Subject: [NEXTEL-1] Wireless War Winner and Losers

From: [email-masked]
Date: Wed, 28 Jul 2004 11:56:54 -0400

Wireless War Winner and Losers
By Cynthia L. Webb
washingtonpost.com Staff Writer

Friday, July 9, 2004; 9:55 AM
The wireless wars are expected to intensify with the Federal
Communications Commission's decision yesterday to hand Nextel
Communications a valuable swath of spectrum and overhaul a number of
regulations governing competition in the wireless industry.

Of the two FCC moves, the Nextel decision got the most headlines today.
The regulatory agency agreed to let the wireless company swap its
existing spectrum holdings for another set of hotly contested spectrum
valued at $4.8 billion. The goal is to fix a problem with Nextel's
cellphone calls interfering with emergency radio communications of
police and firefighters. But, no surprise, Nextel's "rivals denounced
the decision, and the matter almost certainly will be fought in court,"
The Wall Street Journal reported. The newspaper noted that the decision
"will give Nextel -- the No. 6 U.S. wireless company measured by
subscribers -- greater flexibility to provide services such as
high-speed wireless Internet surfing, which it is challenged to do with
its current spectrum."

• The Wall Street Journal: Nextel Communications Wins Coveted Swath of
Airwaves (Subscription required)

• Text of the FCC's Nextel Decision (PDF)

According to The New York Times, the "decision in the Nextel matter,
which will help determine which companies prevail and what services they
will be able to provide, was the culmination of years of lobbying by
Nextel and its rivals. The case has been among the biggest battles over
spectrum policy in recent years, as products and consumers continue to
move into a wireless world. Spectrum licenses have become one of the
most valuable assets of the information age. Cellphones, hand-held
personal digital assistants, laptop computers and other wireless devices
need spectrum space to function," The New York Times said. TheStreet.com
wrote that the Nextel "swap proposal has been the subject of heated
debate in Washington and on Wall Street, as the FCC attempts to balance
the interest of public safety with the value of scarce wireless spectrum
central to the interests of a highly competitive industry. Based on the
reported cost to Nextel and the value of the new spectrum, Legg Mason
analyst Craig Mallitz estimated this spring that Nextel will post a gain
on the transaction well north of a billion dollars."

• The New York Times: FCC Approves Plan To Swap Nextel Licenses For
Safety Uses (Registration required)

• TheStreet.com: FCC Clears Nextel Spectrum Swap

For Verizon, the Fight Goes on

The FCC's unanimous decision "marked a defeat for Verizon Wireless Inc.,
which had lobbied the agency to auction the disputed frequencies --
worth about $4.8 billion -- instead of 'giving' them to Nextel. FCC
Chairman Michael K. Powell characterized the lobbying as 'the most
ruthless I have encountered.' The intensity underscored the competition
for space on the valuable, publicly owned radio spectrum, which is
increasingly crowded with signals from radio stations, mobile phones and
wireless computers," The Los Angeles Times reported.

• The Los Angeles Times: FCC Grants Nextel New Radio Spectrum
(Registration required)
Verizon Wireless, which "has indicated it would challenge the move in
court, urged Congress to step in," The Boston Globe reported. The Globe
picked up on this statement by Verizon spokesman Jeffrey Nelson: "Has
the FCC financed this project illegally by bypassing both the Congress
and the auction process? Is the award of billions of dollars worth of
prime spectrum to a private commercial service provider prohibited by
federal law?" CTIA-The Wireless Association is among the critics of the
decision, even though Nextel is a CTIA member. According to the Wall
Street Journal, CTIA president and chief executive Steve Largent said
giving the spectrum to Nextel "without a public auction means the U.S.
Treasury is losing billions of dollars" that "could've been used to
provide public safety with [the] money to make much-needed
improvements."

• The Boston Globe: Nextel Wins US Licenses For Airwaves Amid Protests

The FCC's decision is far from set in stone. In addition to potential
legal challenges from Verizon, the jockeying continues on Capitol Hill.
"The General Accounting Office has opened a review of the FCC's plan to
see if it violates laws governing the private sale of public resources.
Sen. Frank Lautenberg, D-N.J., requested the review. Verizon Wireless is
based in Bedminster, N.J.," The AP said. "Right now it is a game of
sharp elbows at a small table," said Nitin Shah, head of the wireless
group at market research firm RHK. "Nextel has won this round but the
game is far from over," he told CBS MarketWatch.
• CBS MarketWatch via Investor's Business Daily: FCC Approves Nextel
Wireless Spectrum Swap
The Bottom Line For Nextel

Surprisingly, an FCC decision largely characterized as a big win for
Nextel was not touted as such by the company. According to The
Washington Post, the "compromise was not immediately embraced by either
side in a 2 1/2-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."
• The Washington Post: Nextel Must Pay At Least $3.2 Billion For
Airwaves (Registration required)
Even though Nextel is gaining access to spectrum that will allow it to
expand services, the company faces a costly transition. In exchange for
the spectrum, Nextel "will give up other spectrum and pay to reconfigure
the airwaves it currently occupies to ensure public service
communications systems are free of interference. The reorganization
would have to be completed within three years. Nextel offered a muted
response to the plan, which could end up costing the company some $1.5
billion it had not expected to be charged. 'We have an obligation to
review all aspects of the decision to fully understand the implications
to Nextel's shareholders,' the company said," The Associated Press
reported.
• The Associated Press via washingtonpost.com: FCC OKs Plan To Swap
Nextel's Bandwidth (Registration required)
The Los Angeles Times had more details on what Nextel will have to pony
up for the new spectrum: "In exchange for relocating, Nextel would
abandon some of its current airwaves and pay $2.5 billion to buy new
equipment for police and firefighters. The FCC would subtract those
payments from the value of the new spectrum as well as credit the
company $1.6 billion for returning the frequencies it currently
occupies. Nextel would remain on the hook for a so-called anti-windfall
payment for the difference between those two costs and the $4.8-billion
value of the new spectrum."
Rewriting the Rules

In the long run, the other actions taken by the FCC yesterday may have a
broader impact on the state of the wireless industry. The New York Times
explained: The commission "adopted rules to make it easier to trade or
lease licenses in a secondary market, not unlike the markets that trade
commodities. The commission also eliminated a rule that had prohibited
the merger of two cellphone providers in the same market. In addition,
Verizon Wireless won a major auction held by NextWave Telecom Inc. with
the approval of the commission for one of the most valuable licenses in
New York for $930 million." FCC Chairman Powell "said on Thursday that
the decisions would sharply reduce interference on increasingly
overcrowded airwaves and make it easier for police and other safety
officers to use their equipment in emergencies. He said the changes
would bring more wireless services to rural and other underserved areas
and help spur the development of new wireless technologies."
Dow Jones said the NextWave spectrum license "covers about 20.1 million
people in New York, Westchester and Rockland counties, as well as
northern and central New Jersey. NextWave is reorganizing under Chapter
11 bankruptcy. Last month, the company said the auction of licenses in
New York and other markets would provide cash to exit bankruptcy
protection. ... Also at the auction, Dallas-based MetroPCS won licenses
for two markets in Florida with bids totaling $43.5 million."

• Dow Jones Newswires via The Wall Street Journal: Verizon Wireless To
Buy NextWave Spectrum License
A Wireless Deal Footnote

In other spectrum news, a wireless spectrum leasing company called First
Avenue Networks is paying about $105 million in stock for the assets of
Herndon, Va.-based Teligent Inc., a dot-com era telecom that flamed out,
The Washington Post reported today, picking up on an announcement from
First Avenue. "Teligent is a provider of high-speed wireless services to
businesses. But First Avenue Networks of Charlottesville [Va.] is
primarily interested in Teligent's spectrum licenses, which will allow
the company to offer more capacity in major cities to the mobile phone
carriers and Internet service providers that are its customers,
according to its president and chief executive, Dean Johnson."

• The Washington Post: First Avenue Buys Teligent For $105 Million In
Stock
Cashing in the Chips
http://www.washingtonpost.com/wp-dyn/articles/A38447-2004Jul9.html

------------------------ Yahoo! Groups Sponsor --------------------~--> 
Make a clean sweep of pop-up ads. Yahoo! Companion Toolbar.
Now with Pop-Up Blocker. Get it for free!
http://us.click.yahoo.com/L5YrjA/eSIIAA/yQLSAA/61FxlB/TM
--------------------------------------------------------------------~-> 

-- 
    "NEXTEL-1 IT'S NOT JUST NEXTEL"
  Note The New address 
Subscribe to Nextel-1: http://www.groups.yahoo.com/subscribe/NEXTEL-1

  "NEXTEL2 FOR iDEN SOFTWARE DEVELOPERS"
Subscribe to Nextel2: http://www.groups.yahoo.com/subscribe/NEXTEL2

  "WIRELESS FORUM HOMELAND SECURITY GROUP"
     The Complete Resource for Wireless Homeland Security.
Subscribe to WFHSG:  http://www.groups.yahoo.com/subscribe/WFHSG

Yahoo! Groups Links

<*> To visit your group on the web, go to:
    http://groups.yahoo.com/group/NEXTEL-1/

<*> To unsubscribe from this group, send an email to:
    [email-masked]

<*> Your use of Yahoo! Groups is subject to:
    http://docs.yahoo.com/info/terms/