Nextel Communications Inc. will likely have to pay more for airwaves it wants in a spectrum swap aimed at resolving interference with emergency service users, officials close to the matter said on Tuesday.
The Federal Communications Commission has developed a plan to let Nextel move operations to the 1.9 gigahertz band from three lower bands while paying $850 million to reorganize the 800 megahertz band and upgrade public safety communications, they said, speaking on the condition of anonymity.
Nextel would have to pay the overall difference between the valuation of the airwaves swapped, the costs incurred for moving its operations and to reorganize the 800 Mhz band, the officials said.
"The idea is to avoid an excessive windfall," one official said. "This is an FCC-driven plan that takes the best" of all the proposals.
At this stage, the source said that FCC staff has rejected a request by Verizon Wireless to auction the 1.9 Ghz airwaves. The rival carrier has argued that Nextel would receive a multi-billion dollar windfall without an auction being held.
Nextel has argued that its obligations to resolving the interference problem would exceed the value of the spectrum it would receive by $2 billion. Verizon Wireless has countered that the spectrum Nextel would receive is worth $5.3 billion.
The officials declined to say which valuation they would use but indicated it would likely be in a range between the two extremes. Analysts at Legg Mason, which owns Nextel stock, estimated in January that Nextel would see a net incremental value of spectrum of about $2.8 billion.
The proposal has just started circulating among the five FCC commissioners so a decision is likely several weeks away.
The sources stressed that this was the "beginning of the debate," and that it could change once the commissioners review it and spectrum value is determined.
U.S. public safety officials, some of whom have backed the Nextel plan, have pressured the Bush administration to step up efforts to resolve interference with their critical wireless communications systems.
While the plan would take time to implement, the sources said the FCC would attempt to determine when there was an interference problem but let the parties resolve it.
Representatives for the FCC commissioners as well as the FCC staff declined to comment.
A Nextel spokeswoman welcomed the move forward by the commission but had not seen the actual proposal.
"We're glad to see there's forward motion, this proposal was put forth more than two years ago and interference issue only increases day by day," said Nextel spokeswoman Audrey Schaefer.
A representative for Verizon Wireless said it was still early in the process and that its proposal didn't unfairly benefit one company.
"We are confident that our proposal accomplishes the same thing that the Nextel proposal does for public safety with the added benefit of a known pool of funding for law enforcement to improve its wireless communications," said Verizon spokesman Jeffrey Nelson.
