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Another piece of the U.S. spectrum puzzle fell into place Thursday as the Federal Communications Commission approved a measure to resolve interference in emergency communications networks by swapping government wireless licenses with spectrum owned by Nextel Communications Inc. The move, which will almost certainly face legal challenges, comes in a charged business and political environment. Aside from election-year politics, and heightened concerns about public safety after Sept. 11, a number of spectrum auctions are shaping up and carriers are carefully examining their needs for the costly and crucial asset. Chairman Michael Powell called the public safety communications review “the most difficult, complex and challenging issue I have ever worked on in seven years,” and said it had spawned “some of the most ruthless lobbying I have ever encountered.” Police, fire and emergency medical workers have long encountered interference on the communications channels they use, believed to be caused by transmissions on Nextel’s adjacent spectrum. To resolve the problem, the Reston, Va.-based carrier offered to pay $850 million to switch public safety licenses with some of its spectrum. The FCC values the spectrum Nextel would get at $4.8 billion. The licenses Nextel gives up, by Commission estimates, are worth $1.6 billion, leaving a $3.2 billion gap. The government devised an “anti-windfall” provision to make sure that Nextel does not get a sweetheart deal at public expense. If the relocation costs are less than $3.2 billion, Nextel would pay the difference. If the amount goes over, Nextel is expected to pick up the balance. The company would also have to arrange a $2.5 billion letter of credit as a sort of insurance. Nextel’s response was muted. A Thursday statement said that, “the information released today by the Commission contains few details regarding the obligations its decision would impose on Nextel.” Verizon Wireless has already attacked the decision, calling it a “spectrum give-away worth billions of dollars in lost revenue to the U.S. Treasury,” and a “multi-billion dollar windfall on Nextel at taxpayer expense.” The carrier, a joint venture between Verizon Communications Inc. and Vodafone Group plc, had previously offered to bid $5 billion for the assets. Some industry sources had voiced concern that a spectrum swap could distort the market for licenses at a time when many carriers are preparing to bid on spectrum. NextWave Telecom Inc. Thursday sold several licenses for about $973 million. Just last week, Verizon Wireless bought wireless spectrum and assets from Qwest Communications International Inc. for $418 million. The FCC plans to auction 234 licenses throughout the country, many of which formerly belonged to NextWave, in January 2005. Many expect NextWave to auction more of its licenses as well. Observers point out that political pressure from both Republicans and Democrats motivated the agency’s decision to make a deal with Nextel. Larry Blosser, telecom attorney at Gray Cary in Washington, said Republican lobbyists pressed the commission to resolve the public safety communications interference problem, partly so Democrats couldn’t blame the Bush administration for hampering emergency communications. Auctioning the spectrum could take up to 18 months, Blosser noted. Verizon is expected to appeal the decision to the U.S. Court of Appeals for the D.C. Circuit. Andrew Lipman, telecom partner at Swidler Berlin Shereff Friedman in Washington, said Verizon’s first step will be to seek a stay. Litigation aside, companies still face the real-world engineering challenge of eliminating the public safety network problems. “I think not enough research has been actually done to determine who is really causing the interference,” said Roger Entner of the Yankee Group, noting that the problems may not stem from commercial wireless transmissions. Copyright �2004 TDD, LLC. All rights reserved.

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