Subject: [NEXTEL-1] Ball is in Nextel's court, but choice is no slam dunk

From: NEXTEL-1
Date: Sat, 10 Jul 2004 16:30:09 -0400

MRT's Wavelengths
July 9, 2004 

Ball is in Nextel's court, but choice is no slam dunk 

By Donny Jackson

For the last two years, Nextel Communications adamantly has stated its
desire for 1.9 GHz spectrum. Yesterday, the FCC unanimously passed an
800 MHz rebanding order that would give Nextel the premium airwaves it
wants. 

So Nextel officials publicly celebrated a hard-fought victory, right?
Wrong.

Instead of issuing a flurry of press statements and granting a series of
congratulatory press interviews, Nextel was remarkably silent yesterday.
Even analysts with usually impeccable sources inside the company failed
to get even courtesy acknowledgement of their phone calls for most of
the day.

What was missing? Information -- something Nextel noted when it finally
issued a brief statement in the afternoon to conclude a confusing day
that began with FCC officials apparently working in the wee hours of the
morning to hammer out the final points of the order.

Nextel said it would wait until it can review the details of its
obligations in the published order -- a document that may not be ready
for a month -- before it takes a position.

Although the plan calls for Nextel to get the 10 MHz in the 1.9 GHz band
it covets, the wireless carrier's blessing on the deal isn't assured.
Guzman & Co. telecom analyst Patrick Comack has said for months that the
market would not like the idea of Nextel having to pay more than $2
billion cash to get the 1.9 GHz spectrum. The FCC order calls for Nextel
to pay a minimum of $3.2 billion cash with no cap on expenses if
rebanding costs more than estimated.

Meanwhile, the $4.8 billion value of the spectrum/cash package Nextel
would have to contribute to the plan doesn't look like much of a bargain
when compared to the sparse carrier interest in NextWave's private
auction of its 1.9 GHz airwaves. In that sale, minimal bids were the
order of the day, and spectrum in some markets failed to attract even a
single bidder.

To make matters worse, Nextel is not assured of getting the 1.9 GHz
spectrum even if it agrees to the deal. The always-present threat of
litigation from rival Verizon Wireless looms, and the General Accounting
Office is investigating the issue to determine whether the FCC has the
authority to dictate where Nextel's payments under the plan would go.
Nextel said it would assume the legal risk if the FCC awarded it 1.9 GHz
spectrum, but it's unclear what would happen if the spectrum award was
blocked.

Nextel may not have much choice though. Without rebanding, it lacks the
contiguous spectrum needed to offer broadband services being provided by
competitors that are pushing relentlessly to steal Nextel's push-to-talk
market share. 

And, after doing a masterful job of making the public aware of the
interference problems at 800 MHz and working with first responders on
rebanding, Nextel faces a potential political/public-relations nightmare
if it walks away from a plan that calls for it to receive the 1.9 GHz
spectrum it wants.

One of the wild cards in the equation is the portion of the order that
requires Nextel to adhere to "extended best practices" if it doesn't opt
for the rebanding plan. These technical guidelines will set a new
standard for what is "unacceptable interference" at 800 MHz, will
establish responsibility for the interference, and will dictate that the
responsible party must pay to fix the problem, according to an official
in the FCC's wireless bureau.

If these "best practices" have teeth, Nextel could be looking at a money
pit that would make even higher-than-expected costs associated with
rebanding seem attractive.

Either way, this appears to be a great deal for public safety
communications. The "best practices" should give public safety more
leverage to get interference problems corrected in the short term. But
clearly the better alternative is the rebanding plan, which would
provide a long-term solution at no cost to public safety while providing
first responders with an additional 4.5 MHz of much-needed spectrum at
800 MHz.

Of course, "the devil's in the details" -- a truism that's especially
appropriate in this situation. And hidden in those details is the
foundation of Nextel's ultimate choice, which promises to be a turning
point for the carrier and the future of public-safety communications.

E-mail me at djackson @ primediabusiness.com. 

http://enews.primediabusiness.com/enews/mobileradiotech/mrt_bulletin/2004_07_09_mrt_bulletin_07092004/view.html

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