European Hotspot Access: Priced out of Reach 

February 2004

by Derek Kerton

Principal, The Kerton Group

On my daily postings at Techdirt Wireless weblog, I have occasionally discussed the hot political issue (at least hot in wireless terms) of the “Nextel Spectrum Swap”. This is an exchange of spectrum whereby Nextel would offer their channels in the 700MHz and 800MHz bands plus some cash in trade for some spectrum at 1,900MHz, where most North American carriers operate cellular/PCS services.

The reason for this swap is that Nextel cell phone towers are known to interfere with public safety (fire, police, etc.) Emergency Service (ES) vehicle-based and handheld radios in the 800MHz range, particularly when those radios are used near a Nextel tower.

While alleviating the interference issue, this swap would also constitute a windfall for Nextel, since they get some high-value spectrum without having to bid for it at a free-market auction. The 1,900 spectrum is seen as ‘better’ for Nextel, since there are more vendors, more equipment available, more phone handset choices, and thus lower prices to run the network. So even though Nextel would have to update their network, and send their customers millions of new phones, it is a benefit to them in the long run.

Well, as in any hot political issue, the battle lines were drawn between groups who were against the Nextel windfall: the Cellular Telecommunications Industry Association (CTIA, representing Nextel’s competitors), individual competitors like Verizon Wireless; and groups who were for a solution even if it had a Nextel windfall: the International Association of Fire Chiefs, the FCC, and other public safety associations.

While those against a compromise solution focused on the unfairness of Nextel getting premium spectrum without that spectrum being valued by a public auction, those in favor of a compromise, like me, argued that a speedy resolution to the interference issue was of greater social benefit than a totally “fair” economic outcome. Government interference through the FCC, for once, is absolutely required, but government intervention never has a neutral or fair outcome. At least in this case, a windfall deal for Nextel would mean Nextel is motivated to comply, and would ensure a speedy migration of Nextel away from the 800MHz band. The argument’s converse is that if a solution is mandated that does not benefit Nextel in some way, then Nextel would be likely to lobby, sue, and otherwise drag their heels (much in the same way the TV broadcasters are dragging to HDTV.) Ultimately, the benefits of saving public-safety lives is more important than any single carrier's windfall

The best news is that in early July, the FCC counter-proposed a solution, largely similar to Nextel’s, which however required Nextel to pony up additional cash as part of the package deal. In my opinion, this FCC solution is superior because it reduced the amount of the windfall to Nextel, while still offering them a motivating package.

The recent development this week, which I’m pleased to see, http://www.rcrnews.com/cgi-bin/news.pl?newsId=19115 is that the CTIA is behaving in a most honorable fashion: they say they opposed the Nextel consensus plan, they also oppose the FCC counter-solution, but that the FCC has voted on a solution, and the priority now is to implement the solution and protect lives. Bravo. But while the CTIA is backing down (while making it clear they don't like the solution), other groups are stepping up to oppose the FCC solution. The so-called http://firstresponsecoalition.org/hill_letter.shtml First Response Coalition (FRC) has stated their vehement opposition to the FCC plan.

In opposing the FCC solution, the FRC is mixing apples and oranges. The only issue between Nextel and ES is interference, but the FRC is up in arms about interoperability. The FRC wants radios from different ES agencies (police, fire, ambulance, secret service, etc.) to be able to interoperate, so these agencies can coordinate better in an emergency. A good idea, perhaps, but unrelated to interference.

The real issue is that the FRC is jealous that Nextel is getting a windfall when they are looking for one themselves. The FRC believes the government should spend tax money in order to upgrade ES radios so they can interoperate, but doesn’t want to go the usual route for federal funding. The FRC thinks that if the frequencies swapped to Nextel were put up for public auction, then those funds could be diverted to fund new radios for ES. But spectrum auction revenues go to the treasury. It is congress that decides a federal budget and whether to fund interoperability.

If this issue is truly important to the FRC, they should lobby congress - they've got trillions in the US budget! Don't waste your time looking for a few penny-ante billion from the FCC, which actually belong to the treasury anyway. And, more importantly, don't complicate the importance of solving the life-or-death interference issue buy mixing it with the interoperability issue.

The FRC argues that this is a high-priority stuff, and though originally inclined to agree, on greater evaluation of their arguments, I’m less certain. They refer to the fact that Tom Ridge has recently heightened the terror alert this week as a call to action. Hmmm, the Dems and a handful of foreign governments have observed that that heightened alert may have been politically motivated, but no matter what it is nebulous, and apparently based on 3-year old intelligence. Either way, the terror level can go up or down in any given week. If it goes down next week, will the FRC argument change?

 The FRC also cites the report of the 9/11 Commission, which called for increased communications among emergency services, as an argument for funding radio interoperability. The commission said: "The inability to communicate was a critical element at the World Trade Center, Pentagon, and Somerset County, Pennsylvania, crash sites, where multiple agencies and multiple jurisdictions responded. The occurrence of this problem at three very different sites is strong evidence that compatible and adequate communications among public safety organizations at the local, state, and federal levels remains an important problem." Okay, point taken, but wasn’t the real problem the systemic and political agency boundaries that prevented the rapid flow of intelligence among agencies? Those weren’t technical limitations.

So who is the First Responders Coalition? Well, it sure sounds like a coalition of first responder professionals, so I was surprised to learn that it's original members include the Gray Panthers, the Black Chamber of Commerce, and the American Corn Growers. They've since been joined by the American Legislative Exchange Council and the California Seniors Coalition. First Responders Coalition? Yeah, that's just who I want to show up if I'm in an accident: senior citizens with corn on the cob. To be fair, the association includes some individual first responders and the National Black Police Officers.

Derek Kerton a Principal at The Kerton Group, a firm specializing in marketing and business strategy in the wireless telecommunications industry.  He can be reached at Derek @ kerton.com.