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FCC Boosts Nextel Spectrum Value - Broadcasting & Cable

FCC Boosts Nextel Spectrum Value

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By sweetening incentives, the FCC Wednesday aimed to entice Nextel into carrying out a spectrum swap that will help TV stations and emergency departments around the country.

The FCC increased the estimated value of spectrum Nextel is relinquishing to emergency departments by $452 million, for a total of $2.1 billion. That valuation is important to Nextel because it will decrease the potential payment it must make to the government for new spectrum the wireless provider is getting in return.

Nextel complained that the FCC’s previous estimate of the company’s existing spectrum was too low.

The company has until Feb. 7 to accept the FCC’s package.

At issue is a plan the FCC approved in July that will require the company to give up spectrum it is currently using on the 800 MHz portion of the radio band so police, fire and other public safety departments around the country can use it exclusively.

Currently, Nextel shares the spectrum with the emergency departments. Unfortunately, in many markets channels have become too crowded to share any longer.

Nextel has offered to give up its channels on that band in return for a new swath of spectrum in the 1.9-2 GHz range.

That new frequency range includes some special “backhaul” channels TV news crews use to beam live remotes back to their studios.

The switch will leave stations with a smaller amount of backhaul spectrum and will force them to return their mobile transmitters to operate on narrower  channels.

Nextel has promised to reimburse stations for the cost of retuning or replacing their electronic newsgathering equipment. Broadcasters have estimated the cost of adjusting their equipment to be roughly $512 million.

The FCC’s higher valuation on Nextel's current spectrum increases the likelihood that the company will move forward on the spectrum swap because it lessens the potential cash outlay of the deal.

Under the FCC’s plan, the company will be required to write an “anti-windfall” check to the U.S. Treasury if the cost of reimbursing broadcasters plus the credit for the value of the Nextel’s existing spectrum doesn’t total $4.8 billion--the amount the FCC figures is the value of Nextel's new home.

The Nextel deal benefits broadcasters because they are obligated to begin relinquishing a portion of their remote newsgathering channels this year and until now had no guarantee of being reimbursed for their new equipment costs.

Previously, satellite communications companies were slated to get all the channels. In theory they also were obligated to reimburse stations for the costs of switching equipment, but their shaky finances made it seem unliekly stations would ever see the money.

Now that wealthy Nextel promises to pay up, stations no longer have to worry.

Nextel's competitors have complained about the deal, saying the spectrum should have been auctioned, but Nextel and its principal competitor, Verizon, have reached a truce and the latter is no longer complaining.

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