Sprint - Nextel 2005 Annual Report Download - page 28

we will cease use of a portion of the 800 MHz spectrum that we currently use before we are able to commence
use of replacement 800 MHz spectrum in that market. To mitigate the temporary loss of the use of this spectrum,
in many markets we will need to construct additional transmitter and receiver sites for use by our iDEN network
or acquire additional spectrum in the 800 MHz or 900 MHz bands. In markets where we are unable to construct
additional sites or acquire additional spectrum, the decrease in capacity may adversely affect the performance of
our iDEN network, require us to curtail subscriber additions on the iDEN network in that market until the
capacity limitation can be corrected, or both. Degradation in iDEN network performance in any market could
result in increased subscriber churn in that market, the effect of which could be exacerbated if we are forced to
curtail iDEN subscriber additions in that market. The reconfiguration process contemplated by the Report and
Order may adversely affect our business and operations, which could adversely affect our future growth and
operating results.
The Report and Order requires us to make a payment to the United States Department of the Treasury at the
conclusion of the band reconfiguration process to the extent that the value of the 1.9 GHz spectrum we received
exceeds the total of the value of licenses for spectrum positions in the 700 MHz and 800 MHz bands that we
surrendered under the decision, plus the actual costs that we incur to retune incumbents and our own facilities
under the Report and Order. The FCC determined under the Report and Order that, for purposes of calculating
that payment amount, the value of this 1.9 GHz spectrum is about $4,860 million and the aggregate value of the
700 MHz spectrum and the 800 MHz spectrum surrendered, net of 800 MHz spectrum received as part of the
exchange, is about $2,059 million, which, because of the potential payment to the U.S. Treasury, results in
minimum cash expenditures of about $2.8 billion by us under the Report and Order. The FCC has designated an
independent Transition Administrator to monitor, facilitate and review the expenditures of the 800 MHz and 1.9
GHz band reconfigurations. A precise methodology for evaluating and confirming our internal costs has not yet
been established by the Transition Administrator. Because the Transition Administrator may not agree that all of
the costs we submit as external and internal costs are appropriate or are subject to credit, we may incur certain
costs as part of the reconfiguration process for which we will not receive credit against the potential payment to
the U.S. Treasury. In addition, we are obligated to pay the full amount of the costs relating to the reconfiguration
plan, even if those costs exceed $2.8 billion. As of December 31, 2005 we had incurred, on a cash basis,
approximately $338 million of costs under the Report and Order. Pursuant to the terms of the Report and Order,
we have established an irrevocable letter of credit in the amount of $2.5 billion to provide assurance that funds
will be available to pay the relocation costs of the incumbent users of the 800 MHz spectrum.
New Spectrum Opportunities and Spectrum Auctions
Several FCC proceedings and initiatives are underway that may affect the availability of spectrum used or useful
in the provision of commercial wireless services, which may allow new competitors to enter the wireless market.
We cannot predict when or whether the FCC will conduct any spectrum auctions or if it will release additional
spectrum that might be useful to the wireless industry or us in the future.
Other FCC Requirements
911 Services
Pursuant to FCC rules, CMRS providers, including us, are required to provide E911 services in a two-tiered
manner. Phase I requires wireless carriers to transmit to a requesting public safety answering point, or PSAP,
both (a) the 911 caller’s telephone number and (b) the location of the cell site from which the call is being made.
Phase II requires the transmission of more accurate location information using latitude and longitude.
Implementation of Phase I or Phase II E911 service must be completed within six months of a PSAP request for
service in its area, or longer, based on the agreement between the individual PSAP and carrier.
We have deployed the necessary platforms and infrastructure to support Phase I and Phase II E911 service
throughout our network. Actual availability of Phase I or Phase II E911 services in any particular market is
dependent upon receipt of a request for service and completion of necessary upgrades by local governments,
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