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Verizon upset over fcc airwaves giveaway { July 9 2004 } Original Source Link: (May no longer be active)
http://www.boston.com/business/technology/articles/2004/07/09/nextel_wins_us_licenses_for_airwaves_amid_protests/http://www.boston.com/business/technology/articles/2004/07/09/nextel_wins_us_licenses_for_airwaves_amid_protests/
Nextel wins US licenses for airwaves amid protests
By Peter J. Howe, Globe Staff | July 9, 2004
Nextel Communications Inc. won a lucrative swath of US airwave licenses yesterday when federal regulators approved a plan to reduce Nextel interference with public safety radio systems, including some operated by Massachusetts state troopers and Cambridge firefighters.
But industry leader Verizon Wireless blasted what it called a "bizarre" decision that amounts to "conferring a multibillion dollar windfall on Nextel at taxpayer expense." Verizon Wireless, which has indicated it would challenge the move in court, urged Congress to step in. A trade group representing other Nextel competitors also ripped into the decision, saying Nextel should have been forced to pay the US Treasury billions more for the government-issued wireless licenses it is receiving.
For years, Nextel has been working to resolve complaints from police, fire, and public safety officials that its cellphone transmitting stations were interfering with, and in some cases drowning out, public safety radio systems. Nextel faces far more complaints than any other wireless carrier because the Reston, Va., company bought up hundreds of radio licenses during the 1990s in channels closely interlaced within public safety channels, then upgraded them for much higher-powered cellphone service.
In a 5-0 vote yesterday, the Federal Communications Commission approved a plan to separate Nextel operations from the public safety frequencies. After getting credit for returning airwave licenses to public safety agencies and covering the cost of returning thousands of police and fire radios, Nextel will pay about $1.9 billion for FCC airwave licenses. Verizon Wireless says they could be worth more than three times as much because they are much better suited for high-speed wireless data services and far more valuable than the spectrum licenses Nextel is giving back.
But FCC chairman Michael K. Powell defended the move, saying, "The cause is just. We have worked extremely hard and today take a bold action because our police and firefighters that protect our local communities deserve nothing less, particularly in these new and dangerous times."
Among agencies around the country that have complained about Nextel interference are the Massachusetts State Police, Cambridge police and fire officials who share a common radio system, town police on Cape Cod, and several other Bay State communities. Nationally, there have been no documented examples of people being injured or killed because of the Nextel interference, but hundreds of police and fire chiefs have called it a serious and growing problem.
While competitors were quick to blast the FCC move as a giveaway, Nextel issued a cautious statement, saying the FCC had revealed "few details regarding the obligations its decision would impose on Nextel. Once the commission's order is released, we have an obligation to review all aspects of the decision to fully understand the implications to Nextel's shareholders."
Wall Street investors apparently agreed that Nextel had failed to win a spectrum jackpot. In Nasdaq trading, Nextel shares slipped 88 cents, or 3.3 percent, to close at $25.52.
Industry analysts said it appeared the FCC move will also face a legal fight overturning or at least delaying any gain for Nextel. Steve Largent, president and chief executive of the Cellular Telecommunications & Internet Association, said, "Giving up such valuable spectrum without a public auction means the US Treasury is losing billions of dollars. Those funds could've been used to provide public safety with money to make much-needed improvements in the vital care it provides all of us."
Verizon Wireless said the FCC's spectrum award to Nextel may violate the Constitution, because "only Congress has the constitutional authority to spend taxpayer dollars."
"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?" the carrier asked in a statement issued by spokesman Jeffrey Nelson.
Verizon Wireless is the largest US carrier, with more than 39 million subscribers. Nextel ranks number six, with more than 13.5 million. But Nextel is fiercely targeted by bigger rivals because Nextel's big base among business and trades workers who like its walkie-talkie "DirectConnect" feature gives Nextel industry-leading revenues and subscriber retention.
Peter J. Howe can be reached at howe@globe.com.
© Copyright 2004 Globe Newspaper Company.
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