WASHINGTON-The Justice Department has urged U.S. District Judge Thomas F. Hogan to relax a 1995 antitrust consent decree imposed on Nextel Communications Inc., saying competition likely will occur in the dispatch industry, but noting it has not developed yet.
“Although the United States cannot predict with precision when this entry will occur, its likely advent within the next couple of years justifies the proposed modifications in the decree’s duration and restrictions,” Justice said in an Aug. 26 reply to oppositions filed against a proposed decree modification negotiated between Nextel and DOJ.
That Justice was not swayed by strong opposition to the Nextel-DOJ deal did not come as a surprise to many. With Justice’s latest pronouncement, it is anticipated Hogan will approve the Nextel modified decree settlement.
Mobex Communications Inc., Chadmoore Wireless Group Inc., Radio Communications Systems and others disagree with Justice, arguing there is little evidence to support the expectation of dispatch competition from mobile phone operators and other wireless carriers that operate in bands other than 900 MHz.
Moreover, small- and medium-sized specialized mobile radio companies warn Nextel’s dominance will be exacerbated if Hogan approves the proposed decree modifications.
The proposed decree modification, struck between Nextel and DOJ in June after government antitrust lawyers objected to lifting the decree altogether, would allow Nextel to acquire additional 900 MHz SMR channels immediately and terminate the decree five years sooner than 2005.
Under the 1995 decree, Nextel cannot hold 900 MHz SMR licenses in major markets because of its ironclad grip on the 800 MHz dispatch market.
“The United States does not dispute that the relevant dispatch markets today remain concentrated,” said Justice.
Nextel, citing changed circumstances, sued the government in February to vacate the decree so it could close on the purchase of
Geotek Communications Inc.’s 191 900 MHz dispatch licenses, which it bought at a bankruptcy auction late last year for $150 million.
Justice opposed the wholesale removal of the decree, but subsequently agreed to modifying it.
Though the proposed decree modification would deny Nextel most of Geotek’s licenses, Nextel would be free to buy them after Oct. 30, 2000, when the decree would end.
Justice said terminating the decree five years ahead of time reflects its “conclusion that significant entry into dispatch markets by cellular, PCS (personal communications services) and 220 MHz providers is likely to occur in the relatively near term, and that such entry will obviate continuation of the decree’s restrictions.”
But government optimism about coming dispatch competition goes against the grain of wireless market trends. Mobile phone operators have shown next to no interest in offering SMR service. The little interest that does exist involves group-calling features, but not true dispatch.
Technical and economic reasons tend to conspire against mobile phone dispatch. Unlike Nextel-whose enhanced, or digital, SMR technology was engineered by Motorola Inc. specifically to offer dispatch, telephony and messaging-mainstream mobile phone systems are not set up for dispatch. Cellular and PCS networks cannot be easily modified to provide SMR service, at least not without substantial expense.
In addition, it is unclear what financial benefit dispatch brings to mobile phone firms whose profit models are based on long-winded conversations by users as opposed to short, choppy two-way radio communications that characterize dispatch.
Justice also rejected allegations by Mobex that Nextel violated the 1995 consent decree by holding more 900 MHz licenses than allowed by the court, saying the change from single-antenna licenses to geographic licenses releases Nextel from legal liability.
