WASHINGTON-Verizon Wireless last month said that if the Federal Communications Commission agrees to the Consensus Plan to solve the public-safety interference problem in the 800 MHz band, Nextel Communications Inc. will receive a $6.5 billion windfall.
“As detailed in the Kane Reece Associates Inc. study, while Nextel asserts that it will merely `swap’ nearly equivalent amounts of spectrum, the value of the spectrum it would receive is radically greater than the value it will turn in. Just as two 10-room houses may be the same size but have very different values depending on how the houses are built and where they are located, the 16 megahertz of spectrum that Nextel would receive is far more valuable than the 16 megahertz it would turn in,” said John Scott, Verizon Wireless vice president and deputy general counsel. “The spectrum that Nextel would give up is seriously impaired, while the spectrum it proposes to get is not. … Kane Reece estimates that the fair market value of the spectrum that Nextel proposes it be granted is $8.45 billion, while the impaired spectrum it would give up is worth $1.26 billion. … The Consensus Plan represents a windfall to Nextel in the amount of $6.5 billion.”
The Kane Reece study examined spectrum values as of December 2002, so the Westfield, N.J.-based firm said the value of the spectrum Nextel seeks could be worth even more.
“Verizon’s self-serving `appraisal’ is a patchwork of questionable methodologies cobbled together solely for the purpose of opposing the Consensus Plan. Verizon’s `appraisal’ ignores the realities of recorded market value for comparable spectrum. We are confident that the assumptions made in this `appraisal’ will not pass the scrutiny of objective experts familiar with the economics of spectrum valuation,” said Nextel. “This `appraisal’ was conducted for one purpose: to detract attention from the real public-safety issues in this proceeding. By artificially inflating the value of the spectrum swap proposed by the Consensus Plan, Verizon is again placing its parochial self interests above solving this pressing problem.”
The FCC has been struggling to find a way to solve the interference problem public safety is experiencing in the 800 MHz band. On the same day that Verizon made its filing, RCR Wireless News reported that FCC staff are readying a proposal that would give no more than six megahertz in the 1.9 GHz band to Nextel.
While there are a variety of different options that could be used, there are only two plans on the table.
The Consensus Plan would split the 800 MHz band into two part-one for cellularized systems and one for non-cellularized systems. Nextel would give up spectrum in the 700 MHz and 900 MHz bands and pay for retuning in exchange for spectrum in the 1.9 GHz band. Nextel would pay up to $850 million to relocate public-safety and private-wireless licensees to other portions of the 800 MHz band.
The balanced-approach proposal, sponsored by the Cellular Telecommunications & Internet Association and the United Telecom Council, calls for timely resolution of interference at the expense of the interferer, coupled with technical rules, notification and coordination procedures to prevent new interference.
