Cyren Call Short Of Time And Backers On The Hill

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WASHINGTON (Dow Jones) Morgan O'Brien isn't one to shy away from a tough fight. Against considerable odds the founder of Nextel Communications built a national cellular provider using radio spectrum that had previously been used by taxi firms to communicate by CB radio.

In 2004, Nextel was sold to Sprint for USD35 billion to form the cellular company Sprint Nextel.

This time, however, the multimillionaire entrepreneur may have picked a fight he can't win.

O'Brien is trying to convince Congress to sell 30 megahertz of prized spectrum at a knock-down rate to a not-for-profit trust to build a national broadband network for emergency-services providers.

That is half the spectrum - which is a result of television broadcasters' transition from an analog to digital signal - due to be auctioned off by the federal government later this year.

The spectrum is some of the most sought-after to become available to the commercial marketplace in years.

Using it, companies like Verizon Communications, Sprint Nextel and AT&T will build the fourth generation of wireless communication - a technology with vast potential for future gadgets and services.

In trying to wrestle a chunk of this spectrum away, Cyren Call, the group fronted by O'Brien, is vying against a series of obstacles that together seem to be proving too formidable for the proposal to have much chance of success.

He is facing lawmakers reluctant to revisit an issue deemed resolved; the concerted opposition of the commercial wireless industry; and alternative proposals that promise less disruption to the plan for the auction.

By the government's own estimates, the spectrum auction could raise USD15 billion for the Treasury, at a time when reducing the budget deficit is a high priority on both sides of the aisle.

Of that, $10.2 billion has been earmarked for deficit-reduction purposes and $1.5 billion will subsidize people's acquisition of set-top boxes allowing them to watch TV after the digital transition is complete in February 2009.

Another $1 billion will be spent on grants for emergency-services workers seeking to upgrade their communications devices.

Better Communication Wanted

As important to lawmakers on Capitol Hill as paying down the federal deficit is ensuring that the next time a 9/11 or Hurricane Katrina-like catastrophe occurs, emergency-services workers are better able to communicate with each other.

Enter O'Brien's Cyren Call

He has promised that, within five years of being granted the spectrum, he would deliver a national wireless broadband network to enable emergency services to communicate by voice, video and data.

The proposal would see a trust holding the license for the spectrum but hiring a private company - Cyren Call, if O'Brien has his way - to oversee the construction and maintenance of the network.

The trust itself would be comprised primarily of representatives of emergency-services workers.

Cyren Call would raise $5 billion from the capital markets to pay for the spectrum, with the condition that the federal government promise to underwrite the borrowings.

It would then enter into an arrangement with one or more commercial wireless operators to build the network, agreeing not only to do so in the lucrative major urban markets but across the rest of the country as well.

Cyren Call estimates the construction would cost $20 billion, paid for by the commercial operators.

Most of the time, those wireless operators would use the network to offer wireless broadband access to their customers, but, crucially, those emergency-services providers that wanted to take part in the scheme would get priority access in times of crisis.

Importantly, both the customers of the commercial operators and emergency services would pay to access the network.

O'Brien argues that the involvement of the private sector is inevitable as there are no signs the government is going to come up with the necessary funding.

"The capital necessary to build this network will never come from the taxpayer, but the capital to build the network of your dreams is sitting out there waiting to be put to work," he said in an interview.

Support Of Emergency-Services Community

O'Brien has the backing of the emergency-services community and has unabashedly employed it to lobby on his behalf on Capitol Hill.

"We view Cyren Call as essential for the country's police, fire and other emergency services to be able to get the communication abilities it needs," said Harlin McEwan, of the International Association of Chiefs of Police, himself the retired chief of the Ithaca, N.Y., police force.

To have any chance of success O'Brien must convince lawmakers to amend the law underpinning the spectrum auction.

Until earlier this month, he counted among his supporters Sen. John McCain, R-Ariz., one of the leading Republican candidates for the White House in 2008.

But then McCain published draft legislation that called for 30 megahertz of spectrum to be auctioned off, rather than sold directly to a trust, which is the lynchpin in Cyren Call's proposal.

Sen. Ted Stevens, R-Alaska, roughed up O'Brien in a February Senate Commerce Committee hearing. Stevens, the committee's top Republican, made it clear he didn't support the campaign.

Privately, staffers for Republican and Democrat lawmakers on both the panel and the House Commerce Committee say there is no support among their bosses for Cyren Call.

"It was a long shot when the year started - it's probably an even longer shot now," said one Democratic senate aide, speaking on the condition of anonymity. "It's much easier to stop something from happening up here than to make something happen."

The cellular industry has argued vociferously that more spectrum is not what emergency services require. They point to the fact that of the total 108 megahertz freed up by the digital TV transition, Congress has already set aside 24 megahertz for first responders.

In addition to CTIA's public opposition, companies like Verizon Wireless are lobbying equally as aggressively in private.

Even some lawmakers, such as Virginia Democratic Rep. Rick Boucher, question the need for emergency services to be allocated more spectrum. Boucher sits on the House Commerce Committee's telecommunications subcommittee, one of the panels O'Brien would have to sway to be successful.

Two other plans have been floated at the Federal Communications Commission, one by a group fronted by a former chairman of the agency, the other by agency staffers themselves.

Neither of these would require a legislative change, and both would involve a portion of the 24 megahertz already set aside for emergency services.

With little support for a change to the current legislation, all eyes are now on FCC Chairman Kevin Martin to determine what involvement the private sector should have in the construction of a broadband network.

While making it clear that it is Congress' decision to make on Cyren Call, Martin said in an interview that he believes auctions are the best way to distribute spectrum.

Not only do auctions "raise money for the government," but they also satisfy "the primary public-policy goal - efficient means to get spectrum in the hands of those who can use it best.

-By Corey Boles, Dow Jones Newswires; 202-862-6637; corey.boles@dowjones.com

(END) Dow Jones Newswires"

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