Subject: [NEXTEL-1] FCC Chairman Sides With Nextel on Disputed Airwaves

From: NEXTEL-1
Date: Thu, 24 Jun 2004 00:01:58 -0400

FCC Chairman Sides With Nextel on Disputed Airwaves 

By Yuki Noguchi
Washington Post Staff Writer
Thursday, June 24, 2004; Page E01 

Federal Communications Commission Chairman Michael K. Powell has 
decided to support a plan giving Nextel Communications Inc. rights to 
cellular frequencies that the mobile-phone company wants, according 
to sources familiar with the decision.

The move marks a crucial victory for Reston-based Nextel, which has 
been lobbying for the airwaves in the 1.9-gigahertz frequency range, 
although the FCC is still determining what the company should pay in 
return. The decision involves airwaves worth billions of dollars and 
is critical to Nextel's future. 

It's a bitter setback for Nextel's cellular-industry rivals, led by 
Verizon Wireless and Cingular Wireless, which have vowed to go to 
court to block Nextel from taking control of the disputed airwaves.

Powell's decision was described by sources at the agency and in the 
industry who declined to comment publicly until the FCC chief 
announces his stance.

Powell appears likely to win approval from the full commission: Three 
of the five commissioners backed Nextel's position in an initial vote 
in April, and sources said the commissioners are seeking unanimous 
agreement.

Nextel, which has 13.4 million subscribers, now carries phone calls 
using slivers of airwaves interspersed with frequencies used to carry 
police and fire dispatch calls. That tangled setup often causes 
public safety radios to go fuzzy or drop calls.

New airwaves would reduce the interference, while making Nextel a 
much stronger competitor in the cutthroat wireless industry because 
it could carry more cellular and Internet traffic.

"We have been focused on this problem from one perspective, how to 
fix the interference problem for public safety. And to do it in a way 
that doesn't provide an excessive windfall to any one company but 
gets the problem solved," Powell said yesterday on CNBC's "Kudlow & 
Cramer" program. "We believe we have come close to figuring out how 
to do that, and we'll get that decision out to the market soon."

To make its case before regulators and Congress, Nextel hired a dozen 
lobbyists -- including former high-ranking congressional and FCC 
staffers -- and spent the past 2 1/2 years trying to persuade the 
commission to accept its plan. It periodically sweetened the deal by 
offering to pay more money and give up more of its existing airwaves. 
In recent weeks, the company took a hard-line stance, telling the FCC 
it would mount its own legal challenge if it didn't receive the 
airwaves it wanted.

Still, the commission isn't prepared to hand Nextel a wholesale 
victory. How much Nextel will have to pay -- both to help relocate 
public-safety groups to less congested airwaves and to compensate for 
Nextel's new airwaves -- is still under negotiation, according to 
sources familiar with those discussions. A final decision appears 
likely in early or mid-July.

Representatives from Nextel and Verizon Wireless and FCC spokeswoman 
Lauren Patrich declined to comment on the issue.

Nextel has offered to pay $850 million in cash to relocate public-
safety users and other private carriers to clearer airwaves. In 
addition, it has agreed to absorb the $512 million cost of moving 
existing occupants of the airwaves it desires. This month, the 
company also agreed to give up some additional airwaves to boost the 
total value of its exchange, which the company maintains is now worth 
more than $5 billion.

Nextel's big cellular rivals launched an aggressive campaign against 
Nextel's plan. Verizon Wireless and Cingular, the nation's number one 
and two cellular phone providers, have said Nextel is trying to game 
the regulatory system to lay claim to airwaves. 

Verizon Wireless argued that Nextel should not be rewarded for 
helping to create the interference problem and said the FCC should 
auction off the airwaves as the commission has done in other cases 
for the last decade.

As an alternative, the company argued Nextel should be required to 
pay $3 billion to public safety agencies and receive less valuable 
airwaves at a higher frequency where cellular carriers don't 
currently operate. That would require Nextel to spend more for 
development of new technology.

Some prominent politicians have objected to Nextel's plan as a 
windfall for the company. House Budget Committee Chairman Jim Nussle 
(R-Iowa) plans to introduce a measure tomorrow barring the FCC from 
granting airwaves except through an auction, a committee spokesman 
confirmed.

In March, the FCC appeared close to an agreement. The commission's 
wireless bureau recommended Nextel pay $1.3 billion to $1.5 billion 
more than it proposed, and later three of the commissioners -- 
including Powell -- voted to grant Nextel the 1.9 gigahertz spectrum. 

Since then, Nextel has offered to pay to move broadcasters off of the 
airwaves it wants, and it has offered to hand over additional 
airwaves to public safety. But the company has not publicly responded 
to the FCC staff's recommendation that it pay more.

After some members of the FCC commissioners' staff and Nextel's 
rivals proposed offering alternate airwaves, the commission staff 
reopened the debate. Powell pulled his vote, effectively giving the 
regulators more time to consider their options.

Nextel's stock closed yesterday at $26.81, up 85 cents a share.

http://www.washingtonpost.com/wp-dyn/articles/A823-2004Jun23.html

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