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VZ Wireless, Nextel Play Hardball Over Spectrum License

Verizon Wireless today urged the Federal Communications Commission (FCC) to auction a valuable swath of spectrum rather than accept an $850 million offer from rival Nextel .

The Bedminster, N.J., carrier, owned by Verizon Communications and Vodafone , also cited a Department of Justice (DOJ) investigation into the push-to-talk market as an additional reason to reject Nextel's plan.

The FCC is considering the proposal as a way to alleviate interference problems on frequency used by public safety agencies. A decision is expected in the next few weeks.

In a letter to federal regulators, Molly Feldman, Verizon Wireless' vice president for business development, said an auction is the only way to obtain fair market value. "There is absolutely no justification for squandering such a valuable asset by giving it away to Nextel or anyone else through a 'private sale'" she wrote.

In a press release, Verizon Wireless was even more caustic, charging that Nextel's deal amounts to a "multi-billion-dollar give-away."

Late today, Nextel fired back with its own press statement, saying Verizon Wireless and others "have indulged in bullying tactics and spent millions of dollars lobbying to derail the [plan]. They have pursued this agenda while offering no alternative to solve public safety radio interference."

Nextel wants the FCC to relocate public safety agencies and private wireless licensees in a portion of the 800 megahertz band used by the Reston, Va., carrier. In exchange, the FCC would license a 10 megahertz block of contiguous spectrum to Nextel at 1.9 gigahertz.

The move would be completed over 42 months. The first nine months would be dedicated to frequency planning and data collection. The movement of the largest public safety systems would occur in the final stages. Nextel said its rival has misrepresented the value of the spectrum. Nextel added that the spectrum move will cost it $4.6 billion to pull off.

Verizon Wireless also said publicly that Nextel was the target of a DOJ investigation into push-to-talk competition.

"At a time when the U.S. Department of Justice is investigating Nextel, another arm of the government should not be considering giving Nextel a multi-billion-dollar spectrum," Verizon Wireless spokesman Jeffrey Nelson told internetnews.com.

A research note from Legg Mason characterized Verizon Wireless' use of the DOJ probe as "a new level of bare-knuckled lobbying," but doesn't think it will stop the process.

"Unless DOJ calls on the FCC to hold off on deciding the spectrum swap proposal, we do not believe the DOJ investigation will lead the FCC to halt its work," Legg Mason analysts said. "The question is whether it puts a cloud around Nextel that leads the FCC to be more hard-nosed than it otherwise would be."

Nextel said it is confident conducted itself appropriately, and is "responding fully to the Department of Justice's request for information."