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Nextel Spectrum Swap: Calm Before Legal Storm

WASHINGTON -- An uneasy calm before another potentially complicated court battle over spectrum usage has settled in over the Federal Communications Commission (FCC).

At issue is the FCC's proposed plan for Nextel's cell phone interference with first responder networks. The proposal has brought threats of legal action and accusations from public safety groups that the FCC is giving away prime "beachfront" spectrum at bargain prices.

Nextel, the nation's sixth largest cellular carrier, currently occupies space in the 800-megahertz band, sharing the spectrum with police, firefighters and other public emergency agencies. The Association of Public Safety Communications Officials (APCO) has complained for the last five years that Nextel's cellular traffic interferes with public safety calls.

Under the FCC plan proposed in July and publicly released last week, Nextel would acquire, without competitive bidding, spectrum located at 1.9 gigahertz, which is currently used by public safety agencies and private wireless licensees.

In return, the Reston, Va.-based Nextel will give up the spectrum it presently owns and pay to reconfigure and reband the vacated space for public safety use.

Although the plan fits most of Nextel's goals in originally proposing the swap, the Reston, Va.-based company has not yet signed off on the deal.

"Nextel is reviewing it [the plan] with an eye to shareholders," FCC Wireless Bureau Chief John Muleta said Tuesday, adding that the agency has seen "nothing specific" from Nextel about whether it plans to accept the deal. Muleta also said Nextel may have up to 60 days to make its decision. A Nextel spokesperson said the carrier is not commenting on the status of the proposal.

The FCC determined that the overall value of the 1.9 GHz spectrum rights is $4.8 billion, less the cost of relocating incumbent users. In addition, the FCC said it would credit Nextel with the actual value of the spectrum rights it would give up.

To the extent that the combined credits total less than $4.8 billion, Nextel would make an "anti-windfall" payment to the U.S. Treasury equal to the difference. If ultimately approved, the entire process is expected to take at least three years.

Likely legal challenges, however, may take longer. Within hours of the FCC decision, Verizon Wireless called the deal a "multi-billion dollar windfall on Nextel at taxpayer expense." The company also said the FCC action was illegal, claiming the agency is obligated to auction off the spectrum to the highest bidder. Verizon Wireless said it was willing to bid $5 billion for the spectrum in question.

Tuesday, Verizon Wireless spokesperson Jeffrey Nelson took the same no comment route as Nextel.

"We're still spending time accessing the FCC order," Nelson said. "We're not leaning one way or the other. We're accessing what they [FCC] said and then we'll start looking at what our options are."

Attorneys close to the plan told internetnews.com Tuesday that Verizon Wireless will most likely wait for its next legal maneuver until Nextel makes a decision on the proposal.

The FCC also recognized the legal challenges involved in allocating the valuable spectrum without an auction and requested the U.S. Comptroller General to review the proposal for any potential violations of the law. The Comptroller General's office has not issued an opinion and was unavailable for comment Tuesday.

When the FCC approved the proposed Nextel spectrum swap, Chairman Michael Powell said it was the "most difficult, complex and challenging issue I have ever worked on in seven years at the Commission." He also noted the efforts by opponents to the deal as the "most ruthless lobbying I have ever encountered."

"In this debate, much has been made of the legal risks of this solution. We recognize the risks, however, and accept the challenge," Powell said at the time. "We have taken prudent steps to try to protect the plan, always cognizant of the fact not to give away some of the most valuable spectrum we have for a song."

Powell added, "Yes, we admit, there are risks [in the plan]. But they seem to me to pale in comparison to the risks that our first responders face each and every day. This crystal clear fact demands that the government rise above the normal battles of commercial self-interests and simply find a solution."

The FCC's plan will result in an additional 4.5 megahertz in the 800 band for public safety agencies, the equivalent of 90 additional two-way channels, including 10 channels for public safety/critical infrastructure interoperability.