Nextel gains from spectrum surrender

The US telecoms regulator has approved a plan to solve interference problems with public safety radio networks by swapping some...

The US telecoms regulator has approved a plan to solve interference problems with public safety radio networks by swapping some of carrier Nextel's mobile phone spectrum with another band.

Under the plan, Nextel will surrender frequencies it has used in the 800MHz band, where many police and fire radio systems operate, in return for two 5MHz blocks of spectrum in the 1900MHz band.

The deal solves increasingly severe interference problems first reported in 1999 but has drawn fire from competitors such as Verizon Wireless, who called it an unfair giveaway.

According to IDC analyst Shiv Bakhshi, the move is of great benefit to Nextel, giving it large bands of spectrum in place of the many slivers that can prove such a disadvantage in introducing new services.

"If Nextel had a service larger than the slice available, it couldn't provide that service," Bakhshi said. "Instead of Nextel being under siege, it can now build a strategy to really expand its market competitiveness," he said.

Because its new spectrum is in bigger chunks and in the 1900MHz band, which has some technical advantages over 800MHz, Nextel will incur lower costs in expanding its network.

However, Bakhshi expects Nextel's rivals to mount a legal challenge to the deal.

Verizon attacked the move as a boon to a carrier that has caused interference to public safety agencies.

"Bypassing both the US Congress and the Federal Communications Commission's own spectrum auction process, and conferring a multibillion-dollar windfall on Nextel at taxpayer expense, commissioners took the bizarre step of rewarding Nextel," the company said.

The 1900MHz band is especially valuable because carriers can use it to upgrade services without replacing base stations or phones.

The FCC has valued Nextel's new spectrum at $4.8bn (£2.6bn). It will credit Nextel with the value of the spectrum it is surrendering, and Nextel will pay the cost of moving incumbent spectrum holders to other frequencies. If those combined figures fall short of $4.8bn, Nextel will pay the difference. To ensure the moving costs are covered, Nextel has to establish third-party accounts and a letter of credit for $2.5bn.

The deal makes an extra 4.5MHz of spectrum in the 800MHz band available to emergency services, critical infrastructure and private wireless users.

The FCC said that voluntary technical changes were no longer enough to address interference problems. The regulator has adopted a technical standard for unacceptable interference and given carriers the responsibility to fix it. A transition administrator will oversee the administrative and financial aspects of the spectrum move.

Nextel gave a cautious welcome to the move, saying the FCC had released few details about Nextel's obligations.

"Once the FCC's order is released, we have an obligation to review all aspects of the decision to fully understand the implications to Nextel's shareholders," the company said.

Stephen Lawson writes for IDG News Service

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