Sprint - Nextel 2013 Annual Report Download - page 157

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Sprint is currently involved in numerous court actions alleging that Sprint is infringing various patents. Most of these cases effectively seek only
monetary damages. A small number of these cases are brought by companies that sell products and seek injunctive relief as well. These cases have progressed
to various degrees and a small number may go to trial if they are not otherwise resolved. Adverse resolution of these cases could require us to pay significant
damages, cease certain activities, or cease selling the relevant products and services. In many circumstances, we would be indemnified for monetary losses that
we incur with respect to the actions of our suppliers or service providers. We do not expect the resolution of these cases to have a material adverse effect on
our financial position or results of operations.
In October 2013, the FCC Enforcement Bureau began to issue notices of apparent liability (NALs) to other Lifeline providers, imposing fines for
intracarrier duplicate accounts identified by the government during its audit function. Those audits also identified a small percentage of potentially duplicative
intracarrier accounts related to our Assurance Wireless business. No NAL has yet been issued with respect to Sprint and we do not know if one will be issued.
Further, we are not able to reasonably estimate the amount of any claim for penalties that might be asserted. However, based on the information currently
available, if a claim is asserted by the FCC, Sprint does not believe that any amount ultimately paid would be material to the Company
’ s results of operations or
financial position.
Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business
enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including
those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by
us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we
expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of
operations.
Spectrum Reconfiguration Obligations
In 2004, the FCC adopted a Report and Order that included new rules regarding interference in the 800 MHz band and a comprehensive plan to
reconfigure the 800 MHz band. The Report and Order provides for the exchange of a portion of our 800 MHz FCC spectrum licenses, and requires us to fund the
cost incurred by public safety systems and other incumbent licensees to reconfigure the 800 MHz spectrum band. Also, in exchange, we received licenses for 10
MHz of nationwide spectrum in the 1.9 GHz band.
The minimum cash obligation is
$2.8 billion under the Report and Order. We are, however, obligated to pay the full amount of the costs relating to the
reconfiguration plan, even if those costs exceed
$2.8 billion . As required under the terms of the Report and Order, a letter of credit has been secured to provide
assurance that funds will be available to pay the relocation costs of the incumbent users of the 800 MHz spectrum. Total payments directly attributable to our
performance under the Report and Order, from the inception of the program, were approximately
$3.3 billion , of which primarily all payments incurred during the
year ended
December 31, 2013 related to FCC licenses. When incurred, these costs are generally accounted for either as property, plant and equipment or as
additions to FCC licenses. Although costs incurred through
December 31, 2013 have exceeded $2.8 billion , not all of those costs have been reviewed and
accepted as eligible by the transition administrator.
Completion of the 800 MHz band reconfiguration was initially required by June 26, 2008. The FCC continues to grant 800 MHz public safety licensees
additional time to complete their band reconfigurations which, in turn, delays our access to some of our 800 MHz replacement channels. Accordingly, we will
continue to transition to our 800 MHz replacement channels consistent with public safety licensees' reconfiguration progress. On May 24, 2012, the FCC revised
its rules to authorize Sprint to deploy wireless broadband services, such as CDMA and LTE, on its 800 MHz spectrum, including channels that become available
to Sprint upon completion of the 800 MHz band reconfiguration program. We anticipate that the continuing reconfiguration progress will be sufficient to
support the 800 MHz portion of our network modernization. In January 2013, we submitted a Request for Declaratory Ruling to the FCC requesting two items: (i)
that it declare that Sprint will not owe any anti
- windfall payment to the US Treasury, because we have exceeded the $2.8 billion of required expenditures, and (ii)
that the FCC remove the
$850
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