Sprint - Nextel 2007 Annual Report Download - page 14

The Report and Order provides for the exchange of a portion of our FCC spectrum licenses, which the FCC
is implementing through modifications to these licenses. Specifically, the Report and Order modified a number
of FCC licenses in the 800 MHz band, including many of our licenses, and implemented rules to reconfigure
spectrum in the 800 MHz band in a 36-month phased transition process. It also obligated us to surrender all of
our holdings in the 700 MHz spectrum band and certain portions of our holdings in the 800 MHz spectrum band,
and to fund the cost incurred by public safety systems and other incumbent licensees to reconfigure the 800 MHz
spectrum band. Under the Report and Order, we received licenses for 10 MHz of nationwide spectrum in the 1.9
GHz band, but we are required to relocate and reimburse the incumbent licensees in this band for their costs of
relocation to another band designated by the FCC.
The reconfiguration process is to be completed by geographic region and involves reaching agreement and
coordinating numerous processes with the incumbent licensees in that region, as well as vendors and contractors
that will be performing much of the reconfiguration. We are permitted to continue to use the spectrum in the 800
MHz band that was surrendered under the Report and Order during the reconfiguration process; however, as part
of the reconfiguration process in most regions, we must cease using portions of the surrendered 800 MHz
spectrum before we are able to commence use of replacement 800 MHz spectrum, which has contributed to the
capacity constraints experienced on our iDEN network, particularly in some of our more capacity constrained
markets, and has, in the past, impacted the performance of our iDEN network in the affected markets.
The Report and Order requires us to complete the 800 MHz band reconfiguration within a 36-month period,
ending in June 2008, subject to certain exceptions, particularly with respect to markets that border Mexico and
Canada, and to complete the 1.9 GHz band reconfiguration within a 31.5-month period, originally ending in
September 2007 and recently extended, as discussed below. If, as a result of events within our control, we fail to
complete our reconfiguration responsibilities within the designated time periods for either the 800 MHz or 1.9
GHz reconfigurations, the FCC could take actions against us to enforce the Report and Order. These actions
could have adverse operating or financial impacts on us, some of which could be material. We believe, based on
our experiences to date, that the 800 MHz reconfiguration will not be completed within the applicable FCC
designated time period due primarily to circumstances largely outside of our control.
On September 11, 2007, the FCC issued a Third Memorandum Opinion and Order, or Third MO&O, in
which the FCC ordered, among other things, that by June 2008 we vacate many 800 MHz channels that we
currently use, even if the applicable public safety licensee is not ready to relocate to the vacated spectrum. Based
upon status reports filed by the 800 MHz Transition Administrator, or TA, and discussions with public safety
licensees, we believe that a significant number of large public safety agencies will not be able to complete their
reconfigurations by June 2008. Should this occur, the Third MO&O provides that we would no longer have
access to a significant portion of 800 MHz spectrum.
Any sudden and significant decrease in network capacity that results from the requirements of the Third
MO&O could adversely affect the performance of our iDEN network. To compensate, we could attempt to
construct additional sites or acquire additional spectrum, to the extent possible. In those markets where these
network investments are not possible, we may be required to curtail subscriber additions and incent certain
existing subscribers of iDEN services to use PowerSource devices or move to our CDMA network until the
capacity limitation can be alleviated, particularly if the replacement 800 MHz spectrum is not available for any
length of time. Degradation in network performance in any market could result in higher subscriber churn in that
market. The loss of a significant number of subscribers could adversely affect our results of operations.
We believe that the Third MO&O is not consistent with the terms of the Report and Order or our
understanding of the reconfiguration process described in the Report and Order, which served as the basis under
which Nextel consented to its terms. In addition, we believe that the process by which the Third MO&O was
adopted was legally deficient in a number of respects. Accordingly, on October 12, 2007, we filed an appeal with
the U.S. Court of Appeals for the D.C. Circuit. On November 27, 2007, the U.S. Court of Appeals granted our
Motion for Expedition, setting forth an accelerated briefing schedule which should result in a decision by the
Court by the FCC’s June 2008 deadline. Both the FCC and we have filed our briefs with the Court, and oral
arguments are scheduled to begin on March 18, 2008.
12