Subject: [NEXTEL-1] CTIA On The "SCAM PLAN"- • Nextel’s Proposal Is Not Legal

From: Marcelrf <[email-masked]>
Date: Thu, 18 Mar 2004 16:27:08 -0500

CTIA On The "SCAM PLAN"- • Nextel’s Proposal Is Not Legal

=====================================================================
March 17, 2004 

The Honorable Michael K. Powell 
Chairman Federal Communications Commission 
445 12th Street, SW Washington, D.C. 20554 

In re: Ex Parte Presentation WT Docket No. 02-55 

Dear Chairman Powell, 

On March 5, 2004, Nextel Communications, Inc. 
(“Nextel”) submitted an ex parte filing entitled 
“What Windfall? A Review of the Valuation 
Components of the Consensus Plan.” 

In its presentation, Nextel makes a number of assertions 
about spectrum valuations that are simply not credible. 
The only consistency in Nextel’s “New Math” approach to 
spectrum valuations is an aggressive inflating of the value 
of its “contributed” spectrum and an aggressive deflating 
of its desired new spectrum. Nextel’s question “what windfall?” 
is resoundingly answered by any reasonable reading of the 
facts, the market reactions and the law bounding agency 
actions. The numbers do in fact add up to a substantial windfall. 

• Nextel’s Numbers Don’t Add Up. 

Nextel claims that its spectrum spread across three bands is more
valuable than contiguous spectrum at 1.9 GHz. This requires a New Math
methodology under which its encumbered, disjointed, non-nationwide 800
MHz spectrum is valued at over 60 percent more than a comparable amount
of exclusive, nationwide 1.9 GHz spectrum. This makes no sense for two
reasons. First, if Nextel valued 1.9 GHz spectrum at the same MHz for
MHz rate as its surrendered 800 MHz spectrum, Nextel would be receiving
$5.76 billion in 1.9 GHz spectrum rather than the $3.335 billion
estimated in its ex parte – a valuation swing of well over $2 billion.
Second, financial analysts have consistently concluded that contiguous
spectrum in the PCS bands would be worth more than non-contiguous 800
MHz spectrum, not less, as Nextel pretends. Thus, Nextel’s math is
premised upon patently faulty assumptions.

• Nextel’s New Math Does Not Count the Increased Value of its 800 MHz
Spectum. 

A striking feature of Nextel’s submission is its claim that rebanding
within 800 MHz results in a loss of 2.5 MHz of spectrum worth $1.44
billion – a loss that should be counted as a credit toward the 1.9 GHz
spectrum. While Nextel would reduce its total amount of spectrum at 800
MHz from 8.5 MHz to 6 MHz on average, there is no recognition assigned
in the ex parte to the plain fact
that the surrendered spectrum is interleaved, encumbered, and less than
nationwide in coverage. The 6 MHz of spectrum Nextel would receive after
rebanding is nationwide, exclusive, contiguous and adjacent to 10 MHz of
other spectrum held by Nextel. Kane Reece estimates a net gain of $2.3
billion to Nextel from this change alone within 800 MHz. 

• Nextel’s SEC Filings and Analysts’ Reports Contradict Nextel’s Claim
that its Plan Causes a $2 Billion Loss to the Company. 

Nextel represents that its proposal will result in a net loss of $2
billion to the company. However, its March 11, 2004, Securities and
Exchange Commission 10-K report omits any disclosure that the plan would
have materially adverse financial effects. In contrast, industry
analysts have undercut Nextel’s own ex parte by noting that the
contiguous spectrum being sought under the plan is more valuable than
the spectrum being contributed. One prominent analyst estimates the net
benefit to Nextel as being in the $1.5 billion to $3.2 billion range. 

• Nextel’s Proposal Is Not Legal. 

Significantly, Nextel’s ex parte ignores an obvious fatal flaw. Whether
the spectrum valuations are right or wrong, the Commission does not have
legal authority to bypass competitive bidding procedures established by
Congress to engage in the type of private negotiations and spectrum
grants inherent in Nextel’s proposal. 

In sum, Nextel’s numbers do not add up. Instead, the facts and
application of a consistent methodology leads to the inescapable
conclusion that Nextel would be receiving a significant windfall under
its “consensus” proposal. 

Respectfully submitted, 

Diane Cornell 
Vice President for Regulatory Policy 
Cellular Telecommunications & Internet Association 

Cc: Bryan Tramont 
Sheryl Wilkerson 
John Muleta 
Ed Thomas 
John Rogovin

Source:
http://svartifoss2.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=6516083089

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