WILMINGTON, Del.-A bankruptcy court here last week approved Nextel Communications Inc.’s
$150 million purchase of Geotek Communications Inc.’s 191 dispatch radio licenses, setting the stage for a fierce fight
in the coming months over whether a 1995 antitrust consent decree-which Nextel is accused of violating with the
apparent blessing of the Justice Department and the Federal Communications Commission-should be vacated or
enforced.
Last Wednesday, following U.S. Judge Peter Walsh’s decision late Tuesday afternoon to let the
bankruptcy sale go forward, Nextel filed suit in the U.S. District Court for the District of Columbia to repeal the 1995
decree so it can use prohibited 900 MHz specialized mobile radio frequencies purchased from Geotek.
“There
is no sound antitrust rationale for limiting Nextel’s ability to compete in the advanced wireless industry,” said
Dan Akerson, chairman and chief executive officer of Nextel.
Others, including the Justice Department and many in
the SMR industry, vehemently disagree.
Mobex Communications Inc.-a California-based SMR with 50,000
subscribers that failed an 11th-hour attempt to counter Nextel’s offer-petitioned a federal court-the same one handling
Nextel’s suit-to either enforce the decree or investigate alleged Nextel violations of it.
“Not only has Nextel
failed to divest itself of the requisite number of 900 MHz licenses in many of the top 14 markets, it has in fact acquired
additional licenses in many of those markets,” Mobex stated.
McLean, Va.-based Nextel bought 900 MHz
licenses from the FCC in 1996. The SMR giant further solidified its dominant market position by gobbling up nearly all
of the 800 MHz licenses in 1997 and buying some 220 MHz dispatch licenses in 1998.
Nextel claims spectrum
restrictions in the decree hurt its ability to compete against AT&T Corp., Sprint Corp. and other wireless carriers. But
Nextel has shunned opportunities to acquire spectrum in auctions in which AT&T, Sprint and others have participated,
choosing instead to concentrate on dispatch radio frequencies in auctions with firms much smaller than
itself.
AT&T, Sprint and other mobile telephone operators do not provide dispatch service even though the law
allows it.
Nextel’s nationwide digital network offers a combination of dispatch, mobile telephony and data
messaging.
Nextel, according to sources, took advantage of ambiguous decree language and lax Justice Department
enforcement, to get FCC approval to erect transmitters just beyond geographic limits set by the consent
decree.
There is disagreement over whether the decree bans Nextel and Motorola from providing SMR service
within a 25-mile radius of markets governed by the decree or whether the decree merely forbids both firms from
building transmitters within that area.
Nextel’s post-decree strategy got it more spectrum and kept it out of the hands
of its distant competitors.
Why the loophole-which some say enabled Nextel to violate the spirit of the decree if not
the letter of the law-was not closed and why the decree was not enforced are unclear.
The Justice Department did
not respond to a request for comment.
For sure, antitrust and telecom regulators were aware of decree
problems.
In May 1997, the FCC rejected Fleet Talk Inc.’s petition to dismiss a Motorola application to operate a
900 MHz SMR license in the New York market. Fleet Talk argued granting the license would violate the 1995 consent
decree.
The FCC, for its part, said it lacked the authority to enforce or interpret the decree and forwarded the ruling
to Justice.
Justice, according to sources, has done little since the 1995 decree was entered to resolve confusion and
complaints about violations by Nextel.
At the same time, Justice says it opposes Nextel’s acquisition of Geotek’s
assets.
Besides controversy over the bankruptcy sale itself, the pending Geotek-Nextel deal has huge implications
for the incredibly shrinking SMR industry.
Today, Nextel serves half of the nation’s 4.6 million SMR users and has
an even tighter grip on 800 MHz dispatch radio subscribers. The second closest competitor to Nextel is Southern Co.,
which is estimated to have 100,00 SMR subscribers. Mobex is third, with 50,000 SMR customers.
“We really
think if Nextel is allowed to pick up Geotek’s spectrum it gives them the lion’s share of dispatch radio
frequencies,” said Rick Rhodes, senior vice president of Chadmoore Wireless Group, a Las Vegas-based SMR
with 30,000 subscribers. “They [Nextel] are going to be in a position to tell small- and medium-size businesses to
take it or leave it, and that’s not good for competition.”
Mobex, Chadmoore, Southern, Industrial
Communications & Electronics Inc. and other SMRs submitted individual bids for Geotek licenses totaling $54 million.
Several made bulk bids but Geotek decided that-because of financing contingencies-those offers were not on par with
Nextel’s $150 million cash/stock package.
The decree, triggered by Nextel’s acquisition of Motorola SMR assets in
1994, limits the number of 900 MHz SMR channels that can be held by Nextel and/or Motorola in Boston, Chicago,
Dallas, Houston, Denver, Los Angeles, San Francisco, Miami, Orlando, New York, Philadelphia, Seattle, Detroit and
Washington, D.C.
The decree also called for Nextel to divest some 800 MHz channels in Atlanta.
If Nextel
cannot get U.S. District Judge Thomas F. Hogan to lift the antitrust decree in the next 120 days, the deal with Geotek-
as it relates to $131 million worth of Geotek’s 191 licenses-is off.
Nextel, during negotiations with top Geotek
creditors Merrill Lynch, Hughes Electronics Co. and Japanese-owned IBJ Whitehall Bank & Trust Co., wanted an
open-ended time frame to get the decree lifted but was rebuffed by creditors.
But, under the purchase asset
agreement, Nextel still could get some Geotek SMR licenses not subject to the decree for $19 million if it can secure
FCC approval.
The FCC, which is obliged to consider the competitive impact of license transfers as part of the
public interest standard review, has chastised Nextel during the past 12 months for heavy-handed marketing tactics and
reviewed allegations of Nextel’s refusal to resell its service.
There are mixed signals about what position, if any, the
FCC took on the 1995 consent decree in talks with the Justice Department in recent months, before antitrust officials
rejected Nextel’s entreaty to vacate the decree.
“I think it [the Geotek-Nextel sale] forces SMRs to be very
creative in how they approach their future,” said Steve Virostek, vice president of the Strategis Group.
Alan
Shark, president of the American Mobile Telecommunications Association, said “temperatures are running very
high and there are merits to the arguments of both sides.”
