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[SemiBizz]

Verizon Wireless sues over 700 MHz open-access conditions

Verizon Wireless challenged in federal appeals court the Federal Communications Commission’s 700 MHz open-access rules, the opening salvo in what could evolve into a messy legal battle. The move puts a cloud of uncertainty over the upcoming auction of more than a thousand wireless licenses in prime airwaves.

The No. 2 mobile-phone carrier said the FCC action “violates the U.S. Constitution, violates the Administrative Procedures Act … and is arbitrary, capricious, unsupported by the substantial evidence and otherwise contrary to law.”

The FCC last month attached open-access requirements to a 22 megahertz block of spectrum—a third of the spectrum set for auction in mid-January—as part of its controversial 700 MHz decision.

The mobile-phone industry was vigorously opposed to attaching conditions to any of the 700 MHz spectrum, but its position was undermined late in the rulemaking process when AT&T Inc. unexpectedly threw its support behind FCC Chairman Kevin Martin’s 700 MHz plan. The plan requires winning bidders of the 22 MHz worth of licenses to permit any devices and application on their networks, as long as they don’t harm the networks.

There is an escape clause of sorts, however. If a reserve price of $4.6 billion is not reached for the 22 megahertz, the open-access obligation will disappear. Other spectrum blocks also have reserve prices, a regulatory provision that critics warn could hinder competition in the auction.

Google Inc., Frontline Wireless L.L.C., Skype Ltd., consumer advocates, public-interest groups and others aggressively lobbied the FCC for open access and wholesale mandates in the 700 MHz spectrum, but succeeded only in securing the former. Open-access supporters either declined comment or could not be immediately reached for a reaction to Verizon Wireless’ appeal.

A FCC spokesman declined to comment on Verizon Wireless’ lawsuit, which it filed at the U.S. Court of Appeals for the District of Columbia Circuit.

Verizon Wireless declined to comment beyond the filing itself. The filing comes ahead of petitions for reconsideration of the FCC’s 700 MHz ruling, which are due later this month.

In addition to hanging open-access requirements on the 22 megahertz of spectrum, the FCC in its 700 MHz auction plan also placed conditions on a nationwide 10 megahertz spectrum block adjacent to a 12 megahertz public-safety block intended for consumer and first responder wireless broadband communications. As such, more than half of the 62 megahertz of spectrum set for the 700 MHz auction has regulatory strings attached.

Congressional budget experts believe the spectrum is worth between $10 billion and $15 billion because of the excellent propagation characteristics of the band, and because another spectrum auction of this magnitude is unlikely to occur in the future. Moreover, the injection into the wireless space of 700 MHz spectrum—set for return by TV broadcasters in early 2009—comes at a time when mobile-phone carriers are planning ahead for deployment of more advanced wireless services.

Potentially complicating the 700 MHz litigation is the unsettled state of a separate lawsuit seeking to overturn the results of last year’s advanced wireless services auction.