A federal appeals court said the FCC was correct when the agency ruled that two companies tied to DISH Network were ineligible to receive $3.3 billion in bidding credits that were available to small businesses that took part in a 2014 spectrum auction. SNR Wireless LicenseCo LLC and Northstar Wireless failed to show that the Commission violated a remand order in a prior ruling by not properly negotiating with the companies over how to secure “de facto” independence from DISH. So ruled Judge Patricia Millett of the U.S. Court of Appeals for the D.C. Circuit, reported Bloomberg.
New Street Research Policy Analyst Blair Levin writes in a note for analysts that while the appeal process can continue, “it is all but done.” That means the FCC would soon be free to re-auction the licenses that were turned back into the Commission when it challenged the DISH/DE relationship, saying it was “contrary” to its rules.
The case concerns the 2014 AWS-3 auction. The FCC provided bidding credits to “designated entities” as part of a policy to provide opportunities for small companies and new market entrants. The rules required DEs to demonstrate they were independent enterprises and not simply mechanisms for larger companies to purchase spectrum more cheaply, according to Levin.
In that auction, two DEs affiliated with DISH won licenses that entitled them to $3.4 billion in bidding credits. After the auction, the FCC found that under the agreements between the parties, DISH possessed de facto control of the DEs. Under this finding, the FCC forced the DEs to forgo the bidding credits.
Instead of paying the $3.4 billion fine, the DEs defaulted on 197 licenses equal to the bidding credit amount, and paid for the licenses they kept. The FCC required DISH to pay a $515 million fine.
The DEs and DISH sued. The court sent the case back to the FCC, saying that while the agency had the authority to interpret its own rules as it did, the agency should have given the companies notice and an opportunity to fix the problem. DISH and the DEs then renegotiated their agreement, says Levin. Then, the FCC decided again that DISH exercised “de facto” control over the DEs and the case went back to the appeals court.
In its decision, the Court found that, “The Commission complied with our previous decision by affording the Companies an opportunity to cure. The Commission also reasonably applied its precedent to the Companies and gave them fair notice of the legal standards that it would apply in analyzing their claims to be very small companies.”
Levin says an appeal is “unlikely to succeed.” DISH could also try to negotiate with the FCC, but that too is unlikely to succeed, adding: “The time to do that was before the oral argument.”
He believes the most likely outcome is the agency will reauction the licenses. However, there’s probably no downside for DISH. “As a legal matter, DISH remains on the hook for any shortfall in a reauction of the licenses in question,” writes Levin. “Based on spectrum values and the location of the licenses, there is unlikely to be any shortfall.”
By Leslie Stimson, Inside Towers Washington Bureau Chief
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