updated 11/2/2004 3:35:30 PM ET 2004-11-02T20:35:30

Nextel Communications Inc. and Verizon Wireless are settling all legal disputes between them, removing a key challenge to a federal decision to clear up interference between cell phones and emergency response radios by moving Nextel to another band of spectrum.

The surprise settlement announced Tuesday also ends Nextel's claim of trademark and ownership rights for the phrase "Push To Talk" and other uses of the word "push" to describe the popular walkie-talkie service which Nextel introduced to cell phones and which Verizon and other rivals now offer.

The deal resolves an angry, long-running dispute over spectrum interference in which each company accused the other of putting their business interests ahead of public safety concerns.

As cell phones and other wireless services have proliferated over the past decade, many swaths of the airwaves have grown overcrowded.

The biggest problems have arisen in the 800 megahertz band of spectrum, which is shared by police, fire and ambulance radio systems with several cell phone companies, though predominantly Nextel.

If, for example, a radio dispatch is made at 850 MHz near a Nextel cell tower broadcasting at 851 MHz, the radio signal can be drowned out. No injuries or deaths have been reported, but public safety officials have said personnel are endangered any time they respond to a call and cannot communicate.

In July, the Federal Communications Commission proposed a spectrum swap based largely on a plan developed in partnership between Nextel and first responder organizations.

Under the FCC plan, Nextel would swap its 800 MHz and 700 MHz licenses for spectrum at a higher frequency in the 1.9 gigahertz band, paying $3.2 billion to cover the difference in value between the new licenses and the old.

In addition, Nextel was asked to put $2.5 billion into escrow to cover all costs of retuning and upgrading public safety radio systems around the nation where the 800 MHz band would be reconfigured to eliminate interference. The money, three times as much as Nextel had estimated the rebanding will cost, also would be used to cover transition costs of businesses which use the 800 MHz and 1.9 GHz spectrum involved in the swap.

The FCC valued the spectrum Nextel would acquire at $4.8 billion. Verizon and others had complained that the value of the 1.9 GHz licenses is much higher and should be determined through a public auction.

Either way, there's little doubt the new spectrum is worth considerably more than Nextel's current hodgepodge of licenses, which are scattered across different frequencies in the 800 MHz band and vary from market to market.

Armed with more continuous spectrum, Nextel would have an easier time rolling out more advanced technologies for services such as high-speed wireless Internet access, an area where the company lags far behind its rivals.

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