Electronic Comment Filing System

Befott the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 Nextel Communications, Inc., Transferee, and Sprint Corporation, ) Transferor 1 ) Applications for Transfer of Control ) of Licenses and Authorizations 1 1 To: The Commission W DocketNo. 0563 File No.: 0002031776 DA 05-502 RECEIVED MAR 3 0 2005 Gnkeofslc~ em+i Communimtbim Commlssbn PETITION TO DENY OF PREFERRED COMMUNICATIONS SYSTEMS. INC. Paul C Besozzi Nicholas W. Allad Stephen D& Gavin Patton Bogs LLP 2550 M Street, N.W. Washington, DC 20037 (202) 457-6000 NO. Of Copies LkI ABCDE SUMMARY This second major horizontal merger in the wireless sector will further concentrate large amounts of the specuum available for mobile telephony services in the control of a relatively smaU number of carriers, incluh the Applicants. The proposed amalgamation also comes on the heels of Commission decisions providing Nextel (along with its corporate affiliate Nextel Partners and other affiliated licensees) unencumbered spectrum in the 800 MHz band suitable for mobile telephony through a relocation and rebandq process. As part of that process Nextel also emerges with 10 MHz of suitable specuum in the 1.9 GHz Band. Indeed, Preferred believes that it was only the benefits received as a result of rebanding that transformed Nextel's spectrum holm into assets that made a maniage with Sprint attractive and feasible from both a business and technical perspective. Unfortunately, the results of rebanding already leave competing regional licensees like Preferred, which paid tens of millions of dollars for geographic licenses, with decidedly less specuum rights than when the process started. In addition, both Applicants control many MHz of other radio spec- an admittedly finite commodity, which can be employed (and which they plan to employ) to provide mobile wireless services. Under such circumstances it does not serve the public interest, convenience, and necessity to permit the proposed merger to go forward on an unconditional basis. To the contmy, the Commission should only grant the Applications with conditions that ensure that licensees such as Preferred are not constrained in their ability to attempt to compete because of encumbered and inadequate access to suitable spectrum in their markets. Preferred proposes conditions to alleviate the inevitable constraint that would accme from granting the Applications without them. .. u TABLE OF CONTENTS &g I . SUMMARY ............................................................................................................................................... 2 I1 . STATEMENT OF PREFERRED?S INTEREST .............................................................................. 3 I11 . ANaYTICAL STANDARD AND FOCUS .................................................................................... 4 Analytical Standard: The Public Interest ......................................................................................... 4 Analytical Focus: Products, Geographic Area, Participants ......................................................... 7 IV . ANALYTICAL CONTEXT: Reltmhg O&s and 2.5 GI+ Spectrum ......................................... 8 A. B . A B . The Competitive Impact of the Reltmhg O&s ............................................................................. 9 The Suitability of Additional Spectrum Held By Applicants for Mobile Telephony Services ................................................................................................................................................ 11 V . UNCONDITIONED GRANT OF THE APPLICATIONS IS NOT IN THE PUBLIC INTEREST ............................................................................................................................................. 14 VI . APPROPRIATE CONDITIONS ....................................................................................................... 15 VI1 . CONCLUSION ..................................................................................................................................... 16 ... lu Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re Applications of Nextel Communications, Inc., Tnnsferee, and Sprint Corporation, Tlansfemr Applications for Transfer of Control of Licenses and Authorizations To: The Commission WT Docket No. 05-63 File No.: 00020317761 PETITION TO DENY OF PREFERRED CO~UNICATIONS SYSTEMS. INC. Preferred Communications Systems, Inc. (?Preferred? or ?Company?), by its attorneys and pursuant to Section 309(d) of the Communications Act of 1934, as amended (?Communications and Section 1.939 of the Commission?s Rules,) hereby petitions the Federal Communications Commission (?FCC? or ?Commission?) to deny or, in the alternative, condition the above- referenced applications (?Applications?) of Nextel Communications, Inc. (?Nextel?) and Sprint Corporation (?Sprint?) seeking Commission approval of the transfer of control to Sprint of the FCC licenses and authorizations held both directly and indirectly by Nextel (collectively, ?Applicants?)? 1 The Commission?s Public Notice DA 05-502, released Febn~ary28,2005 (?Public Notice?), at p. 2, n 6 states that this file ?has been designated as the lead application.? Therefore, Preferred is &g reference u) that file rather than citing all the file numben. 2 47 US.C § 309(d). 3 47 CFR § 1.939. 4 The Petition is timelyfded pursuant t~ the timetable set in the Public Notice. I. SUMMAR Y This second major horizontal merger in the wireless sector will further concentme large amounts of the spectrum available for mobile telephony services in the control of a relatively small number of carriers, including the Applicants. The proposed amalgamation also comes on the heels of Commission decisions providmg Nextel (along with its corporate affiliate Nextel Partners and other affiliated licensees) unencumbered spectrum in the 800 h4Hz band suitable for mobile telephonythrough a relocation and rebanding process. As part of that process Nextel also emerges with 10 MHz of suitable spectrum in the 1.9 GHi Band. Indeed, Preferred believes that it was only the benefits received as a result of rebanding that transformed Nextel's specuum holdmgs into assets that made a marriage with Sprint attractive and feasible from both a business and technical perspective. Unfortunately, the results of rebanding already leave competing regional licensees like Preferred, which paid tens of millions of dollars for geographic licenses, with decidedly less specuum rights than when the process started. In addition, both Applicants control many MHz of other radio spectrum, an admittedly finite commodity, which can be employed (and which they plan to emplo9 to provide mobile wireless services. Under such circumstances it does not serve the public interest, convenience, and necessity to permit the proposed merger to go forward on an unconditional basis. To the contrary, the Commission should only grant the Applications with conditions that ensure that licensees such as Preferred are not constrained in their ability to attempt to compete because of encumbered and inadequate access to suitable spectrum in their markets. Preferred proposes conditions to alleviate the inevitable constraint that would accrue from gt.anting the Applications without them 2 11. STATEMENT OF PREFERRED?S INTEREST Preferred is licensed by the Commission to provide mobile telephony services using portions of the 800 MtE Specialized Mobile Radio (?SMR?) band. The Company holds Economic Area (?EA?) licenses awarded in Auction No. 34 that encompass a total population of approximately29.4 million in the District of Columbia and parts of California, Oregon, Virginia, West Virginia, Maryland, Pennsylvania, Kentucky, Ohio, North Carolina, Puerto Rico and the US. Virgin Islands (?Preferred Markets?)? Preferred paid the FCC approximately $31.7 don for its EA licenses. Since that time the Company has invested substantial additional sums in engineering and other expenses related to the development of its systems. In addition, the Company has acquired site- based 800 MHz SMR licenses located in the same and other EAs. As a result, Preferred has a substantial economic stake in the mobile telephony semr, a stake that will be directly affected by the proposed merger of the Applicants. More importantly, in each of the Preferred hkkets one or both of the Applicants holds 800 MHz and other specuum that is suitable to provide mobile telephony services. In many of the Preferred Markets Applicants are already providing such services. Thus Preferred and the Applicants already are competing licensees, focusing on many of the same potential customers for such services. A combined Sprint-Nextel entity would no doubt be a direct, and even more formidable, competitor for Preferred. Finally, the Company has been a continued active and substantive participant in other proceedings before the Commission addressing issues affecting competition in the provision of mobile telephony, particularly the 800 MHz SMR services. Preferred?s detailed submissions in the 5 Based on 2003 population information A map showing Preferred?s EA licenses is attached as Exhibit 1 hereto. The Commission has found that apart from cellular and broadband PCS, the approximately26 megahertz of spectrum in the 800 and 900 h4Hz bands that has been licensed for SMR can be used to provide mobile telephony services. In hMdte7 rfAppltmaam $A T& T Wk S&, In ad Cbgadar W&s Chpmlzm For Gxasl to Tmfi rfcahd rfLia?raa md A&&, 19FCCRcd. 21522,21553,760 (2004) (hereinafter?AT6 T W&sn). 3 Commission?s 800 MHi rebandug proceeding raised a number of legitimate, meamgful concern about the competitive impact of providing enhanced spectrum access to NexteL? Those concern are only magnified by the prospect of fder accumulation of wireless spectrum contemplated by the Applications being considered here. In light of the foregoing, Preferred clearly is directly impacted by the Commission?s consideration and action on the Applications and will suffer competitive injury without at a minimum the imposition of conditions on the merger if the Commission grants the Applications. Therefore, the Company has the requisite standing to fie this Petition and thereby convey its concerns and positions to the Commission. 111. ANALYTICAL STANDARD AND FOCUS k Under Sections 214(a) and 310(4 of the Communications Act, the burden is on the Applicants m demonstrate that the proposed metger, which would combine the third and fifth largest nationwide mobile carriers, will serve the public interest, convenience, and necessity.7 Application of that broad standard involves ?a balancing process that welghs the potential public interest harms of the proposed vansaction against the potential public interest benefits.?? Analytical Standard: The Public Intetest b In rheMllttw~IqntnhgP&S& Gm7Mnmbopa ? ? tntlR800MHzBmd~anfO/ds;FJb?,R~anfOnls;Fourtl, Mm& Qmk md Odq anf M, 19 FCC Rcd. 14969 (2004), as amended by Errz~u~ released September 10, 2004, Errdmz DA 04-3208, 19 FCC Rcd. 19651 and Erramq DA 043459, released October 29,2004, raon anf@ jmhg Szqpbnmd order md order On R& 19 FCC Rcd. 25120 (2004), raon &. (cokctively, yRt&&g cM??sy. 7A TC T W&s, at 7 40. Accounting for the ATiYT Wueless-cingular merger, acconhg to the FCC the Applicants are now the 3d and 5* largest mobile telephone operators based on number of subscribers as of year-end 2003. Ad Repoot anf Am& dca?pehaze Mda Gdim W& Rqa to Chmd Ma Smim, Ninth Rqmt, 19 FCC Rcd. 20597,20697 (2004) (?2004 w). According to the 2004 Rw statistics, the combination of the Applicants would be the third largest mobile operator with almost 29 million subscribers. While these data are well over a F~J old, Preferred has no reason to believe that these ra&hgs have changed. 8 A TC T P%iks, at f40. 4 The Commission?s public interest evaluation is required to encompass the ?broad aims of the Communications Act,? which include, among other thmgs, ?a deeply rooted preference for preserving and enhancing competition in relevant markets, accelerating private sector development of advanced services, ensuring a diversity of license holdings and generally managing the spectrum in the public interest.?? The Commission has asserted its interest as serving the public interest in a broad range of the radio services that it regulates, an interest that has been repeatedly upheld by reviewing c0urt.s.1~ In conducting its analyxis, the Commission may consider ?techological and market changes, and the nature, complexity, and speed of change of, as well as vends within, the communications industry.?? The analpis also includes an assessment of the ?merger?s affect on future competition,? which is a particularlyrelevant concern in this case.? The Commission?s public interest evaluation is not limited by uaditional antiuust principles. The Commission is chaqged with determining whether the proposed transaction serves the broader public interest. 'Ibis assessment includes determining whether combining assets may allow the merged entity to ?create market power, create or enhance banien to entry by potential competitos, and create oppommities to disadvantage rivals in anticompetitive ways.?? Further, the Commission?s public interest authority under the Communications Act empowers the agency to impose and enforce transaction-specific conditions that ensure that the ?Id.atv41. l0Rqmt ad onhr on B&t Gmmhp RukF (Bd Rqpdatny rrcieruold), 18 FCC Rsd. 13620 (2003), @d m- pt sub mRrrmrhaa Ra& l+q& w F.CC, No. 03-3388, slip op (3d G, June 24, 2004) (competition in locd do markets) AT& T W&, at 141. 12 Id 13 M, at 7 42. 5 public interest is served by the tran~acti0n.l~ The Commission has frequently imposed such conditions in approving mergers of this magnitude. For example, it did so with respect to eighteen markets in the A TC T WAS matter. Finally, a fundamental tenant of the Commission?s public interest review is that ?absent significant offsetting efficiencies or other public interest benefits, a transaction that creates or enhances sgdicant market power or facilitates its use is unlikelyto serve the public intere~t.??~ In this case, the Commission also must consider a special and specific statutory mandate applicable to the mobile telephony sector, MI-IXIY Section 332 of the Communications Act. Therein Congress directed the Commission with respect to the mobile telephony sector, to manage the spectrum ?to encourage competition? and to emm ?regulatory parity? between all providers of commercial mobile radio services. ?he Commission?s obligation in this regard is not solelyto ensure that Nextel can compete or has regulatory parity with cellular and PCS providers. The Commission has an equal obhgation to ensure that EA licensees like Preferred are similarly protected in that competition, includmg competition with Nextel, in order to preserve the broad Tange of service offerings for the public.?? As the Commission assesses the impact of the proposed merger, it must follow this express Congressional instruction. 14 Id, a 1 43. ?5 Id, at 168. 1bSection 6002 of the Omnibus Budget Reconciliation Act of 1993 directs the FCC to ensure that pmviden of ?substantiisimilar common carrier services? are subject to compaable requirements. Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66 @002(d)(3)@), 107 Stat. 312,397 (1993) (?Ea&Ad). The FCC pmperlyinrerpreted rhis requirement to apply to all CMRS pmviden, including SMR, Pa, cellular, and paging licensees. Se In E Ad, R&&ny TiazZnmt 4M& SV&E, GN Docket No. 93- Inp[martaticpI cfS& 3(.$ ad332 4th omnmrmdcnr 252, n3trdRptd W, 9 FCC Rcd 7988,7996,712,8009-8035,11 37-77,8042,194 (1994), and found that ueahg substantially sLnikr CMRS pmviden equally advanced the goal of ?ensufimg] that economic forces - not disparate regulatory burdens - shape the development of rhe CMRS marketplace.? Id, at 7994,14 .. 6 B. The Commission must apply the same analpical focus in assessing Sprint-Nextel that it applied in connection with the recently completed AT&T Wmless-cdngular merger. First, the initial relevant product market is the ?combined market for mobile telephony services.?? This market includes both intenonnected mobile and mobile data services, provided to both residential and enterprise subscnirs.18 Second, another critical relevant product market is ?the input market of spectrum that is suitable for provision of mobile service^."'^ As the Commission held ?In this sector ... spectrum suitable for use in mobile telephony is an input of finite supply. It is possible that rivals to the merged entity may be unable to add subscribers so as to function as a competitive check if there is an insufficient amount of spectrum available to As a result, the Commission?s focus is properly on ?the amount of spectrum suitable for the provision of mobile telephony services that the combined entity would control in the relevant markets.?? Especially worrisome are ?markets in which provides are present but are constrained from repositioning and expandmg output for some reason such as incomplete footprint or inadequate spectrum bandwidth.?? As noted below, Preferred believes that a thorough analysis requires the Commission to consider the concenmtion of cellular, PCS, SMR and all other spectrum suitable for the provision of mobile telephony services (;.e., 2.5 GHz band as well)). 17 A TC T W&s at ((i 74-79. 18 Id, at 7 74. 19 Id, at 7 81. This spectrum includes, among other bands, the SMR spectrum licensed to Preferred. Id 20 Id, at 7 118. The Commission must be properly ??mindful of the unique role of spectrum as a critical input in the market for wireless services?? and must ?carefully [dp] the potential impact of this merger on that input.? Id, at 7 138. 21 Id, at 7 188. 2 Id, at 7 149. Also ?worrisome are markets in which the combined share of the merged entity is veryhigh.? Id 7 hurl, as to the relevant geographic market, the proper focus is "a local one, not nati~nal."~' While a local market does not include individual counties, it certainly includes EAs such as those licensed to Preferred. Fourth, the relevant participants include cellular, PCS, SMR and other licensees employing various technologies that provide the same basic voice and data functionality and are indistinguishable to the consumer.2' This includes, among others, the five (5) remaining nationwide carriers, among them the Applicants, along with Preferred and similarly situated EA licensees in the 800 MHz ba11d.2~ IV. ANALYTICAL CONTEXT: Rebandhg orders and 2.5 GHz Spectrum In performing its review, the Commission must recognize the current context in which the proposed merger arises, p.Iticularly recent competitive and regulatory developments in the mobile telephony marketplace. The Rdm&.g onlws are, for example, a very sigruficant regulatory development, affecting the finite spectrum input product component, which must be factored into the Commission's review. But there are other developments that the Commission must also include. First, last year the Commission approved the ATH Wmless-cingular merger which reduced the number of nationwide competitors and increased the concentnuon of spectrum ownership suitable for the provision of mobile telephony services. At the time the Commission noted the "challenge of examining the potential consequences of a proposed merger between two large national wireless carriers that is largely horizontal in nature."26 The challenge is no less in this 23 A TC T lE&s, at 11'1 86,89. 24 zd, at 91. 25 Id, at 7 94. 26 Id, at 7 3. At the rime the SprindNml merger was announced, then Chairman Powell reportedly noted that "[wlhenever we ... consolidate the market one fewer we're going to take a very, very hard and rigomus look at that." Communications Ddy, Vol. 24, No. 241, December 16,2004, at p. 8. 8 case. Tnis second proposed horizontal merger, which would permit the combination of two of the fastest growing nationwide carriers, would only further heighten that concentration and market power.Z7 In addition, there is pending at the Commission a proposed third merger of two large regional carriers - AUTel and Westem Wmless.2* The plain fact is that the burden of meeting the public interest standad should be helghtened as the market becomes more hghlyconcenmted Second, implementation of the R- Odm will already provide Nextel (and Nextel Partners) fundamental competitive advantages over Preferred and other similarly situated 800 MHz licensees. These Cdts directly affect the specuum input component of the FCK?s analysis. Third, the Commission must include as part of its analysis additional spectrum that is suitable for mobile telephony services that is held by both Sprint and Nextel in many relevant markets, including a number of the Preferred Markets. k Separate and apart from the proposed merger, the Rehdqg C&s substantially enhance the suitabil;~ of 800 MHz band spectrum held by Nextel (along with Nextel Partners and other contractually affiliated entities) (collectively, the ?Nextel Conml Group? or ?NCG?) to provide mobile telephony services. These enhancements for the NCG have come, in major part, at the expense of other EA and site-based 800 IvHz SMR licensees such as Preferred. The Competitive ImDact of the Rebadkg orders The key competitive impacts of the R$wwrhrg Cdts on Preferred and other similarly situated EA SMR and site-based 800 MHz SMR licensees include: 1. The alders divide the 800 MHz SMR spectrum into two blocks - one for cehhr - type services, the other for non-cellular-type services - and shrink the cellular ekble spectnun from a tod of 26 MHz to no more than 16 MHz. Most if not all of the celldar 27 At the time that the Commission approved the ATBIT Wmless-ongukr merger, the Commission noted that Sprint and Nextel collectively had, between the fourth quarter of 1998 and the fourth quarter of 2003, gained ten percent in subscriber based market shares in the mobi telephony sear, while the shares of Verizon and angular had both declined by approximately six percent. A TC T Whks, at 1 132. 28 FCC Public Notice DA 05-332, released February7,2005. 9 2. 3. 4. 5. 6. 7. ebble spec- will be reserved exclusively to NCG, thus severely limiting the possibility for operators like Preferred to expand their cellular-type operations. The cellular eligible specuum ?lost? in the 800 MHz SMR bands is ?replaced? in pan in the 1.9 GHz band, with only NCG gaining access to a nationwide license of 10 MHz in that band As a result, Nextel is allowed to increase its cellular elgible spectrum from a nationwide average of 17.9 - 18.5 MHz per EA to some 23 MHz, largely by removing the right to use cellular ebble spectrum from Preferred and similarly situated EA and site-based 800 IvIE-Iz SMR licensees. NCG is permitted to exchange encumbered, non-contiguous spectrum for unencumbered, contiguous spectrum. While NCG?s EA and site-based 800 MHz spectrum moves to new spectrum with unencumbered status, Preferred and similarly situated EA and site-based 800 MHz SMR licensees do not. NCG is permitted to exchange EA and site-specific licenses for nationwide exclusive spectrum. Preferred and similarly situated EA and site-based 800 MHz SMR licensees were offered no such option. NCG retains the right to provide cellular-type service on their EA licensed spectrum, whether constructed or not. Preferred and other similarly situated EA licensees retained that right only if they had consuucted a cellular type system using the 800 MHz spectrum before November 22,2004. NCG retains the right to provide cellular-type service on their site-based 800 MHz spectrum and can now do so on an EA-wide bases. The $ht of Preferred and other similarly situated EA and site-based 800 MHz SMR licensees to do so was conditioned on geographic and construction req~irements.2~ Indeed, the extended uncertainty and competitive impact generated by the Rthhg OmEn has already made it more difficult for Preferred and others to fie system designs and attract the additional capital needed to implement those designs. In other words, rebanding has already interposed its own baniers to entry?? *9The lZ&&g oldos also provided for implementation hugh an impartial Transition Administrator. However, the issue of that impartialityhas been called into question by legitimate inquiries concerning the relationship between Nextel and a key member of the Transition Administrator team. Se Ew P& For Rd glkanwJ?& Fm Tmitian A&&&ator TmmdCsdimCfTmitianPnx~s P~A~Cf~A~~&, February7,2005, filed byMobde RelayAssociates and Sldtronics, LLCin WTDocket 02-55. Wnder Section 257 of the Communications Acr, the Commission has an independent obligation to seek to ebte regulatory banien to entry ?for entrepreneurs and other small businesses in the provision and ownership of telecommunications services ... 47 U.S.C 257. 10 The cumulative competitive impact of the Rdtmhig O&s is to provide Nextel with unencumbered, contiguous 800 MHz spectnun for use to provide cellular-type services. On the other hand, compeutos like Preferred, who also paid the FCC millions in value for EA 800 MHz spectrum to provide similar services, are relegated to a shrunken segment of encumbered spectrum in an effoa to compete, at least on a regional basis, on an equal footing.? Yet access to clean and unencumbered specuum is an essential precondition to future competitive effom by EA licensees like Preferred Without such spectmm, such licensees are unable to offer the type of integrated advanced dispatch, cellular voice, text messaging and mobile Internet services that Nextel and Sprint now plan to provide. Tnus, in assessing the proposed merger the Commission must consider these localized impacts of the R&&g O&s and how they are amplified by the proposed merger. B. The Suitability of Additional Spectnun Held By App licants for Mobile Telephony Services In analping the AT&T Wmless-cangular merger the Commission dismissed the need to include additional specuum in the 2.5 GI+ band as suitable for mobile telephony services, on the grounds that ?it is committed to non-mobile telephony uses currently and for the near-term future.??* Preferred respectfully submits that in analyzing the Sprint-Nextel merger, the Commission?s failm to consider the Applicants? control of this spectrum is unrealistic, shortsighted and simply wrong. First, Nextel controls considerable quantities of this spectrum as evidenced by a number of the Applications which are the subject of this proceeding. Indeed, Preferred estimates that in its Washtngton-Baltimore EA Nextel controls over 150 MHZ of this 2.5 GHz spectnun alone?? Sprint 31 Preferred?s detailed analysis of the impact of the August 2004 R&&g 0th is contained in its December 22,2004 Petition for Reconsidemion of the decision, which is attached as Exhibit 2 hereto. 32 Am T VZ&s,ai B 81, n 282. Wreferred attaches as Exhibit 3 an analysis of the 800 MHz, 900 MHz, 1.9 GHz and 2.5 GHz specttum that would be conmlled by a combined Sprint and Nextel in the Preferred Marks. The 2.5 GHz spectrum includes both licensed 11 also controls considerable quantities of this specuum as well In fact, Sprint's 2.5 GHz spectrum covers geographic areas that overlap with areas wherein both Applicants provide mobile telephony services. Sprint controls substanti 2.5 GHz specuum in at least four (4) of Preferred's Markets. In seven (7) of the ten (10) Preferred Markets, the Sprint-Nextel combination would conml on average 42.88% of the spectrum that Preferred believes is suitable for mobile telephony services." Second, this spectrum is authorized for use for the mobile telephony services, which are relevant to the Commission's public interest assessment. ?he FCC, in a concerted effort to afford the licenses of this spectrum greater flexibhty, specifically sanctioned this specuum for use for mobile service^.'^ Therefore, this specuum is legally available to be convened and applied to such use. 36 Prefemd believes that Nextel for has already been testing the use of the specuum for these and other purposes. Thud, Nextel and Sprint actively lobbied the Commission to permit the use of this specuum for expanded and mobile applications." The fact that the Applicants in this case have not necessarily emphasized the utility of the spectrum for mobile telephony services does not justify or warrant its exclusion from the Commission's analysis of specuum concenmtion and control. Fourth, the Applicants have boasted that the "2.5 GHz spec- offers the potential of suppolting services that change the way people communicate comparable to the communications and leased spectrum. Note hat the chan separates out Washington and Baltimore because they a separate Basic Trading Areas in which the Applicants hold or conad relevant spectrum. "Exhibit 3 also includes an analysis of the percentage of spectrum conrrolled by Sprint-Nextel in seven (7) of the Preferred Markets. 35Ardt7~~4Pans 1,21,73, 74ad101 ~eheormicsiol'sStoF~eheAorician~F~edm$MoEikB~ Amss, E~~CXherAduPnrdSmiarm~21SO-2162~2100-2690MHzBm?lC, 19 FCCRcd. 14165, 14210,111 111-112 (ZW), v.ai&d 19FCCRcd.22284 (2004). "The fact that there is a transition period to greater mobile use should not be a basis for excluding this spectrum. There is a uansition period associated with the Rdmdwg Wm, yt clearlythe Commission is not contemplating excluding hat spectrum from its anal+. 37 Both Sprint and Nextel were active participants in WT Dockt No. 03-66 filing comments and ex parte submissions. revolution that accompanied the intmduction of cellular mobile services.??* Further they are proud that Sprint and Nextel will have access to a 2.5 GHz footprint covering nearly 85% of the population in the top 100 Basic Trading Areas in the COLUI~~~.)~ It is clear from public statements by the Applicants reported after the announcement of the merger that they feel in an ?enviable spectrum position? and envision an integrated spectrum platform of voice and data across all bands that they control, includmg 2.5 GHz, no matter what form of mobile wireless service that spectrum is actually used for.?O While there may be some impediments, the Applicants are confident that a ?combined Sprint Nextel will be able to overcome these impediments more successfully than either company acting al~ne.?*? Indeed, Nextel has opposed any effort to delay access to this spectrum and urged the FCC to accelerate the transition.?? Fifth, as previously noted, the Codsion has a special responsh%ty with respect to mobile telephonyto ?manage the spectrum to ensure competition? and to ensure ??regulatolypatlty? among mobile telephony competitors.?3 Tuming a blind eye to this additional suitable spectrum controlled by both Sprint and Nextel ignores that responsibility. For this, and the other foregoing reasons, the Commission?s public interest anal~is must consider all spectrum that the Applicants will contml that is capable for use in providmg mobile telephonyservices, including the 2.5 GHz specu~m 38J~int Declaration of Todd Rowley and Robert Finch, dated February 8, 2005, Attachment E, Sprint/Nextel Application for transfer of Conuul (?Ro&y?Fid e&). 39 Rdq/F& Dcdrmtion, at p. 8 Communications w, Vol. 24, No. 241, December 16,2004, at p.8. ?ROl.ku/Finrh LMmmm, at p. 2. There is clearly equipment and software in development and use to employ this spectrum for mobile telephony purposes. See,eg, m. ipwirelress.codnews/press. ?Nextel?s Consolidated Opposition To Petitions for Reconsideration, WT Docket No. 03-66, FW10586, February 22, 2005, at p. 4. 43 47 U.S.S.C. § 332. V. 8 UN NDI IONEDG PUBLIC INTEREST Based on all of the foregoing, Preferred respectfully submits that the Commission cannot find that an unconditioned grant of the Application will serve the public interest convenience and necessity. Without any conditions, the potential public interest harms of the proposed merger outweigh the potential public interest benefits because the merger would, when coupled with the competitive impact of the Rdudg Odets, box out potential competitos like Preferred from access to specm reasonably necessary to compete. The merger would leave the Applicants in control of well in excess of 70 MHz of spectrum suitable for the provision of mobile telephony in six (6) out of the ten (10) Preferred Markets.? Indeed, considering all such spectrum available to the Applicants, in some Preferred Economic Areas, the combined entitywill control well in excess of 100 MHz of spectrum in those markets. Conml over such large amounts of additional spectrum suitable for mobile telephony will only ma& the competitive advantages gained by Nextel as a result of the Rehmikg Onh, which clearly favored Nextel to the deuiment of licensees like Preferred. As the Commission stated with respect to the ATgLT -action, ?especially worrisome are markets in which provides are present but are constrained from repositioning and expanding ... for some reason such as an incomplete footprint or inadequate spectrum bandwidth.?45 If granted without conditions, the proposed merger will leave Preferred and other licensees stranded precisely in that position identified by the Commission in the A T& T WAS decision. * In A T& T Wis, the Commission used 70 MHz as the trigger for special focus on a particular market. In A T& T MAS the applicants also volunteered to divest any spectrum in excess of 80 MHz of cellular or broadband PCS spectrum held in a particular marker, an offer the Commission readilyaccepted. A T& T W&, at 7 199. 45 A T& T W&, at II 149. 14 The Commission?s unconditioned grant of the Applications and the sanctioning of such a spectrum hoard by a merged Sprint and Nextel would fly in the face of the standards that it has applied to past mergers, includmg most Tecently the merger of AT&T Wmless and cingular. The end result would be to further devalue the specuum acquired in good faith by Preferred and similarly situated auction winners long before the Rdwdtg C&s and this proposed merger. It would send a message to such entities that the concept and requirement to manage spectrum to encourage competition is a hollow one for licensees like Preferred. Therefore, the Commission should not grant the applications without appropriate conditions. VI. APPROPRIATE CONDITIONS It is appropriate for the Commission to impose conditions on the transfer of control of Commission licenses to mitigate the competitive harms the transaction would likely create. In this case, the competitive harms directly relate to the amount of the spectrum that would be controlled by a combined Sprint-Nextel entity versus the ability of competitors such as Preferred to gain access to such spectrum. To redress these competitive harms, Preferred believes that any approval of the Applications must be subject to the following conditions: 1. In a patticular EA market, either Nextel or Nextel PaJules would, in exchange for spectrum specified below, divest itself of EA market-wide unencumbered and contiguous spectrum in the former NPSPAC Channels (821-824 W866-869 IvIHz) and at the Upper End (Channels 551-600 or 819.7375-820.9875 MHd864.7375-865.9875 MHz) of the Upper 200 channels. This spectrum comprises one hundred seventy (170) Channels, or a total of 8.5 MHz spectrum. This spectrum would be reallocated as follows: a. First, to non-Nextel EA licensees on an EA market-wide, unencumbered and 1:l channel basis with respect to their respective (1) 800 MHz General Category and Lower 80 EA Authorizations, (2) presently held 800 MHz site- licensed channels and (3) site licensed channels subsequently acquired and constructed as part of a ?cellular system,? as that term is defined in the R&&g O&s within elghteen (18) months of the FCs final approval of the Nextel-Sprint merger. Second, to the extent that such spectrum remains unallocated at the end of such eighteen (18) month period, the FCCwould conduct an auction of such spe- b. 15 2. In exchange for the foregoing divestiture in a pa&ular EA market, a non-Nextel EA or site licensee electing to receive such specu~m would: a. b. In the case of EA licenses, exchange its EA-licensed spectrum (post- R&&g On&) in a particular EA market with Nextel or Nextel Partners for unencumbered and contiguous 800 MI& spectrum in the former NPSPAC Channels on an EA markt-wide, 1:l channel basis. If such spectrum is insufficient to accommodate a non-Nextel EA licensee, it would have the election to exchange such ?excess? specvum with Nextel or Nextel Partners either for unencumbered and contiguous channels (1) in the Upper 200 channels on an EA market-wide and 1:l channel basis beginning with channel 600 and then moving downward on a contiguous channel basis or (2) the 1.9 GHz Band beginning with 1,910 MHz and then moving upward on a contiguous channel basis. In the case of site-licensed 800 MHz spectnun presently held or subsequently acquired during the eighteen (18) month described above by a non-Nextel EA or site licensee, it would exchange such site-licensed spectnun with Nextel or Nextel Partners on an EA market-wide basis for either (1) the former NPSPAC Channels, (2) Upper 200 Channels beginning with the fkt channel not previously exchanged by Nextel or Nextel Partners with a participating non-Nextel EA licensee, or the (3) 1.9 GHz Band beg- with the first channel not previously exchanged by Nextel or Nextel Partners with a partkipatkg non-Nextel EA or site licensee. 3. Nextel andor Sprint would divest itself of 10 MHz of 1.9 GHz Band Spectrum in certain EA or BTA markets to non-Nextel EA and site Licensees. Such Non-Nextel licensees would receive such spectrum in exchange for (1) foregoing reimbursement of their respective 800 MHz Band relocation costs and (2) posting an irrevocable letter of credit to pay a portion of the total 800 MHz Band and 1.9 GHz Band relocation costs. Such letter of credits would be in an amount equal on a M?Pops basis to the amount of Nextel?s irrevocable letter of credit. At the FCC?s discretion, such lettel(s) of credit could serve as a substitute for one or more of the eight (8) separate letters of credit provided by Nextel on March 8,2004 or as an addition thereto. These are reasonable conditions to redress the competitive barriers which would be erected or solidified by unconditional grant of the Applications. Divestiture has been the conditional remedy that the Commission has previously employed to remedy concerns about parricular local markets. VI. CONCLUSION The Applicants have failed to demonstrate the grant of the captioned Applications is wananted An unconditioned grant of the Applications would not serve the public interest and would cause harm to wireless competition as outlined herein and thereby wireless consumers in the 16 markets licenseed to Preferred. For the reasons stated herein the Commission should dismiss or deny the Applications or grant them only with the conditions outlined in Section VI. above. Respectfully submitted, PREFERRED COMMUNICATIONS SYSTEMS, INC. BY Nicholas W. Auard Stephen Db Gavin Patton Boggs LLP 2550 M Street, N.W. Washington, DC 20037 (202) 457-6000 Dated: March 30,2005 17 Exhibit 1 Preferred Communication Systems, Inc. BEAMap BEA165 D,DD,E 75 Ch. D.DD,E,EE,F,FF BEA162 DD,E,FF 75 Ch. D,DD,E,EE,F 125 Ch. Exhibit 2 December 22,2004 BY ELECTRONIC FILING Marlene Dortch, Secretary Federal Communications Commission 445 Twelfth Street, S.W. Washington, D.C. 20554 Re: WT Docket No. 02-55 Petition for Reconsideration Dear Ms. Dortch Preferred Communication Systems, Inc. (?Preferred?) and Silver Palm Communications, Inc. hereby submit their Petition for Reconsideration of the Commission?s Report and Order in WT Docket 02-55, Improving Public Safety Communications in the 800 MHz Band. Sincerely, ldcharles M. Austin Charles M. Austin /&at S. Foster Kent S. Foster 400 EAST ROYAL LANE. SUITE N24 IRVING, TEXAS 75039 (972) 869-7626: (972) 8697625 (FAX) -& aQkx!l Attachments cc: Chairman Michael K. Powell Commissioner Kathleen Q. Abemathy Commissioner Jonathan S. Adelstein Commissioner Michael J. Copps Commissioner Kevin J. Martin John A. Rogovin, Chief Counsel bond J. Thomas, Chief Engineer, Office of Engineering and Technology Jennifer A. Manner, Senior Counsel to Commissioner Abemathy R. Paul Margie, Legal Advisor to Commissioner Cops Samuel L. Feder, Legal Advisor to Commissioner Martin Bany Ohlson, Senior Legal Advisor to Commissioner Adelstein John B. Muleta, Chief, Wireless Telecommunications Bureau Michael J. Wilhehn, Deputy Chkt Public Safety and Critical In6astmcture Division of the Wireless Telecommunications Bureau Loan Proposal -2. Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. In the Matter of 1 ) Improving Public Safety Communications ) In the 800 MHz Band ) 1 Consolidating the 800 and 900 MHz Industrid ) Land Transportation and Business Pool Channels ) To Allocate Spectrum Below 3 GHz for Mobile ) And Fixed Services to Support the introduction of ) New Advanced Wireless Services, including ) Third Generation Wireless Services 1 1 Petition for Rule Making of the Wireless ) Information Networks Forum Concerning the ) Unlicensed Personal Communications Service ) ) Petition for Rule Making of UT Starcom, Inc., ) Concerning the Unlicensed Personal ) Communications Service ) ) Amendment of Section 2.106 of the Commission?s ) Rules to Allocate Spectrum at 2 GHz for Use by ) The Mobile Satellite Service ) To: The Commission WT Docket No. 02-55 ET Docket No. 00-258 RM-9498 RM-10024 ET Docket No. 95-18 PETITION FOR RECONSIDERATION Preferred Communication Systems, Inc. (?Preferred?) and Silver Palm Communications, Inc. (?Silver Palm?) hereby request that the FCC reconsider its position with respect to certain issues in the Report and Order. EXECUTIVE SUMMARY 800 MHz Band Movement > The Report and Order?s impermissible discriminatory treatment of Non- Nextel EA and Cellular-Architecture System EA- and Site-Licensed Spectrum and SMR Site-Licensed Spectrum violates the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution and the Commission?s statutory mandates to maintain regulatory parity and promote competition among ESMR and SMR Site licensees and between such licensees and cellular and PCS licensees. 9 The FCC should expressly recognize and affm the spectrum rights of EA authorization holders: (1) the right to offer cellularized service throughout the geographical market area in which they hold one or more EA frequency block licenses; and (2) the right to recover ?white space? upon the expiration or termination of an underlying Site-Specific license on a frequency within its EA-Licensed Spectrum. The Commission therefore should reaffm that all General Category and Lower 80 EA licensees will be afforded the three (3)- part election set forth in paragraph 162 of the Report and Order concerning the movement of their respective EA authorizations. 9 The FCC should reaffirm that all Cellular-Architecture System Site licensees will be afforded the three (3)-part election set forth in paragraph 162 of the Report and Order concerning the movement of their respective Site licenses. 9 The FCC?s discriminatory treatment of Site-Licensed Spectrum held by Nextel, Nextel Partners and the licensees who have executed purchase option or management agreements with Nextel (?Nextel Control Group? or ?NCG) and Non-Nextel EA, Cellular-Architecture System and SMR Site licensees constitutes a confiscation of these licensees? spectrum right to offer cellular service on their respective Site-Licensed Spectrum without compensation and thereby violates the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution and the Commission?s statutory mandates to maintain regulatory parity and promote diversity of license ownership and competition among SMR licensees as well as between SMR, cellular and PCS licensees. The Commission therefore should modify the Report and Order to permit Non-Nextel EA, Cellular-Architecture System and SMR Site licensees to move their respective Site Channels into the Cellular Block on an EA market wide Clean 1: 1 basis if such Channels are included in a Cellular-Architecture System as of the present construction deadline for Site Channels held by the Nextel Control Group (December 20, 2005). L > The Commission should modify the Report and Order to extend such three (3)-part election to a SMR Site licensee if it has obtained a fm commitment to purchase the inhstmcture equipment for a Cellular-Architecture System within nine (9) months following the date the Memorandum Opinion and Order (reflecting all clarifications and modifications to the Report and Order) is published in the Federal Register. b Given the considerable spectral benefits provided to the Nextel Control Group in the 800 and 900 MHz Bands and the 1.9 GHz Band and the crediting to Nextel, and presumably Nextel Partners, of their respective capital expenditures incurred to add cell sites to maintain their respective present operating systems? capacity toward Nextel?s total contribution of $4.86 billion, and the uncertainty created, and impermissible results caused, by the pro rata distribution approach set forth in paragraph 168 and footnote 444 of the Report and Order, the Commission expressly should eliminate such approach. 9 Alternatively, the FCC should modify the Report and Order to restrict the pro ruta distribution approach set forth in paragraph 168 and footnote 444 of the Report and Order to the unique 800 MHz licensing situation found in Southern Communications Services, Inc.?s core EA markets (Georgia, Alabama, southeastern Mississippi and northern Florida). 9 The Commission should clarify that a Cellular-Architecture System licensee?s Upper 200 Site Channels are entitled to remain in the Upper 200 Channels and thereby become EA-Licensed Spectrum. 9 The FCC should modify the Report and Order to provide that if a Nan-Nextel or Cellular-Architecture System licensee elects to move its EA- and qualifying Site-Licensed Spectrum to the new Cellular Block, it further may elect to move its (1) General Category EA- and Site-Licensed Spectrum to the thirty (30) Channels at the top of the Upper 200 Channels (Channels 571-600), if held by Nextel or Nextel Partners, and available to be vacated, and the former NPSPAC Channels (821-824 MHd866-869 MHz) on an EA market, Clean and 1: 1 basis; if the top of the Upper 200 Channels is not held by Nextel or Nextel Partners, as is the case in the Puerto Rico EA market, the Nan-Nextel EA licensee alternatively could elect to relocate up to thirty (30) of its General Category EA andor Site Channels to the 1.9 GHz Band on an EA market, Clean and 1 : 1 basis. (2) Lower 80 EA- and Site-Licensed Spectrum either to the top of the Upper 200 Channels and moving downward or to the 1.9 GHz Band spectrum on an EA market. Clean and 1 : 1 basis. 3 9 Except for Site Channels held by EA and Cellular-Architecture System licensees, the Commission should modify the Report and Order to provide that all Site Channels that (1) presently are within the new Cellular Block, or (2) are moved into the new Cellular Block pursuant to the election set forth in paragraph 162 of the Report and Order and paragraph 163 therein and (3) qualify to be treated as EA-Licensed Spectrum as set forth in paragraph 163 of the Report and Order, would be relocated to the Non-Cellular Block on a geographic ?footprint? basis as follows: (1) Initially, such Site Channels will be moved to the Guard Band; (2) If the Guard Band is insufficient to accommodate the Site Channels required to be relocated from the Upper 200 Channels in a particular EA market, then the excess Site Channels would be relocated to the Expansion Band; and (3) If the Expansion Band is insufficient to accommodate the remaining Site Channels that are required to be relocated fiom the Upper 200 Channels in a particular EA market, then the excess Site Channels will be moved to the top of the Non-Cellular Block and move downward. Site Channels required to be moved kom the Upper 200 Channels will be relocated on a geographic ??footprint? basis only.? 9 The Commission should recognize that, much like Southern Communications Services, Inc.?s core markets, the Puerto Rico EA market presents an unusual licensing situation that should be addressed separately from the remaining EA markets. Since Nextel failed to win the A and C Frequency Blocks in FCC Auction #16 in this EA market, movement of Preferred?s EA- and Site- Licensed Spectrum to the Upper 200 Channels as proposed in the Report and Order would result in the loss of numerous Channels in violation of the Due ? The relocation NkS with respect to Site Channels in the Upper 200 Channels also would apply to EA Authorizations not constructed as part of a Cellular-Architecture System within seven (7) years hm the license issuance date. To expedite rebanding in EA markets in which Preferred Communication Systems, Inc. holds EA Authorizations, it would forego reimbursement of its relocation costs and pay the total 800 MHz and pro rata 1.9 GHz band relocation costs in exchange for the award of 10 MHz of 1.9 GHz band spectrum in those EA markets. In the Puerto Rico EA market, Preferred also would commit to pay Nextel?s relocation costs involving its B Frequency Block EA Authorization and Site Channels in the Upper 200 Channels to the Interleave Channels in that EA market. Preferred would seek to complete the rebanding process in these EA markets within thrty-six (36) months, or several years before the schedule proposed in the Report and Order and proposed by Nextel. 4 Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution. 0 Allocation of 1.9 GHz Band Spectrum 9 The Federal Communications Commission (?FCC? or ?Commission?) clearly lacks the statutory authority to allocate either a nationwide 10 MHz license in the 1.9 GHz Band or multiple 1.9 GHz Band licenses based upon the one hundred seventy-five (175) EA markets exclusively to Nextel and Nextel Partners. Such spectrum award would violate the mandatorily applicable competitive bidding provisions of Section 309 of the Communications Act and the FCC?s statutory mandates to maintain regulatory parity and promote diversity of license ownership and competition under Sections 332(c), 309 and 257 of the Communications Act. k Lacking the discretion to allocate the 1.9 GHz Band spectrum exclusively to Nextel and Nextel Partners, a reviewing court clearly would reverse the FCC?s determination. > The allocation of 1.9 GHz Band spectrum exclusively to Nextel and Nextel Partners clearly would involve the issuance of an ?initial? license under the standard enunciated in the Fresno Mobile Radio decision, the Commission?s own rules and the standard announced by the FCC in the Competitive Bidding Second Report and Order. Having already allocated the 1.9 GHz Band spectrum for commercial services, recent Commission decisions that avoid mutual exclusivity by limiting eligibility to participate in the award of spectrum are inapplicable. 9 Section 309(j)(6)(E) provides no authority for a private sale of spectrum to Nextel and Nextel Partners. That Section admonishes the FCC to consider ?engineering solutions, threshold qualifications, service regulations and other means? to avoid mutual exclusivity when it accommodate the needs of all of the members of a class of licensees. By separating the award of 1.9 GHz Band spectrum from the movement of 800 MHz Band General Category and Lower 80 EA- and Site-Licensed and BILT Site Channels converted to CMRS, the Report and Order renders this Section inapplicable. 9 The FCC should clarify that Nextel Partners, Inc. receives an allocation of 10 MHz of 1.9 GHz band spectrum in the seventy-one (71) EA markets in which it, rather than Nextel, holds 800 MHz band spectrum. 9 The Commission should clarify that it is issuing multiple 1.9 GHz band licenses to Nextel Communications, Inc. and Nextel Partners, Inc. according to the one hundred seventy-five (175) EA markets. 5 P The FCC should clarify that Nextel Partners, Inc. is not contributing any funds toward defraying 800 MHz band relocation costs. P The Commission should clarify that Nextel is receiving credit for the value of 800 MHz Band spectrum to be vacated by Nextel Partners. P The Commission should modify the Report and Order by explicitly recognizing that a minimum of 5.5-6.5 MHz of 1.9 GHz band spectrum is integral to any 800 MHz rebanding proposal (1) moving EA-Licensed Spectrum from the underlying Site- Licensed Spectrum held by EA licensees on a 1 : 1 Clean basis to the new Cellular Block and separating such Spectrum from the Site-Licensed Spectrum held by Non-EA licensees and (2) protecting fully the spectrum rights of all General Category and Lower 80 EA licensees. Unlike the Consensus Parties? Proposal, such an alternative proposal necessarily would open up participation in the allocation of such 1.9 GHz Band spectrum to all such licensees. P Having recognized (1) the minimum of 800 MHz band spectrum that needs to be moved, and replaced by spectrum outside the Private Land Mobile Radio Band (?PLMFW?)(806-824 MHd851-869 MHz), and (2) the spectrum rights of Non-Nextel EA, Cellular-Architecture System and SMR Site licensees that need to be protected and promoted, the FCC should modify the Report and Order to increase the allocation of 1.9 GHz band spectrum from 10 MHz (1,910-1,915 MHd1,990-1,995 MHz) to 12.5 MHz (1,910-1,916.25 MHd1,990-1,996.25 MHz). P The Commission should modify the Report and Order by adopting a proposal that provides that all General Category and Lower 80 EA licensees who (I) forego reimbursement of their own relocation costs, and/or (2) promise to contribute funds to defray total relocation costs andor, (3) in certain EA markets, lose 800 MHz frequencies, would be entitled to an allocation of additional 1.9 GHz band spectrum. P Preferred is willing to forego reimbursement of its own relocation costs estimated at $20 million, contribute up to $180 million to defray total 800 MHz relocation costs and 1.9 GHz band clearing costs, and give up some 800 MHz frequencies in the Puerto Rico EA market. In exchange, Preferred would receive 8 MHz of 1.9 GHz spectrum in the Puerto Rico EA market and 6 MHz of such spectrum in each of its other EA markets and certain other EA markets. b If Nextel refuses to accept the only rebanding proposal for whch the Commission has the legal authority to adopt, Prefemd believes that the Commission should adopt such ImprovemenrS and fund the 800 MHz band relocation including that of Nextel from the alternative funding sources set forth in this Comment. 6 Funding P The FCC should seek amendment of the Communications Act to grant it the authority to impose a license renewal fee of $.15 per MHziPop on cellular licensees who originally obtained their respective licenses by a comparative hearing or random selection lottery procedure and/or have acquired their licenses from such licensees. Such renewal fees are estimated to raise $2.19 billion over the next five (5) years. The amendment would allow the Commission to apply such fees toward payment of 800 MHz Band reconfiguration costs and to assist Public Safety and CII licensees to achieve interoperability in the 800 MHz and 700 MHz Bands. P If the Commission determines to afford a higher priority to providing additional funding for 800 MHz relocation costs than an additional 4.5 MHz of spectrum for Public Safety licensees, it should allocate such spectrum by a competitive public auction and require the auction winners to pay a portion of the total 800 MHz Band relocation costs. Preferred estimates that the winners of such auction would be willing to pay as much as several hundred million dollars to relocate SMR, BILT and Public Safety Site licensees. Interference Protection Standards and Administrative Issues > The Commission should clarify the Report and Order by granting all General Category and Lower 80 EA licensees a waiver of their respective five (5)-year construction deadline on a day-for-day basis from the date of the publication of the Notice of Proposed Rulemaking in the WT 02-55 proceeding until the publication of the Supplemental Order and Order on Reconsideration in the Federal Register. P The FCC should recognize that in many EA markets that Nextel or Nextel Partners lacks the necessary total channels within the Interleave Channels (Channels 151-400) to accommodate the movement of Public Safety and Non- Nextel BILT and SMR Site Channels in Channels 1-150 proposed in its Report and Order. P The Commission should recognize that in many of the one hundred eighteen (118) EA markets in which Nextel or Nextel Partners shares EA-Licensed Spectrum with Non-Nextel EA and Cellular-Architecture System licensees, Nextel and Nextel Partners respectively lack the Clean Channels in the Upper 200 Channels to accommodate the movement of the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum to the Upper 200 Channels within the new Cellular Block without requiring Nextel and/or Nextel Partners to vacate a considerable number of their Clean Channels and incur significant capital expenditures to maintain their respective systems? operating capacity. 7 b The FCC should recognize that in many EA markets it will prove difficult, if not impossible to provide Public Safety and Non-Nextel BILT and SMR Site licensees with Site Channels in Channels 1-150 comparable facilities as guaranteed by the Reporr and Order in the Interleave Channels (Channels 151-400) due to the unavailability of the same sites and coverage contours or ?footprints.? As a result, numerous such Public Safety, BILT and SMR Site licensees will lose sites, coverage areas and Channels and the cost of such relocation will be increased significantly above the $2.5 billion figure Nextel is required by the Commission to collateralize by providing an irrevocable letter of credit. 8 TABLE OF CONTENTS INTRODUCTION ............................................................................ 10 DISCUSSION ................................................................................. 12 I . Reconfiguration of the 800 MHz Band ................................................ 12 A . Present Licensing Scheme in the Private Land Mobile Radio Band ............ 12 B . Report and Order ...................................................................... 12 1 . Underlying Assumptions of Report and Order ................................. 19 2 . Legal Inf~ties of Report and Order .......................................... 21 C . Nextel?s and Others? Requests for Clarification ................................... 29 D . Preferred?s Improvements ............................................................. 32 I1 . Allocation of 1.9 GHz Band Spectrum ................................................. 33 A . Report and Order ...................................................................... 33 B . Nextel?s Request for Clarification ................................................... 44 C . Preferred?s Improvements ............................................................. 44 111 . Funding ..................................................................................... 46 A . Report and Order ...................................................................... 46 B . Nextel?s Requests for Clarification .................................................. 46 C . Preferred?s Improvements ............................................................. 47 IV . Interference Protection Standards and Administmtive Issues ....................... 49 A . Report and Order ...................................................................... 49 B . Nextel?s Requests for Clarification ................................................. 50 V . Conclusion 52 .................................................................................. 9 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. In the Matter of ) ) Improving Public Safety Communications ) ) ) In the 800 MHz Band Consolidating the 800 and 900 MHz Industrial/ ) Land Transportation and Business Pool Channels ) To Allocate Spectrum Below 3 GHz for Mobile ) And Fixed Services to Support the introduction of ) New Advanced Wireless Services, including ) Third Generation Wireless Services ) 1 Petition for Rule Making of the Wireless 1 Information Networks Forum Concerning the ) Unlicensed Personal Communications Service ) 1 Petition for Rule Making of UT Starcom, Inc., ) Concerning the Unlicensed Personal 1 Communications Service 1 ) The Mobile Satellite Service ) Amendment of Section 2.106 of the Commission?s ) Rules to Allocate Spectrum at 2 GHz for Use by ) To: The Commission INTRODUCTION WT Docket No. 02-55 ET Docket No. 00-258 RM-9498 RM-10024 ET Docket No. 95-18 On November 22, 2004, the FCC?s Report and Order in this proceeding was published in the Federal Register. Preferred and Silver Palm hereby file this Petition for Reconsideration to the Commission?s Report and Order within the thirty (30) dal period specified in the Report and Order for the modification of applications or licenses. In addition to recommending that the FCC reconsider certain of its decisions in the Report and Order, Preferred and Silver Palm propose solutions with respect to the treatment of 800 h4Hz Band Non-Nextel EA and Cellular-Architecture System licensees? EA- and Site-Licensed Spectrum and the allocation of 1.9 GHz Band spectrum that would address the Report and Order?s legal, practical and even mathematical infmities, ~ ? See 47 C.F.R. @ 1.429. 10 the lack of adequate funding of 800 MHz Band relocation costs and 1.9 GHz Band clearing costs and the unavailability in many EA markets of the total channels and/or channels with the matching sites and coverage areas or ?footprints? within the Interleave Channels to accommodate the reconfiguration of the 800 MHz Private Land Mobile Radio Band (806-824 MHd851-869 MHz). 11 DISCUSSION I. Reconfiguration of the 800 MHz Band A. Present Licensing Scheme in the Private Land Mobile Radio Band Under the Commission?s present geographic overlay licensing system for SMR licenses in the Private Land Mobile Radio Band (?PLMRB?) (806-824 MHz/851-869 MHz), a minimum of 26.5 MHz of spectrum is eligible to provide Commercial Mobile Radio Service (?CMRS?)(?Cellular Eligible Service Spe~trum?).~ 9.5 MHz of spectrum in the PLMRB is reserved for public safety licensee^.^ Beginning in 1997, the FCC conducted auctions of the Upper 200, General Category and Lower 80 Channels. Nextel won ninety percent (90%) or more of the licenses granted in the Upper 200 and Lower 80 auctions. However, in the General Category Channels? auction, it won only 76% of the licenses granted. As a result, Nextel or Nextel Partners holds all of the EA-Licensed Spectrum in only fitly-eight (58) Economic Area (?EA?) markets in which 151 million persons live. Nextel or Nextel partners share EA-Licensed Spectrum in one hundred seventeen (1 17) EA markets in which 133.5 million persons reside. In these EA markets, the EA- Licensed and Site-Licensed Spectrum therefore are held by nonaffiliated entities. In these EA markets this ?dual ownership? increases the amount of present Cellular Service Eligible Spectrum from 26.5 MHz to as much as 31-32.5 MHz of such Spectrum. B. Report and Order The FCC sought in the Report and Order to mitigate, if not eliminate, interference with public safety and other systems in the PLMRB by separating high site and high power (?Won-Cellular?) systems tlom low and multi-cell site and low power (?Cellular?) systems? According to the Commission it was guided by the principle that it could This figure is comprised of 7.5 MHz of spectrum in the General Category Channels (806.0125-809.7375 MHd851.0125-854.7375 MHz), 4 MHz in the Lower 80 Channels (16 5 Channels Blocks within 809.7625-815.9875 MHd854.7625-860.9875 MHz), 10 MHz of spectrum within the Upper 200 Channels (816.0125-821.9875 W861.0125- 865.9875 MHz) and 5 MHz in the Business and Industrial LandlTransportation Channels? Pool (within 809.7625-815.9875 MHz/854.7625-860.9875 MHz). In this context, ?cellular service? would be defined as set forth in the Consensus Parties? Reply Comment filed on February 25,2003, at pp. 27-28 and nn. 59-60. See also Nextel Communications, Inc., Ex Parte Presentation, June 14,2004, at p. I. This figure is comprised of seventy (70) channels within 809.7625-815.9875 M?854.7625-860,9875 MHz and the two hundred tlurty (230) NPSPAC Channels (822-824 W866-868 MHz), most of which use a 12.5 Hz, rather than a 25 kHz bandwidth. These latter channels comprise 6 MHz of spectrum. Report and Order, at 1,22 and 142-148. 12 minimize unacceptable interference in this Band by ?placing similar system architectures in like spectrum and isolating dissimilar archtectures from one another.?6 By largely adopting the Consensus Parties Proposal?s movement methodology: the Commission?s Report and Order adopted a plan that also seeks to (1) separate EA-Licensed Spectrum from Site-Licensed Spectrum? (2) separate the EA- and Site-Licensed Spectrum of Nextel Communications, Inc., (?Nextel?) Nextel Partners, Inc. (?Nextel Partners?) and licensees that have executed ether a purchase option or management agreement with Nextel (?Nextel Control Group? or ?NCG) from that of the Non-Nextel Id., at 7 22. Id., at 77 149-151 & n. 402. In declining to adopt Preferred?s Improvements, the FCC mischaracterized Preferred?s plan as not providing public safety licensees additional PLMRB spectrum rights. Under Preferred?s Improvements public safety licensees would be afforded exclusive access to seventy (70) additional PLMRB channels (channels 121- 150; channels 201-208, 221-228, 241-248 and 261-268) or twenty (20) more channels than allocated to public safety licensees by the Consensus Parties? Proposal. Although the FCC adopted Nextel?s subsequent modification of the Consensus Parties? Proposal to provide for a Guard Band (816-817 MHd861-862 MHz) and Expansion Band (815-816 MHd860-861 MHz) in the Report and Order, given the number of Non-Nextel Site licenses required to be moved from Channels 1-150 and Channels 401-600 if the Non- Nextel EA and Cellular-Architecture System licensees? spectrum holdings are to be relocated to Clean Upper 200 Channels spectrum held by the NCG, such Guard and Expansion Band practically will be unavailable to public safety licensees. See Concepts To Operations, Inc., Analysis of the Relocation of Non-Nentel SMR. BILT and Public Safety Site Licenses in Channels 1-150 and 401-600 Under the FCCS Report and Order (?CTO Report?) attached hereto as Exbibit A, and Southern Communications Services, Inc., Ex Parte Presentation, October 8, 2004. Given the unavailability of these Bands, Preferred?s Improvements provide more additional spectrum to public safety licensees than does the rebanding approach adopted by the Commission in the Report and Order. Given the legal, practical and mathematical infirmities of the Report and Order and the FCC?s failure to articulate a basis for declining to adopt Preferred?s Improvements, a reviewing court likely would fmd that the Commission?s determination to select the Consensus Parties? movement methodology and resulting PLMRB plan would be found to be arbitrary and capricious and an abuse of its discretion, or otherwise not in accord with law under the Administrative Procedure Act. See 5 U.S.C. §706(2)(A), Preferred March Ex Parte, at p. 46 (section is entitled ?Additional Spectrum for Public Safety and Critical Inkastructure Licensees?) and Southern Communications Services, Inc., Ex Parte Presentation, June 21, 2004, at pp. 15-16. See also Comparison Channel Movement Charts attached hereto as Exhibit B. * See Mobile Relay Associates? and Skitronics, LLC?s Motion for Partial Stay Of Decision Pending Appellate Review, November 19, 2004; Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, at p. 27 (?Preferred March EX Parte?). EA licensees and certain Site licensees that have deployed Cellular- Arclutectae systems (?Cellular-Architecture System Licensees?);9 (3) move the Nextel Control Group?s Site-Licensed Spectrum to the former NPSPAC Channels and 1.9 GHz Band spectrum on an EA market wide, Clean 1:l basis;? and (4) exclusively reserve the former NPSPAC Channels and 1.9 GHz Band spectrum to the NCG.? Given the above, the Report and Order relocates Non-Nextel Control Group Site licenses in Channels 1-150 to the Interleave Channels (Channels 151-400) to be vacated by the NCG.? Although it is somewhat unclear, the FCC?s rebanding rationale set forth above would appear to require relocation of Non-Nextel Site licenses in Channels 401- 600 to channels 151-400 within the Non-Cellular B10ck.l~ This conclusion is buttressed by the Report and Order?s relocation of Non-Nextel EA and Cellular-Architecture System licensees? EA-Licensed and qualifying Site-Licensed Spectrum to the Clean Upper 200 Channels presently held and to be vacated by the Nextel Control Group. As set forth in the CTO Report attached hereto as Exhibit A absent relocation of the Non- Nextel Site licenses the NCG holds insufficient Upper 200 Channels spectrum to accommodate the Report and Order?s movement of Non-Nextel EA and Cellular- Architecture System licensees? spectrum holdings without applying the pro rata distribution approach set forth in paragraph 168 and footnote 444. As discussed below and in Appendix I at length, the pro rata distribution approach clearly violates both the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the US. Con~titution?~ and the Commission?s statutory mandates to promote regulatory parity?? and to promote competition.I6 ?See Report and Order, at 77 151, 168 & n. 444, 196,325 & n. 743; Preferred March Ex Parte, at pp. 26-27,29-35 and 43-44. lo Id., at 77 23,68-74 and 198; see also Preferred March Ex Parte, at pp. ?? See Report and Order, at 77 65-74, 151 and 198; see also Preferred March Ex Parte, at ?See Report and Order, at fl23, 151 and 198. l3 See id., at fl 1-2,22, and 142-148. I4 For a general discussion of the constitutional limitations upon the FCC?s authority to modify licenses under Section 316, see William L. Fishan, Proper@ Rights, Reliance and Retroactivity Under the Communications Act of 1934, 50 Federal Communications Law Journal 2, 13-23 (1997)(?Fishman?). See also Preferred March Ex Parte, at p. 29 & n. 58. Is Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66 $ 6002(d)(3)B), 107 Stat. 312, 397 (1993), 47 U.S.C. $332 (c). See Amendment of Part 90 of the Commission?s Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, First Report and Order, Eighih Report and Order and Second Further Notice of Proposed Rulemaking, 11 FCC Rcd 1463, at 1483, 7 23 & n. 88 (?800 MHz SMR First Report and Order?); Amendment of Part 90 of the Commission?s Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, Second Report and Order, 12 FCC Rcd 19079 at 19087-88, MI 10, 12 25-28 and 41-43. 14 In paragraph 162 of the Report and Order17, the Federal Communications Commission (?FCC? or ?Commission?) provided Non-Nextel EA and Cellular- Architecture System Site licensees (?Cellular System Site Licensees?) an ?incentive? to relocate their respective systems by providing them the flexibility of the following three options: (1) Relocate all of their systems in an EA market into the ESMR portion (817- 824 MHz/862-869 MHz) portion of the band where they will share spectrum with Nextel, Nextel Partners and licensees which have executed a management or purchase option agreement with Nextel (?Nextel Control Group? or ?NCG?); (2) Relocate their systems as close as possible to the ESMR portion of the band but remain in the non-cellular portion of the band, i.e., in order of preference: (a) the 816-817 MHz/861-862 MHz Guard Band; @) the 815-816 MHd860-861 MHz Expansion Band; and (c) channels below 815 MHd860 MHz if necessary. According to the FCC, these licensees will operate on a strict non-interference basis, subject to pre-coordination of any new or modified operations; or (3) Remain on their current channels in the non-cellular portion of the band on a strict non-interference basis, subject to pre-coordination of any new or modified operations. In paragraph 163, the FCC expounded upon the frst option it afforded Non- Nextel EA and certain Site licensees. According to the Commission, if a Non-Nextel EA or Cellular-Architecture System Site Licensees elect to relocate to the ESMR portion of the band, their EA licenses will move upon an EA market wide, Clean 1:l basis. The FCC also recognized that these Licensees also hold Site-Licensed Spectnun. The FCC therefore also determined to provide these Licensees the option of relocating their Site- Licensed Spectrum along with their EA-Licensed Spectrum to the ESMR portion of the band. However, to transfer Site-Licensed Spectrum, a Non-Nextel EA or Cellular- Architecture System Site Licensee must: (a) currently hold an EA license in the relevant EA market; and and 15 & n. 35 (800 MHz SMR Second Report and Orde?); Amendment of Part 90 of the Commission b Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, Memorandum Opinion and Order of Reconsideration, 14 FCC Rcd 17556 at 17564, 1 11 & n. 30 (?800 MHz SMR Memorandum Opinion?). l6 47 U.S.C. $j 309(j)(3)(B) and (4)(C) and 47 U.S.C. $j 257. ?7 Report and Order, at 1 162. 15 (b) be using the Site-Licensed Spectrum as part of a cellular-architecture system in that EA market as of the date of the publication of the Report and Order in the Federal Register.?* Moreover, to create a more uniform licensing scheme, the transferred Site- Licensed Spectrum would be converted to EA-Licensed Spectrum on a Clean 1:l basis. If Non-Nextel EA or Cellular-Architecture System licensees elect to move to Guard Band or must be relocated to the Expansion Band, or to the spectrum immediately below, when necessary, subject to the conditions set forth immediately above, their Site-Licensed Spectrum also would be converted to EA-Licensed Spectrum on a Clean 1: 1 basis. In footnote 444 to paragraph 168 of the Report and Order, the FCC seemingly contradicts the three preceding paragraphs by placing an additional limitation upon the movement of EA- and Site-Licensed Spectrum held by Non-Nextel EA and Cellular- Architecture System Site Licensees into the ESMR portion of the band. In paragraph 164 the Commission had noted that in some EA markets insufficient spectrum in the ESMR portion of the band may be available due to multiple incumbent ESMR licensees already operating in the band. The FCC cited, but did not limit this possible problem of insufficient spectrum to, those markets in which Nextel or Nextel Partners and Southern Communications Services (?Southern?) are offering service. Noting that Southern holds a large number of channels (average of 85 channels in its core markets) in the interleaved portion of the band and licenses for some General Category channels (average of 94 channels in its core markets). Although not mentioned by the Commission, Southern also holds a considerable number of Lower 80 channels (average of 26 channels in its core ?* This new two-part ?Cellular Deployment Test? for Site-Licensed Spectrum impermissibly confiscates the present spectrum right held not only by Non-Nextel EA and Cellular-Architecture System licensees, but also by SMR Site licensees to offer cellular service on such Spectrum. See Motion for Partial Stay, at pp. 4-5. By failing to provide Non-Nextel EA, Cellular-Architecture System and SMR Site licensees reasonable notice that the retention of such spectrum right would be conditioned upon the (1) location of their respective Site-Licensed Spectrum within an EA market in which they also hold an EA authorization, and (2) the construction status of such qualifymg Site-Licensed Spectrum as of the date the Report and Order was to be published in the Federal Register, the FCC confiscated such spectrum right in violation of the Due Process Clause of the Fifth Amendment to the US. Constitution. See, e.g., McElroy Electronics Corp. v. FCC, 990 F.2d 1351, 1358 (?[Wle look not at the reasonableness of the Commission?s intended interpretation, but at the clarity with which the agency made that intent known.?) See id., at 1363-64. Under the McEZroy decision and its progeny, the Commission clearly did not provide these licensees sufficient notice that it would confiscate their respective spectrum right to offer cellular service on their Site Channels. Moreover, such ?Cellular Deployment Test? violates the Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution and the FCC?s statutory mandates to maintain regdatory parity and promote diversity of license ownership and competition. See 47 C.F.R. 3 332; 47 U.S.C. 3 309G)(3)(B) and Cj)(4)(C); and 47 U.S.C. 3 257. markets). Southern therefore holds an average of two hundred five (205) Interleaved, Lower 80 and General Category Channels (10.2 MHz of spectrum) in its core markets. In several of these EA markets, Southern also holds the A Frequency Block EA Authorization in the Upper 200 Channels. We have attached a Summary Spreadsheet and a Complete Spreadsheet detailing Southern?s and Nextel?s or Nextel Partners? spectrum holdings in these and other EA markets as Schedule 4 hereto. As a result, the FCC concluded that are an inadequate number in the 816-824 -861-869 MHz band to replicate the channel capacity of both Southern and Nextel or Nextel Partners. The Commission noted that in ex parte filings Southern and Nextel had cited a preliminary agreement in which they proposed to widen the 816-824 MHz/861-869 MHz band such that the lower edge would begin at 813.5 W858.5 MHz. With the ESMR portion of the band so widened by one hundred (100) paired channels, Southem and Nextel would engage in a channel-for-channel exchange that would result in the configuration of channels shown in Appendix G to the Report and Order. Although the FCC noted that the Southern and Nextel agreement was not fmal and that the parties had not been able to agree on a fmal apportionment of channels in the Atlanta, Georgia EA market, on its own motion the Commission defued the ESMR portion of the band in the area shown in Appendix G as the band segment 813.5-824 MHd858.5-869 MHz. The Expansion Band in these markets shall extend from 812.5-813.5 MHd857.5-858.5 MHz. In paragraph 168 the FCC provides that if Nextel and Southern fail to reach such agreement within the prescribed period, they shall submit their differences to the Transition Administrator who will attempt to facilitate a fmal agreement. If the disputed matters are not resolved within thirty (30) days, the Transition Administrator will submit the entire record to the Commission for de novo review. The FCC then continues by stating that ?[plarties are hereby put on notice that disputed matters concerning the ESMR channels in any area of the country, including the area shown in Appendix G may be resolved by the Commission making a pro rata distribution of ESMR channels.? Citing footnote 444, the FCC then states in that footnote: ?When the ESMR spectrum is not adequate to accommodate all eligible licensees that wish to relocate in the ESMR block, and parties are unable to agree, we may apportion the ESMR block as a function of the relative spectrum rights each licensee holds in a given EA. For example, in a hypothetical market, outside the area shown in Appendix G, in which licensee ?A? currently has rights to 150 channels and licensee ?B has rights to 250 channels, the 320 channels in the ESMR block would be apportioned by giving licensee ?A? access to 128 channels (40%) and licensee ?B access to 192 channels (60%).?19 l9 The Commission initially should note that its pro rata distribution example set forth in footnote 444 is in error. Licensee ?A? has 37.5% of the total EA Channels and therefore should have rights to one hundred twenty (120) channels while licensee ?B has 62.5% of the total EA Channels and shouId receive spectrum rights to two hundred (200) channels. A second and much greater problem is that the FCC?s pro rata distribution approach is based on the rights to ESMR channels currently held by various parties in the 800 MHz band. Such approach ignores that under the Report and Order Nextel?s or Nextel 17 Partners? relinquishment of spectrum rights to certain channels in the 800 MHz band in the one hundred eighteen (118) EA markets in which it shares EA-Licensed Spectrum with Non-Nextel EA licensees is compensated either (1) by the award of 1.9 GHz band spectrum as replacement spectrum, or (2) as partial payment for the grant of 10 MHz of spectrum in the 1.9 GHz band. Under this approach Nextel or Nextel Partners therefore effectively would receive a double spectrum ?credit.? This double spectrum ?credit? is illustrated by considering the Washington-Baltimore- DC-MD-VA-WVA-PA (BEA) EA in which Nextel and Preferred Communication Systems, Inc. both hold EA and Site Channels. In this market Nextel currently holds EA Authorizations comprising three hundred thirty (330) EA channels while Preferred holds such Authorizations comprising one hundred (100) EA channels. The new Cellular Block has three hundred twenty (320) channels including those in the Guard Band. Under the pro rata distribution approach set forth in footnote 444, Nextel would hold 76.74% of the total EA Channels and therefore would receive two hundred forty-six (246) EA Channels and Preferred would hold 23.26% of the total EA Channels or seventy-four (74) channels. Although Nextel experiences a loss of eighty-four (84) channels, under the Report and Order these Channels previously have been counted as relinquished and used as a spectrum ?credit? toward the Commission?s award of 1.9 GHz band spectrum. In this EA market Nextel therefore would receive a double ?credit? the EA Channels lost. By contrast, Preferred would receive no 1.9 GHz spectrum rights or spectrum ?credit? for its twenty-six (26) lost EA Channels even though it has offered to contribute $180 million to defray total 800 MHz Band relocation costs and 1.9 GHz band clearing costs. This offer has not been recognized in the Report and Order. In the Puerto Rico EA market Nextel currently holds EA Authorizations comprising one hundred forty (140) EA Channels while Non-Nextel EA licensees hold EA Authorizations comprising two hundred sixty-five (265) EA Channels (Preferred 125; North Sight Communications, Inc.: 120; and High Tech Communications Services, Inc.: 20). Under the pro rata distribution approach, apportioning these currently held rights in accordance with footnote 444 would result in Nextel holding 34.57% of the total EA Channels. As a result, Nextel would be granted one hundred eleven (1 11) EA Channels of the three hundred twenty (320) available channels. Under such approach the Non- Nextel EA licensees would hold 65.43% of the total EA Channels and therefore would receive two hundred nine (209) EA Channels. Nextel would experience a reduction of twenty-nine (29) channels but would receive the entire 10 MHz of the 1.9 GHz band in this EA market (a net gain of 171 EA Channels) while the Non-Nextel EA licenses would lose fifty-six (56) EA Channels and would not be entitled to receive any 1.9 GHz band spectrum as compensation. Preferred?s current EA Channels were obtained pursuant to FCC Auction #34. Preferred maintains that the reduction in EA Channels by the pro rata distribution approach set forth in paragraph 168 and footnote 444 in the Report and Order constitutes an 18 1. Underlying Assumptions of Report and Order. In largely adopting the Consensus Parties Proposal?s movement methodology, with respect to the sufficiency of the Nextel Control Group?s spectrum holdings within (a) the Interleave Channels (Channels 151-400) to accommodate the relocation of Non- Nextel Sm BILT and Public Safety Site Channels within Channels 1-15020 and if the Commission?s rebanding rationale is to be applied consistently:? the Non-Nextel SMR, BILT and Public Safety Site Channels within Channels 401-600?2 Under the Report and Order, such relocated Site licensees are required to receive ?comparable facilitie~.??~ Such term encompasses the following: the Report and Order necessarily accepted most, if not all, of that Proposal?s assumptions (1) equivalent channel capacity (defmed by the FCC?s rules as the same number of channels with the same bandwidth that is currently available to the end user)?4 (2) equivalent signaling capability, baud rate and access time;25 (3) coextensive geo aphic coverage:6 and (4) operating costs. To test the Report and Order?s assumptions set forth above, Preferred retained Concepts To Operations, Inc. (?CTO), to download the Non-Nextel SMR, BILT and Public Safety Site licenses in Channels 1-150 and 401-600 in every EA market and prepare a license spreadsheet reflecting these results. Preferred also requested that CTO to determine whether the Nextel Control Group held sufficient spectrum within Channels 151-400 to accommodate the Report and Order?s proposed relocation of such Non-Nextel Site licenses. Finally, since the Commission?s rules require such relocated Site licenses to receive coextensive geographic coverage, Preferred requested that CTO compare the ?footprints? of the Non-Nextel Site SMR, BILT and Public Safety licenses to be R uncompensated taking of its EA spectrum rights in violation of the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the US. Constitution. 2o See Report and Order, at fl23, 153. ?? See n. 9 supra. 22 See Non-Nextel SMR, BILT and Public Safety Site Licenses spreadsheet attached as Schedule 1 to the CTO Report attached hereto as Exhibit A. 23 See Report and Order, at 7 201 & n. 527. 24 See id., Amendment of Part 90 of the Commission?s Rules to Facilitate Future Development of 800 MHz Systems in the 800 MHz Frequency Band, Second Report and Order, PR Docket No. 93-144, 12 FCC Rcd 19079, 19112-13 7 92 (1997)(?800 MHz SMR Second Report and Order?); see also 47 C.F.R. 8 90.699(d)(2). 25 Id. 26 Id. ?Id. 19 relocated in the top eleven (1 1) EA markets as ranked by population used by the FCC to determine Nextel?s 800 MHz General Category, Lower 80 and BILT spectrum ho1dmgs2* to the ?footprints? of the Interleave Channels (Channels 151-400) presently held and to be vacated by the NCGZ9 CTO initially examined whether the Nextel Control Group holds sufficient Interleave Channels to accommodate the relocation of Non-Nextel SMR, BILT and Public Safety Site licenses ffom both Channels 1-150 and Channels 401-600 on a total channels basis. Based upon the FCC?s license database as of June 30, 2004, CTO found that in forty-nine (49) more ?heavily congested? EA markets in which 174.79 million persons (2003 census figures) reside, the NCG lacks sufficient spectrum within the Lower 80 Channels to accommodate either the relocation of (1) Non-Nextel SMR, BILT and Public Safety Site licenses in Channels 1- (2) those Site licensees and the Non-Nextel SMR, BILT and Public Safety 150; and Site licenses in Channels 401-600. CTO then assumed that all of the NCG?s BILT Channels? site coordinates and geographic ?footprints? match3? and subtracted the Nextel Control Group?s BILT channels r om the excess Non-Nextel SMR, BILT and Public Safety licenses in the forty- nine (49) ?heavily congested? EA markets. As CTO?s Report indicates, even if all of the NCG?s Interleave Channels? geographic ?footprints? match those of the Non-Nextel SMR, BILT and Public Safety licenses within Channels 11-150 and 401-600 to be relocated under the Report and Order?s movement methodology, in thirty-eight (38) EA markets in which 103.18 million persons reside, or approximately thirty-six percent (36%) of the US. population, the NCG still lacks sufficient spectrum holdings to accommodate the Report and Order?s relocation of Non-Nextel SMR, BILT and Public Safety licenses. CTO then examined the alternative rebanding scenario pursuant to which the Transition Administrator and the FCC do not relocate Non-Nextel SMR, BILT and Public Safety Site licenses &om the Upper 200 Channels to the Interleave Channels ?* See Report and Order, at 7 3 18 & n. 733. 29 For this purpose CTO used both the actual coverage and the 22 dBu contour boundary of the Non-Nextel SMR, BILT and Public Safety licensees and the Nextel Control Group to compare ?footprints.? Although the Commission?s rules and the Report and Order are somewhat unclear on this point, Preferred and CTO adopted the position that the term ?coextensive geographic coverage? means virtually identical geographic and population coverage at the same site coordinates or at a site coordinate that would represent a minor modification thereof (would not increase the contour bounh). 30 For this purpose CTO considered that a ?match? would exist if the Non-Nextel SMR, BILT or Public Safety Site license?s site coordinates were within a one quarter mile of the site coordinates of the Nextel Control Group?s Interleave Channel and the relocation would constitute a minor modification under the Commission?s rules. 20 presently held by and to be vacated by the Nextel Control Group. Given the Report and Order?s exclusive reservation of the former NPSPAC Channels and the 1.9 GHz Band Spectrum respectively to the NCG and Nextel,? CTO sought to determine whether the Nextel Control Group holds sufficient Clean spectrum holdings in the Upper 200 Channels to accommodate the Report and Order?s relocation of Non-Nextel EA and Cellular-hhitecture System licensees? EA- and qualifymg Site-Licensed Spectrum. CTO downloaded the FCC license database as of June 30, 2004 with respect to Non-Nextel SMR, BILT and Public Safety licenses in the Upper 200 Channels and created the Nextel Control Group Clean Spectrum Holdings in Channels 410-600 spreadsheet attached hereto as Schedule 3 to CTO ?s Report. As this Schedule indicates, in the majority of EA markets the NCG holds sufficient Clean Upper 200 Channels spectrum to accommodate the relocation of the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spechum. However, in forty (40) EA markets, in which 64.28 million persons, or approximately 22.46% of the total U.S. population resides, the Nextel Control Group lacks sufficient Clean Upper 200 Channels to accommodate the relocation of the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifling Site-Licensed Spectrum. Given these results, CTO now is examining the geographic ?footprints? of each Non-Nextel SMR, BILT and Public Safety Site licenses in Channels 1-150 and 401- 600 and those of the Nextel Control Group in the top eleven (11) EA markets by population to determine the extent of this spectrum ?shortfall.? Preferred will submit CTO?s fmdings concerning whether the NCG?s Interleave Channels spectrum holdings are sufficient to satisfy the Commission?s rules concerning ??comparable facilities? set forth above to the FCC when they become available within the next few days. 2. Legal Infities ofReport and Order Given the practical and even mathematical infirmities of the Report and Order, a reviewing court necessarily will employ a heightened degree of scrutiny with respect to the FCC?s rationale(s) for its discriminatory treatment of Non-Nextel EA and Cellular-Architecture System licensees with respect to movement within the PLMRB. As noted above, the Report and Order exclusively reserves to the Nextel Control Group both the (1) former NPSPAC Channels (Channels 601-830 under the present PLMRB (2) 10 MHz of 1.9 GHz Band ~pectrum.?~ In the fifty-seven (57) EA markets in which Nextel or Nextel Partners holds all of the General Category and Lower 80 EA-Licensed Spectrum, the Report and licensing scheme);32 and 3? Seen. 14 supra. 32 See id. 33 See id. 21 Order?s rebanding approach is both logical and relatively simple.34 One hundred twenty (120) channels of the General Category EA authorizations move on an EA market wide Clean 1:l basis to the former NPSPAC Chel~.~~ Although the Report and Order is silent on this point, the thirty (30) excess General Category EA channels necessarily would be modified and swapped or exchanged for 1.9 GHz Band spectrum on an EA market wide, Clean 1:1 basis.36 Similarly, Nextel?s or Nextel Partners? Lower 80 EA and BILT Site Channels would be modified by swapping or exchanging them for 1.9 GHz Band spectrum on an EA market wide Clean and 1: 1 basis.? In these EA markets Nextel and Nextel Partners experience a considerable increase in their respective Total, Clean and Cellular Service Eligible Spectrum?? In the one hundred nineteen (119) EA markets in which Nextel or Nextel Partners shares EA-Licensed Spectrum with Non-Nextel EA and Cellular-Architecture System the Report and Order?s rebanding approach becomes illogical and convoluted. Given the Report and Order?s adoption of the Consensus Parties? movement methodology, it necessarily accepted their goal of separating the Nextel Control Group?s EA- and Site-Licensed Spectrum from that of the Non-Nextel EA and Cellular- Architecture System licensees.40 As a result, the Report and Order excludes the Non- Nextel EA and Cellular-Architecture System licensees from relocating to the former NPSPAC Channels4? and the 1.9 GHz Band spectrum exclusively reserved to the NCG.4? As noted above, under the FCC?s present PLMRB licensing scheme, a minimum of 26.5 MHz of spectrum is Cellular-Service Eligible Spectrum in all one hundred seventy-five (175) EA markets!3 In the one hundred nineteen (1 19) EA markets in which Nextel and Nextel Partners share EA-Licensed Spectrum with Non-Nextel EA licensees, this figure increases to 31-32 MHz due to the Commission geographic overlay licensing scheme. In seeking to bifurcate the present PLMRB into two separate blocks 34 These EA markets are set forth in spreadsheets attached hereto as Exhibits C and D. 35 See Report and Order, at 77 151,198 and 325 & n. 743. 37Seeid.,at7711,23,31,35,6S-74, 151, 198,307,317-18,323and325&n.743. 38 See the Nextel Control Group?s Clean Spectrum Holdings in Channels 401-600 s readsheet attached hereto as Schedule 2 to CTO ?s Report. 3BThese EA markets are set forth in spreadsheets attached hereto as Exhibits E and F. 40 See Preferred March Ex Parte, at pp. 2-3,25-29 and 41-44. 4? See AirPeak Communications, LLC Ex Parte Presentation, August 16, 2004; and AirPeak Communications, LLC Ex Parte Presentation, September 23, 2004. Preferred has leamed that the Wireless Telecommunications Bureau staff recently has indicated to both Airpeak and Airtel Wireless, LLC, both Cellular-Architecture System licensees, that their respective General Category and Lower 80 EA- and Site-Licensed and BILT Site Channels spectrum holdings may be relocated to the former NPSPAC Channels. 42 See n. 14 supra. 43 See n. 6 supra; Report and Order, at Seeid.,at~~ll,23,31,35,65-74, 198,307,314-16,321 and325&n. 743. 36 22 and 36-39. LL for Non-Cellular (22 MHZ) and Cellular (14 MHz) systemsM and precluding the Non- Nextel EA and Cellular-Architecture System licensees kom the former NPSPAC Channels and the 1.9 GHz Band as replacement spectrum, the Report and Order necessarily is required to squeeze these licensees? spectrum holdings into the Clean Upper 200 Channels presently held and to be vacated by the NCG. In many EA markets the Nextel Control Group holds sufficient Clean Upper 200 Channels spectrum to accommodate the relocation of Non-Nextel EA and Cellular- Architecture System licensees? EA- and qualifying Site-Licensed Spectrum without requiring Nextel or Nextel Partners to vacate a considerable portion of their respective Upper 200 Channels. However, as the Nextel Control Group?s Clean Spectrum Holdings in Channels 401-600 spreadsheet attached hereto as Schedule 3 to CTO?S Report indicates in forty (40) EA markets in which 64.28 million persons reside, Nextel or Nextel Partners lack sufficient Clean Upper 200 Channels to accommodate the relocation of the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum without vacating a considerable portion of its Upper 200 Channels spectrum and incurring significant capital expenditures for additional cell sites to replace lost operating system capacity!? To minimize the loss of the Nextel Control Group?s Upper 200 Channels and capital expenditures that otherwise be required to maintain operating system capacity the FCC added the language to paragraph 168 and footnote 444 extending the pro rata distribution approach beyond Southern?s core EA markets in Georgia, Alabama, southeastern Mississippi and northern Florida set forth in the Report and Order?s Appendix G to any dispute between a Non-Nextel or Cellular-Architecture System licensee and Nextel or Nextel Partners with respect to ESMR channels!6 Under this approach, in the one hundred eighteen (118) EA markets in which Nextel or Nextel Partners shares EA-Licensed Spectrum with Non-Nextel EA and Cellular-Architecture System licensees, Nextel or Nextel Partners would experience an increase or maintain its present Total Spectrum and a considerable increase in its Clean and Cellular-Service Eligible Spectrum. 44 In the Report and Order, the Commission states that it is allocating 18 MHz of PLMRB spec- to the Non-Cellular Block and 14 MHz of such spectrum to the Cellular Block. See Report and Order, at 77 11 and 151. Since the 4 MHz in the Guard and Expansion Bands are available to Public Safety and other Non-Cellular System licensees and that no Non-Nextel EA licensee would elect to move any of their respective EA authorizations to such Bands, Preferred believes that this spectrum properly should be considered part of the Non-Cellular Block. See Southern Communications Services, Ex Parte Presentation, October 8, 2004 (insufficient spectrum for Expansion Band to which Public Safety licensees could be relocated in the Atlanta, Georgia EA market due to numerous Non-Nextel and Non-Southern licensees in Channels 1-1 50; therefore requested clarification that Expansion Band restrictions not applicable to this EA market). 45 See Nextel Communications, Inc., Ex Parte Presentation, June 14,2004, at pp. 4-5 & n. 17. See Report and Order, at 7 168 and n. 444. 23 In the Sacramento, California EA market, for example, without the application of the pro rata distribution approach under the Report and Order Nextel?s Total Spectrum would increase from 21.55 to 26.0 MHz. Its MHflops Equivalent and EA- Wide Market Spectrum respectively would increase from 18.40 MHz and 16.50 MHz to 26.0 MHz. To accommodate the relocation of Preferred?s and AirPeak Communications, LLC?s EA- and qualifymg Site-Licensed Spectrum comprising one hundred forty (140) channels or 7 MHz, Nextel would vacate one hundred forty (140) of its two hundred (200) Clean Upper 200 Channels. Nextel?s Total, M?ops Equivalent and EA-Wide Market Spectrum therefore respectively would be reduced by 7 MHz to 19.0 MHz. While Nextel would experience a slight reduction in its Total Spectrum, its MHzPops Equivalent and EA-Wide Market Spectrum respectively would increase by 3.26% and 15.2%. However, if the pro rata distribution approach is applied, Nextel would receive 70.83 % of the three hundred twenty (320) channels available or two hundred twenty-seven (227) ~hannels.4~ Preferred and AirPeak Communications, LLC would receive the remaining ninety-three (93) channels. Under this approach, Nextel would recover forty-seven (47) channels or 2.35 MHz of spectrum and Preferred and AirPeak Communications, LLC collectively would lose that number of channels. Nextel?s Total Spectrum thus would be reduced from 21.55 MHz to 21.35 MHz, or .25 MHz. Its MHflops Equivalent and EA-Wide Market Spectrum respectively similarly would be increased to 21.35 MHz, a considerable increase of 2.95 MHz of MHzlPops Equivalent Spectrum and 4.85 MHz of Cellular-Service Eligible Spectrum.48 By contrast, Preferred and AirPeak Communications, LLC?s Total Spectrum would be reduced eom one hundred forty (140) to only ninety-three (93) channels, a decrease of forty-seven (47) channels, or 33.58% decrease in Total Spectrum. Preferred?s sixty (60) MHzPops Equivalent and seventy-five (75) Cellular-Service Eligible channels would be reduced to fifty (50) channels, respectively a 16.7% and 33.3% decrease. AirPeak Communications, LLC?s sixty-five (65) Total Channels would be reduced to thirty-eight (38) channels, a 42.54% decrease.49 In discussing the pro rata distribution approach with respect to Nextel?s and Southern?s EA- and Site-Licensed 47 Although the Cellular Block consists of only 14 MHz, in footnote 444 the FCC used three hundred twenty (320) channels or 16 MHz in its example of how the pro rata distribution approach would be applied by the Commission. 48 To make up for this perceived Total Spectrum shortfall, the FCC amended its rules so that Nextel could use its 900 MHz Band Spectrum holdings for CMRS. Moreover, the Commission?s amendment permitted other 900 MHz Band licenses to sell or othenvise assign their respective licenses to Nextel for CMRS use. See 47 C.F.R. 5 90.621(f); Report and Order, at 7 6. Based upon Nextel?s published spectrum holdings, the FCC?s amendment would increase Nextel?s 800 and 900 h4Hz EA-Wide Market Spectrum by a proximately seventy-two (72) chels, or 3.6 MHz. 44)For further discussion of the application of the pro rata distribution approach and its practical, mathematical and legal infhties, please review Appendix I attached hereto. 24 Spectrum, the Commission noted that both companies would suffer a reduction in their respective total number of channels.5o However, the FCC maintained that Nextel has additional spectrum at 900 MHz which it can use to offset the shortfall and is receiving 10 MHz of 1.9 GHz Band spectrum.5? According to the Commission Southern?s loss of total channels was mitigated by its relocation to the Cellular Block and receipt of Clean and conti ous spectrum arguably of greater value and capacity than the spectrum it now occupies ? However, based upon Preferred?s analysis of five (5) representative EA markets in which Nextel or Nextel Partners shares EA-Licensed Spectrum with one or more Non-Nextel EA licensees and/or Cellular-Architecture System licensees, it appears that the FCC?s characterization of the mitigating effect of Non-Nextel EA and/or Cellular-Architecture System licensees? receiving Clean Spectrum is incorrect.53 In seeking to separate the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spec- from that of the Nextel Control Group and reduce their respective Total, and in many EA markets, MHdPops Equivalent and Cellular-Service Eligible Spectrum, the Report and Order impermissibly discriminates against the Non-Nextel EA and Cellular-Architecture System licensees as follows: (1) exclusively reserves the former NPSPAC Channels as replacement spectrum to the Nextel Control (2) exclusively reserves the 1.9 GHz Band spectrum as replacement spectrum to Nextel and Nextel Partners:5 (3) through application of the pro rata distribution approach set forth in paragraph 168 and n. 444, conditions the relocation of Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum to the Cellular Block to their acceptance of a reduction in their respective Total, and in many EA markets, Clean and Cellular-Service Eligible Spectrum;56 and See Report and Order, at 1 168. Id. Id. As discussed in Appendix I attached hereto, even in Southern?s core EA markets (Georgia, Alabama, southeast Mississippi and northern Florida), the pro rata distribution approach operates to reduce Nextel?s or Nextel Partners? Total Spectrum slightly while considerably increasing its Clean and Cellular-Service Eligible Spectrum and, by contrast, reduce Southern?s Total, Clean and Cellular-Service Eligible Spectrum. For a detailed discussion of the effect of the pro rata distribution approach upon the spectrum holdings of Non-Nextel EA and Cellular-Architecture System licensees in the Sacramento, California, Washington-Baltimore, DC-Maryland, Atlanta Georgia, Puerto Rico and the Staunton, Virginia, see Appendix I attached hereto. 54 See n. 14 supra. 55 See id. 56 See generally Appendix I attached hereto and Nextel Control Group?s Clean Spectrum Holdings in Channels 401-600 in Schedule 3 attached thereto. 53 25 (4) relocates the NCGs unconstructed Site-Licensed Spectrum to the former NPSPAC Channels and the 1.9 GHz Band spectrum on an EA market wide Clean 1:l basis while imposing conditions upon the movement of Non-Nextel EA and Cellular-Architecxure Systems licensees? constructed and unconstructed Site-Licensed Spectrum?? In 1993 Congress enacted the Omnibus Budget Reconciliation Act. Included in this legislation was an amendment of Section 332 of the Communications Act of 1934, as amended. Pursuant to this amendment the Commission is required to maintain regulatory parity among cellular, PCS and SMR licensees, all of whom fall under the category of Commercial Mobile Radio Service (?CMRS?) ~roviders.~? Although Nextel refers to the Commission?s statutory requirement to maintain regulatory parity only in terms of the FCC?s providing equal regulatory treatment with respect to the cellular and PCS carriers and itself:9 Preferred maintains that the FCC?s duty to maintain regulatory parity is even more applicable to providers within a single service, such as Nextel, Nextel Partners, Southern, Preferred, A.R.C., Inc., AirPeak Communications, LLC, Skitronics, LLC and Airtel Wireless, LLC6? In addition, in two separate statutes Congress has mandated that the FCC promote competition among SMR operators.61 In the Fresno Mobile Radio decision6?, the D.C. Circuit Court of Appeals found that the Commission could not discriminate among similarly situated EA licensees and the holders of Extended Implementation Authorizations (?EIA) with respect to construction requirements absent articulation of a reasonable basis for the disparity in regulatory treatment.63 Ironically, in the Fresno Mobile Radio remand proceeding, Nextel itself filed comments in support of regulatory parity. Nextel specifically requested that the Commission afford wide area 800 MHz SMR licensees using BILT Channels the same flexible construction requirements as those given to other CMRS providers because they provide similar services.? Nextel now argues and the Report and 57 See Report and Order, at 7 163. 58 47 U.S.C. 5 332(d)(2). See Implementation of Sections 3(n) and 332 of the Communications Act, GN Docket No. 93-252, Second Report and Order, 9 FCC Rcd 141 1, 1417 (1994)(?CMRS Second Report and Order?) and Preferred March Ex Parte, at 16-17 & n. 11-22. See, e.g., Nextel Communications, Inc., Supplemental Response, May 7, 2004, at pp. 10, 13, 17-18; Nextel Communications, Inc., Comments, May 6,2002, at pp. 12-13. ?? See Southern Communications Services, Inc., Ex Parte Presentation, June 21, 2004, at ?? 47 USC. 4 309 (i)(3)(B) and (4)(C) and 47 U.S.C. 5 257. See, e.g., Public Notice, Media Bureau Seeks Comment on Ways to Further Section 257 Maadoe and to Build on Earlier Studies, June 15,2004. 62 Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C. Cir. 1999). 63 Id., at 970. PP 5. Nextel Communications, Inc., Comments, March 27,2000, PR Docket No. 93-144, at 1-2. and 5-6. 26 Order provides that for purposes of 800 MHz rebanding the reverse is true with respect to Non-Nextel EA and Cellular-Archtecture Systems licensees other than Southern. The Consensus Parties? Proposal largely adopted by the FCC sought to differentiate between the Nextel Control Group and the Non-Nextel EA licensees primarily upon the present construction status or architecture of their respective systems!? Recognizing the weakness of the so-called ?Cellular Deployment Test,? the FCC apparently sought to address Nextel?s opposition to relocating Non-Nextel EA and Cellular-Architecture System licensees EA- and qualifying Site-Licensed Spectrum.66 However, absent articulation of a reasonable basis for: (1) excluding the Non-Nextel EA and Cellular-Architecture System licensees? (other than perhaps AirPeak Communications, LLC and Airtel Wireless, LLC) EA- and qualifying Site-Licensed Spectrum from relocating to the former NPSPAC Channels as replacement spectrum;67 (2) excluding the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum from relocating to the 1.9 GHz Band spectrum as replacement spectrum;6* (3) conditioning the relocation of Non-Nextel EA and Cellular-Architecture System licensees? EA- and Site-Licensed Spectrum to the Cellular Block upon their acceptance of reduction of their respective Total, and in many EA markets, Clean and Cellular-Service Eligible Spectrum while increasing considerably the NCG?s Clean and Cellular-Service Eligible Spectrum; and (4) imposing conditions upon the relocation of Non-Nextel EA and Cellular- Architecture System licensees? constructed and unconstructed Site- Licensed Spectrum to the Cellular Block while moving the Nextel Control Group?s constructed and unconstructed Site-Licensed Spectrum to the Cellular Block and 1.9 GHz Band spectrum on an EA market Clean and I : 1 bad9 65 See Preferred March Ex Parte, at pp. 25-26. 67 As pointed out by AirPeak Wireless Communications, LLC in a recent ex parte presentation, allowing Non-Nextel EA and Cellular-hhitecture System licensees to select the channels within the Cellular Block to which their respective EA- Licensed and qualifying Site-Licensed Spectrum would be relocated would require fewer re-tunings, less time and less expense than the approach advocated by Nextel and adopted in the Report and Order by the FCC. See AirPeak Communications, LLC, Ex Parte Presentation, September 23,2004, at pp. 3-4. 69 Arguably, by imposing the pro rata distribution approach and relocating the NCG?s constructed and unconstructed Site-Licensed Spectrum on an EA market Clean and 1 : 1 basis, the FCC is forcibly confiscating the Non-Nextel EA and Cellular-Architecture System licensees? Total and, in many EA markets, Clean and Cellular-Service Eligible Spectrum and transfening them to the NCG. For a detailed discussion if this point, see See Nextel Communications, Inc., Ex Parte Presentation, June 14,2004, at p. 5. Seen. 14 supra. 27 a reviewing court necessarily would reach the same result as the Fresno Mobile Radio decision, namely that the Commission?s discriminatory treatment of Non-Nextel EA and Cellular-Architecture System licensees was arbitrary and capricious in violation of Section 5 of the Administrative Procedure Act7? Moreover, as noted above, Congress has addressed the precise questions at issue?? As the FCC notes in the Report and Order, Section 316 of the Communications Act grants the FCC broad authority to modify already existing license^.^' However, such broad authority clearly is circumscribed by the statutory mandates enacted by Congress requiring the FCC to exercise such modification authority so as to maintain regulatory parity among cellular, PCS and SMR licensees and among SMR licensees as a single class and promote competition among such licensees. Given the Report and Order?s violation of these statutory mandates, a reviewing court necessarily would disallow the FCC?s exercise of its modification authority. Finally, as noted by Southern, the Commission cannot make any lawful distinctions between the Nextel Control Group and the Non-Nextel EA and Cellular- Architecture System licensees with respect to the relocation of their respective EA- and Site-Licensed Spectrum within the PLMRB.73 Neither Nextel?s promise to contribute funds to pay the total 800 MHz band relocation costs and its pro rata share of the UTAM relocation and all of the BAS licensee relocation costs in the 1.9 GHz Band spectrum nor its interference with public safety and other licensees? systems in the PLMRB can justify the Report and Order?s different treatment. As Southern pointed out, Nextel Partners, which is not promising to pay $1 toward 800 MHz or other relocation costs and causes little, if any, interference with public safety and other licensees? systems in the 800 MHz Band, is afforded the same favorable treatment as Ne~tel.~~ Appendix I attached hereto. For a discussion of the Consensus Parties Proposal?s attempt to affect the same result, see Preferred March Ex Parte, at pp. 27-29. 70 5 U.S.C. 5 706(2)(A). See Atlantic Tele-Network, Inc. v. FCC, 59 F.3d 1384, 1389 (D.C. Cir. 1995). Such disparate treatment involving the Non-Nextel EA and Cellular- Architecture System licensees? loss of spectrum rights and the failure by the Commission to articulate a reasonable basis therefor violates the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution. See Bolling v. Sharpe, 347 US. 497 (1954)(holding that the Fifth Amendment?s Due Process Clause prohibits arbitrary discrimination by the federal government); Appendix I attached hereto; Southem Communications Services, Inc., Ex Parte Presentation, June 21,2004, at p. 11; andFishman, atpp. 11- 13. ? See ChevronU.S.A., Inc. v. NRDC, 467 US. 837 (1984). ?See Report and Order, at 73 Southern Communications Services, Inc., Ex Parte Presentation, June 21, 2004, at pp. 11-15. 74 Id., at pp. 13-16. See also Report and Order, at 7 325 & n. 743. 12,65-74. 28 C. Nextel?s and Others? Requests for Clarification In exparte presentations filed in September 2004, Nextel requested the following ?clarifications? to the Report and Order with respect to its relocation of licenses within the PLMRB. First, Nextel contends that SMR, BILT and Public Safety licensees should not be moved fiom Channels 121-150 with the General Category Channels are unnecessary to carry out the Commission?s reorganization of the PLMRB, would disrupt incumbents without countervailing public interest benefits and not result in additional spectrum becoming available for use by public safety li~ensees.7~ Interestingly enough, the Commission determined to relocate SMR, BET and Public Safety Site licenses fiom Channels 121-150 to provide Public Safety licensees nationwide access to thuty (30) channels or 1.5 MHz of spectrum?6 As noted above, Preferred?s Improvements relocated SMR, BILT and Public Safety Site licenses from Channels 121-150 to the Interleave Channels presently held and to be vacated by the Nextel Control Group on a matching geographic ?footprint? ba~is.7~ Preferred continues to support this position and maintains that such allocation would provide Public Safety licensees with needed additional spectrum to develop interoperability. Preferred therefore opposes Nextel?s request for ?clarification? or the relocation of SMR, BILT and Public Safety Site licenses within Channels 121-150. Nextel also requested ?clarification? that incumbent Non-ESMR EA licensees? EA- and Site-Licensed Spectrum on Channels 1-120 (other than Nextel and Southern) would be retuned to comparable channels below 861.4 MHz, i.e., they will receive comparable channel availability and interference protection from high-density cellular operators?8 Nextel?s suggested ?clarification? is a recitation of the Consensus Parties? Proposal as enhanced by Nextel in certain of its June 2004 Ex Parte filings.? Preferred already has addressed the legal, practical and mathematical problems resulting from such impermissible discriminatory treatment at length above and in its Ex Parte Presentations 75 Nextel Communications, Inc., Ex Parte Presentation, September 16, 2004, at p.2; and Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 6. 76 See Report and Order, at 7 153. 77 See Preferred March Ex Parte, at p. 45. See Nextel Communications, Inc., Ex Parte Presentation, September 16, 2004, at p. 2; and Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 6. See Nextel Communications, Inc., Ex Parte Presentation, June 4, 2004; Nextel Communications, Inc., Ex Parte Presentation, June 8, 2004, at pp. 6-8; Nextel Communications, Inc., Ex Parte Presentation, June 14,2004, at pp. 4-7. 78 79 29 filed on March 2,2004 and April 23,2004.? incorporates these Ex Parte Presentations and their Exhibits by reference.?? For the sake of brevity, Preferred hereby Nextel?s ?cl~fication? seeks to revive the discredited Cellular Deployment Test that the Consensus Parties? Proposal employed to (1) separate the EA- and Site-Licensed Spectrum of the Nextel Control Group and Non-Nextel Control Group EA licensees and (2) move only the NCG?s (and, to a limited extent, Southern?s) EA- and Site-Licensed Spectrum to the Cellular Block on an EA market wide, Clean and 1 : 1 basis. Instead of limiting the movement of Non-Nextel EA licensees? EA- and Site-Licensed Spectrum into the new Cellular Block to their geographical ?footprint? as proposed by the Consensus Parties, in its Ex Parte Presentation filed on September 16, 2004 Nextel reaffhms the position it adopted in its June Ex Parte Presentations that such movement should be limited to the number of the Non-Nextel EA licensees? Clean or MHflops Equivalent Channels. Nextel thus advocates that the winners of FCC Auction #34, such as Preferred, should lose Total Channels in its EA markets while the losers of such Auction in those EA markets such Nextel or Nextel Partners would gain a considerable number of Total, Clean and Cellular-Service Eligible Spectrum. Under Nextel?s proposed ?clarification,? the Non-Nextel EA licensees holding General Category EA- Licensed Spectrum effective1 would be forced to transfer both spectrum (Total Channels) and spectrum rights to the Nextel Control Group and, unlike the members of such Group, not receive value-for-value for such c~ntribution.~~ Preferred maintains that the constitutional and statutory infirmities of the Consensus Parties Proposal?s impermissible discriminatory treatment of Non-Nextel EA licensees apply to Nextel?s proposed ?clarificati~n.?~~ For all of the reasons set forth above, Preferred opposes Nextel?s proposed clarification. 8T On October 8, 2004, Southern filed an ex parte presentation seeking a clarification that the restrictions associated with the Expansion Band in the Atlanta, Georgia EA market (812.5-813.5 MHd857.5-858.5 MHz) are inapplicable due to the considerable number of Non-Nextel and Non-Southern SMR, BILT and Public Safe Site licenses that would be relocated to the Interleave Channels in this EA market. Preferred maintains that Southern?s filing reinforces the practical and even mathematical difficulties encountered by the Report and Order set forth above. Moreover, Southern?s filing ignores the fifty-four (54) Non-Nextel Site licenses in the Upper 200 Channels in 2 See Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, at pp. 23-29; & 41-45; Preferred Communication Systems, Inc., Ex Parte Presentation, April 23, 2004, at p. 3-7. See also Southern Communications Services, Inc., Ex Parte Presentation, June 23,2004, at pp. 11-16. For Nextel Communications, Inc.?s responses to Preferred?s criticism of the Consensus Parlies Proposal?s impermissible discriminatory treatment of Non-Nextel EA licensees, see Nextel Communications, Inc., Ex Parte Presentation, March 19,2004. See 47 C.F.R. 4 90.683; and Preferred March Ex Parte, at pp. 25-27,29-35 and 41-43. 83 See Report and Order, at11 5, 12,31-34, 85,213-216 and 278-324. 84 See Preferred March Ex Parte, at pp. 41-43. 85 See Southern Communications Services, Inc., Ex Parte Presentation, October 8,2004. 30 the Atlanta, Georgia EA market that also arguably should be relocated to the Interleave A review of the FCC?s license database as of June 30, 2004, confirms Southern?s analysis.?? Preferred therefore supports Southern?s proposed clarification to the Report and Order. On September 23, 2004, AirPeak Communications, LLC filed an ex parte presentation seeking clarification that it may elect to relocate its EA- and qualifying Site- Licensed Spectrum to the former NPSPAC Channels (821-824 -866-869 MHz) within the new Cellular Block since such election would not: (1) increase the cost of retuning their systems; (2) delay the retuning process; and (3) not adversely impact the ongoing operations of either Nextel or public safety entities.*? As discussed above, the Report and Order?s movement methodology fails on practical and even mathematical grounds due to the considerable number of Non-Nextel SMR, BILT and Public Safety Site licenses that need to be relocated from Channels 1- 150 and, if the Report and Order?s rationale for rebanding is to be applied consistently, such licenses in Channels 401-600,89 to the Interleave Channels?? Moreover, if the Transition Administrator and the Commission choose not to relocate Non-Nextel SMR, BILT and Public Safety licenses ffom the Upper 200 Channels, in forty (40) EA markets in which 64.28 million persons reside, Nextel or Nextel Partners lack sufficient Clean Upper 200 Channels Spectrum to accommodate the relocation of Non-Nextel EA and Cellular-Architecture System licensees absent application of the pro rata distribution approach?? Preferred therefore supports AirPeak Communications, LLC?s proposed clarification. Preferred would expand AirPeak Communications, LLC?s proposed clarification. As discussed below, Preferred maintains that all Non-Nextel EA and Cellular- Architecture System licensees should be afforded a second election to move their respective EA- and qualifying Site-Licensed Spectrum to either the (1) former NF?SPAC Channels; or (2) Upper 200 Channels 86 See n. 9 supra. ? See Non-Nextel SMR, BILT and Public Safety Licenses in Channels 1-150 and Channels 401-600 attached hereto as Schedule 2 to the CTO Report. ?? See AirPeak Communications, LLC, Ex Parte Presentation, September 23,2004, at pp. 3-4. 89 See n. 9 supra. 90 See n. 85 supra. 91 See Nextel Control Group Clean Spectrum Holdings In Channels 401-600 attached as Schedule 3 to the CTO Report. 31 within the new Cellular Block on an EA market Clean and 1 : 1 basis?2 Such approach generally would require fewer re-tunings, less time and less expense than the approach advocated by Nextel and adopted by the FCC in the Report and Order?3 As noted by AirPeak Communications, LLC, moving the General Category EA-Licensed Spectrum of Non-Nextel EA licensees to the former NPSPAC Channels will minimize the costs Nextel and Nextel Partners will incur in modifying their respective network^?^ D. Preferred?s Improvements In March 2004, Preferred proposed certain modifications to the Consensus Parties? Proposal?? Unlike the Consensus Parties? Proposal or the approach adopted by the Commission in the Report and Order, Preferred?s rebanding approach maintains the spectrum and spectrum rights of all Non-Nextel EA and Cellular-Architecture System licensees. As noted above, with respect to General Category EA-Licensed Spectrum, a Non- Nextel EA licensee would have a second election with respect to the Channels within the new Cellular Block to which its Channels would be relocated. With respect to Lower 80 EA-Licensed Spectrum, a Non-Nextel EA licensee would have a second election pursuant to which its Channels would be relocated either to the (1) Upper 200 Channels beginning with Channel 600 and moving downward; or 92 If a Non-Nextel EA or Cellular-Architecture System licensee were to choose the first prong of such election, Channels 1-30 of its General Category EA Authorizations would be retuned to Channels 571-600 in the Upper 200 Channels, if held by Nextel or Nextel Partners in a particular EA market and thus available to be vacated and Channels 31-150 of its General Category EA Authorizations would be retuned to Channels 601-720 (as calculated on a 25 kHz bandwidth basis) in the former NPSPAC Channels, on an EA marker wide Clean 1 : 1 basis. If, as in the Puerto Rico EA market, Channels 576-600 in the Upper 200 Channels were not held by Nextel or Nextel Partners and therefore were unavailable, the Non-Nextel EA licensee?s Channels 1-30 if its General Category EA Authorizations would be relocated to the 1.9 GHz Band spectrum in that EA market on an EA market Clean and 1 : 1 basis. 93 See AirPeak Communications, LLC, Ex Parte Presentation, September 23,2004, at pp. 3-4. 9.1 See Nextel Communications, Inc., Ex Parte Presentation, June 14, 2004, at p. 5 & n. 17; Nextel Communications, Inc., Ex Parte Presentation, September 16,2004, at p. 2; and Nextel Communications, Inc. Ex Parte Presentation, September 21,2004, at Slide entitled ??Wextel?s Retuning Costs.? 9? See Preferred March Ex Parte, at p. 45. 32 (2) 1.9 GHz Band spectrum on an EA market Clean and 1:l basis. With respect to Site-Licensed Spectrum held by either a Non-Nextel EA or Cellular-Architecture System licensee, Preferred maintains that such licensee should be afforded an election to move its Site Channels to the Cellular Block on an EA market Clean and 1:l basis if it constructs such Channels as part of a Cellular-Architecture System by the construction deadline afforded Nextel and Nextel Partners for their respective unconstructed Site-Licensed Spectrum?6 No justification was provided by the FCC in the Report and Order for its discriminatory treatment of Non-Nextel EA and Cellular-Architecture System licensees' Site-Licensed Spectrum. Preferred maintains that no lawful distinctions can be made by the Commission between the Site-Licensed Spectrum held by the NCG and Non-Nextel EA and Cellular-Architecture System licensees justifying different treatment for purposes of 800 MHz rebanding. 11. Allocation of 1.9 GHz Band Spectrum A. Report and Order The FCC rejected the Consensus Parties Proposal's exclusive allocation to Nextel of a nationwide 10 MHz license in the 1.9 GHz Band in exchange for its vacating a nationwide average of approximately 2.5 MHz in the 800 MHz Band, 4 MHz in the 700 MHz Guard Band and 4 MHz in the 900 MHz Band and its promise to pay up to $850 million to defray total 800 MHz Band relocation costs since it perceived that such approach provided an insufficient benefit to Public Safety licensees and spectrum of less than comparable value to that of the 1.9 GHz Band spectrum Nextel would be granted.97 Instead, the Commission exclusively allocated Nextel 1.9 GHz Band Spectrum on a "value-for-value" exchange basis?' The Commission initially determined that the value of the 1.9 GHz Band spectrum it would award Nextel was $1.70 per MHzPop or $4.86 billion.99 The FCC then determined that the value of the 4.5 MHz of 800 MHz Band spectrum Nextel was vacating"' was $1.526 per MHflop."' Multiplying such figure by the 4.5 MHz of 800 MHz Band spectrum to be vacated and Nextel's 234 million licensed Pops, the Commission determined that the value of such spectrum was $1.607 billion.''* The FCC 96 See Nextel Partners, Inc., Form 10-K for the period ended December 31,2003, at pp. 20-21. 98 See id. 99 See id., at 7 297. loo See id., at 7 307. ''I See id., at 7 323. lo' See id. See Report and Order, at fl32,212 and 278. 97 33 then added the amount of Nextel?s projected $827 million relocation costs and the $527 million cost of the UTAM and BAS licensee 1.9 GHz Band spectrum relocation costs.Io3 Unable to determine the probable amount of the total 800 MHz Band relocation costs, the Commission required Nextel to provide a $2.5 billion irrevocable letter of credit to secure its promise to pay all reasonable 800 MHz Band relocation Finally, to ensure that Nextel would not receive a spectrum ?windfall? the FCC imposed an Anti-Windfall payment of the difference between the $4.86 billion value of the 1.9 GHz Band spectrum Nextel would receive and its costs in reconfiguring the 800 MHz band and clearing the 1.9 GHz Band.?? A considerable part of the difficulty encountered by the FCC in fitting all of the EA- and Site-Licensed Spectrum held by the Nextel Control Group and Non-Nextel EA licensees into the ESMR portion of the band, which led to its adoption of the pro rata distribution approach, is the FCC?s separation of 800 MHz rebanding fiom its exclusive allocation to Nextel of 10 MHz of 1.9 GHz band spectrum by a private sale. The Commission could have based its allocation of such spectrum upon its Section 316 modification authority by moving the General Categoly and Lower 80 EA- and Site- Licensed Spectrum held by EA licensees and the BILT Channels held by EA licensees that previously had been converted to CMRS according to the type of license held rather than upon the identity of the licensee. The problem with this approach advocated by Preferred and other Non-Nextel EA licensees was that Nextel apparently was unwilling to share 1.9 GHz band spectrum.?o6 Instead, the Report and Order separates the Nextel Control Group?s EA- and Site- Licensed Spectrum fiom that of Non-Nextel EA and Cellular-architecture System Site licensees. As noted above, it then substitutes a ?value-for-value? approach to the exclusive allocation of 10 MHz of 1.9 GHz band spectrum to Nextel for the ?kHz-for- ICHZ? approach advocated by the Consensus Parties? Proposal. The Commission?s approach clearly was intended to answer Verizon Wireless? challenge to the FCC?s legal authority to award Nextel a nationwide 10 MHz license in the 1.9 GHz band under the Anti-Deficiency and Miscellaneous Receipts Act.lo8 However, by establishing a $4.8 billion fair market value ?price tag? for the 1.9 GHz band spectrum, the Commission clearly converted a modification of Nextel?s 800 MHz Spectrum for which it has authority under Section 316 to a private sale of 1.9 GHz band spectrum clearly IO3 See id., at 303-304. The BAS licensee relocation costs would be reduced by any MSS-reimbursed expenses incurred prior to the end of the thirty-six (36) month reconfiguration period when offsets will be calculated. ?Os See id., at fl12 and 212. IO6 See Nextel Communications, Inc., Ex Parte Presentation, March 19,2004, p. 1 & n. 2. Io? The Anti-Deficiency Act, 31 U.S.C. 5 1341(a)(l)(B). log The Miscellaneous Receipts Act, 31 U.S.C. 8 33020). See id., at 182-187,325 and 329-332. 34 contravening the mandatorily applicable competitive bidding provisions of Section 3O9(j).'O9 In the Report and Order the FCC maintains that Section 309(j) is inapplicable since the award of a nationwide 10 MHz license in the 1.9 GHz band to Nextel does not represent such a major modification of its 800 MHz Interleave and Lower 80 EA and Site Channels to be vacated as to be considered the issuance of an "initial license.""' The Commission then determines that even if Nextel's spectrum rights and responsibilities resulting from the FCC's award of 1.9 GHz band spectrum awarded were so different fiom those of its 800 MHz band spectrum to be vacated that such award of 1.9 GHz band spectrum should be considered the grant of an initial license, it has the authority under Section 3 16 to avoid mutual exclusivity when it determines that such avoidance serves the public interest, convenience and necessity."' As support for this position, the FCC cited Section 309(j)(6)(E)"' and the Conference Report concerning the 1997 Balanced Budget Act."' According to the FCC, Section 309(j)(6)(E) provides it with broad Unlike the authorities cited and relied upon by the FCC in determining that it has the Section 316 modification authority to allocate a nationwide 10 MHz license in the 1.9 GHz band, the Commission already has allocated the 1.9 GHz band spectrum for commercial services and indicated the desirability of using this Spectrum for advanced wireless service. See Report and Order, at 65-68; Cellular Telecommunications & Internet Association, Ex Parte Presentation, December 4, 2003, p. 12; Verizon Wireless, Whitepaper, at pp. 10-11. 'lo See Report and Order, at fl 72-73 and n. 236. The Commission refers to California Metro Mobile Communications v. FCC, 365 F.3d 38, 45 (D.C. Cir. 2004) as support for the proposition that it may move licensees on a service-wide basis without license-by- license consideration. See Report and Order, at 7 65 & n. 214. The FCC would be correct if it had chosen to adopt a movement methodology based upon the type of license held. Instead, in its Report and Order, it bases such movement methodology upon the identity of the licensee and impermissibly discriminates between the EA- and Site- Licensed Spectrum held by the Nextel Control Group and that held by the Non-Nextel Control Group EA and Cellular-Architecture System Site Licensees both with respect to movement within the 800 MHz band and the allocation of 1.9 GHz band spectrum. In determining whether such discrimination is justified, a reviewing court necessarily will consider the Report and Order's movement of 800 MHz band licenses held by these two groups and its exclusive allocation of 1.9 GHz band spectrum to Nextel on a license-by- license basis. See id.. at 773 and n. 237. 'I2 47 U.S.C. § 309(j)(6)(E). 'I3 H.R Conf. R~D. No. 105-217. 105" Cone.. 1'' Sess.. at 572 (1997); 1997 U.S. Code -, Cong. & Admin: News, p. 192; see also Commission's R&s Regarding Multiple Address Systems, Report and Order, 15 FCC Rcd 11956, 11962-63 (2000); DirectW, Inc. v. FCC, 100 F.3d 816, 828 (D.C. Cir. 1997); cf: Benkelman Telephone Co. v. FCC, 220 F.3d 601,605-606 (D.C. 2000). Contra Verizon Wireless White Paper, at pp. 15-16. 35 authority to create or avoid mutual exclusivity in licensing depending upon the Commission?s assessment of the public interest.Il4 The Commission?s argument suffers ffom several factual and legal infirmities. First, the 10 MHz nationwide license in the 1.9 GHz band to be awarded clearly differs in significant ways from the Lower 80 EA and Site Channels and BILT Channels exchanged therefor: A nationwide ?running? average of 5.5 MHz of the 1.9 GHz band spectrum would represent new and additional spectrum; No service rules have been promulgated for the 1.9 GHz band spectrum; FCC likely would follow the service rules promulgated under Part 27 of its Rules which differ from the service rules applicable to Nextel?s 800 MHz band spectrum; Nextel would be awarded a single nationwide license in exchange for its 800 MHz EA- and Site-Licensed Spectrum in one hundred four (104) EA markets; Nextel would be awarded a nationwide license even though it holds no 800 MHz band spectrum in seventy-one (71) EA markets in which 43 million persons live and work;?5 Nextel would be awarded Clean and Contiguous Spectrum even though the nationwide ??running? average of 4.5 MHz of 800 MHz band spectrum is largely encumbered by EA Authorizations and Site licenses held by nonaffiliated entities; and Nextel would be awarded such Clean and Contiguous Spectrum even though a considerable portion of its 800 MHZ band spectrum is Site- Licensed Spectrum with a small grouping of frequencies and limited geographic and population coverage.?I6 ?I4 See Report and Order, at 7 73 & n. 237. See Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, Exhibit F. Nextel Partners also holds 800 MHz spectrum in several EA markets in which Nextel holds 800 MHz spectrum covering the majority of the total population. Nextel Partners? spectrum in these EA markets covers a total of 10 million Pops. See also Nextel Partners, Inc. Form 10-K for the period ended December 31,2003, pp. 7-8. ?I6 Under previous FCC decisions, the conversion of the Nextel Control Group?s Site- Licensed Spectrum into a single nationwide 10 MHz PCS license in the 1.9 GHz band is by itself the award of an initial license triggering the competitive bidding requirements of Section 3096). See Verizon Wireless White Paper, at pp. 11-12; see also Verizon Wireless, LLC, Ex Parte Presentatioq June 10, 2004, p. 7. The award of a nationwide license would be considered an initial license under the Commission?s rules since it clearly would be a ?major modification.? Under such Rules, a licensee? request ?to add a fixquency or frequency block for which the applicant is not currently authorized? is considered a ?major modification.? 47 C.F.R. 8 1.929(a)(6). The Commission has long regarded such a ?major modification? as the equivalent of an ?initial license? that is subject to the competitive bidding provisions of Section 309Cj) since such changes are ?analogous to applications for construction permits for new stations? and because of ?the 115 36 Second, assuming arguendo, as does the Commission, that the award of the 10 MHz nationwide license in the 1.9 GHz band involves the issuance of an initial license,?? the FCC clearly no longer could rely upon its Section 316 modification authority to restrict participation in such spectrum allocation to Nextel. In such event, the Commission could look only to Section 309Cj)(6)(E) as authority for its avoiding mutual exclusivity and the competitive bidding provisions of Section 309Cj). However, a reading of the legislative history of this section indicates that it was meant to encourage the FCC in certain situations to accommodde all parties seeking access to a particular block of spectrum?I8 where such an arrangement would better serve the public interest, convenience and necessity. This paragraph was added to Section 309 to address the concerns of companies interested in obtaining MSS or Big LEO authorizations that the new competitive bidding provisions would disrupt the MSS rulemaking proceeding. The paragraph was intended to eliminate their opposition to auctions by its encouragement of the Commission to specifically seek an aman ement to avoid mutually exclusive applications in the MSS or Big LEO proceeding. I,$ As noted above, the FCC contends that Section 309(j)(6)(E) provides it with broad discretionary authority to avoid mutual exclusivity based upon its determination of the public interest.?? However, based upon this section?s legislative history, such discretion is limited to determining whether it would better serve the public interest to allocate s ectnun to a class of licensees on a pro rata or settlement basis or by a public auction.?? None of the authorities cited by the FCC, including the MSS L-Band Order, authorize it to award an initial license to a single entity, particulary where, as here, the absence of another viable method for resolving instances of mutual exclusivity in a timely and efficient manner.? Implementation of Section 309u) of the Communications Act4ompetitive Bidding for Commercial Broadcast And Instructional Fixed Service Licenses, First Report and Order, 13 FCC Rcd 15920, 15925-26 (1998). ?I7 See Verizon Wireless white Paper, at pp. 11-12 & n. 49. See also Fresno Mobile Radio, Inc. v. FCC, 165 F.3d965,970 (D.C. Cir. 1999). ?I9 See id. I2O See Report and Order, at 7 73 and n. 236. 12? See Verizon Wireless White Paper, at p. 15; see also Flexibility for Delivery of Communications by Mobile Satellite Service Providers in the 2 GHz Band, the L-Band, and 1.612.4 GHz Bands, Report and Order and Notice of Proposed Rulemaking, IB Docket No. 01-185, 18 FCC Rcd 1962, 2070 at T 225 & n. 591 (2003) (?MSS/ATC Order?); Establishing Rules and Policies for the Use of Spectrum for Mobile Satellite Services in the Upper and Lower L-Band, Notice of Proposed Rulemaking, IB Docket No. 96-132, 11 FCC Rcd 11675, 11685, at 77 23-24 (1996)rMSS L-Band NPW); Report and Order, 17 FCC Rcd 2704 (2002)(?MSS L-Band Order?); Amendment of the Commission?s Rules to Relocate the Digital Electronic Message Service from the 18 GHz Band to the 24 GHz Band for Fixed Service, ET Docket No. 97-99, 12 FCC Rcd 4990 (1997), recon. denied, 13 FCC Rcd 15147 (1998)(?DEMS Ordei?). See id., atp. 16; H.R. Rep. No, 103-111, at 258-59 (1993). 37 Commission already has allocated the spectrum in question for advanced commercial service. The FCC conrends that i has the authority to establish threshold qualifications and limit eligibility to apply for a license where it finds that such restricted access serves the public interest, convenience and necessity.Iu However, most analysts and subsequent court decisions have found that the U.S. Supreme Court?s decision in Storer Broadcasting,Iz3 the case relied upon by the Commission, authorizes the FCC to do more than establish reasonable licensee qualification standard^."^ The FCC can establish rules that all licensees may be required to satisfy. It cannot, as it does in the Report and Order, establish the licensee by rule.125 Finally, the Commission argues that mutual exclusivity does not exist since it has not authorized the filing of applications for this spectrum, has never proposed to do so, and for reasons set forth in the Report and Order conclude that it is not in the public interest to open the spectrum for the filing of competitive applications.126 However, the FCC cannot avoid its statutory obligation to maintain regulatory parity and promote ~ompetitionl~~ and allocate licenses for advanced commercial service by a competitive bidding procedure simply by awarding Nextel the 1.9 GHz band spectrum pursuant to a private sale.128 Many investment banking fm analysts recognize that an award of 1.9 GHz band spectrum to Nextel would represent a significant spectrum enhan~ement.?~~ According to some of these analysts, such spectrum award would be a ?transforming event? for Nextel allowing it to construct a CDMA-based 3G network for voice and data or a high speed data network using Flarion Technologies, Inc.?s OFDM technology.130 lu See Report and Order, at 7 74 & n. 239. United States v. Storer Broadcasting Co., 351 US. 192,202 (1956). See, e.g., Committee For Effective Cellular Rules v. FCC, 53 F.3d 1309, 1315 (D.C. Cir. 1995); Aeronautical Radio, Inc. v. FCC, 928 F.2d 428, 459-460 (D.C. Cir. 1991); Telocator Network of America v. FCC, 691 F.2d 525 (D.C. Cir. 1982). 125 Committee for Effective Cellular Rules v. FCC, 53 F.3d 1309, 1315 (D.C. Cir. 1995); Aeronautical Radio, Inc. v. FCC, 928 F. 2d 428,460 (D.C. Cir. 1991); New South Media Corp. v. FCC, 685 F.2d 708,709-711,715-716 (D.C. Cir. 1982). IZ6 See Report and Order at 7 7 1. Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 6002(d) (3) (B), 107 Stat. 397 (1993)(mandating that Commission establish a uniform regulatory regime for all commercial mobile services); 47 U.S.C. 6 309u)(3)(B) & (4)(C); 47 U.S.C. 6 257; see Verizon Wireless White Paper, at pp, 14-15. 124 127 See Verizon Wireless White Paper, at p. 11 & nn. 45-46. See id. I3O See Nextel Sees Resolution of Spectrum Plan in 70 Days, Reuters Online article, October 6, 2004 (?Nextel has said in the past that a resolution of interference problems with public safety networks would help it develop plans for high-speed mobile Internet services. Donahue told investors on Wednesday that he expects Nextel to decide by the 38 Preferred and twenty-seven (27) other licensees share EA-Licensed Spectrum with Nextel or Nextel Partners in one hundred nineteen (119) EA markets. Discriminatory treatment of the Non-Nextel Control Group EA licensees by modifying their EA-Licensed Spectrum differently than that of Nextel?s and excluding them from eligibility to (1) file modification applications for such 1.9 GHz band spectrum in certain EA markets and (2) purchase a portion of such Spectrum in these and other EA markets would violate the Commission?s statutory obligation to ensure regulatory parity among Nextel, Nextel Partners and the Non-NCG EA licensee^.'^' According to Nextel, ?[r]egulatory parity is a fundamental requirement established by Congress in the Omnibus Budget Reconciliation Act of 1993 (?1993 The 1993 Act created the CMRS regulatory classification and expressly directed the FCC to modify its rules for common canier and private mobile radio services ?establish regulatory symmetry among mobile service^.""^ In enacting this legislation, Congress? intent was ?to create a level regulatory playing field for CMRS.??34 As the Commission has determined, the ?broad goal of this [legislation] is to ensure that economic forces-not disparate regulatory burdens-shape the development of the CMRS marketpla~e.??~~ According to Nextel the 1993 Act ?directed the Commission to ensure that all CMRS licensees, including cellular-like SMR licensees, cellular licensees and PCS licensees, are subject to the same rules and regulations, including geographic area licensing and a level regulatory playing field.??36 Further, as Nextel has stated, pursuant to the 1993 Act the FCC has auctioned beginning of next year which technology it will use for such services. He said the company could have a national high-speed network built by the end of 2006. By this time it could deliver media content over its networks and could also partner with cable television operators looking to get into telecommunications.?) Although Nextel refers to the FCC?s statutory requirement to maintain regulatory parity only in terms of the Commission?s providing equal regulatory treatment with respect to the cellular and PCS carriers and itself, such statutory obligation in this context clearly encompasses the class of licensees whose EA- and Site-Licensed Spectrum is to be relocated and thereby modified. See, e.g., Nextel Communications, Inc., Supplemental Response, May 7,2004, at pp. 10, 13, 17-18; Nextel Communications, Inc., Comments, May 6, 2002, at pp. 12- 13; Southern Communications Services, Inc., Ex Parte Presentation, June 23,2004, at pp. 3 & n. 6, 11-12 & n. 48, and 15-16. 13? Southern Communication Services, Inc., Ex Parte Presentation, June 23, 2004, at p. 18. 13? CMRS Third Report and Order, at 7 1. 133 Id., at See also H.R. Rep. No. 103-111 (1993)(1993 Act ?directs the Commission to review its rules and regulations to achieve parity among services that are substantially similar. In addition, the legislation establishes uniform rules to govern the offering of all commercial mobile services.?); Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965,970 (D.C. Cir. 1999). 134 Id., at 7 4. 135 Nextel Communications, Inc., Comments, May 6, 2002, at p. 12. See also, Southern Communications Services, Inc., Ex Parte Presentation, June 23,2004, at p. 3 & n. 6. 11. 136 Id. 39 geographic area overlay licenses in the 800 MHz Land Mobile Radio Band. In doing so, the Commission expressly stated that such licenses could be used to operate ?multiple base station, wide-area ?cellular-type? commercial radio networks in competition with cellular and PCS ~perators.??~? Like Nextel and Nextel Partners, Preferred is seeking an allocation of 1.9 GHz band spectrum so that it might increase its spectrum capacity, improve the cost efficiency of the network it will deploy over the next 2-3 years and offer a fmed high-speed broadband wireless service. Holding the same type of licenses as these companies, Preferred is seeking the same opportunity to compete on an equal basis in the marketplace against cellular and PCS operators. Preferred contends that the FCC is required by the statutory mandates to promote regulatory parity and promote diversity of license ownership and competition among commercial SMR licensees and operators to open up participation in the allocation of 1.9 GHz band spectrum to all General Category and Lower 80 EA licenses whose authorizations are being moved and m~dified.?~ Preferred maintains that if the FCC uses the EA market boundaries and moves the EA-Licensed Spectrum of Nextel, Nextel Partners and the Non-Nextel EA and Cellular- architecture System Site licensees in the same way based upon the type of license held as contrasted with how a particular licensee presently operates its spectrum or the identity of the licensee it clearly has the Section 316 modification authority to allocate 10 MHz or more of 1.9 GHz band spectrum to the class of licensees including all of the General Category and Lower 80 EA 1icen~ees.l~~ Since 5.5-10 MHz or more of the 1.9 GHz band 137 See Preferred Communication Systems, Inc., Ex Parte Presentation, April 23, 2004, at p. 7. See also, Southern Communications Services, Inc., Ex parte Presentation, June 23, 2004, at p. 5 (?Regulatory parity is even more applicable to providers within a single service, such as Nextel, Nextel Partners, and Southern LINC. Thus, Nextel, Nextel Partners, Southern LINC and other CMRS entities should receive comparable regulatory treatment.?); Nextel Communications, Inc., Comments, May 6, 2002, at p. 12 (1993 Act ?directed the Commission to ensure that all CMRS licensees, including cellular-like SMR licensees, cellular licensees, and PCS licensees, are subject to the same rules and re latiom, including geographic area licensing and a level regulatory playing field.?) I35ee Preferred Communication Systems, Inc., Ex Parte Presentation, April 23,2004, at p. 7. See also Southern Communications Services, Inc., Ex Parte Presentation, June 23, 2004, at p. 5 (?Regulatory parity is even more applicable to providers within a single service, such as Nextel, Nextel Partners and Southern LINC. Thus, Nextel, Nextel Partners, Southern LINC and other CMRS entities should receive comparable regulatory treatment.?); Nextel Communications, Inc., Comments, May 6, 2002, at p. 12 (1993 Act ?directed the Commission to ensure that all CMRS licensees, including cellular-like SMR licensees, cellular licensees, and PCS licensees, are subject to the same rules and reptions, including geographic area licensing and a level regulatory playing field.?) l3 Both Nextel and the FCC apparently recognize that adoption of such an approach would provide it with the legal authority lacked by the Enhanced Consensus Parties? Proposal and the present version of the Report and Order. Based upon conversations between certain representatives of A.R.C., Inc. and WTB staff members, the Commission 40 spectrum to be awarded in one of these EA markets would be replacement spectrum and such award arguably would neither be significantly different from or greater than the spectrum modified that it should be considered the award of an initial license under the Fresno Mobile Radio decision, the Commission?s rules or the Competitive Bidding Second Report and Order. Moreover, Section 309(i)(6)(E) would be applicable since the FCC would be providing a solution that would accommodate the replacement spectrum of all members of the class of licensees affected-the General Category and Lower 80 EA licensees whose authorizations are being moved and modified by the FCC. In applying Section 309Cj)(3)(C)?s directive that the FCC should consider whether the award of a particular license or set of licenses outside the competitive bidding provisions of Section 3096) would unjustly enrich the licensee, the FCC necessarily compares the value of the replacement spectrum to that vacated or returned. For the reasons discussed above, the Report and Order would in many EA markets clearly provide Nextel with spectrum reasonably valued at a much greater amount than its 800 MHz band spectrum to be vacated.? In the twenty-eight (28) EA markets in which Nextel holds all of the EA-Licensed Spectrum, the Consensus Parties? Proposal and Nextel?s recent modification would grant it a geographical portion of nationwide 10 MHz as replacement spectrum. However, in the seventy-one (71) EA markets in which Nextel holds no 800 MHz band spectrum and in the one hundred eighteen (1 18) such markets in which Nextel Partners (42 EA markets) or it (78 EA markets) shares EA-Licensed Spectrum with Non- Nextel Control Group EA licensees, the Commission?s award of a geographic portion of a 10 MHz nationwide license in the 1.9 GHz band clearly would provide Nextel with spectrum far more valuable than the 800 MHz spectnun it would surrender. In seventy- one (71) of these markets, Nextel holds no 800 MHz band spectrum to be exchanged. To equalize the value of the spectrum to be exchanged, Nextel would be required to pay the intends to allocate 1.9 GHz band spectrum in each of the 175 EA markets as replacement spectrum for the already existing 800 MHZ band spectrum to be vacated in those EA markets by either Nextel or Nextel Partners. Nextel Partners, Inc. would be allocated 1.9 GHz band spectrum in the seventy-one (71) EA markets in which it, rather than Nextel, holds 800 MHz band spectrum in excess of such replacement spectrum for its agreement to pay its own relocation costs. Such approach would buttress the Commission?s contention that the award of 1.9 GHz band spectrum would not involve the issuance of ?initial? licenses triggering the otherwise mandatorily applicable competitive bidding provisions of Section 3096) and thus minimize the litigation risk posed by the anticipated legal challenge from Verizon Wireless. However, unless such approach also includes the Non-Nextel Control Group EA licensees, it necessarily will violate the Commission?s statutory mandates to maintain regulatory parity and promote competition. See Report and Order, at MI325 & n. 743, 326,345,347, 353 and 357. Contra, Report and Order, at 7 12 and 34. See also Preferred Communication Systems, Inc., March Ex Parte, March 2, 2004, at pp. 49-50; Preferred Communication Systems, Inc., Ex Parte Presentation, April 23,2004, at pp. 5-7. ?40 See Verizon Wireless White Paper, at p. 11 & nn. 45-46. 41 ?full? fair market value of the 1.9 GHz band spectrum, the amount the Commission reasonably could be received if it conducted a competitive auction. In certain of the one hundred eighteen (118) EA markets in which Nextel or Nextel Partners shares EA- Licensed Spectrum, the Consensus Parties? Proposal also would provide Nextel with 1.9 GHz band spectrum far more valuable than the 800 MHz band spectrum Nextel would surrender. To equalize the value of the spectrum to be exchanged, Nextel would be required to pay the ?full? fair market value of the 1.9 GHz band spectrum. Of course, the problem with increasing the cash component in the EA markets in which Nextel lacks 800 MHz band spectrum or Nextel Partners or it shares EA-Licensed Spectrum with Non-NCG EA licensees is that it converts such spectrum modification into a private sale of 1.9 GHz band spectrum in these EA markets clearly triggering the competitive bidding provisions of Section 309(j). Under Preferred?s Improvements all General Category and Lower 80 EA licensees would receive replacement spectrum on a Clean 1 : 1 basis for their encumbered EA-Licensed Spectrum. As discussed above, such licensees? Site-Licensed Spectrum would be exchanged for EA market-wide frequencies on a MHz/Pops Equivalent basis. Given the amount of CMRS Cellular Service Eligible Spectrum moving and modified under all of the Rebanding Proposals presently under consideration by the FCC, a minimum of 5.5 MHz of 1.9 GHz band spectrum is needed to replace already-existing 800 MHz band spectrum. While such 1.9 GHz spectrum may be more valuable than the encumbered 800 MHz band spectrum it would replace, it would not appear that such increase would be as great as that afforded MSS licensees by the Commission in the MSS/ATC Order. Moreover, unlike previous proceedings involving the relocation of fixed microwave or MSS licensees to clear spectrum for its reallocation to commercial service, here SMR EA- and Site-licensees would be relocating their existing systems to replacement frequencies for the benefit of public safety and other systems presently experiencing interference within the 800 MHz band. Under Preferred?s Improvements certain of these EA licensees also would elect to forego reimbursement of their own relocation costs and contribute funds toward the total 800 MHz band relocation costs. These EA licensees would be afforded the opportunity to purchase 1.9 GHz spectrum in a particular EA market in excess of that needed to replace already-existing 800 MHz band spectrum. Given the above facts and the Commission?s need to provide an incentive to EA licensees to pay at least a portion of the total 800 MHz band relocation costs, the FCC should determine that award of 1.9 GHz band spectrum licenses under Preferred?s Improvements would not unjustly enrich the EA licensees in violation of Section 309(j)(3)(C)?s directive. Unlike the Consensus Parties? Proposal, under Preferred?s Improvements all General Category and Lower 80 EA licensees as a class would contribute more spectrally and financially than they would receive from an allocation of 1.9 GHz Band spectrum. As discussed above, such EA licensees would vacate an average of 13-13.5 MHz of 800 MHz band spectrum. 6 MHz of such spectrum would be replaced on a Clean 1 : 1 basis by 6 MHz in the new Cellular Block comprised of the former NPSPAC Channels. An 42 average of 7-7.5 MHz of such spectrum would be replaced on a Clean 1: 1 basis by 7-7.5 MHz in the 1.9 GHz band. Recognizing that (1) additional 1.9 GHz band spectrum is necessary to be allocated as replacement spectrum for already-existing 800 MHz band spectrum that is being moved and modified and (2) practically neither Nextel (and Nextel Partners) nor Non-Nextel EA and Cellular-Architecture System licensees can be expected to contribute considerable funds to defray total 800 MHz relocation costs unless they receive a significant spectrum benefit, under Preferred's Improvements the Commission would increase the allocation of 1.9 GHz band spectrum from 10 MHz (1,910-1,915 discussed above, such additional allocation of 1.9 GHz band spectrum is practically and mathematically necessary to accommodate the reorganization of the PLMRB set forth in the Report and Order and to maintain the spectrum rights of Non-Nextel EA, Cellular- Architecture System and SMR Site licensees. MHd1,990-1,995 MHz) t012.5 MHz (1,910-1916.25 MHd1,990-1996.25 MHz). AS At $1.526 per MHz/F'0p14' the value of the 8.55 MHz of such spectrum to be vacated by the General Category and Lower 80 EA licensees as a class of licensees would have a value of $3.809 billion.'" In addition, Nextel, Preferred and other such EA licensees would forego a minimum of $847 million in reimbursement of their own relocation costs and contribute up to $1 billion to defray total 800 MHz band relocation costs and $527 million in UTAM and BAS licensee relocation costs. The total spectral and financial contributions by all of the General Category and Lower 80 EA licensees as a class of licensees therefore would be $6.183 billion. As noted above, the FCC calculated that the value of such 1.9 GHz band spectrum to be received would be $1.70 per MWop or $4.860 bi1li0n.l~~ The General Category 14' This is the figure used by the Commission in the Report and Order for the 800 MHz Band spectrum to be vacated by Nextel. The total contribution by Nextel, Nextel Partners and the Non-Nextel Control Group EA licensees under Preferred's Improvements would be $6.163 billion. Assuming that the value of the 1.9 GHz band spectrum is the $1.70 per MHzlpop figure determined by the Commission in the Report and Order, these licensees therefore would contribute $1.199 billion more in spectral and financial contributions than they would receive in exchange therefor. See Report and Order, at 77 35,297 and 323. The Non-Nextel Control Group EA licensees hold a nationwide average of forty (40) Channels, or 2 MHz of General Category and Lower 80 EA-Licensed Spectrum that would move and need to be replaced on a Clean 1:l basis in the new Cellular Block. Assuming that such licensees' Site-Licensed Spectrum (including the BiILT Channels held by Southern) also move into the new Cellular Block, the average spectrum figure and value would increase accordingly. '43 Using the $1.70 per MHz/Pop valuation figure determined by the FCC in the Report and Order, under Preferred's Improvements this amount would be $6.0775 billion (286 million Pops multiplied by 12.5 MHz of 1.9 GHz band spectrum multiplied by $1.70 per MWop). Nextel, Nextel Partners and the Non-Nextel Control Group EA licensees 1 42 43 and Lower 80 EA licensees as a class of licensees therefore would contribute $1.323 billion more in spectral and financial contributions than they would receive in exchange therefor. Under Preferred's Improvements the General Category and Lower 80 EA licensees therefore clearly could not be considered to have received an undue benefit or be unjustly enriched in violation of Section 309(j)(3)(C). B. Nextel's Request for Clarification In an exparte presentation filed on September 21, 2004, Nextel requested that the Commission clarify the Report and Order with respect to its calculation of the value of Nextel's spectral contribution.'" Although not entirely clear from its ex parte presentation, Nextel apparently is seeking credit for the value of the 800 MHz Band spectrum to be vacated by Nextel Partners, I~c.'~' Preferred maintains that Nextel's request confirms the legal infirmity of the Report and Order's exclusive allocation of 1.9 GHz Band spectrum to Nextel. If the Commission allocates the 1.9 GHz Band spectrum to Nextel in the seventy-one (71) EA markets in which it holds no 800 MHz Band spectrum, such award of spectrum clearly is pursuant to a rivate sale rather than a modification of its already existing 800 MHz Band spectrum.'.'' On the other hand, if the FCC allocates the 1.9 GHz Band as replacement spectrum for the already-existing 800 MHz Band spectrum held by Nextel or Nextel Partners in the one hundred seventy-five (1 75) separate EA markets, the Commission would have no basis for denying Non-Nextel EA and Cellular-Architecture System licensees from participating in the award of 1.9 GHz Band spectrum.'.'' Preferred therefore supports Nextel's proposed clarification to the Report and Order based upon its understanding that the FCC will award the 1.9 GHz Band spectrum on an EA market basis to Nextel, Nextel Partners and Non-Nextel EA and Cellular- Architecture System licensees depending upon which of them holds the 800 MHZ Band spectrum to be vacated in a particular EA market. C. Preferred's Improvements In its March 2004 ex parte filing, Preferred proposed that the Commission explicitly recognize that a minimum of 5.5 MHz of 800 MHz Band EA- and Site- therefore would receive a benefit of $409.5 million. Presumably, these licensees would See Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide See Report and Order, at 7 325 & n. 743. See Preferred March Ex Parte, at pp. 4,37-38 and 41-42. 14' Preferred has been informed by representatives of A.R.C., Inc. that the Wireless Telecommunications Bureau has adopted the latter position. According to A.R.C.'s representatives the Wireless Telecommunications Bureau's position is based upon the language in footnote 743 in the Report and Order. ay such amount to the U.S. Treasury as an anti-spectrum windfall payment. P" 9. 44 Licensed Spechum needed to be moved and exchanged for 1.9 GHz Band spectrum.?48 In the one hundred eighteen (118) EA markets in which Nextel or Nextel Partners share General Category and Lower 80 EA-Licensed Spectrum with Non-Nextel EA licensees, such figure increases from 5.5 MHz to as much as 8-9 MHz. As noted above, under Preferred?s Improvements the FCC would modify and move the General Category, Lower 80 EA- and Site-Licensed and BILT Site Channels according to type of license held rather than their construction status, type of system architecture deployed or identity of the licensee. As a result, the FCC clearly has authority under existing precedent to modify and move the 800 MHz licenses of a particular class of licensees to the 1.9 GHz Band on an EA market Clean and 1:l basis.?49 With respect to the ?excess? 1.9 GHz Band spechum, the 1.9 GHz Band spechum awarded in the one hundred seventy-five (175) EA markets, under Preferred?s Improvements the FCC would sell such spectrum to members of the class of General Category and Lower 80 EA licensees and Cellular-Architecture System licensees that elect to (1) forego reimbursement of their own relocation costs; and (2) contribute funds toward payment of total 800 MHz Band relocation costs and the clearing of the 1.9 GHz Band spect~um.l~~ Preferred maintains that although the award of such spectrum would involve the issuance of an initial license, under existing precedent the FCC would have the authority to avoid mutual exclusivity and the otherwise mandatorily applicable competitive bidding provisions of Section 3O9(j).l5? Such approach clearly would comply with the 148 See Preferred March Ex Parte, at pp. 7,37-38 and 49-50. 149 See Amendments to the Television Table of Assignments to Change Noncommercial Educational Reservations, MM Docket No. 85-41, Report and Order, RR 2d 1455 (1986)(?Channel Exchange Order?)(1988), affd Rainbow Broadcasting v. FCC, 949 F.2d 405 (D.C. Cir. 1991)(?Rainbow Broadcasting?); Flexibility for Delivery of Communications by Mobile Satellite Service Providers in the 2 GHz Band, the L-Band, and 1.612.4 GHz Bands, Report and Order and Notice of Proposed Rulemaking, IB Docket No. 01-185, 18 FCC Rcd 1962,7225 & n. 591 (?MSS/ATC Order?); Establishing Rules and Policies for the Use of Spectnun for Mobile Satellite Services in the Upper and Lower L-Band, IB Docket No. 96-132, Report and Order, 17 FCC Rcd 2704, at fi 225 (?MSS L-Band Order?); Amendment of the Commission?s Rules to Relocate the Digital Electronic Message Service from the 18 GHZ Band to the 24 GHz Band and to Allocate the 24 GHz Band for Fixed Service, ET Docket No. 97-99, Order, 12 FCC Rcd 4990 (1997), recon. denied, 13 FCC Rcd 15147 (1998)cDEMS Order?) at fi 11. 150 See Preferred March Ex Parte, at pp. 7 and 49-50. and the authorities cited inn. 147 supra. See Sections 316 and 309(i)(6)(E) of the Communications Act of 1934, as amended 151 45 Commission?s statutory mandates to maintain regulatory parity among SMR licensees and to promote competition among thern.l5? 111. Funding A. Report and Order Under the Consensus Parties? Proposal Nextel promised to contribute up to $850 million toward payment of total 800 MHz Band relocation costs. Nextel also promised to place $100 million into an independent escrow account and securing the remaining $750 million balance of such amount with an irrevocable letter of credit. Seeking to avoid a scenario in which Public Safety and other licensees? Site-Licensed Specbum were partially relocated and Nextel?s estimates of relocation costs proved unrealistically low leaving such licensees without the means of completing the relocation process, the Commission declined to cap Nextel?s payment obligation at any Instead, the FCC required Nextel to pay all 800 MHz Band reconfiguration costs as defined in the Report and Order.?54 Moreover, the Commission required Nextel to irrevocably commit a minimum of $2.5 billion to ensure completion of 800 MHz reba~~ding.?~~ Under the FCC?s approach Nextel and/or the issuing bank would select a Letter of Credit Trustee. Such Trustee is required to be independent and free of conflicts of interest. The Trustee would draw upon the Letter of Credit to fund the costs involved in the 800 MHz rebanding process and clearing the 1.9 GHz Band.Is6 If, at any time during the 800 MHz rebanding process, the Transition Administrator determines that the Letter of Credlt does not retain sufficient undrawn funds to ensure completion of such process, Nextel would be required to open an additional Letter of Credit. However, the Transition Administrator is instructed not to permit Nextel to reduce the aggregate secured by the Letter(s) of Credit below $850 milli~n.?~? B. Nextel?s Requests for Clarification In its ex parte presentation filed on September 21, 2004, Nextel requested a clarification that would allow it to substitute a standby letter of credit for the irrevocable letter of credit required by the Commission in the Report and Order.I5* In its ex parte 15? See Preferred Communication Systems, Inc., Ex Parte Presentation, April 23,2004, at ??See Report and Order, at 7 29. 154 See id. 155 See id., at7 181. See id.. at ll 182. 5-7; and Preferred March Ex Parte, at pp. 49-50. 157 See id.; at 4 183. Nextel Communications. Inc.. Ex Parte Presentation. September 21, 2004, at Slide 9; .~ see also Nextel Communications, Inc., Ex Parte Presentation, September 23, 2004; and Nextel Communications, Inc., Ex Parte Presentation, October 1,2004. 46 presentation filed on September 23,2004, Nextel requested the following clarifications of the Report and Order with respect to its obligation to provide a Letter of Credit: (1) provide multiple letters of credit to be issued by a number of fmancial (2) Nextel be allowed to pay 800 MHz rebanding costs directly as they are (3) if Nextel determined not to accept the Report and Order, it would not be institutions; incurred during the course of the relocation process; and required to perform its obligations set forth therein.?59 Preferred maintains that in reviewing Nextel?s requests for clarification the Commission should seek to promote an 800 MHz rebanding payment process involving the least possibility for disputes and resulting delay. Under this standard, Nextel?s requests appear reasonable and justifiable. However, if the FCC allows Nextel to pay 800 MHz relocation costs directly, Preferred would request that the Commission explicitly retain the Transition Administrator?s role in determining which 800 MHz Band relocation costs are to be paid and in what amounts. Nextel?s role under this approach would be to simply fonvard the payments approved by the Transition Administrator. In its ex purte presentation filed on September 16, 2004, Nextel requested clarification that it receive credit in the fmcial reconciliation process described in paragraphs 329-330 of the Report and Order for the costs it incurs in adding base stations to maintain its existing network capacity during the band reconfiguration process. necessTo Preferred believes that Nextel?s request for clarification is reasonable and should be adopted. Preferred would note that Nextel inadvertently omitted to request such clarification on behalf of Nextel Partners. Preferred would support extending the credit Nextel would receive for such capital expenditures to those incurred by Nextel Partners. However, Preferred maintains that the Commission?s amendment of its rules to allow 900 MHz Band licenses to initiate CMRS operations on their currently authorized spectrum or to assign their authorizations to others for CMRS use16? and the Transition Administrator?s credit of Nextel?s and Nextel Partners? capital expenditures incurred in adding base stations to maintain their respective existing operating systems? capacity should obviate the need to impose thepro rata distribution approach discussed above and in Appendix I attached hereto. C. Preferred?s Improvements One of the major legal and practical problems with the CTIANerizon Wireless Compromise Proposal was that it required Nextel to pay for 10 MHz of new 2.1 GHz 159 See Report and Order, at 7 87. See Nextel Communications, Inc., Ex Parte Presentation, September 16, 2004, at p.3; and Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 8. See 41 C.F.R. 8 90.621(f) andReport and Order, at 7 6. 47 band spectrum when it is purchasing an average of only 3.5-4.5 MHz of such spectrum.?62 As discussed above, in the FCC?s reconsideration of the Report and Order, the balance of the 1.9 GHz band spectrum replaces the 800 MHz band Cellular Eligible Service Spectnun Nextel or Nextel Partners is vacating. Modification of already-exisitng 800 MHz band spectrum largely addresses Verizon Wireless? contention that the FCC lacks the legal authority to sell 1.9 GHz band spectrum to Nextel by a private sale outside of the competitive bidding provisions of Section 3096). The problem, of course, is that if the Commission is selling less 1.9 GHz band spectrum, it cannot expect or ask Nextel or a Non-Nextel Control Group EA licensee to pay a considerable amount. This is particularly the case if Nextel and Nextel Partners vacate a considerable portion of their Upper 200 Channels? Spectrum in the one hundred eighteen (1 18) EA markets in which these licensees share General Category and Lower 80 EA-Licensed Spectrum with Non- Nextel EA licensees. As noted above, the capital expenditures to be incurred by Nextel and Nextel Partners for additional cell sites to maintain their respective operating systems? capacity should be counted toward Nextel?s obligation to contribute a total of $4.86 billion in value in exchange for its receipt of 10 MHz of 1.9 GHz Band spectrum in each of the one hundred seventy-five (175) EA markets. One of the major legal and practical problems with the Enhanced Consensus Parties? Proposal was that Nextel?s promised contribution does not cover all of the reasonably anticipated 800 MHz relocation costs. Preferred maintains that cellular licensees who benefit from reorganization of the 800 MHz Private Land Mobile Band should contribute funds to defray total 800 MHz band relocation costs. For example, cellular carriers operating in the A Frequency Block are converting the lower half of their respective spectrum from analog to digital. Such conversion necessarily will result in increased incidents of interference with Public safety and other licensees in the immediately adjacent 800 MHz Private Land Mobile Radio Band. As a result, such licensees would receive a considerable operating and financial benefit from the FCC?s adoption of Preferred?s Improvements. Moreover, these licensees and cellular carriers operating in the B Frequency Block have had the benefit of utilizing their respective spectrum for over twenty years without paying either for the initial issuance of their respective licenses or their several renewals. With the passage of the Omnibus Budget Reconciliation Act of 1993, which mandated that the FCC maintain regulatory parity among all CMRS licensees and the 1997 amendment to Section 309 of the Communications Act, which mandated the future allocation of commercial services spectrum by a competitive bidding procedure, Preferred contends that the FCC should now seek to impose license renewal fees on CMRS licenses previously awarded by comparative hearing or a lottery procedure. As Preferred noted in its Ex Parte Comment filed on March 2,2004, the probable realistic cost of the Consensus Parties? Proposal is approximately $3.360 bi1li0n.l~~ Given the relatively small amount of 1.9 GHz band spectrum that would be allocated This problem is highlighted by Nextel?s request for clarification with respect to the FCC?s incorrect calculation of the value of Nextel?s 800 MHz Band spectral contribution. See Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 9. 163 Preferred Communication Systems, Inc., March Ex Parte, at pp. 35-37 and Exhibit K. 48 under the Consensus Parties? Proposal, the WTB Draft Report and Order or Preferred Improvements outside of the movement of 800 MHz spectrum, Preferred believes that it is unrealistic to expect Nextel, Preferred and perhaps other 800 MHz General Category and Lower 80 EA licensees to pay this entire amount. Preferred therefore would suggest that the Commission consider imposing a fee of $.15 M?op as a condition of granting a renewal of the cellular authorizations that originally were allocated pursuant to a comparative hearing, lottery procedure or full market settlement approximately twenty years ago and which have been renewed several times. Preferred estimates that such fee, which would be imposed upon the filing of each cellular license renewal application, would raise more than $2.19 billion over the next five years.?? Such monies could and arguably be used by the Commission to pay a portion of the total 800 MHz band relocation costs. Moreover, if the FCC determines to afford adequate relocation cost funding a higher priority the providing additional 800 MHz band spectrum to Public Safety and Business and Industrialhind Transportation licensees, it could allocate the 800 MHz band spectrum to be vacated within Channels 121-400 by a competitive public auction. Preferred estimates that an average of 4.5-4.7 MHz of 800 MHz band spectrum would be allocated in each of the one hundred seventy-five (175) EA markets. The Commission clearly would have the authority to require the winners of this auction to pay the relocation costs of the Public Safety and Business and IndustriaVland Transportation licensees presently holding spectrum within the Interleave Channels. Preferred estimates that the winners of such auction would be required to pay approximately $686 million to relocate such Public Safety and Business and IndustriaILand Transportation licensees, or an average of $.50 per MHz/Pop for the 800 MHz spectrum acquired in the auction. Together with Nextel?s (up to $850 million with $100 million secured by irrevocable letter of credit) and Preferred?s (up to $200 million) promised contributions and a renewal fee imposed upon cellular licensees, more than $3.876 billion would become available over a five-year period to pay the total 800 MHz band relocation costs reasonably estimated at approximately $3.360 billion. IV. Interference Standards and Administrative Issues A. Repori and Order ?? Under Sections 158 and 159 of the Communications Act, the FCC has authority to impose and collect the monies. However, the amount of application and regulatory fees are capped by statute. See Verizon White Paper, at p. 4. If necessary, Preferred would suggest that the Commission request that Congress amend one or more of these Sections or enact an entirely new section to empower the FCC to impose such fees as a condition of its renewing such cellular licenses and using the monies to defray a portion of the total 800 MHz band relocation costs and other purposes. 49 The Commission under took the following steps to minimize interference immediately with Public Safety and other non-cellular licensees? systems in the 800 MHz Band (1) adopted a new, objective def~tion of ?unacceptable interference? for purposes of this proceeding only, to determine when Public Safety and other Non-Cellular licensees are entitled to interference pr~tection;?~~ (2) assigned shict responsibility for eliminating interference to the ESMR or cellular operator(s) implicated in the interference occurrence, and assigned responsibility to all involved commercial operators if unacceptable interference results form a combination of signals from multiple systems;?66 (3) required ESMR and cellular licensees, on request, to notify Public Safety and Critical Infrastructure Industry (?CII?) licensees prior to activating new or modified cells, and require Public Safety and CII licensees receiving such information to notify ESMR and cellular licensees of changes in system parameters. ?? The FCC also imposed milestones and deadlines so that the 800 MHz band relocation process would be completed within thirty-six (36) months of release of a Public Notice announcing the start date of reconfiguration in the frst NPSPAC region. To ensure timely compliance, the Commission required Nextel to meet both an interim benchmark and a final benchmark. As an interim benchmark, within eighteen (18) months of release of a Public Notice announcing the start date of rebanding in the frst NPSPAC region, Nextel must complete, and the Transition Administrator must certify that Nextel has completed, the relocation of Channels 1-120 for twenty (20) NPSPAC regions.I6* At thu2y-six (36) months, Nextel must complete, and the Transition Administrator must certify, all relocation of 800 MHz incumbents required by the Report and Order.?69 B. Nextel Requests for Clarification In its ex parte presentations filed in September 2004, Nextel requested clarification of the Report and Order of the following: (1) Report and Order?s interference protection standard achievable only after realignment-spectnun interleaving necessary to achieve this protection; FCC therefore should enforce transition period interference protection standard 165 See Report and Order, at fl19,102 105-106,109-110 and 107. 166 See id., at 7 130. I6?See id., atfl 124-127. 16* See id., at 7 28. ?69 See id. 50 tailored to the interleaved spectrum environment that remains (both lower channels and NPSPAC) until rebanding completed in a Region;17' (2) Report and Order's eighteen (18) month relocation milestone does not apply to Nextel and (3) milestones and deadlines for completing 800 MHz Band relocation should commence on the start date of band reconfiguration in the fnst NPSPAC Region;17' (4) Report and Order leaves rebanding sequence and details to Transition Administrator and incumbent licensee^;"^ (5) Nextel and incumbents may directly negotiate and implement relocation agreements unless either asks Transition Administrator to be intermediary;174 and (6) refusal to ne otiate or make realistic counter-offer constitutes bad faith under FCC rules; I7f Preferred maintains that the primary goal of the Commission should be to ensure the immediate implementation of technical standards and mitigation tactics that are designed to minimize unacceptable interference with Public Safety and CII systems in the 800 MHZ Band. Preferred therefore opposes Nextel's requests for clarification that would weaken the interference protection standard the Report and Order would impose immediately and delay the commencement of the thuty-six (36) month reconfiguration milestone period. I7O Nextel Communications, Inc., Ex Parte Presentation, September 21, 2004, at Slide 7; and Nextel Communications, Inc., Ex Parte Presentation, September 28,2004, at pp. 1-5. 17' Nextel Communications, Inc., Ex Parte Presentation, September 16, 2004, at p. 4; and Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 4. Nextel Communications, Inc., Ex Parte Presentation, September 16,2004, at p. 3; and Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 4. Nextel Communications, Inc., Ex Parte Presentation, September 21,2004, at Slide 5. Id. 172 173 17~ Id. 51 CONCLUSION The actual operation of the Report and Order?s 800 MHz Band movement methodology in rhe twenty-ejght (28) EA markets in which Nextel holds all of the EA- Licensed Spectrum provides the Commission a road map both as to how to reorganize the 800 MHz band and allocate the 1.9 GHz band ~pectrum.?~ Seeking to provide 1.9 GHz band spectrum exclusively to Nextel in the EA markets in which it holds no 800 MHz band spectrum or shares EA-Licensed Spectrum with Non-NCG EA licensees through a hybrid part modification of 4.5 MHz of Nextel?s 800 MHz band spectrum and part private sale clearly results in a violation of the competitive bidding provisions of Section 309Cj) as well as the FCC?s statutory mandates to maintain regulatory parity and promote diversity of license ownership and competition among commercial SMR operators. Given the 800 MHz band?s spectrum realities, adoption of a rebanding approach that separates EA-Licensed Spec- from its underlying Site-Licensed Spectrum, Preferred believes that such separation is probably required if the Commission is seeking contributions fiom Nextel and other EA licensees to defray total 800 MHz band relocation requires the FCC to adopt Preferred?s Impr~vements.?~ Ignoring the 800 MHz band spectrum realities in the one hundred forty-seven (147) EA markets in which Nextel does not hold all of the EA-Licensed Spectrum and Business and Industrial/Land Transportation Channels and adopting a rebanding approach exclusively allocating 1.9 GHz band spectrum will lead to regulatory and judicial challenges and further delay in resolving the interference experienced by public safety and other licensees in the 800 MHz band. Given the importance of the interference issue, Preferred believes that the FCC should get this right the first time and not adopt an approach unlikely to withstand judicial scrutiny. If Nextel determines that it cannot contribute funds to dekay total 800 MHz band relocation costs and forego reimbursement of its own relocation costs if the FCC adopts Preferred?s Improvements, Preferred would strongly recommend that the Commission pursue the alternative sources of funding set forth above to replace Nextel?s promised contribution. Preferred believes that such separation is probably required if the Commission is seeking contributions from Nextel and other EA licensees to defray total 800 MHz band relocation costs. 17? See Nextel Communications, Inc., Ex Parte Presentation, June 14, 2003, at p. 5 (?Obviously, being forced to cease operations, or deploy hundreds of millions of dollars worth of added infrastructure in these markets alone was not part of a balancing of interests sought by the Consensus Parties in proposing a comprehensive realignment of the 800 MHz band. It would be impossible for Nextel to support 800 MHz realignment under these circumstances.?) Of course, if Nextel were to agree to Preferred?s Improvements, except in a relatively few EA markets Nextel would not vacate a considerable number of its Upper 200 Channels. It therefore would neither experience major disruption to its current operations nor considerable additional costs. See Preferred Communication Systems, Inc., March Ex Parte, at pp. 45-51. 52 Respectfully Submitted, Charles M. Austin, President Preferred Communication Systems, Inc. 400 E. Royal Lane Suite N24 Irving, Texas 75039 (972) 869-7626 (972) 869-7625 (Fa) precomsys@,aol.com Kent S. Foster, President Silver Palm Communications, Inc. 5454 Wisconsin Avenue Suite 720 Chevy Chase, Maryland 20815 (301) 656-5858 (301) 656-5859 (Fax) kfosterCa).cellularonetx.com 53 EXHIBIT A CONCEPTS TO OPERATIONS, INC. REPORT "PROFESSIONALS PUTTING GOOD IDEAS TO WORK" Preferred co ANEQUAL OPPORTUNITY EMPLOYER nPROFESSIONALS PUTTING GOOD IDEAS TO WORK? November 3,2004 Mr. Charles M. Austin President Preferred Communication Systems, Inc. 63 11 North O?Connor Blvd. Irving, Texas 75039 Dear Mr. Austin: Concepts To Operations, Inc. (?CTO) has completed an analysis of the Non-Nextel SMR and BILT Site licenses in Channels 1-150, 151-400 and 401-600 in the Private Land Mobile Radio Band (806-821 MHz/851-866 MHz) (?PLMRB?). The Federal Communications Commission?s (?Commission? or ?FCC?) recently released Report and Order in the 800 MHz Public Safety Interference proceeding? moves Non-Nextel SMR and BILT Site-Specific Channels presently in the General Category Channels (Channels 1-150) to the Interleave Channels (Channels 151-400) to be vacated by Nextel Communications, Inc. (?Nextel?), Nextel Partners, Inc. (?Nextel Partners?) and licensees who have executed a purchase option or management agreement with Nextel (collectively, ?Nextel Control Group? or ?NCG?) on a geographic ?footprint? basis? The Report and Order?s 800 MHz rebanding movement methodology is based upon separating Public Safety and other high-site and high-power systems into the lower end of the PLMRB denominated as the ?Non-Cellular Block? (806-816.9875 MHz/851-861.9875 MHz) and low- site and low-power digital systems into the up er end of the PLMRB denominated as the ?Cellular Block? (817-824 MHz/862-869 MHz). The Commission determined to adopt this approach to minimize the intermodulation, out-of-band emissions (?OOBE??) and other types interference experienced from low-site and low-power cellular systems with Public Safety and other high-site and high-power systems? Although the Report and Order is not entirely clear on this point, based upon its rebanding movement methodology, SMR and BILT Site licenses in Channels 401-600 apparently also would be relocated to the Interleave Channels to be vacated by the Nextel Control Group on a geographic ??footprint? basis. r: I See Improving Public Safety Communications in the 800 MHz Band, Report and Order, Fifth Report and Order, Fourth Memorandum Opinion and Order and Order, WT Docket No. 02-55, FCC 04-16 (?Repri and Order?). See id., at fi 21-23, 151-153; see also 77 154-156 (Expansion Band), fl 157-158 (Guard Band), lf 159-168 (Relocating ESMR Operations in 800 MHz Band) and 77 198 (Relocation Process Within NPSPAC Region). See id., atm 21-23 and 151-153. 4Seeid.,atm21-22. 2 AN EQUAL OPPORTUNITYEMPLOYER ~ C 0 N C E P T S T 0 0 P E R A T I 0 N S CORPORATEOFFICES 801 Compass Way, Suite 217, Annapolis, MD21401-7813 email: cto@cancepts2op.com, (410) 224-8911, Fax (410) 224-8591 ~~ (4PROFESSIONALS PUTTING GOOD IDEAS TO WORK? The Report and Order proposes to reserve the one hundred twenty (120) former NPSPAC Channels (822-824 W866-868 MHz) exclusively to the Nextel Control Group? The FCC thus seeks to move the Non-Nextel General Category and Lower 80 EA licensees? EA- and qualifymg Site-Licensed Spectrum and Cellular-Architecture System licensees? Site-Licensed Spectrum to the Upper 200 Channels (Channels 401-600) presently held by the NCG, and available to be vacated. The purpose of the report will be for submission to the Commission in support of the Comment to be filed by Preferred Communication Systems, Inc in response to the Commission?s recent Public Notice soliciting comments with respect to Nextel?s and others? requests for clarifications to the FCC?s Report and Order released on August 6, 2004.6 The report discusses the problems likely to be encountered in implementing the FCC?s reorganization of the 800 MHz band into two separate Non-Cellular and Cellular Blocks. This constitutes the sole purpose of the report. Based upon the FCC License Database as of June 30,2004, and the assumptions set forth herein, the report concludes that in several major Economic Area (?EA?) markets, the Nextel Control Group lacks sufficient MHz/Pops Equivalent and Total Spectrum to accommodate the SMR and BILT Channels in Channels 1-150 and 401-600 sought to be relocated by the Commission?s Report and Order to the Interleave Channels (Channels 151-400) to be vacated by the NCG. In moving the Non-Nextel Site Channels within Channels 1-150 and 401-600 to the Interleave Channels on a geographic ??footpfit? basis, it is unclear whether the Commission andor Nextel determined whether the Nextel Control Group?s Lower 80 and BILT Site Channels possessed sufficient Total Channels and identical geographical ?footprints? and population coverages to accommodate such relocation? The report also concludes that in several major EA markets the Nextel Control Group lacks the MHzPops Equivalent or even Total Spectrum within the Upper 200 Channels to accommodate the movement of Non-Nextel EA and Cellular-Architecture System licensees? spectrum to the new Cellular Block or ESMR portion of the band. Moreover, the report concludes that if Non- See id., at 7 198. ? Commission Seeks Comment on Ex Parte Presentations and Extends Certain Deadlines Regarding the 800 MHz Public Safety Interference Proceeding, Public Notice, WT 02-55 October 22,2004)(?PubZic Notice?). ? In determining whether a SMR, BILT or public safety Site licensee is relocated to a comparable facility, the FCC determined that such facility must provide the same level as service as the incumbent?s existing facilities, with transition to the new facilities as transparent as possible to the end user. Specifically, the Commission determined that such new facilities must have (1) equivalent channel capacity; (2) equivalent signaling capability, baud rate and access time; (3) coextensive geographic coverage; and (4) operating costs. See id., at 7 201 & n. 527. The Commission further found that its rules defined ?channel capacity? as the same number of channels with the same bandwidth that is currently available to the end user. See Amendment of Part 90 of the Commission?s Rules To Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, Second Report and Order, 12 FCC Rcd 19079,19112-13 7 92 (1997)(?SMR SecondReport and Ordei?). ANEQUAL OPPORlUNI7YEhfPLOYER CORPORATE OFFICES 801 Compass Way, Suite 217, Annapohs, MD 21401-7813 e-mail: cfo@conccpfs2ops corn, (410) 224-891 I, Fax (410) 224-8591 womssrorws PUTTING GOOD IDEAS TO VOW Nextel SMR and BILT Site licenses in the Upper 200 Channels (Channels 401-600) are not relocated, in many EA markets the NCG lacks sufficient MHdPops Equivalent or Clean Spectrum to accommodate the movement of Non-Nextel EA and Cellular-Archtecture System licensees? spectrum to the new Cellular Block without requiring Nextel or Nextel Partners to vacate most of their Upper 200 Channels? spectrum and thereby to lose considerable system capacity. Finally, the report sets forth recommendations with respect to alternative relocation approaches that address the Report and Order?s practical and mathematical infmities. We set forth a summary of the report?s analysis and conclusions in the immediately following Executive Summary. Sincerely, CONCEPTS TO OPERATIONS, INC ANEQUAL OPWRNNITYEMPLOYER CORPORATE OFFICES 801 Compass Way, Suite 217,Annapolis, MD 21401-7813 emnil: cto@eoncrpts2ops.com, (410) 224-8911,F;u (410) 224-8591 Executive Summary Introduction. On August 6, 2004, the Federal Communications Commission (?Commission? or ?FCC?) released its Report and Order in the 800 MHz Public Safety Interference proceeding. Largely adopting the Enhanced Consensus Parties? Proposal,8 the Commission bifurcated the Private Land Mobile Radio Band (806-824 MHd851-869 MHz) (?PLMRB?) into two separate blocks: a (1) Non-Cellular Block (806-816.9875 MHd851-865.9875 MHz) reserved exclusively for high- site and high-power Public Safety, BILT and SMR systems; and (2) Cellular or ESMR Block (81 7-824 MHd862-869 MHz) reserved exclusively for low-site and low-power digital cellular systems? According to the FCC, such rebanding approach was based upon the Commission?s premise it could ?minimize that unacceptable interference in the 800 MHz band by placing similar system architecmes in like spectrum and isolating dissimilar architectures from one Pursuant to such approach, the Report and Order would relocate the Non-Nextel Control Group SMR, BILT and Public Safety Site Licenses in the General Category Channels (Channels 1-150) to the Interleave Channels (Channels 151-400) held and to be vacated by Nextel Communications, Inc. (?Nextel?), Nextel Partners, Inc. (?Nextel Partners?) and licensees who have executed a purchase option or management agreement with Nextel (collectively, ?Nextel Control Group? or ?NCG) on a geographic ?footprint? basis.? Although not entirely clear, based upon the FCC?s enunciated rationale for its determination to reorganize the 800 MHz band, it appears that the Report and Order would relocate Non-Nextel SMR, BILT and Public Safety licenses in the Upper 200 Channels (Channels 401-600 or 816-821 MHz/861-865 MHZ) to the Interleave Channels held and to be vacated by the NCG.? Moreover, the Report and Order would reserve the former NPSPAC Channels (822-824.9875 MHz/866-869.9875 MHz) exclusively to the Nextel Control Group?s General CategoIy EA- and Site-Licensed Spectrum.? The excess General Category and Interleaved Channels? EA- and Site-Licensed Spectrum to be vacated by the NCG would be replaced by an exclusive allocation of 1.9 GHz band ~pectrum.?~ As a result, the Report and Order would relocate the Non-Nextel See Nextel Communications, Inc., Ex Parte Presentation, June 4,2004; Nextel Communications, Inc., Ex Parte Presentation, June 7,2004; Nextel Communications, Inc., Ex Parte Presentation, June 9,2004; Nextel Communications, Inc., Ex Parte Presentation, June 14, 2004. lo See id., at 7 22. ?Seeid.,atT723and151. ?*See id., atfl 21-23, 151-158 and 159-168. l3 See id., at fl 198 and 306. l4 See id., at 77 65-73. The Commission maintained that it had the legal authority to allocate 10 MHz in the 1.9 GHz band exclusively to Nextel and Nextel Partners largely based upon its Section 3 16 authority to modify already-existing licenses by relocating them to new spectrum. See id., at 7 67. It reemphasized this point by finding that such allocation of 1.9 GHz band spectrum did not involve the issuance of initial licenses and provided ?Nextel access to substitute spectrum with which it may continue the development of its services.? See Id., at fl69 and 73. See Report and Order, at fl21-23 and 151-158. 1 EA licensee?s General Category and Lower 80 EA- and qualifying Site-Licensed Spectrum and other Site-Licensed Spectrum and Cellular-Architecture System licensees? qualifying Site- Licensed Spectrum into the new Cellular Block or ESMR portion of the PLMRB by moving them to the Upper 200 Channels (Channels 401-600 or 816-824 MW861-869 MHz) presently largely occupied by the NCG.15 Methodology. In developing the Non-Nextel Site SMR, BILT and Public Safety Licenses? Spreadsheet attached hereto as Schedule 1, CTO downloaded the FCC PLMRB license database as of June 30, 2004. We included a particular license as within an EA market if its site coordinates were located within the EA market?s boundaries and the license was comprised of nonduplicated frequencies within such EA market. Based upon the Report and Order, we assumed that Non-Nextel Site licenses within Channels 1- 150 and 401-600 would be relocated on a geographic ?footprint? basis to Interleave Channels (Channels 151-400) presently held by the Nextel Control Group. Based upon the Nextel Control Group License Holdings Spreadsheet attached hereto as Exhibit B, we determined that the NCG holds an average of fifty-two (52) Clean Channels or 2.6 MHz in the Lower 80 Channels. The NCG holds an average of thirty-three (33) BILT Site Channels. The Nextel Control Group holds no Clean BILT Channels in any EA market. We then determined both the average (1) actual coverage area and (2) protected service area as measured by a 22 dBu contour of the SMR, BILT and Public Safety Site Channels within Channels 1-150 and 401-600 in the top eleven (11) EA markets used by the Commission to determine Nextel?s average 800 h4Hz spectrum holdings throughout the Overlaying such average coverage areas over the 2000 US. Census Tract, we then determined the average population covered by these licenses. Since the Report and Order relocates these Non-Nextel Site Channels into the Interleave Channels presently held and to be vacated by the Nextel Control Group, we then determined the average (1) actual coverage area and (2) protected service area as measured by a 22 dBu contour of the NCG?s Lower 80 EA and Site and BILT Site Channels in the eleven (1 1) EA markets. Overlaying such average coverage areas over the 2000 U.S. Census Tract, we then determined the average population covered by these licenses. Where the NCG?s Lower 80 EA authorizations were encumbered by a previously granted Site license held by a Non-Nextel licensee, we subtracted such Site license?s area and population coverage from that of the Nextel Control Group?s Lower 80 EA Authorization to determine its correct coverage figures. Conclusions. l5 See id., at fl 159-168. See id., at 7 318 & n. 733. For purposes of evaluating Nextel?s spectrum holdings within the Interleave Channels to be vacated, the Commission analyzed Nextel?s spectrum holdings within these Channels in the top fifteen (15) EA markets by population and then extrapolated Nextel?s average number of Total Channels and spectnun in these EA markets for the entire US. and its territories. In conducting its analysis, the FCC deleted three border area EA markets-Detroit, Seattle and San Diego and the Atlanta EA market. 2 16 Relocation of SMFi, BILT and Public Safety Site Licenses Within Channels 1-150. SMR licensees hold an average of twenty-four (24) Site Channels within Channels 1-150. However, in forty-nine (49) EA markets in which 174,792,406 persons reside, such licensees hold an average of fifty-three (53) Site Channels, or 2.65 MHz. BILT licensees hold an average of fourteen (14) Site Channels, or .7 MHz, within Channels 1-150. However, in the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of thirty-three (33) Site Channels, or 2.65 MHz. Public Safety licensees hold an average of thirteen (13) Site Channels, or .65 MHz, within Channels 1-150. However, in the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of twenty-nine (29) Site Channels, or 1.45 MHz. The Nextel Control Group holds an average of seventy-nine (79) total Lower 80 Channels, or 3.95 MHz, and fifty-two (52) Clean Lower 80 Channels, or 2.6 MHz. The NCG holds an average of thuty-three (33) total BILT Channels, or 1.65 MHz. The NCG holds no Clean BILT Channels in any EA market. On average, SMR, BILT and Public Safety licensees? fifty-one (51) Site Channels within Channels 1-150 apparently can be relocated to the Lower 80 EA authorizations and Site Channels and the BILT Site Channels comprising an average of one hundred twelve (112) Channels, or 5.6 MHz, presently held and to be vacated by the NCG. How.ever, the FCC requires that relocated licensees receive ?comparable facilities? and defines such term as encompassing Channels with coextensive geographical and population coverage.? Since the NCG?s Site Channels within the Interleave Channels (Channels 151400) to be vacated often have smaller geographical coverage areas or ?footprints? than those of the SMR, BILT and Public Safety licensees? spectrum holdings within Channels 1-150 to be relocated, in certain of these one hundred twenty-eight (128) EA markets, the Report and Order?s relocation approach fails to provide these Site licensees ?equivalent channel capacity? and thus ?comparable facilities?? as required by Commission precedent and the Report and Order itself.I8 However, problems clearly arise in the forty-nine (49) more ?heavily congested? EA markets. In these EA markets, the SMR, BILT and Public Safety licensees hold an average of one hundred fifteen (115) Channels, or 5.75 ME. As noted above, the Nextel Control Group holds an average of one hundred twelve (1 12) Channels, or 5.6 MHz. As a result, in these more ?heavily congested? EA markets, even before considering the problem of the ?mismatching? geographical ?footprints,? the NCG lacks the Lower 80 EA and Site Channels and BILT Site Channels to accommodate the Report and Order?s relocation of SMR, BILT and Public Safety licensees? Site Channels within Channels 1-150. ? See SMR SecondReport and Order, at 191 12-13 7 92. See Report and Order, at 7 201 & n. 537. 3 Relocation of SMR, BILT and Public Safety Site Channels Within Channels 401-600. SMR licensees hold an average of twenty-nine (29) Site Channels within Channels 401-600. However, in forty-nine (49) EA markets in which 174,792,406 persons reside, such licensees hold an average of forty-nine (49) Site Channels. BILT licensees hold an average of two (2) Site Channels within Channels 401-600. However, in the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of four (4) Site Channels. Public safety licensees hold an average of less than one (1) Site Channel within Channels 401-600. In the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of less than one (1) Site Channel. The relocation of SMR, BILT and Public Safety licensees? Site Channels within Channels 401- 600 does not change the conclusion set forth above with respect to whether the Nextel Control Group on average holds sufficient Lower 80 EA- and Site-Licensed Spectrum and BILT Site Channels to accommodate the Report and Order?s relocation of SMR, BILT and Public Safety licensees? Site Channels. However, with respect to the forty-nine (49) more ?heavily congested? EA markets, such relocation of the SMR, BILT and Public Safety licensees? Site Channels within Channels 40 1-600 exacerbates the already overcrowded spectrum. With such relocation, an average of fifty-four (54) additional Site Channels would be moved into the Lower 80 EA and Site Channels and BILT Site Channels presently held and to be vacated by the NCG. Together with the relocation of SMR, BILT and Public Safety Site Channels within Channels 1-150, such relocation would result in an average excess of fifty-seven (57) Channels or 2.85 MHz of spectrum over the EA- and Site-Licensed Spectrum held by the Nextel Control Group and to be vacated in the Interleave Channels. We also examined a ?best case? scenario which assumes all of the geographic ?footprints? of the Nextel Control Group?s BILT Site Channels match those of the Non-Nextel SMR, BILT and Public Safety licenses within Channels 1-150 and 401-600 to be relocated under the Report and Order. As the Non-Nextel Site Licenses spreadsheet attached hereto as Schedule 1 indicates, in thirty-eight (38) EA markets in which 103.18 million persons, or approximately thuty-six percent (36%) of the total U.S. population resides the NCG lacks sufficient spectrum holdings to accommodate the Report and Order?s relocation of the Non-Nextel Site licensees. Relocation of Non-Nextel EA and Cellular-Architecture System Licensees? Channels. The Report and Order seeks to minimize the intermodulation interference experienced by Public Safety and other high-site and high-power systems from the operations of low-site and low- power digital cellular systems by separating them into two separate blocks: (1) Non-Cellular (Channels 1-440 or 806-816.9875 MHd851-861.9875 MHz); and (2) Cellular (Channels 441- 720 or 817-824 MHd862-869 MHz).I9 The Report and Order reserved the former NPSPAC Channels (Channels 601-720 or 822-824.9875MHz866-868.9875 MHz) to the Nextel Control Group?? As a result, the Report and Order relocated the Non-Nextel EA licensees? EA- and qualifying Site-Licensed Spectrum and Cellular-Architecture System licensees? Site Channels to the Upper 200 Channels Spectrum (Channels 401-600) presently held by the NCG. l9 See id., at 77 21 -23 and 151 -1 53. ?? Seen. 12 inpa. For purposes of this analyzing whether the NCG holds sufficient spectrum within the Upper 200 Channels to accommodate the relocation set forth in the Report and Order, we assumed that the Non-Nextel SMR, BILT and Public Safety Site licenses within Channels 401-600 would not be relocated to the Interleave Channels (Channels 151-400) held by the NCG and to be vacated. As the Nextel Control Group Upper 200 Channels Spreadsheet attached hereto as Schedule 3 indicates, Nextel or Nextel Partners holds an average of one hundred sixty-eight (168) Clean Upper 200 Channels throughout the U.S. However, in forty (40) ?heavily congested? EA markets in which 64,288,606 persons reside, Nextel holds an average of only one hundred fifty- five (155) such Clean Channels?? As noted above, the Report and Order relocates the Non- Nextel EA licensees? EA authorizations and qualifying Site Channels and the Cellular- Architecture System licensee? qualifying Site Channels to the Upper 200 Channels held by the Nextel Control Group on an EA market wide Clean and 1: 1 basis. In the one hundred thuty-five (135) ?less congested? EA markets, Nextel or Nextel Partners has sufficient spectrum within the Upper 200 Channels to accommodate the Report and Order?s relocation of Non-Nextel EA and qualifying Site-Licensed Spectrum. However, in the forty (40) ?heavily congested? EA markets, in which 64,288,606 persons reside, Nextel or Nextel Partners lacks sufficient spectrum to accommodate the Report and Order?s relocation without requiring them to vacate 120-200 channels within the U per 200 Channels and thereby lose considerable sufficient system capacity in these EA markets. & For purposes of determining ?heavily congested? EA markets in this context, we focused upon EA markets in which following the relocation of Non-Nextel EA- and qualifymg Site-Licensed Spectrum, Nextel or Nextel Partners would hold fewer than eighty (80) channels within the Upper 200 Channels. 22 Nextel already has voiced strong opposition to vacating a considerable portion of its Upper 200 Channels spectrum to accommodate the relocation of Non-Nextel EA and Cellular- Architecture System licensees respective EA- and qualifymg Site-Licensed Spectrum. See Nextel Communications, Inc., Ex Parte Presentation, June 14, 2004, at p. 5 (?Obviously, being forced to cease operations, or deploy hundreds of millions of dollprs worth of added infrastructure in these markets alone was not part of the balancing of interests sought by the Consensus Parties in proposing a comprehensive realignment of the 800 MHz band. It would be impossible for Nextel to support 800 MHz realignment under such circumstances.?) 5 Consensus Parties? Rebanding Proposal Relocation Cost Analysis Report 6 I. Introduction. On August 6, 2004, the Commission released its Report and Order in the 800 MHz Public Safety Interference proceeding. Largely adopting the Enhanced Consensus Parties? Proposal as a model for reorganization of the 800 MHz Private Land Mobile Radio Band (806-824 W851- 869 MHZ)?~ the FCC divided the PLMRB into two separatc and distinct blocks: (1) Non- Cellular Block (Channels 1-440 using 25 lcHz bandwidth channels24 or 806.0125-816.9875 M?851.0125-868.9875 MHz) and (2) Cellular Block; and (2) Cellular Block (Channels 441- 720 using 25 lcHz bandwidth channels? or 817.0125-823.9875 h4H21862.0125-868.9875 MHz). Under the FCC?s present PLMRB licensing scheme, 26.5 MHz was Cellular Eligible Service Spectrum. Such Spectrum was comprised of the following: 1. General Category Channels (Channels 1-150 or 7.5 MHz); 2. Lower 80 Channels (Channels 201-208, 221-228, 241-248, 261-268, 281-288, 301- 308,321-328,341-348,361-368 and 381-388 or4 MHz); 3. Business and Industrial Land Transportation Channels (Channels 151-158, 161-168, 171-178, 181-188, 191-198, 212-217,232-237,252-257,272-277, 292-297, 312-317, 332-337,352-357,372-377 and 392-397 or 5 MHz); and 4. Upper 200 Channels (Channels 401-600 or 10 MHz). Under this licensing scheme, Public Safety was allocated one hundred ninety (190) Channels, or 9.5 MHz of spectrum. The Report and Order increases the allocation of PLMRB spectrum to Public Safety by thirty (30) Channels, or 1.5 MHz?~ Moreover, it reserves all ??White Space? created by the Nextel Control Group?s vacating the Interleave Channels (Channels 151-400 or 809.7625-815.9875 MHd854.7625-860.9875 MHz).Z7 The FCC and Nextel estimate that on average that such vacated spectrum comprises fifty (50) Channels or 2.5 MHz. Finally, it carves out 2 MHz kom the upper end of thc Interleave Channels (Channels 361-400 or 815.0125-815.9875 MHZi860.0125-860,9875 MHz and Channels 401-440 or 816.0125-816.9875 MHd861.0125- 861.9875 MHz) for use by Public Safety and other Non-ESMR operators, EA and Non-Cellular- Architecture System licensees. Public Safety licensees therefore receive an average increase of up to one hundred twenty (120) Channels or 6 MHz. 23 See n. 8 infi-a. 24 Using the largely 12.5 kHz bandwidth channels for the NPSPAC Channels moving to the former General Category Channels, the Non-Cellular Block comprises Channels 1 - 150. 25 Using the largely 12.5 kHz bandwidth channels for the NPSPAC Channels moving to the former General Category Channels, the Cellular Block comprises Channels 551-830. 26 This increase occurs due to the Commission?s allocating Channels 121-150 to Public Safety. Interestingly, Nextel has expressed opposition to the FCC?s reservation of these thirty (30) Channels to Public Safety. See, e.g., Nextel Communications, Inc., Ex Parte Presentation, September 21, 2004, at Third Power Point Slide and Nextel Communications, Inc., Ex Parte Presentation, September 16,2004, at p. 2. 27 See Report and Order, at 7 23 & nn. 55-56. 7 The Report and Order squeezes the 26.5 MHz of Cellular Service Eligible Spectrum into the new Cellular Block comprising only 14 MHz, a decrease of 12.5 MHz. Moreover, it exclusively reserves the former NPSPAC Channels to the NCG?? Further, it allocates 10 MHz of 1.9 GHz band spectrum exclusively to Nextel and Nextel Partne1s.2~ As a result, the Report and Order relocates the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum to the remaining 8 MHz (817-821 W862-865 MHz) of the Upper 200 Channels within the new Cellular Block on an EA market wide Clean 1 : 1 basis.30 11. Methodology. To determine the practical and mathematical viability of the Report and Order?s relocation of SMR, BILT and Public Safety Site licensees? spectrum within (1) Channels 1-150 and (2) the Upper 200 Channels (Channels 401-600) we initially downloaded a nationwide PLMRB database (as of June 30, 2004) from the FCC. To avoid ?multiple counting? issues in determining which SMR, BILT and Public Safety Site licenses within Channels 1-150 and 401- 600 were within a particular EA market, we included only Site licenses whose site coordinates were located within a particular EA market?s boundaries and nonduplicated frequencies within such EA market. Based upon the Report and Order, we assumed that Non-Nextel Site licenses within Channels 1-150 and 401-600 would be relocated on a geographic ?footprint? basis to Interleave Channels (Channels 151-400) presently held by the Nextel Control Group. Based upon the Nextel Control Group License Holdings Spreadsheet attached hereto as Exhibit B, we determined that the NCG holds an average of fifty-two (52) Clean Channels or 2.6 MHz in the Lower 80 Channels. The NCG holds an average of thirty-three (33) BILT Site Channels. The Nextel Control Group holds no Clean BILT Channels in any EA market. To determine whether the NCG holds sufficient spectrum to accommodate the Report and Order?s relocation of SMR, BILT and Public Safety licensees? spectrum holdings within Channels 1-150 and then within Channels 410-600, we then determined both the average (1) actual coverage area and (2) protected service area as measured by a 22 dBu contour of the SMR, BILT and Public Safety Site Channels within Channels 1-150 and 401-600 in the top eleven (1 1) EA markets used by the Commission to determine Nextel?s average 800 MHz spectrum holdings throughout the U.S.3? Overlaying such average coverage areas over the 2000 U.S. Census Tract, we also determined the average population covered by these licenses. Since the Report and Order relocates these Non-Nextel Site Channels into the Interleave Channels presently held and to be vacated by the Nextel Control Group, we then determined the average (1) actual coverage area and (2) protected service area as measured by a 22 dBu contour of the NCG?s Lower 80 EA and Site and BILT Site Channels in the eleven (11) EA markets. Overlaying such average See n. 6 infra. 29 See Report and Order, at 7 325 & n. 743. 30 See id., at fl 162-163. To alleviate the resulting ?crowding? caused by moving the Non- Nextel EA and Cellular-hhitecue System licensees? EA- and qualifying Site-Licensed Spectrum to the Upper 200 Channels already occupied by the Nextel Control Group, the Commission adopted a pro rata distribution approach to resolve disputes between the relocated licensees and the NCG. 31 See n. 16 inpa. 8 coverage areas over the 2000 US. Census Tract, we then determined the average population covered by these licenses. Where the NCG?s Lower 80 EA authorizations were encumbered by a previously granted Site license held by a Non-Nextel licensee, we subtracted such Site license?s area and population coverage from that of the Nextel Control Group?s Lower 80 EA Authorization to determine its correct coverage figures. We then compiled such database into the Non-Nextel Site SMR, BILT and Public Safety Licenses? Spreadsheet as Schedule 1 hereto. III. Discussion. A. Bifurcation of 800 MHz PLMRB 1. General Movement of SMR, BILT and Public Safety Site Licenses a. Within Channels 1-150 The Report and Order relocates SMR, BILT and Public Safety Site Channels within Channels 1-150 to the Interleave Channels (Channels 151-400)psently held and to be vacated by the Nextel Control Group on a geographic ?footprint? basis? SMR licensees hold an average of twenty-four (24) Site Channels, or 1.2 MHz, within Channels 1-150. However, in forty-nine (49) EA markets in which 174,792,406 persons reside, such licensees hold an average of fifty-three (53) Site Channels, or 2.65 MHz. BILT licensees hold an average of fourteen (14) Site Channels, or .7 MHz, within Channels 1-150. However, in the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of thirty-three (33) Site Channels, or 1.65 MHz. Public safety licensees hold an average of thirteen (13) Site Channels, or .65 MHz within Channels 1-150. However, in the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of twenty-nine (29) Site Channels, or 1.45 MHz. The Nextel Control Group holds an average of seventy-nine (79) total Lower 80 Channels and fifty-two (52) Clean Lower 80 Channels. The NCG holds an average of thirty- three (33) total BILT Channels. The NCG holds no Clean BILT Channels in any EA market. On average, SMR, BILT and Public Safety licensees? fifty-one (51) Site Channels, or 2.55 MHz, within Channels 1-150 apparently can be relocated to the Lower 80 EA authorizations and Site Channels and the BILT Site Channels comprising an average of one hundred twelve (112) Channels, or 5.6 MHz, presently held and to be vacated by the NCG. In determining whether SMR, BILT and Public Safety licensees are relocated to ?comparable facilities? as required by previous Commission decision^,'^ the FCC requires that such licensees receive coextensive geographical and population coverage.34 The problem here is that the NCG?s Site Channels within the Interleave Channels (Channels 151-400) to be vacated often have smaller geographical coverage areas or ?footprints? than those of the SMR, BILT and Public Safety licensees? spectrum holdings within Channels 1-150 to be relocated. As a result, in 32 See Report and Order, at fl23,151 and 198. 33 See SMR Second Report and Order, at 191 12-13 7 92. 34 See id. 9 certain of these one hundred twenty-eight (128) EA markets, the Report and Order?s relocation approach fails to provide these Site licensees ?equivalent channel capacity? and thus ?comparable facilities? as required by Commission precedent and the Report and Order itself.? Moreover, problems clearly arise in the forty-nine (49) more ?heavily congested? EA markets. In these EA markets, the SMR, BILT and Public Safety licensees hold an average of one hundred fifteen (1 15) Channels, or 5.75 MHZ. As noted above, the Nextel Control Group holds an average of one hundred twelve (1 12) Channels, or 5.6 MHz. As a result, in these more ?heavily congested? EA markets, the NCG lacks the Lower 80 EA and Site Channels and BILT Site Channels to accommodate the Report and Order?s relocation of SMR, BILT and Public Safety licensees? Site Channels withm Channels 1-150. b. Within Upper 200 Channels (Channels 401-600) Although the Report and Order is unclear on this point, based upon its central premise that separation of dissimilar system architectures will minimize, if not eliminate the intermodulation interference experienced by Public Safety and other high-site and high power systems within the 800 MHz band,)6 we believe that the better view is that SMR, BILT and Public Safety Site licenses within the Upper 200 Channels not held by an EA or Cellular- Architecture System licensee, or otherwise not qualifying for relocation to the new Cellular Block:? will be moved to the Interleave Channels (Channels 151-400) presently held and to be vacated by the NCG on a geographic ?footprint? basis. SMR licensees hold an average of twenty-nine (29) Site Channels within Channels 401-600. However, in forty-nine (49) EA markets in which 174,792,406 persons reside, such licensees hold an average of forty-nine (49) Site Channels, or 2.65 MHz. BILT licensees hold an average of two (2) Site Channels within Channels 401-600, or .1 MHz. However, in the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of four (4) Site Channels, or .2 MHz. Public safety licensees hold an average of less than one (1) Site Channel, or .05 MHz, within Channels 401-600. In the forty-nine (49) more ?heavily congested? EA markets, such licensees hold an average of less than one (1) Site Channel, or .05 MHz. The relocation of SMR, BILT and Public Safety licensees? Site Channels within Channels 401-600 does not change the conclusion set forth above with respect to whether the Nextel Control Group on average holds sufficient Lower 80 EA- and Site-Licensed Spectnun and BILT Site Channels to accommodate the Report and Order?s relocation of SMR, BILT and Public Safely licensees? Site Channels. However, with respect to the forty-nine (49) more ?heavily congested? EA markets, such relocation of the SMR, BILT and Public Safety licensees? Site Channels within Channels 401-600 exacerbates the already overcrowded spectrum. With such relocation, an average of fifty-four (54) additional Site Channels, or 2.7 MHz, would be moved into the Lower 80 EA and Site Channels and BILT Site Channels presently held and to be vacated by the NCG. Together with the relocation of SMR, BILT and Public Safety Site Channels within Channels 1-150, such relocation would result in an average excess of fifty-seven 35 See Report and Order, at 7 201 & n. 531. 36Seeid.,atfi 151-158. ?See id., at 7 163. 10 (57) Channels or 2.85 h4Hz of spectrum over the EA- and Site-Licensed Spectrum held and to be relocated by the Nextel Control Group in the Interleave Channels. We also examined a ?best case? scenario which assumes all of the geographic ??footpr?ints?? of the Nextel Control Group?s BILT Site Channels match those of the Non-Nextel Sh4R, BET and Public Safety licenses within Channels 1-150 and 401-600 to be relocated under the Report and Order. As the Non-Nextel Site Licenses spreadsheet attached hereto as Schedule 1 indicates, in thirty-eight (38) EA markets in which 103.18 million persons, or approximately thirty-six percent (36%) of the total U.S. population resides the NCG lacks sufficient spectrum holdings to accommodate the Report and Order?s relocation of the Non-Nextel Site licensees. 2. Movement of Non-Nextel EA and Cellular-Architecture System Licensees? EA- and Qualifying Site-Licensed Spectrum. As noted above, the Report and Order seeks to minimize the intermodulation interference experienced by Public Safety and other high-site and high-power systems from the operations of low-site and low-power digital cellular systems by separating them into two separate blocks: (I) Non-Cellular (Channels 1-440 or 806-816.9875 MHd851-861.9875 MHz); and (2) Cellular (Channels 441-720 or 817-824 MHd862-869 MHz).~* The Report and Order reserved the former NPSPAC Channels (Channels 601-720 or 822-824.9875hAHz 866-868.9875 h4Hz) to the Nextel Control Gr0up.9~ As a result, the Report and Order relocated the Non- Nextel EA licensees? EA- and qualifying Site-Licensed Spectrum and Cellular-Architecture System licensees? Site Channels to the Upper 200 Channels Spectrum (Channels 401-600) presently held by the NCG. For purposes of this analyzing whether the NCG holds sufficient spectrum within the Upper 200 Channels to accommodate the relocation set forth in the Report and Order, we assumed that the Non-Nextel SMR, BILT and Public Safety Site licenses within Channels 410-600 would not be relocated to the Interleave Channels (Channels 151-400) held by the NCG and to be vacated. As the Nextel Control Group Upper 200 Channels Spreadsheet attached hereto as Exhibit C indicates, Nextel or Nextel Partners holds an average of one hundred sixty-eight (168) Clean Upper 200 Channels throughout the U.S. However, in forty (40) ?heavily congested? EA markets, Nextel holds an average of only one hundred fifty-five (155) such Clean channel^.^' As noted above, the Report and Order relocates the Non-Nextel EA licensees? EA authohations and qualifying Site Channels and the Cellular-Architecture System licensee? qualifying Site Channels to the Upper 200 Channels held by the Nextel Control Group on an EA market wide Clean and 1:l basis. In the one hundred thirty-five (135) ?less congested? EA markets, Nextel or Nextel Partners has sufficient spectrum within the Upper 200 Channels to accommodate the Report and Order?s relocation of Non-Nextel EA and qualifying Site-Licensed Spectrum. 38 See n. 17 infro. ?See n. 12 infra. 4o For purposes of determining ?heavily congested? EA markets in this context, we focused upon EA markets in which following the relocation of Non-Nextel EA- and qualifying Site-Licensed Spectrum, Nextel or Nextel Partners would hold fewer than eighty (80) channels within the Upper 200 Channels. 11 However, in the forty (40) ?heavily congested? EA markets, in which 64,288,606 persons reside, Nextel or Nextel Partners lacks sufficient spectrum to accommodate the Report and Order?s relocation without requiring them to vacate 120-200 channels within the U per 200 Channels and thereby lose considerable sufficient system capacity in these EA markets. 4P B. Recommendations. Based upon the above discussion, the Report and Order?s relocation of SMR, BILT and Public Safety Site licensees? spectrum holdings withm Channels 1-150 and the Upper 200 Channels (Channels 401-600) is practically and even mathematically flawed. Moreover, the Report and Order?s treatment of Nan-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum appears similarly flawed, particularly if the Commission interprets the Report and Order to not requiring SMR, BILT and Public Safety licensees to relocate their respective Site spectrum holdings from the Upper 200 Channels. To remedy these practical and mathematical flaws, we would recommend that the FCC consider the following alternatives: Relocate SMR, BILT and Public Safety Site Licensees? respective spectrum holdings from Channels 1-150 to the Interleave Channels (Channels 151-400) presently held and to be vacated by the Nextel Control Group; in EA markets where the NCG lacks sufficient spectrum to accommodate such relocation, move the excess relocated Site Channels fnst to the Expansion Band, and then if such excess Channels remain, then to the Guard Band in a particular EA market. Relocate SMR, BILT and Public Safety Site Channels within the Upper 200 Channels (Channels 401-600) to the Interleaved Channels presently held and to be vacated by the Nextel Control Group; in EA markets where the NCG lacks sufficient spectnun to accommodate such relocation, move the excess relocated Site Channels first to the Expansion Band, and then if such excess Channels remain, then to the Guard Band in a particular EA market. Relocate the Non-Nextel EA and Cellular-Architecture System licensees? EA- and qualifying Site-Licensed Spectrum initially to the former NPSPAC Channels on an EA market wide Clean and 1:l basis. If such Channels are insufficient to accommodate the relocation of the Nan-Nextel EA and Cellular-Architecture System licensees? Spectrum, these licensees should be entitled to elect to move the excess of such relocated Spectrum either to (1) the 1.9 GHz band spectrum (1,910-1,915 MW1,990-1,995 MHz) or (2) the Upper 200 Channels (Channels 401-600) on an EA market wide Clean and 1 : 1 basis. See n. 19 infra. 41 12 EXHIBIT B COMPARISON CHANNEL MOVEMENT CHARTS Channel Mavement Charts af Consensus Pades' Propwa\ and The Balanced Prooosal CURRENTUSAGE Cc#E*s"sPROPo%L CWNNEL PREFERRED CHANNEL YWEYEUI l YPlKl" E Y E N ls MOVEMENT "@Mflr D - BlDsl (15Ch.) Channel Movement Cham of Consenaus Partles' Proposal and The Balanced Proposal CURRENTUSAGE CM1SE"t"S PROPOSAL CWIlllEL PREFERRED C " A Y N E L YWEYEM lYPROVEYENn MOVEMENT CONSENSUS PROPOSAL TOTILL PREFERREDIMPROVEYENl8 120.150 CHANNELS+ EXACT NUMBER UNCERTAIN CHANNELS 121-150 MARKET SPECIFIC 1% 30 NEW ALLOCATION OF PUBLIC SAFETY CHANNELS Channel Movement Charta of Consensus Parties' Proposal and The Balanced Proposal GENERAL CLIEGORY LICENSES (CHANNELS r45W GENERAL CITECOR" ?A LICSNSEES HAVE NOT CONSTRUCTED AND DO NOT HAVE FIRM COMMllMENl CURRENT USAGE CONSENSUSPROPOSAL CHANNEL PREFERRED CHANNEL MOVEMENT IMPROVEMENTS MOVEMENT Channel Movement Charts of Consensus Partier' Proposal and The Balanced Proposal GEIIERIL CATEGORY LICENSES (CHANNELS 1.150) GENERAL CkTTEGORY EA LICENSEES HAVE NOT CONSTRUCTED AND DO NOT HAVE FIRM COMMITMENT CURRENT USAGE CONSENSUS PROPOSAL CHANNEL PREFERRED CHANNEL MOVEMENT lMPROVEMENTS MOVEMENT "G.".,.l" EE -Blah (S0nt.l %."..*I- F. Blosk (25Ch.) (mnt.1 "G."."I" f-Block CONSENSUS PROPOSAL TOTALS PREFERRED IMPROVEMENTS qm.160 CHANNELS + EXACT NUMBER UNCERTAIN CHANNELS 121-150 MARKET SPECIFIC 160 262 Chancdl Mwment Cham ofC0nmu Padies' Pmpcral and Tho Balamd Proposal CURRENT USAOE CONSENSUS PROWSAL CHANNEL MOVEMENT PREFERRED IMPROVEYENS I CHANNEL Y0VEYE"I Channel Movement Charts of Consensus ParUea' Piepwa\ and The Ba\anced holYAd CURREM USAGE CONSENSUS PROPOSAL CHANNEL PREFERRED CIUNNEL MOVEMENT IMPROVEYENS MOVEMENT I CURREMUSAGE I iLS 'IRY CoYIlllYENI CONSENSUSPROPOSAL CHANNEL MOVEMENT PREFERRED CHANNEL IMPROVEYENS MOVEMEM COWSENWSPROPOSALTOIAL~ 0CHA"NELS PREFERREDIMROVEYENTS IOCHANNELS IFCHANNELS SH4CQAVAIUBLE Channd Movement Charta of Cansensus PaW' Proposal and The Balanced Propasal CURREMUSAGE wwwsmorns*L CHANNEL PREFERRED I cD YPROVEYENTS YOVEYENT CHANNEL YOVEUENT I I I I COWYNSIJS PWPSSALIOTIL(; PREFERRED IMPROVEMENTS tm CHANNELS 120 CHANNELS EXHIBIT C EA MARKETS IN WHICH NEXTEL HOLDS ALL 800 MHz GENERAL CATEGORY AND LOWER 80 EA AUTHORIZATIONS EA MARKETS WHERE NEXTEL HOLDS ALL OF THE LOWER 230 EA- LICENSED SPECTRUM NEMEL EA Markets 1 P 1 IBEA023 ICharloUe-Gaslonia-Rock Hill, 2 [BEAM2 [Asheville. NC lops 22 IBEA142 IScottsbluff, NE-WY 23 IBEA158 IPhoenix-Mesa, AL-NM EXHIBIT D EA MARKETS IN WHICH NEXTEL PARTNERS HOLDS ALL 800 MHz GENERAL CATEGORY AND LOWER 80 EA AUTHORIZATIONS EA MARKETS WHERE NEXTEL PARTNERS HOLDS ALL LOWER 230 EA- LICENSED SPECTRUM APPENDIX I APPLICATION OF REPORTAND ORDER, NEXTEL?S REQUESTS FOR CLARIFICATIONS AND PREFERRED?S IMPROVEMENTS TO SPECIFIC EA MARKETS I. Introduction In seeking to resolve the apparent conflict in the paragraphs 159, 162-163 and 168 of the Report and Order with respect to the movement of EA- and Site-Licensed Spectrum held by Non-Nextel EA and Cellular-Architecture System Site Licensees, Preferred has examined the 800 MHz spectrum holdings in five (5) EA markets: (1) Sacramento, California; (2) Washington-Baltimore, D.C.-Maryland-Virginia-West Virginia- Pennsylvania; (3) Atlanta, Georgia-Alabama-North Carolina; (4) herto Rico; and (5) Staunton, Virginia-West Virginia. With respect to the movement of the EA- and Site-Licensed Spectrum of the NCG, the Commission largely adopted the Enhanced Consensus Parties? Proposal. As a result, both the EA- and Site-Licensed Spectrum of these licensees moves into the ESMR portion of the band on an EA market wide Clean 1: 1 basis (General Category Channels)? or is vacated and credited toward the purchase price of the nationwide 10 MHz license in the 1.9 GHz band (Interleave and Lower 80 Channels).? This result apparently also applies regardless of whether the Site-Licensed Spectrum held by the Nextel Control Group is constructed and incorporated into a Cellular-Architecture System as of the Report and Order?s publication in the Federal Register? With respect to the movement of Non-Nextel EA licensees? EA-Licensed Spectrum, the Report and Order purportedly offers such licensees an ?incentive? to relocate their respective Spectrum holdings by affording them the flexibility of three (3) options: (1) Relocate all of their systems in an EA market into the ESMR portion (817-824 MHd862-869 MHz) portion of the band where they will share spectrum with Nextel, Nextel Partners and licensees which have executed a management or purchase option agreement with Nextel (?Nextel Control Group? or ?NCG); (2) Relocate their systems as close as possible to the ESMR portion of the band but remain in the non-cellular portion of the band, i.e., in order of preference: ? See Improving Public Sa$+ Communications in the 800 MHz Band, Report and Order, Fifth Report and Order, Fourth Memorandum Opinion and Order, 19 FCC Rcd 14969 (?Report and Order?) at q 23. The treatment of Site-Licensed Spectrum held by the Nextel Control Group and by Non-Nextel EA and Cellular-architecture Site Licensees conflicts with the Commission?s previous decisions concerning whether such expansion of spectnun rights (fkequency reuse throughout the geographical market area) involved the issuance of an initial license triggering the competitive bidding provisions of Section 3090) of the Communications Act of 1934. See Verizon Wireless, LLC, Ex Parte Presentation, April 6,2004, pp. 11-12 & n. 49 (?Verizon Wireless White Paper?). ? See Report and Order, at 7 35. Exchange Commission for the period ended December 3 1,2003, pp. 20-21. See id., at fi 23, 161; Nextel Partners, Inc. Form 10-K filed with the Securities and 1 (a) the 816-817 MHzI861-862 MHz Guard Band; @) the 815-816 MHd860-861 MHz Expansion Band; and (c) channels below 815 MHd860 MHz ifnecessary. According to the FCC, these licensees will operate on a strict non-interference basis, subject to pre-coordination of any new or modified operations; or (3) Remain on their current channels in the non-cellular portion of the band on a strict non-interference basis, subject to pre-coordination of any new or modified operations. If a Non-Nextel EA or Cellular-Architecture System Site Licensees elect to relocate to the ESMR portion of the band, their EA licenses will move upon an EA market wide, Clean 1:l basis. The FCC also recognized that these Licensees also hold Site-Licensed Spectrum. The FCC therefore also determined to provide these Licensees the option of relocating their Site-Licensed Spectrum along with their EA-Licensed Spectrum to the ESMR portion of the band. However, to transfer Site-Licensed Spectrum, a Non-Nextel EA or Cellular- Architecture System Site Licensee must: (a) currently hold an EA license in the relevant EA market; and @) be using the Site-Licensed Spectrum as part of a cellular-architecture system in that EA market as of the date of the publication of the Report and Order in the Federal Register. Moreover, to create a more uniform licensing scheme, the transferred Site-Licensed Spectrum would be converted to EA-Licensed Spectrum on a Clean 1:l basis. If Non- Nextel EA or Cellular-Architecture System licensees elect to move to Guard Band or must be relocated to the Expansion Band, or to the spectrum immediately below, when necessary, subject to the conditions set forth immediately above, their Site-Licensed Spectrum also would be converted to EA-Licensed Spectrum on a Clean 1 : 1 basis. In footnote 444 to paragraph 168 of the Report and Order, the FCC seemingly contradicts the three (3) preceding paragraphs by placing an additional limitation upon the movement of EA- and Site-Licensed Spectrum held by Non-Nextel EA and Cellular- Architecture System Site Licensees into the ESMR portion of the band. In paragraph 164 the Commission had noted that in some EA markets insufficient spectrum in the ESMR portion of the band may be available due to multiple incumbent ESMR licensees already operating in the band. The FCC cited, but did not limit this possible problem of insufficient spectrum to, those markets in which Nextel or Nextel Partners and Southern Communications Services (?Southern?) are offering service. In paragraph 164 the Commission had noted that in some EA markets insufficient spectrum in the ESMR portion of the band may be available due to multiple incumbent ESMR licensees already operating in the band. ?The FCC cited, but did not limit this possible problem of insufficient spectrum to, those markets in which Nextel or Nextel Partners and Southern Communications Services (?Southern?) are offering service. 2 The FCC then continues by stating that ?[plarties are hereby put on notice that disputed matters concerning the ESMR channels in any area of the country, including the area shown in Appendix G may be resolved by the Commission making a pro rata distribution of ESMR channels.?? Citing footnote 444, the FCC then states in that footnote: ?When the ESMR spectrum is not adequate to accommodate all eligible licensees that wish to relocate in the ESMR block, and parties are unable to agree, we may apportion the ESMR block as a function of the relative spectrum rights each licensee holds in a given EA. For example, in a hypothetical market, outside the area shown in Appendix G, in which licensee ?A? currently has rights to 150 channels and licensee ?B has rights to 250 channels, the 320 channels in the ESMR block would be apportioned by giving licensee ?A? access to 128 channels (40%) and licensee ?B access to 192 channels (60%).? A. Spectrum Holdings in the Sacramento, California EA Market. As set forth in the Chart immediately below, Nextel holds seventy-five (75) General Category EA-Licensed frequencies covering an average of 99.00% of the Sacramento, California EA market?s total population, or the equivalent of seventy-four (74) Channels of MHziPops Equivalent Spectrum. Likewise, due to its sixty-five (65) Lower 80 EA kequencies covering an average of 92.53% of the EA market?s total population, Nextel would hold the equivalent of sixty-four (64) Channels of MHdPops Equivalent Spectrum. Nextel holds forty-six (46) Business Category Channels in this EA market. Pursuant to the Commission?s decision allowing SMR licensees to purchase such Channels and convert them to CMRS, these Channels would be included. Due to these frequencies? covering an average of 51.80% of the total population, Nextel would hold the equivalent of twenty-four (24) Channels of MHziPops Spectrum. MARKET BEAM4 SACRAMENTO, CA EA MARKET 200 100.00% 200 0 0 200 200 10.00 10.00 NEXTEL CHANNELS SUMMARY 200 200 10.00 I 0.00 I 3 431 360 330 21.55 I I 18.40 I 16.50 I 17.01 m I. Report and Order?s Movement Methodology: (a) move the Nextel Control Group?s General Category EA- and Site-Licensed Spectrum to the new Cellular Block on an EA market wide Clean It1 basis; (b) credit Nextel with a nationwide ?running average? of the General Categoiy, Interleave and Lower 80 Channels vacated by it, Nextel Partners and licensees which have executed a management or purchase option agreement with it and modifv such spectrum by reassigning to Nextel 4.5 MHz of 1.9 GHz band spectrum; (c) move the Non-NCG ?s EA and Cellular-architecture Systems Site Licensees? EA-Licensed Spectrum to the new Cellular Block on an EA market wide, Clean I: I basis; however such Licensees ? Site-Licensed Spectrum would move to the new Cellular Block on such basis only $(I) it is located in an EA market in which such Licensee holds an EA Authorization and (2) the Non-Nextel Control Group EA or Cellular-architecture System Site Licensee is using such Site-Licensed Spectrum as part of a Cellular-architecture System as of the date of the publication of the Report and Order in the Federal Register. Due to the presence of site-specific incumbents and EA licensees, Nextel, Nextel Partners and licensees who have executed a management or purchase option agreement with Nextel (?Nextel Control Group? or ?NCG) hold one hundred sixty-eight (168) M?ops Equivalent Lower 230 Channels. Upon their movement under the Report and Order, the Nextel Control Group would be allocated two hundred thirty-one (231) Channels on a Clean basis, a net gain of sixty-three (63) MHflops Equivalent Channels. As noted in Preferred?s Ex Parte Presentation filed on March 2, 2004, this result appears to belie the oft-repeated argument by the Consensus Parties that their Proposal involves only a ?kHz-for-kHz exchange? or ?replacement spectrum.?? Under the Report and Order, this result will hold true in all of the 175 EA markets. See Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, at pp. 27-29. The Preferred Spectrum Calculation Method credits Nextel in this EA market, and the Nextel Control Group generally, with more Total Spectrum than Nextel claims in its own calculations. Preferred?s Total Spectrum calculation will be greater than Nextel?s Total Spectrum figure for every EA market because it encompasses the entire EA market rather than only the more heavily urbanized or populated portions thereof. Interestingly enough, in this EA market, Preferred?s MHzRops Equivalent Spectrum figure of 18.40 MHz approximates Nextel?s published 18.55 MHz Total Spectrum figure. See Nextel 4 4 Since the Report and Order moves spectnun on a Total, rather than upon a MHz/Pops Equivalent basis, it moves all of the NCG?s one hundred twenty (120) General Presumably these Channels would be moved to and fully occupy the former NPSPAC Channels. The Nextel Control Group?s one hundred eleven (1 11) B/ILT and Lower 80 Channels (5.55 MHz) would be modified by the Commission?s reassigning to Nextel an identical number of frequencies in the 1.9 GHz band as part of the FCC?s exclusive allocation to Nextel of a nationwide 10 MHz license in that frequency band. This result will hold true in the majority of the EA market^.^ Category EA- and Site-Licensed Channels (6 MHz) to the new Cellular Block. 2. Allocation of 1.9 GHz Band Spectrum Exclusively to Nextel. Pursuant to the Report and Order, the FCC therefore allocates Nextel 5.55 MHz of 1.9 GHz band spectrum solely as the result of its 800 MHz band movement methodology, not as Nextel and the Consensus Parties repeatedly insisted in their respective filings, due to Nextel?s returning its unrelated 700 MHz Guard Band holdings and promising to pay the total 800 MHz band relocation costs and its pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band.6 The Report and Order?s private sale of the remaining portion (4.45 MHz) of the 1.9 GHz band spectrum in exchange for: (a) Nextel?s 700 MHz Guard Band holdings unrelated to any reorganization of the 800 MHz band; (b) partially secured promise to pay the total 800 MHz band relocation costs; and (c) promise to pay its pro rata share of UTAM and all of Communications, Inc., Reply Comments, August 7, 2002, Appendix I to Nextel Reply Comments in WT 02-55-Nextel?s Available Spectrum in Top 320 Markets. As discussed below, in the one hundred eighteen (1 18) EA markets where Nextel and Non-Nextel Control Group members share EA-Licensed Spectrum, the Report and Order?s use of Total Spectrum as the basis for its movement methodology necessarily results in serious practical and mathematical problems. As Preferred will demonstrate, absent Nextel?s vacating a considerable number of 800 MHz Upper 200 Channels, which are the core of its system, or opening up the allocation of 1.9 GHz spectrum to other General Category and Lower 80 EA licensees, 800 MHz rebanding would be difficult, if not impossible to implement. See Nextel Communications, Inc., Ex Parte Presentation, June 14, 2004, pp. 4-5; Southern Communication Services, Inc., Ex Parte Presentation, June 23, 2004, pp. 12-19. The Commission recognized and sought to address these problems by use of the pro rata distribution approach and separating 800 MHz rebanding kom the allocation of 1.9 GHz band spectrum. As discussed below, this approach impermissibly discriminates against Non-Nextel Control Group EA and Cellular- Architecture System Site licensees in violation of the Due Process Clause to the Fifth Amendment to the U.S. Constitution and the FCC?s statutory mandates to maintain regulatory parity and promote competition. Since the Report and Order moves Nextel?s General Category and Business and Industrid Land Transportation Site-Licensed Channels to the 1.9 GHz band on an EA market wide, Clean, 1:l basis thus increasing the amount of 800 MHz band spectrum needing to be replaced by 1.9 GHz band spectrum to 6.1 MHz of such spectrum. 5 5 the BAS licensee relocation costs in the 1.9 GHz band apparently was believed necessary by the Commission to avoid (1) connecting the award of 1.9 GHz band to the movement and modification of the 800 MHz EA- and Site-Licensed Spectrum of General Category and Lower 80 EA licensees (2) triggering the otherwise mandatory competitive bidding provisions of Section 3090) by providing a basis for the FCC?s limiting the participation in the allocation of the 1.9 GHz band spectrum to only Nextel. Pursuant to its Section 316 modification authority, in this EA market the FCC would allocate 5.55 MHz of 1.9 GHz band spectrum, rather that the nationwide ??running average? of 4.50 MHz of the 1.9 GHz band spectrum to Nextel to replace that company?s already-existing 800 MHz band spectrum. The award of such 1.9 GHz band spectrum to replace Nextel?s already-existing 800 MHz band spectrum clearly would not involve the issuance of an ?initial? license by the Commission implicating the competitive bidding provisions of Section 309(j)? Under Sections 316, 301, 303 and 3090)(6)(E), the Commission maintains in the Report and Order that it has the discretion to determine that it better serves the public interest to allow Nextel to purchase the remaining 4.45 MHz of 1.9 GHz band spectrum free from the filing of competing license applications8 While this position appears meritorious if the FCC were allocating this remaining 1.9 GHz band spectrum to the class of licensees whose spectrum holdings were being modified and movedaeneral Category and Lower 80 EA and Cellular-Architecture System licensees, it clearly violates the Commission?s statutory mandates under the to maintain regulatory parity and promote competitiong and the competitive bidding provisions of Section 3O9(j)I0 by restricting participation in such allocation to a single entity within such class of licensees.? 3. Effect of Report and Order Upon Nextel?s Total and Clean Spectrum. In the Sacramento, California EA market, prior to accommodating other Cellular Eligible Licensees, Nextel considerably increases its published Spectrum ?See Report and Order, at 77 65-68 & nn. 219-223. * See Report and Order, at 9See Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 6002(d) (3) (B), 107 Stat. 397 (1993)(mandating that Commission establish a uniform regulatory regime for all commercial mobile services)(?l993 Act?), 47 U.S.C. 5 332 (c); Implementation of Sections 3(n) and 332 of the Communications Act, GN Docket No. 93-252, Regulatory Treatment of Mobile Services, Third Report and Order, 9 FCC Rcd 7988, 7994, at 7 4 (1994)(?CMRS Third Report and Order?); 47 U.S.C. 5 309(i)(3)(B) & (4)(C); 47 U.S.C. 5 257; see also Amendment of Part 90 of the Commission?s Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, SecondReportandOrder, 12FCCRcd 19079,19080,atT 15, 19103,at761 (1997). lo See Verizon Wireless White Paper, at pp. 14-16 & n. 67. See Preferred Communication Systems, Inc., Ex Parte Presentation, April 23, 2004, at pp. 5-6; Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, at pp. 37-38; Southern Communication Services, Inc., Ex Parte Presentation, June 23, 2004, at pp. 11-16. 73-74. 11 6 holdings hm 18.55 MHz to 26.0 MHz, its flops Equivalent Spectrum from 18.40 MHz to 26.0 MHz, and its EA Wide Spectrum from 16.50 MHz to 26.0 MHz.? These spectrum increases occur because the Report and Order?s (a) 800 MHz band movement 10 MHz of 1.9 GHz band spectrum. methodology discussed immediately above and 0) the exclusive allocation to Nextel of 4. Increase in Value of Nextel?s Spectrum Holdings (800 MHz and 1.9 GHz Band Spectrum). According to the Report and Order, the present average fair market value of Nextel?s 800 MHz band spectrum to be exchanged as part of the Consensus Parties Proposal?s movement methodology is $1.61 MHZ/POP.~~ The FCC further determined that the present fair market value of the 800 MHz and 1.9 GHz band spectrum Nextel would receive in exchange would be $1.70 MHzPoP.?~ Applying these figures to the Sacramento, California EA market, the present value of the Nextel Control Group?s 800 MHz band spectrum to be exchanged under the Report and Order would be determined by multiplying Nextel?s one hundred sixty-eight (168) Channels, or 8.40 MHz of MHZPop Equivalent Spectrum, by the EA market?s total population of 2,311,567 (2003 Pops) and then multiplying the resulting figure of 19,417,163 by $1.61 MHzPop. The resulting figure of $31,261,632 would be the present value of the 800 MHz band spectrum the Nextel Control Group would exchange in this EA market under the Report and Order. However, since under the Report and Order?s movement methodology, the NCG?s EA- and Site-Licensed Spectrum moves on a Total Spectrum 1 : 1 basis, rather than upon a MHZiPops Equivalent basis, the Nextel Control Group would receive a total of two hundred thirty-one (231) Clean 800 MHz (120 Channels in the former NF?SPAC Channels) and 1.9 GHz band Channels (111 such Channels), or 11.55 MHz of such Spectrum, in exchange therefor. Nextel would receive an additional eighty-nine (89) Clean 1.9 GHz band Channels, or 4.45 MHz of such Spectrum, in exchange for its returning its 700 MHz Guard Band spectrum holdings, secured promise to pay the total 800 MHz band relocation costs and promise to pay its pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band. ? With the movement of Preferred?s EA-Licensed Spectrum and Airpeak?s EA- and Site- Licensed Spectrum into the one hundred forty (140) Upper 200 Channels to be vacated by Nextel, its Total, Clean or MHzPops Equivalent and Cellular Spectrum would be reduced by 7 MHz. Nextel therefore would hold 19.0 MHz of Total, Clean or MHzPops Equivalent and Cellular Spectrum in this EA market. l3 See Report and Order, at fl 314-323. The Commission determined that the present fair market value of the Nextel Control Group?s General Category Channels was $1.70 per MWop. Due primarily to the limited use by the NCG of its band edge channels to avoid interference with BILT and public safety licensees, the FCC applied a twelve and one-half percent (12.5%) discount and determined that the present fair market value of suchChannels heldbytheNCG was $1.4875 perMHzPop. See id., at 7 318. See id., at 293-297. 14 7 Under the Report and Order, the fair market value of this Spectrum would be determined by multiplying 16 MHz of Clean Spectrum by the EA market?s total population of 2,311,567, and then multiplying the resulting figure by $1.70 MHzPop. The resulting figure of $62,874,622 would be the fair market value of the Clean Spectrum the NCG would receive under the Report and Order. The $31,612,990 difference in the fair market values of the spectrum to be exchanged under the Report and Order arguably is the amount of the Nextel Control Group?s 800 MHz band spectrum enhancement. 5. Effect of Report and Order Upon Non-Nentel EA and Cellular-Architecture Site Licensees? Spectrum Holdings. Preferred Communication Systems, Inc. (?Preferred??) holds seventy-five (75) General Category EA Channels (3.75 MHz) in this EA market. Due to the presence of site-specific incumbents, Preferred?s Channels cover 80.33% of this EA market?s total population. Preferred therefore holds sixty (60) MHzPops Equivalent Channels. AirPeak Communications, LLC (?AirPeak?) holds fifteen (15) Lower 80 EA Channels in this EA market. Due to the presence of site-specific incumbents, Airpeak?s Channels cover 80% of this EA market?s total population. AirPeak therefore holds twelve (12) 800 MHdPops Equivalent Channels. AirPeak also holds fifty (50) BOLT Channels in this EA market. Under paragraph 163 of the Report and Order, Preferred?s and Airpeak?s EA- and Site-Licensed Spectrum would move to the new Cellular Block on an EA market wide, Clean 1:l basis. As a result, their one hundred forty (140) channels presumably would move to the Upper 200 Channels in the new Cellular Block beginning with Channel 401 on an EA market wide, Clean 1:l basis. Nextel would vacate these Channels but retain Channels 541-600 and its 900 MHz band spectrum in this EA market.15 Under the Report and Order, the value of this 800 MHz band spectrum vacated by Nextel would be determined by multiplying Nextel?s one hundred forty (140) channels (7 MHz) by the EA market?s total population of 2,3 11,567 (2003 Pops) and then Is See Report and Order, at 7 168 (?... a pro rata apportionment could reduce the number of channels available to Nextel. However, we observe that Nextel has additional spectrum at 900 MHz which can be used to offset the shortFa11 and is receiving spectrum at 1.9 GHz.?) This conclusion is based upon the assumption that Nextel holds two hundred (200) Clean Channels within the Upper 200 Channels in this EA market. In this EA market that assumption proves to be correct. See Non-Nextel Site License Spreadsheet developed by Concepts To Operations, Inc., a RF engineering and consulting firm headquartered in Annapolis, Maryland, on Preferred?s behalf and attached hereto as Schedule 3 to its Analysis of the Relocation of Non-Nextel SMR, BILT and Public Safety Site Licensees in Channels 1-150 and 401-600 Under the FCC?s Report and Order attached hereto as Exhibit A. 8 multiplying the resulting figure of 16,180,969 by $1.70 WPOP.?~ The resulting figure of $27,507,647 would be the present value of the 800 MHz band spectrum in the Upper 200 Channels Nextel would vacate to facilitate the movement of the EA- and Site- Licensees in this EA market. Thus, even if Nextel vacates its one hundred forty (140) Channels in the Upper 200 Channels on an EA market Clean 1 : 1 basis to Preferred and Airpeak, it would realize a $4,105,343 increase or enhancement of its spectrum holdings in this EA market. Licensed Spectnun held by Non-Nextel EA and Cellular-architecture System Site 6. Effect of Report and Order Upon Other 800 MHz Licensees? Spectrum Holdings. Under the Report and Order, the Site Channels held by other Non-Nextel Control Group licensees in the General Category Channels (Channels 1-150) and in the Upper 200 Channels would move to the forty-six (46) Interleave and sixty-five (65) Lower 80 Channels to be vacated by the NCG. In this EA market, other Non-Nextel Control Croup licensees hold thirty-one (31) General Category Site Channels. Other Non-Nextel Control Croup licensees do not hold any Site Channels in the Upper 200 Channel~.?~ According to the Report and Order, these Site Channels would receive comparable facilities and their present geographic ?footprint.? 7. Effect ofAdoption of Preferred?s Improvements. If the FCC determines to adopt Preferred?s Improvements set forth in the its accompanying Petition for Reconsideration, Channels 1-25 of the General Category EA Authorizations held by Preferred would move to Channels 576-600 of the Upper 200 Channels held by Nextel, and available to be vacated, on an EA market wide Clean 1:l basis. Preferred?s remaining fifty (50) General Category EA Channels would move to Channels 601-650 of the former NPSPAC Channels on an EA market wide Clean 1:l basis. Under Preferred?s Improvements, AirPeak would have the option of moving its fifteen (15) Lower 80 EA Channels to either (1) the 1.9 GHz band or (2) Channels 561-575 of the Upper 200 Channels held by Nextel, and available to be vacated, on an EA market wide Clean 1: 1 basis. Since AirPeak complies with the condition set forth for moving its Site Channels to the new Cellular Block on an EA market wide, Clean 1:l basis, it would have the election to move its fifty (50) Site Channels in this EA market l6 See Report and Order, at l7 These figures are based upon the Commission?s nationwide 800 MHz Private Land Mobile radio database downloaded by Concepts To Operations, Inc., a RF Engineering and System Design firm headquartered in Annapolis, Maryland (?CTO). CTO summarized the license database in the Non-Nextel Site Licenses Spreadsheet attached hereto as Schedule 3 hereto. CTO has acted as a consulting form to Preferred in this proceeding. 321-322. 9 either to (1) the 1.9 GHz band or (2) Channels 511-560 of the Upper 200 Channels held by Nextel, and available to be vacated, on a MHZ/Pops Equivalent basis. Under such approach, Nextel would move its seventy-five (75) General Category EA Channels to the former NF?SPAC Channels on an EA market wide Clean 1: 1 basis. If AirPeak elects to move its sixty-five (65) Lower 80 EA and Site Channels to the Upper 200 Channels held by Nextel, and available to be vacated, Nextel would hold sixty-five (65) fewer Channels within the Upper 200 Channels. Nextel therefore would retain seventy-five (75) additional Channels within the Upper 200 Channels than it would under the Report and Order. Under Preferred?s Improvements, both Nextel?s sixty-five (65) Upper 200 and Lower 80 EA Channels, and its remaining five (5) General Category EA Channels would move to the 1.9 GHz band on an EA market wide Clean 1:l basis. Its General Category and BhLT Site Channels would move to the 1.9 GHz band on a MHdPops Equivalent basis. Nextel therefore would move such Site Channels to the 1.9 GHz band for thirty (30) Channels in the 1.9 GHz band on an EA market wide and Clean basis. Nextel therefore would hold one hundred sixty-five (165) Channels, or 8.25 MHz, rather than the nationwide ??running average? of 4.5 MHz of such 1.9 GHz band spectrum on an EA market wide and Clean basis as replacement spectrum for its vacated 800 MHz band spectrum. Under such approach, in this EA market the FCC would award the remaining thirty-five (35) Channels or 1.75 MHz of 1.9 GHz band spectrum by a private sale or other means. However, unlike under the Report and Order, Preferred?s Improvements would expand the eligibility to participate in the allocation of such 1.9 GHz band spectrum to the entire class of General Category and Lower 80 EA licensees whose EA- and Site-Licensed Spectrum was moved and modified in this proceeding. Licensees within such class who would forego reimbursement of their own relocation costs, such as Nextel Partners apparently is willing to do, would be entitled to receive an allocation of 1.9 GHz band spectrum on an EA market wide and Clean basis. Preferred already has indicated in several previous filings that it would be willing to forego reimbursement of its relocation costs in exchange for an allocation of 1.9 GHz band spectrum in the EA markets in which it holds EA Authorizations. Absent Airpeak?s or another Non-Nextel Control Group EA licensee?s foregoing reimbursement of its relocation costs, Preferred would seek an allocation of the thirty-five (35) Channels or 1.75 MHz of 1.9 GHz band spectrum in this EA market. Such award of 1.9 GHi band spectrum would not violate the otherwise mandatorily competitive bidding provisions of Section 3090) since the Commission has the authority under Section 3090)(6)(E) to avoid mutual exclusivity and would not violate the FCC?s statutory mandates to maintain regulatory parity and promote competition. 8. Conclusion. Under the Report and Order?s approach, the NCG increases its published Total Spectrum figure, its MHflops Equivalent and it?s EA Wide Spectrum in this EA 10 market increases.? With Nextel?s vacating one hundred forty (140) channels in the Upper 200 Channels in the new Cellular Block, the Nextel Control Group would hold three hundred eighty (380) total and M?ops Equivalent 800 MHz and 1.9 GHz band Total, and three hundred sixty-eight (368) MHflops Equivalent channels it presently holds. According to the Report and Order, the value of the 800 MHz and 1.9 GHz band spectrum the Nextel Control Group would receive in this EA market would exceed the value of the 800 MHz band spectrum it would vacate by $13,852,066 (the value of the spectrum Nextel would receive would be determined by multiplying 2,311,567 Pops (2003 figure) by (a) 13.5 MHz of 800 MHz and 1.9 GHz Band spectrum; the resulting figure of 31,206,155 is then multiplied by (b) $1.70 per MHzPop producing a figure of $53,050,463; the value of the spectrum Nextel would vacate would be determined by multiplying the Pops figure by (a) 4.4 MHz of 800 MHz Band spectrum (Interleave Channels) and (b) 7 MHz of 800 MHz Band spectrum?; the resulting figures of (a) 10,170,882 and (b) 16,180,969 are then multiplied respectively by (a) $1.4875 per M?op and (b) $1.70 per MHzPop producing a figure of $42,636,834; the difference between $53,050,463 and $42,636,834, or $10,413,629 would be the amount ofNextel?s spectrum enhancement in this EA market. channels (1 9 MHz) as compared to the three hundred and seventy-one (371) published The Non-Nextel EA and Cellular-Architecture System Licensees in this EA market experience an increase in their respective MHzPops Equivalent Channels. Preferred?s and Airpeak?s Clean Spectrum, respectively, increases from sixty (60) (3 MHz) to seventy-five (75) (3.75 MHz) Channels and from (52) (2.60 MHz) Channels to sixty-five (65) (3.25 MHz) Channels. Since their EA-Licensed and Site-Licensed Spectrum moves on a Total, rather MHzPops Equivalent Channels basis, these Licensees? Total Chels remain unchanged. NEXTEL AFTER Is In addition to the 800 MHz and 1.9 GHz Spectrum Nextel is to receive FCC amended its rules so that Nextel could use its 900 MHz Band Spectrum holdings to offer CMRS. Moreover, the Commission?s amendment permitted other licensees holding such Spectrum to sell or otherwise assign their respective holdings to Nextel for CMRS use. See Report and Order, at 7 6. According to Nextel?s published figures, on a nationwide ??running average? basis Nextel?s Total, MHzPops Equivalent and EA Wide Spectrum therefore would increase by approximately seventy-two (72) channels, or 3.6 MHz. I9 These figures would include the eighty-eight (88) Clean or MWops Equivalent Interleaved Channels? spec- (Lower 80 and BILT Channels) and the one hundred forty (140) EA market wide Clean Upper 200 Channels to be vacated by Nextel. 11 ~~. . PREFERRED 8 AIRPEAK BEFORE AND AFTER 1 PICTURE NEXTEL AFTER REBANDING-ADOPTION PREFERRED 8 AIRPEAK BEFORE AND AFTER 12 b. Spectrum Holdings in the Washington-Baltimore, D.C.-Maryland, Virginia-West Virginia-Pennsylvania EA Market. As set forth in the Chart immediately below, Nextel holds fifty (50) General Category EA-Licensed frequencies covering an average of 75.85% of the Washington- Baltimore, D.C.-Maryland-Virginia-West Virginia-Pennsylvania EA market?s total population, or the equivalent of thirty-eight (38) channels. Likewise, due to its eighty (80) Lower 80 EA frequencies covering an average of 99.74% of the EA market?s total population, Nextel would hold the equivalent of eighty (80) Channels of MWops Equivalent Spectrum. Nextel holds thnty-three (33) Business Category Channels in this EA market. Pursuant to the Commission?s decision allowing SMR licensees to purchase such Channels and convert them to CMRS, these Channels would be included. Due to these kquencies? covering an average of 54.00% of the total population, Nextel would hold the equivalent of eighteen (18) Channels of MWPops Equivalent Spectrum. MARKET BEAOl3 WASHINGTON-BALTIMORE, DC-MD-VA-WV-PA EA MARKET NEXTEL CHANNELS SUMMARY 436 311 330 21 .eo 18.55 I 16.50 1. Report and Order?s Movement Methodology: (a) move the Nextel Control Group?s General Category EA- and Site-Licensed Spectrum to the new 13 Cellular Block on an EA market wide Clean 1:l basis; (b) credit Nextel with a nationwide ?running average? of the General Catego y, Interleave and Lower 80 Channels vacated by it, Nextel Partners and licensees which have such spectrum by reassigning to Nextel 4.5 MHz of 1.9 GHz band spectrum; (c) move the Non-NCG S EA and Cellular-architecture Systems Site Licensees? EA-Licensed Spectrum to the new Cellular Block on an EA market wide, Clean I: I basis; however such Licensees? Site-Licensed Spectrum would move to the new Cellular Block on such basis only if(1) it is located in an EA market in which such Licensee holds an EA Authorization and (2) the Non-Nextel Control Group EA or Cellular-architecture System Site Licensee is using such Site-Licensed Spectrum as part of a Cellular-architecture System as of the date of the publication of the Report and Order in the Federal Register. Due to the presence of site-specific incumbents and EA Licensees, the Nextel Control Group holds one hundred seventy-two (172) MHflops Equivalent Lower 230 Channels. Upon their movement under the Report and Order, the NCG would be allocated two hundred thirty-six (236) Channels on a Clean basis, a net gain of sixty-four (64) MHzlpops Equivalent Channels. As noted in Preferred?s Ex Parte Presentation filed on March 2,2004, this result appears to belie the oft-repeated argument by the Consensus Parties that their Proposal involves only a ?kHz-for-& exchange? or ?replacement spectrum.?? As noted above, under the Report and Order, this result will hold true in a majonly of the 175 EA markets. executed a management or purchase option agreement with it and modtjj Since the Report and Order moves spectrum on a Total, rather than upon a MHflops Equivalent basis, it moves one hundred twenty (120) (6 MHz) of the NCG?s one hundred and twenty three (123) General Category EA- and Site-Licensed Channels to the former NPSPAC Channels. The NCG?s remaining three (3) General Category and its one hundred thirteen (1 13) BiILT and Lower 80 Channels (5.80 MHz) would be modified by the Commission?s reassigning to Nextel an identical number of frequencies in the 1.9 GHz band as part of the FCC?s exclusive allocation to Nextel of a nationwide 10 MHz license in that frequency band. As noted above, this result will hold true in a majority of the EA markets?? 2. Allocation of 1.9 GHz Band Spectrum Exclusively to Nextel. Pursuant to the Report and Order, the FCC therefore allocates Nextel 5.80 MHz of 1.9 GHz band spectrum solely as the result of its 800 MHz band movement methodology, not as Nextel and the Consensus Parties repeatedly insisted in their respective filings, due to Nextel?s returning its unrelated 700 MHz Guard Band holdings *O See n. 4 supra. Interestingly enough, in this EA market, Preferred?s MHflops Equivalent Spectrum figure of 18.55 MHz exceeds Nextel?s published Total Spectrum figure of 17.75 MHz. ?? See n. 5 supra. 14 and promising to pay the total 800 MHz band relocation costs and pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band.? The Report and Order?s sale of the remaining portion (4.20 ME) of the 1.9 GHz band spectrum in exchange for (a) Nextel?s 700 MHz Guard Band holdings unrelated to any reorganization of the 800 MHz band; @) secured promise to pay the total 800 MHz band relocation costs; and (c) promise to pay its pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band apparently was believed necessary by the Commission to avoid (1) connecting the award of 1.9 GHz band to the movement and modification of the 800 MHz EA- and Site-Licensed Spectrum of General Category and Lower 80 EA licensees (2) triggering the otherwise mandatory competitive bidding provisions of Section 3096) by providing a basis for the FCC?s limiting the participation in the allocation of the 1.9 GHz band spectrum to only Nextel. Pursuant to its Section 3 16 modification authority, in this EA market the FCC would allocate 5.80 MHz of the 1.9 GHz band spectrum to Nextel to replace that company?s already-existing 800 MHz band spectrum. As noted above, the award of such 1.9 GHz band spectrum therefore clearly would not involve the issuance of an ?initial? license by the Commission implicating the competitive bidding provisions of Section 309(j).? Under Sections 316, 301, 303 and 309(j)(6)(E), the Commission maintains in the Report and Order that it has the discretion to determine that it better serves the public interest to allow Nextel to purchase the remaining 4.20 MHz of 1.9 GHz band spectrum free from the filing of competing license application^?^ While this position appears meritorious if the FCC were allocating this remaining 1.9 GHz band spectrum to the class of licensees whose spectrum holdings were being modified and moveddeneral Category and Lower 80 EA licensees, it clearly violates the Commission?s statutory mandates under the to maintain regulatory parity and promote competitionZ5 and the competitive bidding provisions of Section 309(j)26 by restricting participation in such allocation to a single entity within such class of licensees?? 3. Effect of Report and Order Upon Nextel?s Total and Clean Spectrum In the Washington-Baltimore, D.C.-Maryland-Virginia-West Virginia- Pennsylvania EA market, Nextel considerably increases its Total Published Spectrum from 17.75 MHz to 26.0 MHz, its MHflops Equivalent Spectrum from 18.55 MHz to 26.0 MHz, and its EA Wide Spectrum from 16.50 MHz to 26.0 MHz?~ These spectrum 22 See n. 6 supra. 23 See n. 7 supra. 24 See n. 8 supra. 25 See n. 9 supra. ?Seen. 10 supra. ?? See n. 11 supra. ?* With the movement of Preferred?s EA-Licensed Spectrum into the one hundred (100) Upper 200 Channels to be vacated by Nextel, its Total, Clean or MHflops Equivalent and Cellular Spectrum set forth immediately above would be reduced by 5.0 MHz. 15 increases occur because the Report and Order?s (a) 800 MHz band movement methodology discussed immediately above and (b) the exclusive allocation to Nextel of 10 MHz of 1.9 GHz band spectrum. 4. Increase in Value ofNextels Spectrum Holdings (800 MHz and 1.9 GHz Band Spectrum). According to the Report and Order, the present average fair market value of Nextel?s 800 MHz band spectrum to be exchanged as part of the Consensus Parties Proposal?s movement methodology is $1.61 MHfl~p?~ The FCC further determined that the present fair market value of the 800 MHz and 1.9 GHz band spectrum Nextel would receive in exchange therefor would be $1.70 MH~/POP.~~ Applying these figures to the Washington-Baltimore, D.C.-Maryland- Virginia-West Virginia-Pennsylvania EA market, the present value of the Nextel Control Group?s 800 MHz band spectrum to be exchanged under the Report and Order would be determined by multiplying Nextel?s one hundred seventy-two (172) Channels, or 8.60 MHzA?ops Equivalent Spectrum, by the EA market?s total population of 8,400,923 (2003 Pops) and then multiplying the resulting figure of 72,247,938 by $1.61 MHflop. The resulting figure of $116,319,180 would be the present value of the 800 MHz band spectrum Nextel would exchange in this EA market under the Report and Order. However, since under the Report and Order?s movement methodology, the NCG?s EA- and Site-Licensed Spectrum moves on a Total Spectrum 1:l basis, rather than upon a MHdPops Equivalent basis, the NCG would receive a total of two hundred thirty-six (236) Clean 800 MHz (120 Channels in the former NPSPAC Channels) and 1.9 GHz band Channels (116 such Channels), or 11.80 MHz of such Spectrum, in exchange therefor. Nextel would receive an additional eighty-four (84) Clean 1.9 GHz band Channels, or 4.20 MHz of such Spectrum, in exchange for its returning its 700 MHz Guard Band spectrum holdings, secured promise to pay the total 800 MHz band relocation costs and promise to pay its pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band. Under the Report and Order, the fair market value of this Spectrum would be determined by multiplying 16 MHz of Clean Spectrum by the EA market?s total population of 8,400,923, and then multiplying the resulting figure by $1.70 MHdPop. The resulting figure of $228,505,106 would be the fair market value of the Clean Spectrum the Nextel Control Group would receive under the Report and Order. The $1 12,185,926 difference in the fair market values of the spectrum to be exchanged under the Report and Order is the amount of the NCG?s 800 MHz band spectrum enhancement. 5. Effect ofReport and Order Upon Non-Nentel EA and Cellular-architecture Nextel therefore would hold 21.0 MHz of Total, Clean or MHzPops Equivalent and Cellular Spectrum in this EA market. 29 See n. 13 supra. 30 Seen. 14 supra. 16 Site Licensees ?Spectrum Holdings. Preferred Communication Systems, Inc. (?Preferred?) holds one hundred (100) specific incumbents, Preferred?s Channels cover 49.75% of this EA market?s total population. Preferred therefore holds fifty (50) MHflops Equivalent Channels. General Category EA Channels (5 MHz) in this EA market. Due tu the presence of site- Under paragraph 163 of the Report and Order, Preferred?s EA- and Site- Licensed Spectrum would move to the new Cellular Block on an EA market wide, Clean 1:l basis. As a result, its one hundred (100) channels presumably would move to the Upper 200 Channels in the new Cellular Block beginning with Channel 401 on an EA market wide, Clean 1:1 basis. Nextel would vacate these Channels but retain Channels 501-600 and its 900 MHz band spectmm in this EA market?? Under the Report and Order, the value of this 800 MHz band spectrum vacated by Nextel would be determined by multiplying Nextel?s one hundred (100) channels (5 MHz) by the EA market?s total population of 8,400,923 (2003 Pops) and then multiplying the resulting figure of 42,004,615 by $1.70 MH~/Po~.~* The resulting figure of $71,407,846 would be the present value of the 800 MHz band spectrum in the Upper 200 Channels Nextel would vacate to facilitate the movement of the EA- and Site- Licensed Spectrum held by the Non-Nextel Licensee in hs EA market. Thus, even if Nextel vacates its one hundred (100) Channels in the Upper 200 Channels on an EA market Clean 1:l basis to Preferred, it would realize a $40,778,080 increase or enhancement of its spectrum holdings in this EA market. 6. Effect ofReport and Order Upon Other 800 MHz Licensees? Spectrum Holdings Under the Report and Order, the Site Channels held by other Non-Nextel Control Group licensees in the General Category Channels (Channels 1-150) and in the Upper 200 Channels would move to the thuty-three (33) Interleave and eighty (80) Lower 80 Channels to be vacated by the NCG. In this EA market, other Non-Nextel licensees hold one hundred forty-six (146) General Category Site Channels. Other Non- Nextel licensees hold fifty-four (54) Site Channels in the Upper 200 channel^?^ According to the Report and Order, these Site Channels would receive comparable facilities and their present geographic ?footprint.? A total of two hundred (200) General Category and Upper 200 Site Channels therefore would be moved into one hundred See n. 15 supra. This conclusion is based upon the assumption that Nextel holds two hundred (200) Clean Channels within the Upper 200 Channels in this EA market. However, according to the Non-Nextel Site License Spreadsheet developed by CTO on Preferred?s behalf and attached hereto as Schedule 3, Nextel holds only one hundred forty-six (146) Clean Channels in the Upper 200 Channels in the Washington-Baltimore, DC-Maryland-Virginia-West Virginia-Pennsylvania EA market. 32 See n. 16 supra. 33 See n. 17 supra. 31 thirteen (1 13) Interleave and Lower 80 Channels to be vacated by Nextel on a geographic ?footprint? basis. While Nextel?s Lower 80 Channels cover an average of 100% of the EA market?s population, its BILT Channels cover an average of only 54% of this EA market?s population. If the average geographical ??footprint? of the General Category and Upper 200 Site Channels is greater than Nextel?s BILT Channels to be vacated, insufficient spectrum would be available to accommodate the movement of the Site Channels held by Non-Nextel licensees in this EA market?4 7. Effect of Adoption of Preferred?s Improvements If the FCC determines to adopt Preferred?s Improvements set forth in the Overview to this First Request For Clarifications, Channels 1-25 of the General Category EA Authorizations held by Preferred would move to Channels 576-600 of the Upper 200 Channels held by Nextel, and available to be vacated, on an EA market wide Clean 1:l basis. Preferred?s remaining seventy-five (75) General Category EA Channels would move to Channels 601-675 of the former NPSPAC Channels on an EA market wide Clean 1 : 1 basis. Under Preferred?s Improvements, Nextel would move its forty-five (45) General Category EA Channels to the former NPSPAC Channels on an EA market wide Clean 1 : 1 basis. Under such approach, both Nextel?s twenty-five (25) Upper 200 and eighty (80) Lower 80 EA Channels would move to the 1.9 GHz band on an EA market wide Clean 1:l basis. Its General Category and BDLT Site Channels would move to the 1.9 GHz band on a MHdPops Equivalent basis. Nextel therefore would move such Site Channels to the 1.9 GHz band for fifty-four (54) Channels in the 1.9 GHz band on an EA market wide and Clean basis. Nextel therefore would hold one hundred sixty-four (164) Channels, or 8.2 MHz, rather than the nationwide ?running average? of 4.5 MHz of such 1.9 GHz band spectrum on an EA market wide and Clean basis as replacement spectrum for its vacated 800 MHz band spectrum. Under Preferred?s Improvements, in this EA market the FCC would award the remaining thirty-six (36) Channels or 1.8 MHz of 1.9 GHz band spectrum by a private sale or other means. However, unlike under the Report and Order, Preferred?s Improvements would expand the eligibility to participate in the allocation of such 1.9 GHz band spectrum to the entire class of General Category and Lower 80 EA licensees whose EA- and Site-Licensed Spectrum was moved and modified in this proceeding. Licensees within such class who would forego reimbursement of their own relocation costs, such as Nextel Partners apparently is willing to do, would be entitled to receive an 34 See id: see also Concepts To Operations, lnc., Analysis of the Relocation ofNon-Nextel SMR, BILT and Public Safety Site Licensees in Channels 1-150 and 401-600 Under the FCC?s Report and Order, attached hereto as Exhibit A. To Preferred?s knowledge, neither Nextel nor the Consensus Parties ever addressed this issue in their filings in this proceeding. 18 allocation of 1.9 GHz band spectrum on an EA market wide and Clean basis. Preferred already has indicated in several previous filings that it would be willing to forego reimbursement of its relocation costs in exchange for an allocation of 1.9 GHz band spectmn in the EA markets in whch it holds EA Authorizations. Absent Airpeak?s or another Non-Nextel Control Group EA licensee?s foregoing reimbursement of its relocation costs, Preferred would seek an allocation of the thirty-six (36) Channels or 1.8 MHz of 1.9 GHz band spectrum in this EA market. Such award of 1.9 GHz band spectrum would not violate the otherwise mandatorily competitive bidding provisions of Section 3090) since the Commission has the authority under Section 309(i)(6)(E) to avoid mutual exclusivity and would not violate the FCC?s statutory mandates to maintain regulatory parity and promote competition. 8. Conclusion Under the Report and Order?s approach, while the NCG suffers a decrease in its Total Spectrum in this EA market, its MHdPops Equivalent Spectrum in this EA market increases. With Nextel?s vacating one hundred (100) channels in the Upper 200 Channels in the new Cellular Block, it would hold four hundred twenty (420) total and h4?ops Equivalent 800 MHz and 1.9 GHz band channels (21 MHz) as compared to the three hundred and fifty-five (355) Total Published, and three hundred seventy-one (371) MHflops Equivalent channels it presently holds. According to the Report and Order, the value of the 800 MHz and 1.9 GHz band spectrum the Nextel Control Group would receive in this EA market would exceed the value of the 800 MHz band spectrum it would vacate by $60,161,109 (the value of the spectrum Nextel would receive would be determined by multiplying 8,400,923 Pops (2003 figure) by (a) 13.5 MHz of 800 MHz and 1.9 GHz Band spectrum, the resulting figure of 113,412,461 is then multiplied by @) $1.70 per MHflop producing a figure of $192,801,183; the value of the spectrum Nextel would vacate would be determined by multiplying the Pops figure by (a) 4.9 MHz of 800 MHz Band Spectrum Interleaved Channels) and (b) 5 MHz of 800 MHz Band Spectrum respectively multiplied by (c) $1.4875 per MHzRop (d) $1.70 per MHflop producing a figure of $132,640,074; the difference between $192,801,183 and $132,640,074, or $60,161,109. (Upper 200 Channels) (35. , the resulting figures of (a) 41,164,523 and @) 42,004,615 then The Non-Nextel EA licensee in this EA market experiences an increase in their respective MWops Equivalent Channels. Preferred?s Clean Spectrum respectively, increases from fifty (50) (2.5 MHz) to one hundred (100) (5 MHz) Channels. Since its EA-Licensed Spectrum moves on a Total, rather MHzRops Equivalent Channels basis, its number of Total Channels remains unchanged. 35 These figures would include both the ninety-eight (98) Clean or MHzRops Equivalent Interleaved Channels? Spectrum (Lower 80 and BILT Channels) and the one hundred (100) EA market wide Clean Upper 200 Channels to be vacated by Nextel. 19 NEXTEL AFTER PCSl NEXTELAFTER REBANDING- PCSl 20 a. Spectrum Holdings in the Atlanta, Georgia-Alabama-North Carolina EA Market. As set forth in the Chart immediately below, Nextel holds twenty-five (25) General Category EA-Licensed frequencies covering an average of 74.27% of the EA market?s total population, or the equivalent of nineteen (19) Channels of MHz/Pops Equivalent Spectrum. Likewise, due to its sixty (60) Lower 80 EA kequencies covering an average of 81.59% of the EA market?s total population, Nextel would hold the equivalent of forty-nine (49) Channels of MHflops Equivalent Spectrum. Nextel holds nine (9) Business Category Channels in this EA market. Pursuant to the Commission?s decision allowing SMR licensees to purchase such Channels and convert them to CMRS, these Channels would be included. Due to these frequencies? covering an average of 45.99% of the total population, Nextel would hold the equivalent of four (4) Channels of MHzPops Equivalent Spectrum. 200 91 09% 182 0 0 200 182 10.00 9.10 MARKET BEAO40 ATLANTA, GA-AL-NC EA MARKET NEXTEL CHANNELS SUMMARY 200 200 10.00 0.00 B 12.55 405 293 305 21 (I) Report and Order?s Movement Methodology: (a) move the Nextel Control Group?s General Category EA- and Site-Licensed Spectrum to the new Cellular Block on an EA market wide Clean 1 : 1 basis; (b) credit Nextel with a nationwide ?running average? of the General Categov, Interleave and Lower 80 Channels vacated by it, Nextel Partners and licensees which have executed a management or purchase option agreement with it and modi@? such spectrum by reassigning to Nextel 4.5 MHz of 1.9 GHz band spectrum; (c) move the Non-NCG ?s EA and Cellular-architecture Systems Site Licensees? EA-Licensed Spectrum to the new Cellular Block on an EA market wide, Clean 1 :I basis; however such Licensees? Site-Licensed Spectrum would move to the new Cellular Block on such basis only if(1) it is located in an EA market in which such Licensee holds an EA Authorization and (2) the Non-Nextel Control Group EA or Cellular-architecture System Site Licensee is using such Site-Licensed Spectrum as part of a Celiular-architecture System as of the date of the publication of the Report and Order in the Federal Register. Due to the presence of site-specific incumbents, the NCG holds one hundred eleven (1 11) MHz/pops Equivalent Lower 230 Channels. Upon their movement under the Report and Order, the Nextel Control Group would be allocated two hundred five (205) Channels on a Clean basis, a net gain of ninety-four (94) MWops Equivalent Channels. As noted in Preferred?s Ex Parte Presentation filed on March 2, 2004, this result appears to belie the oft-repeated argument by the Consensus Parties that their proposal involves only a ?lcHz-for-kHz exchange? or ?replacement spectrum.,?36 AS noted above, under the Report and Order, this result will hold true in a majority of the 175 EA markets?? Since the Report and Order moves spectrum on a Total, rather than upon a Mwpops Equivalent basis, it moves the NCG?s one hundred twenty (120) (6 MHz) of the NCG?s two hundred five (205) (10.25 MHz) General Category and Lower 80 EA- and Site-Licensed Channels and BILT Channels to the former NPSPAC Channels. 2. Allocation of 1.9 GHz Band Spectrum Exclusively to Nextel. Under the Report and Order, therefore, Nextel would be allocated 4.25 MHz of the 1.9 GHz band spectrum solely as the result of its 800 MHz band movement 36 See n. 4 supra. Interestingly enough, in this EA market, Preferred?s MHAPops Equivalent Spectrum figure of 14.65 MHz slightly exceeds Nextel?s published Total S ectrum figure of 14.60 MHz. 2 See n. 5 supra. 22 methodology. The Report and Order therefore would sell 5.75 MHz of the 1.9 GHz band spectrum in this EA market to Nextel in exchange for (a) Nextel?s 700 MHz Guard Band holdings unrelated to any reorganization of the 800 MHz band; (b) secured promise to UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band apparently was believed necessary by the Commission to avoid (c) connecting the award of 1.9 GHz band to the movement and modification of the 800 MHz EA- and Site-Licensed Spectrum of General Category and Lower 80 EA licensees (b) triggering the otherwise mandatory competitive bidding provisions of Section 309fj) by providing a basis for the FCC?s limiting the participation in the allocation of the 1.9 GHz band spectrum to only Nextel. pay the total 800 MIIz band relocation costs; and (c) promise to pay its pro rata share of Pursuant to its Section 316 modification authority, in this EA market the FCC would allocate 4.25 MHz of 1.9 GHz band spectrum to Nextel to replace that company?s already-existing 800 MHz band spectrum. As was the case in the Sacramento and Washington-Baltimore EA markets, the award of such 1.9 GHz band spectrum in this EA would not involve the issuance of an ?initial? license by the Commission implicating the competitive bidding provisions of Section 309(i).38 Under Sections 316, 301, 303 and 3096)(6)(E), the Commission maintains in the Report and Order that it has the discretion to determine that it better serves the public interest to allow Nextel to purchase the 10 MHz of 1.9 GHz band spectrum free hm the filing of competing license appli~ations?~ While this position appears meritorious if the FCC were allocating this remaining 1.9 GHz band spectrum to the class of licensees whose spectrum holdings were being modified and moved-General Category and Lower 80 EA licensees, it clearly violates the Commission?s statutory mandates under the to maintain regulatory parity and promote competition4? and the competitive bidding provisions of Section 309(j)4? by restricting participation in such allocation to a single entity within such class of licensees.? 3. Effect of Report and Order Upon Nextel S Total and Clean Spectrum. In the Atlanta, Georgia-Alabama-North Carolina EA market, Nextel considerably increases its Total Published Spectrum from 14.60 MHz to 26.0 MHz, its MHzPops Equivalent Spectrum from 14.65 MHz to 26.0 MHz, and its CMRS Cellular Service Eligible Spectrum from 14.25 MHz to 26.0 MHz!~ These spectrum increases ?See n. 7 supra. 39 See n. 8 supra. See n. 9 supra. 4? See n. 10 supra. 42 See n. I 1 supra. 43 With the movement of Southern?s EA- and Site-Licensed Spectrum into the one hundred forty (140) Upper 200 Channels to be vacated by Nextel, its Total and MHflops Equivalent Spectrum set forth immediately above would be reduced by 7.00 MHz. Nextel therefore would hold 19.0 MHz of Total, Clean or MHzPops Equivalent and Cellular Spectrum in this EA market. 40 23 occur because the Report and Order?s (a) 800 MHz band movement methodology discussed immediately above and (b) the exclusive allocation to Nextel of 10 MHz of 1.9 GHz band spectrum. 4. Increase in Value of Nextelk Spectrum Holdings (800 MHz and 1.9 GHz Band Spectrum). According to the Report and Order, the present average fair market value of Nextel?s 800 MHz band spectrum to be exchanged as part of the Consensus Parties Proposal?s movement methodology is $1.61 MHzPop.? The FCC further determined that the present fair market value of the 800 MHz and 1.9 GHz band spectrum Nextel would receive in exchange therefor would be $1.70 MHflo~.~~ Applying these figures to the Atlanta, Georgia-Alabama-North Carolina EA market, the present value of the Nextel Control Group?s 800 MHz band spectrum to be exchanged under the Report and Order would be determined by multiplying Nextel?s one hundred eleven (1 11) Channels, or 5.55 MHz of Clean Spectrum, by the EA market?s total population of 5,471,412 (2003 Pops) and then multiplying the resulting figure of 30,366,634 by $1.61 MHzE?op. The resulting figure of $48,889,802 would be the present value of the 800 MHz band spectrum Nextel would exchange in this EA market under the Report and Order. However, since under the Report and Order?s movement methodology, the NCG?s EA- and Site-Licensed Spectrum moves on a Total Spectrum 1 : 1 basis, rather than upon a MHz/Pops Equivalent basis, and the FCC allocates all 10 MHz of 1.9 GHz band spectrum exclusively to Nextel by a private sale, the NCG would receive a total of three hundred twenty (320) Clean 800 MHz (120 Channels in the former NF?SPAC Channels) and 1.9 GHz band Channels (200 such Channels), or 16.00 MHz of such Spectrum. Under the Report and Order, the fir market value of this Spectrum would be determined by multiplying 16 MHz of Clean Spectrum by the EA market?s total population of 5,471,412, and then multiplying the resulting figure by $1.70 MHzPop. The resulting figure of $148,822,406 would be the fair market value of the Clean Spectrum the Nextel Control Group would receive under the Report and Order. The $99,932,504 difference in the fair market values of the spectrum to be exchanged under the Report and Order is the amount of the NCG?s 800 MHz band spectrum enhancement. 5. Effect of Report and Order Upon Non-Nextel EA and Cellular-Architecture Site Licensees ? Spectrum Holdings. Southem Communications Services, Inc. (?Southern?) holds one hundred twenty-five (125) General Category EA Channels (6.25 MHz) in this EA market. Due to the presence of site-specific incumbents, Southern?s Channels cover 63.04% of this EA See n. I 3 supra. 45 Seen. 14 supra. 24 market?s total population. Southern therefore holds seventy-nine (79) MHzPops Equivalent Channels. Moreover, Southern also holds thirteen (13) General Category Site Channels witlun the twenty-five (25) General Category EA authorization held by Nextel h thjs EA marker. These Sire Chmels cover an average 0f28.04% of the EA market?s population and therefore are equivalent to four (4) Channels of MHflops Equivalent Spectrum. Further, Southern holds twenty (20) Lower 80 EA-Licensed Channels. Due to these frequencies covering an average of 23.45% of the population of this EA market, they are equivalent to five (5) Channels of MHz/Pops Equivalent Spectrum. In addition, Southern holds six (6) Lower 80 Site Channels within the sixty (60) Lower 80 EA Channels held by Nextel in this EA market. Due to these frequencies? covering an average of 12.03% of the total population of th~s EA market, they are the equivalent of one Channel of Clean or M?ops Equivalent Spectrum. Finally, Southern holds ninety-three (93) BILT and three (3) Upper 200 Channels in this EA market. Since these BILT and Upper 200 Channels respectively cover an average of 28.15% and 2.50% of this EA market?s total population, they are the equivalent of twenty-six (26) and one (1) Channel(s) of MHflops Equivalent Spectrum. Under paragraph 163 of the Report and Order, Southern?s EA- and Site- Licensed Spectrum generally would move to the new Cellular Block on an EA market wide, Clean 1:1 basis. As a result, two hundred sixty (260) channels presumably would move to the former NF?SPAC and Upper 200 Channels in the new Cellular Block on an EA market wide, Clean 1:l baskM The problem, of course, under the Report and Order is that Nextel is allocated the former NPSPAC Channels in every EA market regardless of its relative 800 MHz band spectrum holdings in a particular EA market. Under the approach suggested above, Southern?s two hundred sixty (260) Ea- and Site-Licensed Channels would move to the new Cellular Block on an EA market wide, Clean 1:l basis. One hundred twenty (120) of Southern?s Channels would move to the former NF?SPAC Channels. Its remaining one hundred forty (140) Channels would move to the Upper 200 Channels to be vacated by Nextel beginning presumably with Channel 404 (Southern?s three Upper 200 Channels presumably would be moved to Channels 401-403). Nextel would retain Channels 541-600 and its 900 MHz band spectnun in this EA market!7 Moreover, under this approach Nextel would be allocated two hundred (200) Channels of 1.9 GHz band spectrum as replacement for its two hundred five (205) EA- and Site-Licensed 800 MHz band spectrum the FCC would move and modify. Such approach would appear clearly preferable to the Commission?s pro 46 However, due to the ?insufficient? spectrum in the ESMR portion of the band to replicate the existing channel capacity of both Nextel and Southern in EA markets in Georgia, Alabama, southeastern Mississippi and northern Florida, on its own motion the FCC expanded the ESMR portion of the band in these EA markets by 2.5 MHz to include 813.5-816 MHd858.5-861 MHZ. Having such portion of the band in these EA markets, the FCC then left it up to Nextel and Southern to reach an agreement concerning the apportionment of their respective channels within the expanded ESMR portion of the band. See discussion at pp. 2-3 supra. 47 See n. 15 supra. 25 rata allocation set forth in paragraph 168 and n. 444 thereto in the Report and Order since it would allocate 1.9 GHz band spectrum as a replacement of Nextel?s already existing 800 MHz band spectrum under the FCC?s Section 316 modification authority rather than exclusively allocating such spectnun to Nextel by a private sale in contravention of the otherwise mandatory competitive bidding provisions of Section 309(j).48 Under the Report and Order, the value of this 800 MHz band spectrum vacated by Nextel would be determined by multiplying Nextel?s one hundred forty (140) channels (7 MHz) by the EA market?s total population of 5,471,412 (2003 Pops) and then multiplying the resulting figure of 38,299,884 by $1.70 MHZ/POP.~~ The resulting figure of $65,109,803 would be the present value of the 800 MHz band spectrum in the Upper 200 Channels Nextel would vacate to facilitate the movement of the EA- and Site- Licensed Spectrum held by the Non-Nextel Licensee in this EA market. Thus, even in this EA market, if Nextel vacates its one hundred forty (140) Channels in the Upper 200 Channels on an EA market Clean 1:l basis to Southern, it would realize a $34,822,701 increase or enhancement of its spectrum holdings. 6. Effect of Report and Order Upon Other 800 MHz Licensees? Spectrum Holdings Under the Report and Order, the Site Channels held by other Non-Nextel Control Group licensees in the General Category Channels (Channels 1-150) and in the Upper 200 Channels would move to the thrty-three (33) Interleave and eighty (80) Lower 80 Channels to be vacated by the NCG. In this EA market, other Non-Nextel licensees hold forty-six (46) General Category Site Channels. Other Non-Nextel licensees hold fifty-four (54) Site Channels in the Upper 200 Channels.50 According to the Report and Order, these Site Channels would receive comparable facilities and their present geographic ?footprint.? A total of one hundred (100) General Category and Upper 200 Site Channels therefore would be moved into sixty-nine (69) Interleave and Lower 80 Channels to be vacated by Nextel on a geographic ?footprint? basis. While Nextel?s Lower 80 Channels cover an average of 81.59% of the EA market?s population, its BILT Channels cover an average of only 45.99% of this EA market?s population. If the average ?footprint? of the General Category and Upper 200 Site Channels is greater than Nextel?s BILT Channels to be vacated, insufficient spectrum would be available to 48 See Verizon Wireless White Paper, at pp. 4-1 1. Under the FCC?spro rata distribution approach, Southern would be allocated 33.72% of the 320 Channels in the ESMR portion of the 800 MHz band or 108 Channels since it holds 145 of the 430 total EA Channels in the Atlanta EA market. Southern therefore would lose 152 total Channels. Nextel would be allocated 220 Channels, or 66.28% of the 320 Channels in the ESMR portion of the 800 MHz band. Nextel therefore would lose 185 total Channels. Of course, Nextel exclusively would be allocated 200 Channels in the 1.9 GHz band by a private sale. Nextel?s total Channels therefore would increase by 15 Channels. 49 See n. 26 supra. See n. 17 supra. 26 accommodate the movement of the Site Channels held by Non-Nextel licensees in this EA market.? 7. Efect ofAdoption of Prflerred?s Improvements. If the FCC determines to adopt Preferred?s Improvements set forth in the Overview to this First Request For Clarifications, Channels 1-25 of the General Category EA Authorizations held by Southern would move to Channels 576-600 of the Upper 200 Channels held by Nextel, and available to be vacated, on an EA market wide Clean 1:l basis. Southern?s remaining one hundred (100) General Category EA Channels would move to Channels 601-700 of the former NPSPAC Channels on an EA market wide Clean 1 : 1 basis. Under Preferred?s Improvements, Nextel would move twenty (20) of its twenty-five (25) General Category EA Channels to the former NPSPAC Channels on an EA market wide Clean 1 : 1 basis. Under such approach, Nextel?s five (5) remaining General Category EA, one hundred eight (108) Upper 200 and sixty (60) Lower 80 EA Channels would move to the 1.9 GHz band on an EA market wide Clean 1:l basis. Its General Category and BDLT Site Channels would move to the 1.9 GHz band on a MHzPops Equivalent basis. Nextel therefore would move such Site Channels to the 1.9 GHz band for forty-one (41) Channels in the 1.9 GHz band on an EA market wide and Clean basis. Nextel therefore would hold two hundred fourteen (214) Channels, or 10.70 MHz, rather than the nationwide ?running average? of 4.5 MHz of such 1.9 GHz band spectrum on an EA market wide and Clean basis as replacement spectrum for its vacated 800 MHz band spectrum. Under Preferred?s Improvements, in this EA market the FCC would need to allocate an additional fourteen (14) Channels or .70 MHz of 1.9 GHz band spectrum to Nextel. Due to the unique licensing situation in Southern?s core markets (Georgia, Alabama, southeast Mississippi and northern Florida), little or no ?excess? 1.9 GHz band spectrum remains after replacing Nextel?s or Nextel Partners? vacated 800 MHz band spectrum. In these EA markets, the Commission clearly has the authority to allocate 1.9 GHz band spectrum under Section 316 since it is largely reassigning frequencies for already existing 800 MHz band spectrum. 8. Conclusion. Under the Report and Order?s approach, the NCG experiences an increase in its both its Total Spectrum and MHz/Pops Equivalent or Clean Spectrum in this EA ~ See id. If Southern?s General Category and Lower 80 EA- and Site-Licensed Channels and BILT Channels move into the new Cellular Block, it would vacate 93 Interleave Channels thereby freeing up sufficient spectrum to accommodate the General Category and Upper 200 Site Channels of other licensees. 27 market. With Nextel's vacating one hundred eight (108) channels in the Upper 200 Channels in the new Cellular Block, it would hold four hundred twelve (412) Total and Clean 800 MHz and 1.9 GHz band channels (20.6 MHz) as compared to its present four hundred five (405) Total, and two hundred ninety-three (293) MHziPops Equivalent channels it presently holds. According to the Report and Order, the value of the 800 MHz and 1.9 GHz band spectrum the Nextel Control Group would receive in this EA market would exceed the value of the 800 MHz band spectrum it would vacate by $32,380,500 (the value of the spectrum Nextel would receive would be determined by multiplying 5,471,412 Pops (2003 figure) by (a) 13.5 MHz of 800 MHz and 1.9 GHz Band spectrum; the resulting figure of 73,864,062 is then multiplied by (b) $1.70 per M"op producing a figure of $125,568,905; the value of the spectrum Nextel would vacate would be determined by multiplying the Pops figure by (c) 3.45 MHz of 800 MHz Band Spectrum (Interleaved Channels) and (d) 7 MHz of 800 MHz Band Spectrum (Upper 200 Channels)52; the resulting figures of (a) 18,876,371 and (b) 38,299,884 are then multiplied respectively by (e) $1.4875 per MfiPop and (0 $1.70 per MHflop producing a figure of $93,188,405; the difference between $125,568,905 and $93,188,405, or $32,380,500 would be the amount ofNextel's spectrum enhancement in this EA market. By contrast, the Non-Nextel EA Licensee in this EA market experiences a decrease in both its MHz/Pops Equivalent Channels and Total Channels. Southern's Clean Spectrum decreases from one hundred nine (109) (5.45 MHz) to one hundred eight (108) (5.40 MHz) Channels. Its Total Channels decrease from two hundred sixty (260) Channels (13 MHz) to one hundred eight (108) channel^.'^ Under the Report and Order's pro rata allocation approach, Southern would lose one hundred fifty-two (152) Total Channels (7.6 MHz), most of which are BILT Channels currently used by it as an integral part of its system. According to the Report and Order, such Spectrum would have a value of $1.4875 MHziPop or $61,854,313. Arguably, the difference of $61,854,313 is the amount of Southern's loss in spectrum or spectrum rights that effectively were transferred to the NCG, which received one hundred nineteen (119) additional Channels of Clean Spectrum, or a considerable portion of the one hundred fifty-two (152) such Channels Southern would be denied by the Report and Order's impermissible discriminatoly movement methodology. Preferred maintains that this uncompensated loss, and spectrum enhancement to the Nextel Control Group, 52 These figures would include the sixty-nine (69) Clean or MHzPops Equivalent Interleaved Channels' Spectrum (Lower 80 and BILT Channels) and the one hundred forty (140) EA market wide Clean Upper 200 Channels to be vacated by Nextel. 53 Under the preliminary agreement reached between Southern and Nextel, Southern would hold one hundred eight (108) Channels in an expanded Cellular Block extending to 813.5B58.5 MHz. F'ursuant to such Agreement, Southern therefore would lose one hundred fifty-two (152) Total Channels (7.6 MHz) in the Atlanta EA market while Nextel would gain seventy-five (75) Total Channels (3.75 MHz). 28 represents a portion of Nextel?s promised contribution of to dehy the total relocation Preferred would maintain that the Report and Order?s pro rata allocation approach as set forth in paragraph 168 and note 444 violates the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution5? and the FCC?s statutory mandate to maintain regulatory parity and promote c~mpetition.~~ Moreover, it would appear that the proposed agreement set forth between Southern and Nextel described in paragraph 168 of the Report and Order is mathematically unworkable due to the number of Non-Nextel and Non-Southern SMR and BALT Site licenses in Channels 1-150 and 401-600.57 As noted above, the proposed agreement would expand the ESMR portion of the band in Southern?s core markets (Georgia, Alabama, Southeast Mississippi and Northern Florida) by one hundred (100) paired channels or 2.5 MHz from Channel 401 or 816.01251861.0125 MHz downward to Channel 301 or 813.5125B58.5125 MHz. Pursuant to such proposed agreement, Southern would be allocated these one hundred (100) paired channels and the forty (40) paired channels beginning with Channel 401 within the Upper 200 Channels. As noted above, Nextel holds only sixty (60) Lower 80 EA Channels and nine (9) B/ILT Channels in this EA market. Non-Nextel and Non-Southern SMR and BALT Site licensees hold one hundred (100) channels in Channels 1-150 and 401-600 that need to be moved into the Lower 80 EA and B/ILT Site Channels Nextel would vacate. Given ~ ~~ 54 This argument also clearly would apply in any EA market with respect to which the Transition Administrator and the Commission apply the pro rata distribution approach set forth in footnote 444 of the Report and Order to reduce the total number of channels held by a Non-Nextel EA or Cellular-Architecture System licensee while increasing both the Total Spectrum and Clean or MHzPops Equivalent Spectrum held by the Nextel Control Group in that market. 55 See Southern Communications Services, Inc., Ex Parte Presentation, June 23,2004, p. 11 & n. 46; Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, pp.41-43 & n. 97; Preferred Communication Systems, Inc., Ex Parte Presentation, April 23,2004, p. 5. 56 See Southern Communications Services, Inc., Ex Parte Presentation, June 23,2004, pp. 12 & n. 48; pp. 13-16; Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, p. 41 & n. 94; Preferfed Communication Systems, Inc., Ex Parte Presentation, April 23,2004, p. 5-6 & nn. 16-17. 57 Southern recently recognized this problem in the Atlanta EA market and filed a request for clarification to eliminate the proposed Expansion Band due to lack of spectrum resulting from the movement of Non-Nextel and Non-Southern Site Channels in Channels 1-150 to the Interleave Channels. If the Commission were to move the fifty (50) Non-Nextel and Non-Southern Site Channels in the Upper 200 Channels to the Interleave Channels to accommodate the relocation of Southern?s channels, this problem would be further exacerbated. See generalZy Southern Communications Services, Inc., EX Parte Presentation, October 8,2004. 29 the relatively small contours and population coverage of Nextel?s BDLT Channels in this EA market, it appears unlikely that their geographic ?footprint? would accommodate the ?footprint? of the Non-Nextel and Non-Southern Site licenses to be relocated. Thus, Non-Nextel and Non-Southern Channels would be moved. The approximately forty (40) excess Channels presumably would be moved to Southem?s BDLT Channels thus necessitating moving Southern?s Channels from Channels 301-400 to the Upper 200 Channels. Southern therefore would move its Channels upward kom Channel 440 to Channel 480 or 816.9875B61.9875 MHz to 817.9875B62.9875 MHz. If Public Safety licensees were to retain their fifteen (15) Channels within Channels 301-400 in this EA market, fifteen (15) additional Southern Channels would be required to be shifted into the Upper 200 Channels moving its Channels upward from Channel 440 to Channel 495 or 816.987W361.9875 MHz to 818.3875B63.3875 MHz. Nextel would retain the remaining 105 Channels in the Upper 200 Channels or 5.25 MHz. Nextel likely holds only sixty (60) usable channels to which these one hundred (100) As discussed above, the problem with shifting Southern?s EA- and Site- Licensed Spectrum upward to accommodate this excess Non-Nextel and Non-Southern Site-Licensed Spectrum is that Nextel apparently is unwilling to surrender more than seventy (70) of its Total Channels in the Upper 200 Channels. NEXTEL AFTER SOUTHERN SOUTHERN BEFORE AND AFTER 30 NEXTEL AFTER REBANDING- 303 100% I 15.15 303 SOUTHERN BEFORE AND AFTER PICTURE d. Spectrum Holdings in the herto Rico EA Market. As set forth in the Chart immediately below, Nextel holds twenty-five (25) General Category EA-Licensed fkquencies covering an average of 73.59% of the EA market?s total population, or the equivalent of eighteen (18) Channels of Clean Spectrum. Likewise, due to its eighty (80) Lower 80 EA frequencies covering an average of 75.85% of the EA market?s total population, Nextel would hold the equivalent of sixty-one (61) Channels of Clean Spectrum. Nextel does not hold any Business or IndustriaVLand Transportation Category Channels in this EA market. MARKET BEAl74 PUERTO RlCO EA MARKET 31 21 9 117 165 I 10.9 5.28 I 8.25 m 1. Report and Order's Movement Methodology: (a) move the Nextel Control Group's General Category EA- and Site-Licensed Spectrum to the new Cellular Block on an EA market wide Clean 1:l basis; @) credit Nextel with a nationwide "running average" of the General Category, Interleave and Lower 80 Channels vacated by it, Nextel Partners and licensees which have executed a management or purchase option agreement with it and modib such spectrum by reassigning to Nextel 4.5 MHz of 1.9 GHz band spectrum: (c) move the Non-NCG 's EA and Cellular-architecture Systems Site Licensees' EA-Licensed Spectrum to the new Cellular Block on an EA market wide, Clean 1 tl basis; however such Licensees' Site-Licensed Spectrum would move to the new Cellular Block on such basis only if(1) it is located in an EA market in which such Licensee holds an EA Authorization and (2) the Non-Nextel Control Group EA or Cellular-architecture System Site Licensee is using such Site-Licensed Spectrum as part of a Cellular-architecture System as of the date of the publication of the Report and Order in the Federal Register. Due to the presence of site-specific incumbents, the NCG holds seventy-nine (79) Wops Equivalent Lower 230 Channels. Upon their movement under the Report and Order, the Nextel Control Group would be allocated one hundred five (105) Channels on a Clean basis, a net gain of twenty-six (26) MHzPops Equivalent Channels. 32 As noted in Preferred?s Ex Parte Presentation filed on March 2,2004, this result appears to belie the oft-repeated argument by the Consensus Parties that their Proposal involves only a ?kHz-for-& exchange? or ?replacement spectrum.?58 As noted above, under the Report and Ordu, thjs result will hold true in a majority of the 175 EA markets.59 Since the Report and Order moves spectrum on a Total, rather than upon a MHZlpops Equivalent basis, it moves the NCG?s twenty-five (25) General Category EA Channels to the former NPSPAC Channels. Its eighty (80) Lower 80 EA-Licensed Channels would be reassigned an identical number of frequencies in the 1.9 GHz band. 2. Allocation of 1.9 GHz Band Spectrum Exclusively to Nextel. Under the Report and Order, therefore, Nextel would be allocated eighty Channels (4 MHz) of 1.9 GHz band spectrum solely as the result of its 800 MHz band movement methodology. Pursuant to the Report and Order, the FCC would sell 6 MHz of the 10 MHz of the 1.9 GHz band spectrum in this EA market to Nextel in exchange for (a) Nextel?s 700 MHz Guard Band holdings unrelated to any reorganization of the 800 MHz band; @) secured promise to pay the total 800 MHz band relocation costs; and (c) promise to pay its pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band apparently was believed necessary by the Commission to avoid (1) connecting the award of 1.9 GHz band to the movement and modification of the 800 MHz EA- and Site-Licensed Spectrum of General Category and Lower 80 EA licensees (2) triggering the otherwise mandatory competitive bidding provisions of Section 309(i) by providing a basis for the FCC?s limiting the participation in the allocation of the 1.9 GHz band spectrum to only Nextel. Pursuant to its Section 3 16 modification authority, in this EA market the FCC would allocate 4 MHz of 1.9 GHz band spectrum to Nextel to replace that company?s already-existing 800 MHz band spectrum. The award of such 1.9 GHz band spectrum in this EA therefore clearly would not involve the issuance of an ?initial? license by the Commission implicating the competitive bidding provisions of Section 309(i).60 Under Sections 316, 301, 303 and 3096)(6)(E), the Commission maintains in the Report and Order that it has the discretion to determine that it better serves the public interest to allow Nextel to purchase 6 MHz of the 1.9 GHz band spectrum free from the filing of ?* See n. 4 supra. Interestingly enough, Nextel did not include a Total Spectrum for any city in Puerto Rico, includmg San Juan, even though it, Ponce, Mayaguez, Arecibo and Aguadilla are Metropolitan Service Areas (?MSA?) markets ranked 91, 147, 169, 202 and 204 by population (1990 Pops). As Preferred noted in its March 2, 2004 Ex Parte Presentation, including such cities in Nextel?s Top 320 Markets reduces the Nextel Control Group?s nationwide ?nmning? average of 800 MHz band spectrum to 17.57 MHz. See Exhibit E to Preferred Communication Systems, Inc., Ex Parte Presentation, March 2,2004. 59 See n. 15 supra. ?O See n. 7 supra. 33 competing license applications.6? While this position appears meritorious if the FCC were allocating this remaining 1.9 GHz band spectrum to the class of licensees whose spectrum holdings were being modified and moved4eneral Category and Lower 80 EA licensees, jt clearly violates the Commission?s statutory mandates under the to maintain regulatory parity and promote competition6? and the competitive bidding provisions of Section 309(i)63 by restricting participation in such allocation to a single entity within such class of li~ensees.6~ 3. Effect of Report and Order Upon Nextel h Total and Clean Spectrum In the Puerto Rico EA market, Nextel considerably increases its Total Spectrum tlom 10.95 MHz to 16.95 MHz, its MHz/Pops Equivalent Spectrum from 5.28 MHz to 14.88 MHz, and its EA Wide Spectrum from 8.25 MHz to 14.25 MHz.~~ These spectrum increases occur because the Report and Order?s (a) 800 MHz band movement methodology discussed immediately above and (b) the exclusive allocation to Nextel of 10 MHz of 1.9 GHz band spectrum. 4. Increase in Value of Nextel?s Spectrum Holdings (800 MHz and 1.9 GHz Band Spectrum). According to the Report and Order, the present average fair market value of Nextel?s 800 MHz band spectrum to be exchanged as part of the Consensus Parties? movement methodology is $1.61 MHfl0p.6~ Following adoption by the Commission of the Consensus Parties? Proposal, the fair market value of the 800 MHz and 1.9 GHz band spectrum Nextel would receive in exchange therefor would be $1.70 MHfl~p.~? Applying these figures to the Puerto Rico EA market, the present value of the Nextel Control Group?s 800 MHz band spectrum to be exchanged under the Report and Order would be determined by multiplying Nextel?s seventy-nine (79) Channels, or 3.95 MHz of Clean Spectrum, by the EA market?s total population of 4,000,000 (2003 Pops) and then multiplying the resulting figure of 13,400,000 by $1.61 MHzPop. The resulting figure of $25,438,000 would be the present value of the 800 MHz band spectrum Nextel would exchange in this EA market under the Report and Order. However, since under the Report and Order?s movement methodology, the NCG?s EA- and Site-Licensed Spectrum moves on a Total Spectrum 1 : 1 basis, rather than upon a MHflops Equivalent See n. 8 supra. 62 See n. 9 supra. 63 Seen. IO supra. See n. 11 supra. 65 With the movement of Preferred?s EA- and Site-Licensed Spectrum into the sixteen (16) Upper 200 Channels to be vacated by Nextel, its Total and MHflops Equivalent S ectrum set forth immediately above would be reduced by .80 MHz. 6gSee n. 13 supra. 67 See n. 14 supra. 34 basis, and the FCC allocates all 10 MHz of 1.9 GHz band spectrum exclusively to Nextel by a private sale, the NCG would receive a total of two hundred and twenty-five (225) Clean 800 MHz (25 Channels in the former NPSPAC Channels) and 1.9 GHz band Channels (200 such Channels), or 11.25 MHz of such Spectrum. Under the Report and Order, the fair market value of this Spectrum would be determined by multiplying 11.25 MHz of Clean Spectrum by the EA market?s total population of 4,000,000, and then multiplying the resulting figure by $1.70 MHziPop. The resulting figure of $76,500,000 would be the fair market value of the Clean Spectrum the Nextel Control Group would receive under the Consensus Parties? Proposal. The $51,062,000 difference in the fair market values of the spectrum to be exchanged under the Report and Order Proposal is the amount of the NCG?s 800 MHz band spectrum enhancement. 5. Effect of Report and Order Upon Non-Nextel EA and Cellular-Architecture Site Licensees? Spctrum Holdings. Preferred holds one hundred twenty-five (125) General Category EA Channels (6.25 MHz) in this EA market. Due to the presence of site-specific incumbents, Preferred?s Channels cover 90.00% of this EA market?s total population. Preferred therefore holds one hundred thirteen (1 13) MHdPops Equivalent Channels. Moreover, Preferred also holds nineteen (19) General Category Site Channels within the twenty-five (25) General Category EA authorization held by Nextel in this EA market. These Site Channels cover an average of 24.94% of the EA market?s population and therefore are equivalent to five (5) Channels of Clean or MHdPops Equivalent Spectrum. Further, in January 2003, Preferred executed a Stock Purchase Agreement with the sole shareholder of North Sight Communications, Inc. and Trunked Systems, PR, Inc. (?North Sight Companies?). The Commission already has approved the EA and Site license transfer applications filed by the parties. The North Sight Companies hold ten (10) Lower 80 Site Channels within the EA Authorizations held by Nextel. Due to these frequencies covering an average of 55.08% of the population of this EA market, they are equivalent to six (6) Channels of Clean or MHdPops Equivalent Spectrum. In addition, the North Sight Companies hold sixteen (16) Upper 200 Site Channels within EA Authorizations held by High Tech Communications Services, Inc. and Nextel. Due to these frequencies covering an average of 46.70% of the population of this EA market, they are equivalent to seven (7) Channels of Clean or MHziPops Equivalent Spectrum. Finally, the North Sight Companies hold the C Frequency Block EA Authorization in this market, which comprises one hundred twenty (120) Channels. The North Sight Companies will deploy a Harmony system satisfying the cellular-architecture system requirement by January 1,2005. Under paragraph 163 of the Report and Order, Preferred?s EA- Licensed Spectrum would move to the new Cellular Block on an EA market wide, Clean 1: 1 basis. However, since Nextel holds only sixteen (16) Upper 200 EA Clean Channels throughout 35 Puerto Rico, it is unclear where the FCC would move one hundred nine (109) of Preferred?s General Category EA Channels. Alternatives include the following: (1) Move 16 of such Channels to Nextel?s Upper 200 EA Clem Channels; (2) Then move 95 of such Channels to the Former NPSPAC Channels (with (3) Then move 14 of such Channels to the 1.9 GHz Band as replacement Nextel?s 25 General Category EA Channels); and spectrum. The problem, of course, under the Report and Order is that Nextel apparently is allocated the former NPSPAC Channels in every EA market regardless of its relative 800 MHz band spectrum holdings in a particular EA market. Under the Report and Order, it is unclear where Preferred?s General Category Site Channels would move. Since Preferred holds EA Authorizations in this EA market, it satisfies the frst prong of the EA Licensees? Site Channels Cellular Deployment Test. However, since it has not yet constructed a cellular-architecture system in this EA market, paragraph 163 of the Report and Order indicates that such Site Channels would move to the Guard Band (816-817 MHz/861-862 MHz) on an EA market wide, Clean 1:l basis.68 Unfortunately, these Channels are held by High Tech Communications Services, Inc. (holder of A Frequency Block EA Authorization) and several Site license incumbents. As noted below, the Expansion Band Channels (815-816 MHzi860-861 MHz) also are fully occupied. Another alternative would be for the Commission to move these nineteen (19) General Category Site Channels to the Upper 200 EA Channels held by Nextel (B Frequency Block Channels 421-480). However, as noted above, Nextel holds only sixteen (16) Upper 200 EA Channels of Clean Spectrum throughout the island. It therefore is unclear where the FCC would move the remaining three (3) General Category Site Channels. Finally, the Commission could move these three to nineteen (3- 19) General Category Site Channels to the 1.9 GHz Band as replacement spectrum. Since Nextel is afforded the benefit of ?constructive? ownership of the licenses held by Nextel Partners, Inc. and licensees which have executed a management or purchase option agreement with Nextel, Preferred would maintain that it should be It is also unclear where Nextel?s Upper 200 Site Channels within the EA Authorizations held by High Tech Communications Services, Inc. and North Sight Communications, Inc. would move. If the Report and Order?s treatment of Site-Licensed Spectrum also applies to the Nextel Control Group, Nextel?s Site Channels would be required to move to the Nan-Cellular Block since they will not been constructed as part of a Cellular-architecture System by the date of the publication of the Report and Order in the Federal Register. However, if such treatment applies only to Nan-Nextel Control Group EA licensees, it necessarily would violate the Due Process Clause of the Fifth Amendment to the U.S. Constitution and the FCC?s statutory mandate to maintain regulatory parity and promote competition. See Southern Communications Services, Ex Parte Presentation, June 23, 2004, p.11 & n. 46 citing Bolling v. Sharpe, 347 U.S. 497 (1954)(holding that the Fifth Amendment?s Due Process Clause prohibits arbitrary discrimination by the federal government). 36 considered to own constructively the licenses presently held by the North Sight Companies. Since, as noted above, these Companies satisfy both prongs of the EA Licensees? Site Channels Cellular Deployment Test, its ten (10) Lower 80 and twenty- two (22) Site Channels generally would move into the new Cellular Block on an EA market wide, Clean 1:l basis. However, given the 800 MHz spectrum holdings in this EA market, it is unclear where these Channels would move. Alternatives include the following: (1) Guard Band (816-817 MHd861-862 MHz); or (2) Expansion Band (815-816 MHd860-861 MHz); or (3) Nextel?s Upper 200 EA Clean Channels in the B Frequency Block (4) 1.9 GHz Band. (Channels 42 1-480); or Under this approach Nextel would be allocated eighty (80) Channels of 1.9 GHz band spectrum as replacement for its eighty (80) EA- and Site-Licensed 800 MHz band spectrum the FCC would move and modify. Such approach would appear preferable to the Commission?spro rata allocation set forth in paragraph 168 and n. 444 thereto in the Report and Order since it would allocate 1.9 GHz band spectrum as a replacement of Nextel?s already existing 800 MHz band spectrum under the FCC?s Section 316 modification authority rather than exclusively allocating such spectrum to Nextel by a private sale in contravention of the otherwise mandatory competitive bidding provisions of Section 309(j).69 69 See Verizon Wireless, Ex Parte Presentation, April 6,2004, pp. 4-1 1. Under the FCC?s pro rata distribution approach, it is unclear what percentage of the 320 Channels in the ESMR portion of the 800 MHz band Preferred would be allocated. Preferred holds one hundred twenty-five (125) General Category EA Channels. North Sight Communications, Inc., a separate company which executed a Stock Purchase Agreement with Preferred in January 2003, holds one hundred twenty (120) Upper 200 EA Channels. High Tech Communications Services, Inc., an independent company, holds twenty (20) Upper 200 EA Channels. Nextel holds twenty-five (25) General Category EA Channels, eighty (80) Lower 80 EA and sixty (60) Upper 200 Channels. Here the total number of EA Channels would be four hundred thirty (430), rather than the three hundred twenty (320) figure used by the FCC in footnote 444. Under this approach, Preferred and North Sight Communications, Inc. would hold two hundred forty-five (245) Channels or 56.98%. High Tech Communications Services, Inc. would hold twenty (20) Channels or 4.65%. Nextel would hold one hundred sixty-five (165) Channels or 38.37%. Preferred and North Sight Communications, Inc. therefore would be allocated one hundred eighty- two (182) Channels or 9.1 MHz of spectrum. High Tech Communications, Inc. would be allocated fifteen (15) Channels or .75 MHz of spectrum. Nextel would be allocated one hundred twenty-three (123) Channels or 6.15 MHz of spectrum. Of course, under the Report and Order, only Nextel would be allowed to purchase 10 MHz of 1.9 GHz band spectrum. Nextel therefore would hold 16.15 MHz of Total, Clean and Cellular Spectrum, a considerable increase over its present 800 MHz band spectrum holdings in 37 Under the Report and Order, the value of this 800 MHz band spectrum vacated by Nextel would be determined by multiplying Nextel?s sixteen (16) channels (.8 MHZ) by the EA market?s total population of 4,000,000 (2003 Pops) and then multiplying the resulting figure of 3,200,000 by $1.70 MHz/p~p.?~ The resulting figure of $5,440,000 would be the present value of the 800 MHz band spectrum in the Upper 200 Channels Nextel would vacate to facilitate the movement of the EA- and Site- Licensed Spectrum held by the Non-Nextel Licensees in this EA market. Thus, even if Nextel vacates its sixteen (16) Channels in the Upper 200 Channels on an EA market Clean 1:l basis to Preferred (and North Sight), it would realize an $45,622,000 increase or enhancement of its spectrum holdings in this EA market. 6. Effect ofReport and Order Upon Other 800 MHz Licensees? Spectrum Holdings Under the Report and Order, the Site Channels held by other Non-Nextel Control Group licensees in the General Category Channels (Channels 1-150) and in the Upper 200 Channels would move to the eighty (80) Lower 80 Channels to be vacated by the NCG. In this EA market, other Non-Nextel licensees hold forty-one (41) General Category Site Channels. Other Non-Nextel licensees hold two hundred twenty-one (221) Site Channels in the Upper 200 Channels?? According to the Report and Order, these Site Channels would receive comparable facilities and their present geographic ?footprint.? A total of two hundred sixty-two (262) General Category and Upper 200 Site Channels therefore would be moved into eighty (80) Lower 80 Channels to be vacated by Nextel on a geographic ?footprint? basis. Nextel?s Lower 80 Channels cover an average of 75.85% of the EA market?s population. If the average ?footprint? of the General Category and Upper 200 Site Channels is comparable to or greater than Nextel?s Lower 80 Channels to be vacated, insufficient spectrum would be available to accommodate the movement of the Site Channels held by Non-Nextel licensees in this EA market?? 7. Effect ofAdoption ofpreferred?s Improvements. If the FCC determines to adopt Preferred?s Improvements set forth in the Overview to this accompanying comment, Channels 1-25 of the General Category EA Authorizations held by Preferred would move to Channels 576-600 of the Upper 200 Channels held by Nextel, and available to be vacated, on an EA market wide Clean 1 : 1 basis. However, in this EA market Nextel does not hold such Upper 200 Channels. this EA market. By contrast, Preferred and North Sight Communications, Inc. would experience a decrease in their Total, Clean and MHflop Equivalent Spectrum. 70 See n. 16 supra. 7? Seen. 17 supra. 72 See id. If southern?s General Category and Lower 80 EA- and Site-Licensed Channels and BILT Channels move into the new Cellular Block, it would vacate 93 Interleave Channels thereby fieehg up suMicient spectrum to accommodate the General Category and Upper 200 Site Channels of other licensees. 38 Preferred therefore would elect to move its twenty-five (25) General Category EA Channels to the 1.9 GHz band on an EA market wide Clean 1:l basis. Preferred?s remaining one hundred (100) General Category EA Channels would move to Channels 601 -700 of the former NPSPAC Channels on an EA market wide Clean 1 : 1 basis. North Sight?s ten (10) Lower 80 Site Channels would move to the 1.9 GHz band on a Clean 1 : 1 basis Under Preferred?s Improvements, Nextel would move twenty (20) of its twenty-five (25) General Category EA Channels to the former NPSPAC Channels on an EA market wide Clean 1: 1 basis. Under such approach, Nextel?s five (5) remaining General Category EA and eighty (80) Lower 80 EA Channels would move to the 1.9 GHz band on an EA market wide Clean 1 : 1 basis. Nextel does not hold any General Category Site Channels or BILT Channels in this EA market. Nextel therefore would hold eighty-five (85) Channels, or 4.25 MHz, rather than the nationwide ?running average? of 4.5 MHz of such 1.9 GHz band spectrum on an EA market wide and Clean basis as replacement spectrum for its vacated 800 h4Hz band spectrum. Under Preferred?s Improvements, in this EA market the FCC would award the remaining eighty (80) Channels or 4.0 MHz of 1.9 GHz band spectrum by a private sale or other means. However, unlike under the Report and Order, Preferred?s Improvements would expand the eligibility to participate in the allocation of such 1.9 GHz band spectrum to the entire class of General Category and Lower 80 EA licensees whose EA- and Site-Licensed Spectrum was moved and modified in this proceeding. Licensees within such class who would forego reimbursement of their own relocation costs, such as Nextel Partners apparently is willing to do, would be entitled to receive an allocation of 1.9 GHz band spectrum on an EA market wide and Clean basis. Preferred already has indicated in several previous fdings that it would be willing to forego reimbursement of its relocation costs in exchange for an allocation of 1.9 GHz band spectrum in the EA markets in which it holds EA Authorizations. Preferred would seek an allocation of the eighty (80) Channels or 4.0 MHz of 1.9 GHz band spectrum in this EA market. Such award of 1.9 GHz band spectrum would not violate the otherwise mandatorily competitive bidding provisions of Section 3096) since the Commission has the authority under Section 309(j)(6)(E) to avoid mutual exclusivity and would not violate the FCC?s statutory mandates to maintain regulatory parity and promote competition. 8. Conclusion. Under the Report and Order?s approach, the NCG experiences an increase in its both its Total Spectrum and MHzPops Equivalent or Clean Spectrum in this EA market. With Nextel?s vacating nineteen (16) channels in the Upper 200 Channels in the new Cellular Block, it would hold three hundred twenty-three (323) (16.15 MHz) total and two hundred ninety-seven (297) MWops Equivalent 800 MHz and 1.9 GHz band channels (14.88 MHz) as compared to its present two hundred nineteen (219) Total and one hundred five (105) MHz/Pops Equivalent Channels. According to the Report and 39 Order, the value of the 800 MHz and 1.9 GHz band spectrum the Nextel Control Group would receive in this EA market would exceed the value of the 800 MHz band spectrum it would vacate by $85,945,000 (the value of the spectrum Nextel would receive would be determined by multiplying 4,000,000 Pops (2003 figure) by (a) 16.15 MHz of 800 MHz and 1.9 GHz Band Spectrum; the resulting figure of 64,600,000 is then multiplied by (b) $1.70 per MHdPop producing a figure of $109,820,000; the value of the spectrum Nextel would vacate would be determined by multiplying the Pops figure by (a) 3.05 MHz of 800 MHz Band Spectrum (Interleave Channels) and (b) .8 MHz of 800 MHz Band Spectrum (Upper 200 channel^)'^; the resulting figures of (a) 12,200,000 and (b) 3,200,000 are then multiplied respectively by (a) $1.4875 per MHzPop and (b) $1.70 per MHz/Pop producing a figure of $23,875,000; the difference between $109,820,000 and $23,875,000, or $85,945,000 would be the amount of Nextel?s spectrum enhancement in this EA market. Absent an allocation of 1.9 GHz band spectrum, the Nan-Nextel EA Licensee in this EA market experiences a decrease in Total Channels from three hundred (300) to two hundred forty-seven (247). Preferred?s MHz/Pops Equivalent Spectrum decreases from one hundred ninety-six (196) Channels (9.88 MHz) to one hundred eighty-four (184) Channels (9.22 MHz). Under the Report and Order?s pro rata allocation approach, Preferred would lose one hundred eighteen (118) Total Channels (5.90 MHz). According to the Report and Order, such Spectrum would have a value of $1.70 MHzPop or $40,120,000. Arguably, the difference of $40,120,000 is the amount of Preferred?s loss in spectrum or spectrum rights that effectively were transferred to the NCG, which received one hundred thirty (130) additional Channels of MHzPops Equivalent Spectrum, slightly more than the one hundred eighteen (1 18) such Channels Preferred would be denied by the Report and Order?s impermissible discriminatory movement methodology. Preferred maintains that this uncompensated loss, and spectrum enhancement to the Nextel Control Group, represents a portion of Nextel?s promised contribution of to defray the total relocation costs. Preferred would maintain that the Report and Order?s pro rata allocation approach as set forth in paragraph 168 and note 444 violates the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. C~nstitution~~ and the FCC?s statutory mandate to maintain regulatory parity and promote ~ompetition.~~ 73 These figures would include the sixty-one (61) Clean Interleave Channels (Lower 80 and BILT) and sixteen (16) Clean Upper 200 Channels to be vacated by Nextel. l4 See n. 10 supra. 75 See n. 11 supra. 40 NEXTEL AFTER REBANDING NEXTEL BEFORE AND AFTER PICTURE PREFERRED BEFORE AND AFTER PICTURE NEXTEL AFTER REBANDING- DCSI 247 60 100% 3.00 60 20 100% 1 20 85 100% 4.25 85 NEXTEL BEFORE AND AFTER PICTURE 41 10.4 I 268.47 I e. Spectrum Holdings in the Staunton, Virginia-West Virginia EA Market. As set forth in the Chart immediately below, Nextel Partners holds no General Category EA-Licensed fkequencies. It does hold one hundred thirty-five (135) General Category Site-Licensed Frequencies with footprints that cover an average of 32% of the total Staunton EA Market population or a MWops equivalent of forty-three (43) channels. Likewise, due to its seventy (70) Lower 80 EA frequencies covering an average of 99.73% of this EA market?s total population, Nextel Partners would hold the MHflops equivalent of seventy (70) Channels. Its nine (9) Lower 80 Site-Licensed eequencies cover an average of 22.73% of the population or a MHdPops equivalent of two (2) channels. Nextel Partners also holds thirty-five (35) B/ILT Site-Licensed flequencies covering an average of 35.53% of the population or a MWPops equivalent of twelve (12) channels. In this EA market Nextel Partners therefore holds a MHzRops equivalent of one hundred twenty-seven chels (6.35 MHz) of spec- below 861.0125 MHz. MARKET BEA016 STAUNTON, VA-WV EA MARKET NEXTEL PARTNERS CHANNELS SUMMARY ARClPCSl i pzi--l rxiq 42 1. Report and Order?s Movement Methodology: (a) move the Nextel Control Groups General Category EA- and Site-Licensed Spectrum to the new Cellular Block on an EA market wide Clean I:1 basis; (b) credit Nextel with a nationwide ?running average? of the General Category, Interleave and Lower 80 Channels vacated by it, Nextel Partners and licensees which have executed a management or purchase option agreement with it and modifi such spectrum by reassigning to Nextel 4.5 MHz of 1.9 GHz band spectrum; (c) move the Non-NCG ?s EA and Cellular-architecture Systems Site Licensees? EA-Licensed Spectrum to the new Cellular Block on an EA market wide, Clean It1 basis; however such Licensees ? Site-Licensed Spectrum would move to the new Cellular Block on such basis only if(1) it is located in an EA market in which such Licensee holds an EA Authorization and (2) the Non-Nextel Control Group EA or Cellular-architecture System Site Licensee is using such Site-Licensed Spectrum as part of a Cellular-architecture System as of the date of the publication of the Report and Order in the Federal Register. Due to the presence of site-specific incumbents and EA licensees, Nextel Partners holds one hundred twenty-seven (127) MHflops Equivalent Lower 230 Channels. Upon their movement under the Report and Order, Nextel Control group would be allocated two hundred forty-nine (249) Channels on a Clem basis, a net gain of one hundred twenty-two (122) MHflops Equivalent Channels. As noted in Preferred?s Ex Parte Presentation fied on March 2, 2004, this result appears to belie the oft-repeated argument by the Consensus Parties that their Proposal involves only a ?Hz-for-kHz exchange? or ?replacement ~pectrum.??~ As noted above, under the Report and Order, this result will hold true in a majority of the 175 EA markets?? Since the Report and Order moves spectrum on a Total, rather than upon a MHflops Equivalent basis, it moves one hundred twenty (120) of Nextel Partners? one hundred forty-three (143) General Category Site Channels to the former NPSPAC Channels. Its remaining fifteen (15) General Category Site Channels, seventy (70) Lower See n. 4 supra. Interestingly enough, in this EA market, Preferred?s MHdPops Equivalent Spectrum figure of 16.40 MHz approximates equals Nextel?s published Total S ectrum figure of 18.10 MHz for the city of Charlottesville, Virginia. 16 77 See n. 5 supra. 43 80 EA-Licensed Channels, nine (9) Lower 80 Site Channels and thirty-five (35) BILT Channels would be reassigned an identical number of frequencies in the 1.9 GHz band. 2. Allocation of 1.9 GHz Band Spectrum. a. Version 1: Exclusively to Nextel. Under the Report and Order, therefore, the Nextel would be allocated one hundred twenty-nine (129) Channels (6.45 MHz) of 1.9 GHz band spectrum solely as the result of its 800 MHz band movement methodology of Nextel Partners? Spectrum. Pursuant to the Report and Order, the FCC would sell 3.55 MHz of the 10 MHz of the 1.9 GHz band spectrum in this EA market to Nextel in exchange for (1) Nextel?s 700 MHz Guard Band holdings unrelated to any reorganization of the 800 MHz band; (2) secured promise to pay the total 800 MHz band relocation costs; and (3) promise to pay its pro rata share of UTAM and all of the BAS licensee relocation costs in the 1.9 GHz band apparently was believed necessary by the Commission to avoid (1) connecting the award of 1.9 GHz band to the movement and modification of the 800 MHz EA- and Site- Licensed Spectrum of General Category and Lower 80 EA licensees (2) triggering the otherwise mandatory competitive bidding provisions of Section 309(j) by providing a basis for the FCC?s limiting the participation in the allocation of the 1.9 GHz band spectrum to only Nextel. Pursuant to its Section 3 16 modification authority, in this EA market the FCC would allocate 6.45 MHz of 1.9 GHz band spectrum to Nextel to replace Nextel Partners? already-existing 800 MHz band spectrum. Since Nextel does hold any 800 MHz EA- or Site-Licensed Spectrum in this EA market, the award of such 1.9 GHz band spectrum in this EA therefore clearly would involve the issuance of an ?initial? license by the Commission implicating the competitive bidding provisions of Section 309(j).? Under Sections 316, 301, 303 and 3096)(6)(E), the Commission maintains in the Report nnd Order that it has the discretion to determine that it better serves the public interest to allow Nextel to purchase 6 MHz of the 1.9 GHz band spectrum free from the filing of competing license appli~ations?~ While this position appears meritorious if the FCC were allocating this remaining 1.9 GHz band spectrum to the class of licensees whose spectrum holdings were being modified and moved4eneral Category and Lower 80 EA licensees, it clearly violates the Commission?s statutory mandates under the to maintain regulatory parity and promote competition? and the competitive bidding provisions of Section 309(#? by restricting participation in such allocation to a single entity within such class of licensees?? b. Version 2: Exclusively to Nextel Partners. l8 See n. I supra. See n. 8 supra. See n. 9 supra. Seen. IO supra. See n. I 1 supra 44 In paragraph 325 and footnote 743 of the Report and Order, the Commission recognizes that Nextel Partners is vacating 800 MHz band spectrum in the seventy-one (71) EA markets in which it, rather than Nextel, holds 800 MHz EA- and Site-Licensed to a telephonic inquiry from a representative of A.R.C., Inc. and Coastal SMR Network, LLC (?A.R.C., Inc. Representative?), a Commission staff member in the Wireless Telecommunications Bureau (?WTB?) informed the A.R.C., Inc. Representative that the FCC would allocate the 1.9 GHz band spectrum on an EA market, rather than a nationwide, basis. The WTB staff member then informed the A.R.C., Inc. representative that the Commission would allocate the 1.9 GHz band spectrum to Nextel Partners in the seventy-one (71) EA markets in which it holds 800 MHz EA- and Site-Licensed Spectrum as a replacement of that spectrum to be reassigned and modified under the Report and Order. Spectrum and participating in the 800 MHz realignment along with Nextel. In response Under this approach, Nextel Partners would be allocated one hundred twenty- nine (129) channels (6.45 MHz) of 1.9 GHz band spectrum solely as a result of the Report and Order?s 800 MHz band movement methodology of its 800 MHz spectrum. Pursuant to such approach, presumably the FCC would sell the 3.55 MHz ?excess? 1.9 GHz band spectrum over that which is needed to replace Nextel Partners? vacated and modified 800 MHz band spectrum to Nextel Pa1tners.8~ However, it is far from clear what, if any, consideration Nextel Partners is providing to acquire such 1.9 GHz band spectrum other than its promise to forego reimbursement of its relocation c0sts.8~ Pursuant to its Section 3 16 modification authority, in this EA market the FCC would allocate 6.45 MHz of 1.9 GHz band spectrum to Nextel Partners to replace its already-existing 800 MHz band spectrum. The award of such 1.9 GHz band spectrum in this EA therefore clearly would not involve the issuance of an ?initial? license by the Commission implicating the competitive bidding provisions of Section 309(j).85 Under Sections 316, 301, 303 and 309(j)(6)(E), the Commission maintains in the Report and Order that it has the discretion to determine that it better serves the public interest to allow Nextel Partners to purchase 3.15 MHz of the 1.9 GHz band spectrum free from the filing of competing license While this position appears meritorious if the FCC were allocating this remaining 1.9 GHz band spectrum to the class of licensees whose spectrum holdings were being modified and moved4eneral Category and Lower 80 EA licensees, it clearly violates the Commission?s statutory mandates under the to ~ 83 This result is far from clear from a careful reading of the Report and Order. Another interpretation is that the FCC would sell such ?excess? 1.9 GHz band spectrum exclusively to Nextel for the consideration set forth in section 2. a. above. This exclusive sale of the ?excess?l.9 GHz band spectrum to Nextel Partners for consideration less than the value of such spectrum arguably would be prohibited by the Miscellaneous Receipts Act, Presentation, June 30,2004. See n. I supra. 86 See n. 8 supra. 84 . See generally, Verizon Wireless, Ex Parte 45 maintain regulatory parity and promote competition8? and the competitive bidding provisions of Section 309(j)88 by restricting participation in such allocation to a single entity within such class of licensees.89 3. Effect ojReport and Order Upon Nextel?s or Nextel Partners? Total and Clean Spectrum. a. Version 1: Exclusively to Nextel Under the Report and Order?s general approach, in the Staunton, Virginia- West Virginia EA market, Nextel would increase its Total, MHziPops Equivalent and EA Wide Spectrum from 0 to 10 MHz. b. Exclusively to Nextel Partners Pursuant to paragraph 325 and footnote 743 of the Report and Order, in the Staunton, Virginia-West Virginia EA market, Nextel Partners considerably increases its Total Spectrum from 22.45 MHz to 26.00 MHz, its MHz/Pops Equivalent Spectrum from 16.25 MHz to 26.00 MHZ, and its EA Wide Spectrum from 13.50 MHz to 26.00 MHz.9? These spectrum increases occur because the Report and Order?s (a) 800 MHz band movement methodology discussed immediately above and @) the exclusive allocation to Nextel Partners of 10 MHz of 1.9 GHz band spectrum. (4) Increase in Value of Nextel S or Nextel Partners? Spectrum Holdings (800 MHz and 1.9 GHz Band Spectrum). According to the Report and Order, the present average fair market value of Nextel Partners? 800 MHz band spectrum to be exchanged as part of the Consensus Parties? movement methodology is $1.61 MHz/Pop?l The FCC further determined that 87 See n. 9 supra. 88 Seen. 10 supra. 89 See n. 1 1 supra 90 With the movement of Preferred?s and A.R.C., Inc.?s EA-Licensed Spectrum into the one hundred sixty (160) Upper 200 Channels to be vacated by Nextel Partners, its Total and MHzPops Equivalent Spectrum set forth immediately above would be reduced by 8.00 MHz. Nextel Partners therefore would hold 14.85 MHz of Total, 8.40 MHz Clean or MHzE?ops Equivalent and 5.50 MHz Cellular Spectrum in this EA market. Since the Report and Order allocates the 10 MHz of 1.9 GHz band spectrum exclusively to Nextel, it would increase its Total, Clean or MHz/Pops Equivalent and EA Wide Spectrum from zero to 10 MHz. Presumably, in such event, Nextel would be considered to have been issued an ?initial? license under any standard. See n. 13 supra. 91 46 the present the fair market value of the 800 MHz and 1.9 GHz band spectrum Nextel would receive in exchange therefor would be $1.70 MHz/p~p.~* Applying these figures to the Staunton, Virginia-West Virginia EA market, the present value of Nextel Partners? 800 MHz band spectrum to be exchanged under the Report and Order would be determined by multiplying Nextel Partners? one hundred twenty-seven (127) Channels, or 6.35 MHz of MHflops Equivalent Spectrum, by the EA market?s total population of 334,087 (2003 Pops) and then multiplying the resulting figure of 2,121,452 by $1.61 MHflop. The resulting figure of $3,415,538 would be the present value of the 800 MHz band spectrum Nextel Partners would exchange in this EA market under the Report and Order. However, since under the Report and Order?s movement methodology, the NCG?s EA- and Site-Licensed Spectrum moves on a Total Spectrum 1:l basis, rather than upon a MHzPops Equivalent basis, and the FCC allocates all 10 MHz of 1.9 GHz band spectrum exclusively to either Nextel (Version 1) or Nextel Partners (Version 2) by a private sale, the Nextel Control Group would receive a total of three hundred twenty (320) Clean 800 MHz (120 Channels in the former NF?SPAC Channels) and 1.9 GHz band Channels (200 such Channels), or 16.00 MHz of such Spe~trum.9~ Pursuant to the Report and Order, the fair market value of this Spectrum would be determined by multiplying 16 MHz of Clean Spectrum by the EA market?s total population of 334,087, and then multiplying the resulting figure by $1.70 MHflop. The resulting figure of $9,087,166 would be the fair market value of the Clean Spectrum the Nextel Control Group would receive under the Report and Order. The $5,671,628 difference in the fair market values of the spechum to be exchanged under the Report and Order arguably is the amount of the NCG?s 800 MHz band spectrum enhancement. 5. Effect of Report and Order Upon Non-Nextel EA and Cellular-architecture Site Licensees? Spectrum Holdings. Preferred holds one hundred fifty (150) General Category EA Channels (7.50 MHz) in this EA market. Due to the presence of site-specific incumbents, Preferred?s Channels cover 68.33% of this EA market?s total population. Preferred therefore holds eighty-seven (102) MHzPops Equivalent Channels. A.R.C., Inc. holds ten (10) Lower 80 EA Channels. Due to the presence of site-specific incumbents, A.R.C., Inc.?s Channels cover -.-% of this EA market?s total population. Under paragraph 163 of the Report and Order, Preferred?s and A.R.C., Inc.?s EA- Licensed Spectrum would move to the new Cellular Block on an EA market wide, Clean 1 : 1 basis. These Channels presumably would move to Nextel Partners? Upper 200 92 Seen. 14 supra. 93 Although the Report and Order is somewhat unclear on this point, it would appear that Nextel Partners would be allocated the one hundred twenty (120) Channels in the former NPSPAC Channels and Nextel would be awarded the 10 MHz in the 1.9 GHz band. 47 EA Channels beginnin with Channel 401. Nextel Partners would retain Channels 561- 600 in this EA Market. $4 Under the Report and Order, the value of this 800 MHz band spectrum vacated by Nextel Partners would be determined by multiplying its one hundred sixty (160) channels (8 MHz) by the EA market?s total population of 334,087 (2003 Pops) and then multiplying the resulting figure of 2,672,696 by $1.70 MHdPop. The resulting figure of $4,543,583 would be the present value of the 800 MHz band spectrum in the Upper 200 Channels Nextel Partners would vacate to facilitate the movement of the EA- and Site- Licensed Spectrum held by the Non-Nextel Licensees in this EA market. 6. Effect of Report and Order Upon Other 800 MHz Licensees? Spectrum Holdings. Under the Report and Order, the Site Channels held by other Non-Nextel Control Group licensees in the General Category Channels (Channels 1-150) and in the Upper 200 Channels would move to the seventy (70) Lower 80 EA Channels, nine (9) Lower 80 Site Channels and thirty-five (35) BILT Channels and to be vacated by the NCG. In this EA market, other Non-Nextel licensees hold twenty-two (22) General Category Site Channels. Other Non-Nextel licensees hold sixteen (16) Site Channels in the Upper 200 Channels.95 According to the Report and Order, these Site Channels would receive comparable facilities and their present geographic ?footprint.? A total of thirty-eight (38) General Category and Upper 200 Site Channels therefore would be moved into seventy (70) Lower 80 EA Channels and forty-four (44) Lower 80 Site and BILT Channels and to be vacated by Nextel on a geographic ?footprint? basis. Nextel?s Lower 80 Channels cover an average of 99.73% of the EA market?s population. In this EA market even if the average ?footprint? of the General Category and Upper 200 Site Channels is comparable to or greater than Nextel?s Lower 80 Channels to be vacated, sufficient spectrum would be available to accommodate the movement of the Site Channels held by Non-Nextel licensees in this EA market?6 7. Effect ofAdoption of Preferred?s Improvements. If the FCC determines to adopt Preferred?s Improvements set forth in the Petition for Reconsideration, Channels 1-25 of the General Category EA Authorizations held by Preferred would move to Channels 576-600 of the Upper 200 Channels held by Nextel Partners, and available to be vacated, on an EA market wide Clean 1 : 1 basis. One hundred twenty (120) of Preferred?s remaining one hundred twenty-five (125) General Category EA Channels would move to Channels 601-720 of the former NPSPAC Channels on an EA market wide Clean 1: 1 basis. Preferred?s ?excess? five (5) General Category EA Channels would move to the 1.9 GHz band on an EA market wide Clean 1 : 1 basis. 94 See n. 15 supra. 95 See n. 11 supra. 96 See id. supra. 48 Under Preferred?s Improvements, A.R.C.?s ten (10) Lower 80 EA Channels would move, at its election, either to the Upper 200 Channels beginning with Channel 570 and moving downward to Channel 561, or the 1.9 GHz band on an EA market wide A.R.C. would elect to move its Lower 80 EA Channels to the Upper 200 Channels beginning with Channel 570. Clean 1:1 basis. For purposes of this Petition for Reconsideration, Preferred assumes that Under such approach, Nextel Partners? seventy (70) Lower 80 EA Channels would move to the 1.9 GHz hand on an EA market wide Clean 1:l basis. Nextel Partners? General Category, Lower 80 and BDLT Channels in this EA market would move on a WPops Equivalent basis to the 1.9 GHz band. Nextel Partners therefore would hold seventy (70) Channels, or 7.00 MHz, rather than the nationwide ?running average? of 4.5 MHz of such 1.9 GHz band spectrum on an EA market wide and Clean basis as replacement spectrum for its vacated 800 MHz band spectrum. Under heferred?s Improvements, in this EA market the FCC would award the remaining sixty-three (63) Channels or 3.15 MHz of 1.9 GHz band spectrum by a private sale or other means. However, unlike under the Report and Order, Preferred?s Improvements would expand the eligibility to participate in the allocation of such 1.9 GHz band spectrum to the entire class of General Category and Lower 80 EA licensees whose EA- and Site-Licensed Spectrum was moved and modified in this proceeding. Licensees within such class who would forego reimbursement of their own relocation costs, such as Nextel Partners apparently is willing to do, would be entitled to receive an allocation of 1.9 GHz band spectrum on an EA market wide and Clean basis. Preferred already has indicated in several previous filings that it would be willing to forego reimbmement of its relocation costs in exchange for an allocation of 1.9 GHz band spectrum in the EA markets in which it holds EA Authorizations. Preferred would seek an allocation of the sixty-three (63) Channels or 3.15 MHz of 1.9 GHz band spectrum in this EA market. Such award of 1.9 GHz band spectrum would not violate the otherwise mandatorily competitive bidding provisions of Section 3090) since the Commission has the authority under Section 309(i)(6)(E) to avoid mutual exclusivity and would not violate the FCC?s statutory mandates to mahtain regulatory parity and promote competition. 8. Conclusion a. Version 1: Exclusively to Nextel. Under the Report and Order?s general approach (Version l), the Nextel Partners experiences a decrease in its Total and Clean or MHzPops Equivalent Spectrum in this EA market. With Nextel Partners? vacating one hundred sixty (160) channels in the Upper 200 Channels in the new Cellular Block, it would hold one hundred sixty (1 60) (8 MHz) as compared to its present four hundred fifty-seven (457) Total Channels (22.85 MHz). Its Clean or MHzPops Equivalent Spectrum would decrease from three hundred 49 twenty-eight (328) (16.4 MHz) to one hundred sixty (160) (8 MHz). Nextel apparently is allocated the 10 MHz of 1.9 GHz band spectrum.9? b. Version 2: Exclusively to Nextel Partners. Pursuant to paragraph 325 and footnote 743 of the Report and Order, Nextel Partners experiences an increase in its Total and MHdPops Equivalent Spectrum and a slight decrease in its EA Wide Spectrum in this EA market. With Nextel Partners? vacating one hundred sixty (160) channels in the Upper 200Channels in the new Cellular Block, it would hold one hundred sixty (160) (8 MHz) as compared to its present four hundred fifty-seven (457) Total Channels (22.85 MHz) in the 800 MHz band. Its MHzE?ops Equivalent Channels also would decrease from three hundred twenty-eight (328) (16.4 MHz) to one hundred sixty (160)(8 MHz). However, since under this approach (Version 2) Nextel Partners exclusively would be allocated the 10 MHz of 1.9 GHz band spectrum, its decrease in Total and MHziPops Equivalent Spectrum would be lessened by the replacement of two hundred (200) channels of such Spectrum by the exclusive award of 1.9 GHz band spectrum. Under this approach, Nextel Partners? EA Wide Spectrum would be decreased from two hundred seventy (270) channels (13.5 MHz) to two hundred forty (240) channels (12 MHz). According to the Report and Order, the value of the 800 MHz and 1.9 GHz band spectrum the Nextel Control Group would receive in this EA market would exceed the value of the 800 MHz band spectrum it would vacate by $1,036,506 (the value of the spectrum Nextel Partners and/or Nextel would be received would be determined by multiplying 334,087 Pops (2003 figure) by (a) 13.5 MHz of 800 MHz and 1.9 GHz Band spectrum; the resulting figure of 4,510,175 is then multiplied by (b) $1.70 per MHzE?op producing a figure of $7,667,297; the value of the spectrum Nextel Partners would vacate would be determined by multiplying the Pops figure by (a) 4.20 MHz of 800 MHz Band Spectrum (Interleave Channels) and (b) 8 MHz of 800 MHz Band Spectrum (Upper 200 Channels)98; the resulting figures of (a) 1,403,165 and (b) 2,672,696 are then multiplied respectively by (a) $1.4875 per MWop and (b) $1.70 per MHzE?op producing a figure of $6,630,791; the difference between $7,667,297 and 6,630,791, or $1,036,506 would be the amount of Nextel Partners? andor Nextel?s spectrum enhancement in this EA market. 97 Contra Report and Order, at 7 325 & n. 743. As noted above, the Wireless Telecommunications Bureau staff has indicated to A.R.C., Inc. that the Commission will allocate 1.9 GHz Band Spectrum on an EA market basis as replacement spectrum for the 800 MHz Band Spectrum to be vacated by either Nextel or Nextel Partners. As a result, Nextel Partners, rather than Nextel would be allocated 10 MHz of 1.9 GHz Band Spectrum in the seventy-one (71) EA markets, in which it, rather than Nextel, holds 800 MHz Band Spectrum. 98 These figures include the eighty-four (84) Clean or MHzE?ops Equivalent Interleave Channels? Spectrum (Lower 80 and BILT Channels) and one hundred sixty (160) EA market wide Clean Upper 200 Channels to be vacated by Nextel Partners. 50 Preferred's Clean Spectrum in this EA market increases from eighty-seven (87) Channels (4.35 MHz) to one hundred fifty (150) Channels (7.50 MHz). A.R.C., Inc.'s Clean Spectrum in this EA market from - Channels (._ MHz) to ten (IO) Channels (0.5 MHz). Since their EA-Licensed moves on a Total, rather MHzmops Equivalent Channels basis, these Licensees' Total Channels remain unchanged. NEXTEL PARTNERS AFTER REBANDING NEXTELPARTNERSBEFOREANDAFTER PICTURE NEXTEL PARTNERS AFTER REBANDING- ARClPCSl NEXTELPARTNERSBEFOREANDAFTER PICTURE 51 PREFERRED 8 A.R.C., INC. BEFORE AND AFTER DICTIIRF . .-. -..- f. Conclusion. As applied to the spectrum holdings in many of the EA markets in which Nextel or Nextel Partners shares EA-Licensed Spectrum with one or more Non-Nextel EA licensees or Cellular-architecture System licensees, the Report and Order clearly fails legally, practically and mathematically both with and without the pro rata distribution approach set forth in footnote 444 to paragraph 168. 1. With Pro Rata Distribution Approach The Report and Order is unclear whether the pro rata distribution approach set forth in paragraph 168 and footnote 444 applies only to EA markets in which (1) Nextel and a Non-Nextel EA licensee already operate Cellular-architecture Systems in the ESMR portion of the band or (2) Nextel otherwise holds insufficient Upper 200 EA Channels to accommodate the movement of the Non-Nextel EA or Cellular-architecture System licensee's EA- and Site-Licensed Spectrum or is generally a~plicable.9~ As noted above, the pro rata distribution approach serves to reduce the Total EA and Site Channels of Non-Nextel Licensees in markets in which Nextel or Nextel Partners shares EA-Licensed and/or Site-Licensed Spectrum with one or more Non-Nextel Licensees while generally maintaining the NCG's Total Spectrum and considerably increasing its Clean or MHz/pops Equivalent Spectrum.'oo 99 See Report and Order, at 7 168 & n. 444. loo Since the Report and Order allocates the Nextel Control Group the 6 MHz in the new Cellular Block comprising the former NPSPAC Channels and the 10 MHz in the 1.9 GHz band, the NCG would experience a considerable loss of Total Channels only in EA markets in which Non-Nextel EA and Cellular-architecture System Site licensee(s) hold more than 200 Channels. As noted above, even in these EA markets, Nextel considerably would increase its Clean or MHz/pops Equivalent Spectrum. However, the Commission seemingly indicates in 7 164 that the pro rata distribution approach is applicable in EA 52 By improperly moving Site-Licensed Spectrum on a Total Channels, rather than upon a Clean Spectrum or MHz/Pops Equivalent basis,?? the Report and Order creates an artificial spectrum ?logjam? in many of the one hundred eighteen (1 18) EA Spectrum. The Report and Order then seeks to resolve its mathematical quandary by limiting the number of Total Channels a Non-Nextel EA licensee or Cellular-architecture System licensee may hold in a particular EA market even though Nextel holds a nationwide ?running? average of 3.3 MHz of 700 MHz Guard Band spectrum and is allocated a nationwide 10 MHz license in the 1.9 GHz band.??* markets in which Nextel or Nextel Partners share EA- (and occasionally Site-Licensed) The Consensus Parties? Proposal sought to discriminate between the Nextel Control Group and Non-Nextel EA licensees by conditioning the movement of the latter?s EA authorizations upon satisfaction of the two prongs of the Cellular Deployment Test. Upon meeting one of such prongs, a Non-Nextel EA licensee?s EA Authorizations would move into the new Cellular Block only upon a geographic ?footprint? basis. As pointed out in Preferred?s Ex Parte Presentations filed on March 2, 2004 and April 23, 2004, such disparate treatment violated the Due Process, Equal Protection and Takings Clauses of the Fifth Amendment to the U.S. Constitution and the FCC?s statutory mandate to maintain regulatory parity and promote omp petition.''^ The Report and Order abandoned the Cellular Deployment Test with respect to Non-Nextel EA licensee?s EA Authorizations. However, it effectively replaced the geographic ?footprint? limitation in the Consensus Parties? Proposal with a reduction of the Non-Nextel EA and Cellular-architecture System Site licensee?s Total Channels thus negatively impacting both spectrum rights purchased by a Non-Nextel EA licensee in FCC Auctions #34, #36 and #43.?04 The Report and Order seeks to justify its application of the pro rata distribution approach by the reduction of the Nextel Control Group?s Total EA Channels.??? However, the Commission impermissibly discriminates against Non-Nextel EA, Cellulm-architecture System Site and other Site licensees with respect to several other issues including, but not limited to: (5) The FCC previously has granted Nextel and Nextel Partners a waiver so that their respective Site Channels construction deadline coincides with market in which two or more ESMR licensees already operate and each holds more Channels than can be accommodated by the movement to the one hundred twenty (120) Channels comprised of the former NPSPAC Channels (821-824 MHz/866-869 MHz). Io? See Verizon Wireless mite Paper, at pp. 11-12 & n. 49. ???See id. IO3 See Preferred Communication Systems, Inc., Ex Parte Presentation, April 23,2004, at pp. 5-6; Preferred Communication Systems, Inc., Ex Parte Presentation, March 2, 2004, at pp. 37-38; n. 14 supra. IO4 See 47 C.F.R 5 90.683. See Report and Order, at 7 168 & n. 444. 53 such deadline for their respective EA Authorizations-December 20, 2005;'06 however, with respect to Site Channels held by Non-Nextel EA licensees, the Report and Order such Channels to the ESh4R portion of the band only if the Non-Nextel EA licensees have constructed such Channels as part of a Cellular-architecture System by the date of the publication of the Report and Order in the Federal Register. No rationale is offered by the Commission to justify such discriminatory treatment that would appear similar to that barred by the D.C. Circuit Court of Appeals in the Fresno Mobile Radio case."' (6) In paragraph 163 of the Report and Order, the Commission further restricts the movement of Site-Licensed Spectrum held by Non-Nextel EA licensees to such Spectrum held in EA markets in which such licensees hold one or more EA Authorizations. No rationale is offered by the FCC for this restriction, which in certain cases may require a Non-Nextel EA licensee to deconstruct a Cellular-architecture System in markets in which it holds only Site licenses. (7) The FCC exclusively allocates the 10 MHz of 1.9 GHz band to Nextel regardless of its 800 MHz band spectrum holdings purportedly by a private sale rather than by modifying and reassigning the frequencies of General Category and Lower 80 EA Authorizations in each of the one hundred seventy-five (175) EA markets on an EA market wide Clean 1:l basis."' 3. Without Pro Rata Distribution Approach The pro rata distribution approach apparently results fiom Nextel's objection to the costs of vacating its Upper 200 EA Channels on a Clean 1:l basis to accommodate the EA- and Site-Licensed spectrum holdings of Non-Nextel EA and Cellular- architecture System Site licensees.109 According to Nextel, vacating a considerable portion of its Upper 200 EA Channels in Southern's core markets would require it to construct numerous additional cell sites and expending several hundred million dollars in capital expenditures."o However, contrary to Nextel's contention in its June 14,2004 Ex Parte Presentation, it would vacate the vast majority of its Upper 200 EA Channels in only six (6) EA markets."' ~~ See Nextel Partners, Inc., Form 10-K for the period ended December 31,2003, at pp. 20-2 1. lo' See Report and Order, at 7 163; Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C. Cir. 1999). lo' See Report and Order, at 'Io See id. 'I1 Southern holds 257 or more Total Channels in the following EA markets: (1) Atlanta, Georgia-Alabama-North Carolina (260 Total Channels); (2) Huntsville, Alabama- 31-35. See Nextel Communications, Inc., Ex Parte Presentation, June 14,2004, p. 4. 109 54 Ignoring the impermissible discrimination set forth above with respect to the treatment of Non-Nextel EA and Cellular-architecture System Site licensees? spectrum holdings, the movement methodology set forth in paragraph 163 of the Report and Order provides a guide to resolving its legal, practical and mathematical infirmities encountered upon applying it to the license holdings in EA markets. As the Commission determined, EA authorizations should move into the ESMR portion of the band upon an EA market wide, Clean 1:l basis. Such movement should be based upon the type of license held rather than the identity of the licensee. As Preferred previously has noted, Site-Licensed Spectrum should be moved on a Clean or MHz/Pops Equivalent basis. Moving such Spectrum on a Total Channels or EA market wide Clean 1:l basis results in an unnecessary spectrum ?logjam? in many of the one hundred eighteen (1 18) EA markets in which Nextel or Nextel Partners shares EA-Licensed Spectrum with Non-Nextel EA licensees. Moreover, such approach clearly conflicts with the competitive bidding provisions of Section 3096) and numerous FCC precedent.?? Furthermore, such approach necessarily leads the Commission to impermissibly discriminate against Non-Nextel EA licensees, Cellular-architecture System Site and other Site licensees. However, Preferred maintaim that if the Site-Licensed Spectrum of the Nextel Control Group moves to the ESMR portion of the band on an EA market wide, Clean 1 : 1 basis without regard to its construction status or market location, the Site-Licensed Spectrum of Non-Nextel EA licensees is required to be identically treated.Il3 Such treatment would allow Non-Nextel EA licensees to move Site-Licensed Spectrum it presently holds or acquires into the ESMR portion of the band if it constructs such Spectrum as part of a cellular-architecture system by the construction deadline for Nextel?s or Nextel?s Partners? Site-Licensed Spectrum regardless of whether it holds an EA Authorization in the particular market. Tennessee (259 Total Channels); (3) Birmingham, Alabama (347 Total Channels); (4) Montgomery, Alabama (257 Total Channels); (5) Mobile, Alabama (313 Total Channels); and (6) Biloxi-Gulfport-Pascagoula, Mississippi. Assuming Southern?s General Category EA-and Site- Licensed Spectrum (and in certain EA markets several of its BILT Channels) moves into the former NPSPAC Channels in these EA markets, Southern would need 137-140 of Nextel?s or Nextel Partners? Upper 200 EA Channels in four of these EA markets. Nextel or Nextel Partners would retain 60-63 Upper 200 EA Channels, its 900 MHz spectrum (nationwide ?running? average of 3.3 MHz) and would be allocated exclusively 10 MHz of 1.9 GHz band spectrum or a total of 16-16.15 MHz of Clean or MHz/Pops Equivalent Spectrum. Even without the 900 MHz spectrum, Nextel?s Clean or MHz/Pops Equivalent Spectrum actually would increase in these four EA markets. ?I2 See Verizon Wireless white Paper, at pp. 4-16; Cellular Telecommunications & Internet Association, Ex Parte Presentation, December 4,2003, at pp. 3-4, 8-13. Failure to treat such Site-Licensed Spectrum identically to that held by the Nextel Control Group would violate the Commission?s statutory mandate to maintain regulatory parity and promote competition. 113 55 SCHEDULE 1 NON-NEXTEL SMR, BILT AND PUBLIC SAFETY SITE LICENSES IN CHANNELS 1-150 AND CHANNELS 401-600 - NON-NEXTEL SMR, BlUT AND PUBLIC SAFETY SITE LICENSES IN CHANNELS 1-150 AND CHANNELS 401-600 NON-NEXTEL SMR, BlUT AND PUBLIC SAFETY SITE LICENSES IN CHANNELS 1-150 AND CHANNELS 401-600 NON-NEXTEL SMR, BlUT AND PUBLIC SAFETY SITE LICENSES IN CHANNELS 1-150 AND CHANNELS 401-600 SEA Name SCHEDULE 2 NEXTEL CONTROL GROW?S SPECTRUM ENHANCEMENT UNDER THE REPORT AND ORDER NU(TELSANDNEXIELPARTNERS'SPEC~UMENHANCEYENT UNDER REPORT AND WER SCHEDULE 3 NEXTEL CONTROL GROUP?S CLEAN SPECTRUM HOLDINGS IN CHANNELS 401-600 NEXTEL CONTROL GROUP CLEAN SPECTRUM HOLDINGS IN CHANNELS 401-600 Page 1 of3 NEXTEL CONTROL GROUP CLEAN SPECTRUM HOLDINGS IN CHANNELS 401-600 Page 2 of 3 NEXTEL CONTROL GROUP CLEAN SPECTRUM HOLDINGS IN CHANNELS 401-600 I I 4" I IUI I I I " Total POp.AII Markets piGi5q Tot.1 Pop. M8jor Defkkncy Mahets Average All Markets I 1.632.430 I 28.73 I 1.52 I 0.01 I 26.73 I 8.16 I 13.65 I 46.55 I I 168.61 I 122.06 I Averaw MaIorDeRc1mcyMark.U I 1,607,215 I 44.05 I 0.53 I 0.00 I 75.00 I 18.50 I 50.~1 1u.oa I I 155.43 I 11.40 I Page 3 Of 3 SCHEDULE 4 SOUTHERN COMMUNICATIONS SERVICES, INC. SPECTRUM HOLDINGS I 28 I 20 8 57 .. 31 I I I I I I I I I I C0-m I , ..I I I I I I uRq.L.amCnm I I I I I I I I I I I I I el -1 wads saaLo1dua aJou JO I RECOMMENDED RECORD RETENTION SCHEDULE1* General HR Information Job descriptions Employee handbooks/manuals Hiring Documents 0 Advertisementdjob posting Application (not hired) Certificate of age (minors) 1-9 forms Interview notes ADA ADEA, AD& E.O. 11246; Title VII; Fair Labor Standards Act (FLSA) ADEA; ADA; E.O. 11246; Title VI1 FLSA? Immigration Reform and Control AcUAmendments (IRCA) 0 E.O. 11246 All employers All employers 0 All employers 0 All employers 0 All employers (if minors employed) All employers 0 Federal contracthbcontract of $50,000 or more and 50 or more employees Permanent Permanent 1 year; 2 years** 3years 1 year; 2 years**; 90 days for temporary job (ADEA) 3 years after hire or 1 year after termination, whichever is later 1 year; 2 years** ? FLSA. Employers are, however, required to keep records of the birth dates of employees under age 19. A certificate of age is recommended by the Department of Labor where an employer is uncertain about a minor applicant?s age, but the certificate is not required by the L RECOMMENDED RECORD RETENTION SCHEDULE1* Leave Documents t Family and Medical Leave (including related medical information) D Sick/disability leave Medical Information D Insurance information b Medical examinations/other medical information (non- FMLA) HIPAAprivacy documentation (training, complaint investigations, accountings, privacy policy and procedures) Pension Information ERISA plan descriptions/ summary annual reports Pension payments/records Pension plan documents Service/eligibility records Family and Medical Leave Act of 1993 (FMLA) D ADA; ADEA; E.0.11246; Title VI1 D HIPAA Privacy Regulations ERISA m 50 or more employees within 75 mile radius B All employers (ifbenefit offered) Employers who sponsor health plans with: 50 or more participants OR an administrator other than the employer that establishes/maintains the plan (regardless of # of participants) Employers with private pension and welfare plans 3years 1 year; 2 years** Length of employment + 3 years 6years 6 years (all records pertinent to covered plans) 3 years alter death Permanent Permanent 3 of Illinois NK Erprnmefir d kcd W&kP RECOMMENDED RECORD RETENTION SCHEDULEI* Safety Records Accident reports (Form 101) D Drug/alcohol testing reports 1 Hazardous exposure/ (CDL drivers) monitoring reports (MSDS) Workers? compensation D OSHA lOgS Salary Records rn Earnings records Payroll Timecarddsheets rn Gamishmentddeductiond assignments Withholdinglexemption certificates Occupational Safety and 1 or more employees Health Act (OSHA) (records to be kept where 10 or more employees) drivers where CDL required 0 Employers employing OSHA OSHA 1 1 or more employees Illinois Workers? Syears 5years 1 year (negative results); 5 years (positive results) 30 years &om date substance last received in workplace 3 years (ffom date of Occuoational Diseases Act I I dkahlementl FLSA; ADA, ADEA; E.O.11246; FMLA; Title VII; Illinois Minimum Wage Law 3 years 2years 3 years I.R.C. I I 4 years 4 RECOMMENDED RECORD RETENTION SCHEDULE1* National Labor Relations Act Terminated Employees Personnel files All unionized employers 1-9 forms Employment contracts Union-Related Documents Grievancehrbitration records Expired collective bargaining agreements D Illinois Personnel Record Review Act; ADA; ADEA; E.0.11246; Title VI1 * IRCA ADA; E.0.11246; FLSA; Title VI1 I 1 year fiom termination; 2 years** 3 years after hire or 1 year after termination, whichever is later 3 years Term of affected collected bargaining agreement + 10 years Permanent The recommended dates specified above are either required by statute or have been determined by acceptable and best practice. Where a lawsuit or agency proceeding is pending, records that may have a bearing on the proceeding should be retained until the matter is fully resolved. The 2 year requirement is for federal contractors with 150 or more employees and a contract ofat least $150,000. Where more than one statute or Executive Order is mentioned, the recordkeeping requirements may vary. In such a case, the longest recordkeeping requirement is provided. * ** + ++ ?Employers covered? refers to employers required to keep the pertinent documentation, not the employee counts specified in the pertinent statute or Executive Order. RECORD RETENTION SCHEDULE revised July03 5 Exhibit 3 OVERUPOF NXTEL &SPRINTS SPECTRUM AN0 PREFERRED COMMUNlCAllON SYSTEMS. lW:S Sm Mfk EA AUTUOrwITIONS mMfk U wc6- - I I.OOM EBSZ5Qh I1 15 4a 16 17 183 164 Io2 I85 , 174 WASHINOTOKBUTIMORE. DC-MPVIWVSA RICHWND. VI\ CWRLESTON. WVXI4H STWNX)N,VA-WY ROUIOKE. VW SAN FRANCISCO. CA BICRNAENT0,CA FRESNO. CA REDOING, CA PUERTO RlCO AVERAQE I4 4x4 [8.ltinami 10 I4 5.075 Wuhinptonl IO 14 4.m 10 I4 4.123 10 14 4.m 10 14 3.875 10 I4 4.m 10 14 4.m to 14 4.m 10 I4 4.m 10 - 14 m - 10 14 4.270 (~lmanl 10 14 4.20 (Wlohingtton) 10 51.W [B.ltimorn) a.780 Wrhinpton) 0 71.m 0 1.980 4s.m 5aO.100 n.m 1m.m e 40 888 I~unOrSl 38 018 (Washmgmn) IM.I(YI (8.nlmOrnl I14.W Wuhlngton 0 71.m 0 1.080 15mw Ii*17W I4o.m 'IU.540 e 82.962 (Banimom1 75 63(1 (Washington) Washinoion 130 30 10 40 30.77% 50 0 0 0 0.00% 10 0 5.075 5.075 50.75% 14 0 14 14 100.00% 402 30 29.075 173.915 43.26% Raltimnra 130 20 10 30 23.08% 50 0 0 0 0.00% 10 0 4.85 4.85 48.50% 14 0 14 14 100.00% 402 20 28.85 236.95 58.94% 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block Total CMRS Spectrum 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block Total CMRS Spectrum 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block Total CMRS Spectrum 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block Total CMRS Spectrum 198 73.26 95.00% 130 20 10 30 23.08% 50 0 0 0 0.00% 10 0 4.125 4.125 41.25% 14 0 14 14 100.00% 402 20 28.125 121.385 30.20% Szm Fmncirn 198 152.46 77.00% 130 30 10 40 30.77% 50 0 0 0 0.00% 10 0 4.6 4.6 46.00% 14 0 14 14 100.00% 402 30 28.6 211.06 52.50% Sacremanto 130 30 10 40 30.77% 50 0 0 0 0.00% 10 0 4.5 4.5 45.00% 14 0 14 14 100.00% 402 30 28.5 187.2 46.57% 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block Total CMRS Spectrum I 2.5 GHz PCS Cellular 900 MHz 800 MHz ESMR Block Total CMRS Spectrum i 130 30 10 40 30.77% 50 0 0 0 0.00% 10 0 4.5 0 0.00% 14 0 14 14 100.00% 402 30 28.5 194.58 48.40% Redding 198 - 144.54 73.00% 130 30 10 40 30.77% 50 0 0 0 0.00% 10 0 4.5 4.5 45.00% 14 0 14 14 100.00% 402 30 28.5 203.04 50.51% M. AI.T STIN I, Charles M. Ausdn, do heteby attest and state a5 follows: 4. 5. I om the CEO end President of Preferred Communications Systems, Inc. (?Trefened?? I have read the foregoing Petition to Day and I have persod howledge of the facts statcd rhetrin in support of &e Pention and the relief requested. I declare under penalry of petjury under the laws of the United States of America that the foregoing is true and correct. Charles M. Ausdn Subscribed and sworn to me this= day of Max& 2005. CERTIFICATE OF SERVICE I, Paul C Besozzi, with the law fm of Patton Boggs LLP, hereby certify that copies of the foregoing Petition to Deny were served this 30" of March 2005, by electronic and/or U.S. mail indicated on the following: Best Copy and Printing, Inc. 445-1Zth Street, S.W. Washington, D.C 20554 FCC@BCPIWEB.COM Louis Peraertz Spectrum and Competition Policy Division Wireless Telecommunications Bureau 445-121h Street, S.W. Washington, D.C 20554 louis.pem~fcc.gov Sara Mechanic Spectrum and Competition Policy Division Wireless Telecommunications Bureau 445-lzth Street, S.W. Washington, D.C 20554 sara.mechanic@ fcc.gov Erin McGrath Mobility Division Wireless Telecommunications Bureau 445-12' Street, S.W. Washmgton, D.C 20554 erin.mgrath@fcc.gov Dennis Johnson Broadband Division Wireless Communications Bureau 445-12" Street, S.W. Washington, D.C 20554 dennis.johnson@fcc.gov Pamela Megna Competition Poky Division Wireline Competition Bureau 445-12' Street, S.W. Washmgton, D.C 20554 pamela.megna@fcc.gov Jim Bird Office of General Counsel 445-12' Street, S.W. Washington, D.C 20554 jimbid@fcc.gov Jo~than Levy Office of Strategic Planning and Policy Analysis 445-1.2'~ Street, S.W. Washington, D.C 20554 jonathan.ley@ fcc.gov Wayne McKee Engineer;.% Division Media Bureau 445-12Ih Street, S.W. Washington, D.C 20554 wayne.mckee@ fcc.gov Charles Iseman Exprimend Licensing Branch Office of Engineering and 445-12" Street, S.W. Washington, D.C 20554 charles.isema@ fcc.gov Technology Jeff Tobias Public Safety and Critical Infmuucture Division Wmless Communications Bureau 445-12' Street, S.W. Waslungton, D.C 20554 jeff.tobias@ fcc.gov David Krech Policy Division, International Bureau 445-12* Street, S.W. Waslungton, D.C 20554 david.krech@ fcc.gov Robert S. Foosaner / Lawrence R Krevor James B. Goldstein Nextel Communications, Inc. 2001 Edmund HalleyDrive Reston, VA 20191 robeIt.s.foosane@nexLcom larry.krevo@nextel.com james.goldstein@nexLcom Richard Metzger, Jr. / Regina M Keeney Charles W. Logan / Stephen J. Berman A. Renke callahan Lawler, Metzger, Milkman & Keeney, LLC 2001 K Street, N.W. Suite 802 Washulgton, D.C 20006 rmetzge@lmmlaw.com gkeeney@blaw.com blow lmmlaw.com sberman@lmmlaw.com rcaUahan@lmm-law.com National Black Chamber of Commerce 1350 Connecticut Avenue, N.W. Waslungton, D.C 20036 info@NationalBCCorg JoAnn Lucanik Satellite Division International Bureau 45-12' Street, S.W. Washugton, D.C 20554 joann.luc& fcc.gov Gregory A. Smith Johnston &Associates 2099 Pennsylvania Avenue, N.W. SLlite 1000 Washington, D.C 20006 gsmith@ johnstondc.com Vonya A. McCann / H Richard Juhnke Luisa L. Lancetti Sprint Corporation 401 9* Street, N.W., Suite 400 Washington, D.C 20004 vonya.b.mccann@ maiLsprint.com richard.juhnke@ maiLsprint.com luisa.l.lance@ mail.sprint.com Philip L. Verveer / Michael G. Jones Angie Kronenberg / David IvL Don Stephanie Podey / Megan Anne Stull Wfie Farr & Gallagher LLP 1875 K Street, N.W. Washington, D.C 20006 pverveem willkie.com mjone@willkie.com akronenbeq@willkie.com ddon@willkie.com spode@willkie.com mstul@willkie.com