Nextel Spectrum Swap: Over and Out 

Kerton Wireless Review, August 2004

by Derek Kerton

Principal, The Kerton Group

FCC Counter Proposal For Nextel Spectrum Swap Solution Will Alleviate Public Safety Radio Interference

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 its 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 Problem Of Interference

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

While alleviating the interference issue, this swap would also constitute a windfall for Nextel, since it will get some high-value spectrum without having to win an open-market auction. The 1,900 spectrum is seen as ‘better’ for Nextel, since there are more vendors, more equipment choices, more available handsets, and thus lower prices than 800MHz gear. Therefore, even though Nextel would have to update its network, and distribute millions of new phones to customers, it is a still benefit to Nextel in the long run.

Opposition To A Nextel Windfall

Well, as in any hot political issue, battle lines have been drawn: those against a Nextel windfall: the Cellular Telecommunications Industry Association (CTIA, representing Nextel’s competitors), individual competitors like Verizon Wireless; and those groups who would accept even a second-best solution so long as the interference is relieved: 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 won in a public auction, those in favor of a compromise, like me, argued that a speedy resolution to the interference offers greater social benefit than a totally “fair” economic outcome. Government interference through the FCC, in this situation, 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 it is motivated to comply, and would ensure a speedy migration of Nextel out of the 800MHz band. The argument’s converse is if the FCC were to mandate a solution that does not benefit Nextel in some way, then Nextel would be likely to lobby, sue, and otherwise drag its heels (much in the same way the TV broadcasters are slowing migration to HDTV.) Ultimately, the benefits of saving public-safety lives is more important than any single carrier's windfall

FCC Proposal Reduces Windfall

A positive development in early July saw the FCC counter-propose a solution, largely similar to Nextel’s proposal, which however required Nextel to pony up additional cash as part of the package deal. This FCC solution is superior because it reduces the amount of the windfall to Nextel, while still offering a motivating package.

Opposition From A Strange Source

Further positive news occurred when the CTIA took an honorable and honest position: it said it opposed the Nextel consensus plan, and it also opposed the FCC counter-solution, but since the FCC has voted on a solution, the priority now is to implement the solution and protect lives. Bravo. But while the CTIA is backing down (while making it clear it doesn’t like the solution), other groups are stepping up to oppose the FCC solution. The so-called First Response Coalition (FRC) has stated its 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 totally unrelated to Nextel interference.

The FRC is jealous that Nextel is getting a windfall when it  is looking for one itself. 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 US treasury. Congress makes a federal budget and decides whether to fund interoperability.

Stick To One Important Issue At A Time

If taxpayer funding is important to the FRC, it 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 belongs 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 (also life-or-death) interoperability issue.

The FRC argues that this is a high-priority stuff, and though originally inclined to agree, on greater evaluation of its arguments, one becomes less certain. FRC refers 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 the heightened alert may have been politically motivated, but no matter what it is nebulous, and apparently based on 3-year old intelligence. The terror level could go up or down in any given week. If it goes down next week, will the FRC’s requests 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? It wasn’t because radios didn’t interoperate that we didn’t figure out we were under attack.

What’s In A Name?

So who is the First Responders Coalition? Well, it sure sounds like a coalition of first responder professionals, so it’s surprising to learn that its original members include the Gray Panthers, the Black Chamber of Commerce, and the American Corn Growers. Recent new members include the American Legislative Exchange Council, and the California Seniors Coalition. First Responders Coalition? Yeah, that's just whom you want to show up if you’re 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. That doesn’t change the fact that this group is in opposition to the International Association of Fire Chiefs and other ES groups on this issue.

Just Do It

So, despite what the corn farmers have concluded regarding the relative benefits of the FCC’s proposed Nextel spectrum swap, I’m eager to see this proposal get formally presented next week at the annual meeting of the Association of Public-safety Communications Officials in Montreal. Hopefully it will receive formal support from Nextel and public safety officials, and grudging acceptance from Nextel competitors. The sooner we see it implemented, the better.

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Derek Kerton is 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.