Verizon Wireless's $5B Spectrum Bid Seeks To Block Nextel

The wireless spectrum war is intensifying. Nextel Communications and Verizon Wireless are battling over the 1.9-GHz band, while many public-safety organizations continue to back a proposal that would reshuffle most of Nextel's traffic into the upper end of the 800-MHz spectrum.

With the Federal Communications Commission considering a vote at an Open Commission Meeting next Thursday, Verizon Wireless has complicated an already complicated situation by stating it will start off an auction for the spectrum with a $5 billion bid. The current proposal has Nextel picking up 10 MHz of 1.9-GHz spectrum without going through an auction.

In a letter to the FCC, Verizon's vice president of Business Development, stated: "The fact the Nextel has demanded this spectrum as its price for promising to rectify interference to public safety operations does not justify the Commission's acquiescence in Nextel's demand. The only proper action for the 1.9-GHz spectrum is to auction it to the highest bidder."

The issue revolves around growing interference problems plaguing the country's public-safely radio channels. Nextel operates primarily in the 800-MHz band, along with most of the nation's public-safety organizations-mainly police and fire departments--and Nextel has been identified as creating the most interference.

"The core problem is Nextel, and to some extent some others," said Bob Gurss of the Association of Public Safety Communications Officials, in an interview. "Nextel's architecture intermixes with public safety [radios]."Gurss, who is director of legal and government affairs at the association, said the association supports the so-called "Consensus Plan" formulated by many public-safety organizations. The plan would move much of Nextel's operations to the upper part of the 800-MHz band "in contiguous spectrum and not intermixed with public-safety channels," he said. Nextel has offered to pay costs incurred by public-safety organizations that would need to retune or replace public-safety radios.

Nextel, whose spokespeople were not available for comment, has offered $850 million toward that end. Earlier this week, the Washington Post reported that a three-member majority of the FCC has decided to approve the Consensus Plan, but to compel Nextel to pay an additional $1.3 to $1.5 billion.

By offering to start an auction off at $5 billion, Verizon has opened up another channel of controversy. Wireless auctions can be expensive. Earlier this year, Verizon Wireless's partner, Vodafone Group, bid up the price for AT&T Wireless, in the process causing competitor Cingular Wireless to spend about $10 billion more than its initial bid to acquire AT&T Wireless. Verizon Communications owns the majority of Verizon Wireless, and Vodafone is a substantial minority owner.

Nextel and Verizon Wireless have been engaged in bitter litigation on other wireless issues in recent months. In past complaints about Verizon Wireless's "misrepresentations" about the 1.9-GHz band, Nextel has said: "Contrary to Verizon Wireless's flawed assessment that the 1.9-GHz spectrum is valued at $7.2 billion, the highest bid ever for 10 MHz of spectrum at 1.9 GHz was $3.3 billion in 1999, which was never paid. The highest amount ever received by the FCC for 10 MHz of spectrum at 1.9 GHz was in fact $1 billion.