified plan. It still gives Nextel the 1.9 GHz spectrum they want, but has increased the price. The FCC claims the new spectrum is worth $4.8 billion, which isn't that far off from Verizon Wireless' original claim. They also value the spectrum that Nextel is returning at $1.6 billion. Nextel will be required to get a line of credit for $2.5 billion, not unlike the original plan. However, if the costs of relocation combined with the $1.6 billion in spectrum returned ends up totaling less than $4.8 billion, Nextel will be required to make up the difference in an "anti-windfall payment" which might also be called the "Verizon Wireless compromise tax."

All in all, the new plan is a somewhat complex, but reasonable compromise. It will, indeed, be more costly for Nextel, but it should avoid most of the accusations that they're somehow getting a windfall. Unfortunately, as with many compromise solutions, neither side is likely to be pleased. Nextel won't be happy with the added costs, while Verizon Wireless will be miffed that they don't get the spectrum they wanted. The CTIA has already put out a statement complaining about the decision, saying that it's taking money away from the U.S. Treasury.

Unfortunately, this very important public safety issue is getting delayed by arguments based on politics and profits. Almost everyone now expects Verizon Wireless to sue to block the deal, which will only delay the issue further. That, by itself, is a public safety hazard. The compromise plan gets rid of most of the claims Verizon could make about a "windfall" for Nextel. Every move they make to delay this transfer only puts more lives at risk. This was an issue for the FCC, Nextel and public safety groups to resolve, and Verizon Wireless is going too far and putting too many lives at risks in an effort to play politics and cause problems for a rival.