What’s in the Escrow Condition the FCC Imposed on EchoStar’s Spectrum Sales?

UPDATE  Digging into more details about the FCC’s conditional approval of EchoStar’s (NASDAQ: SATS) spectrum sale to SpaceX and AT&T (NYSE: T), Inside Towers has more information to share about the escrow account, the future for Boost Mobile and buildout conditions for AT&T.

The Commission imposed a “limited” escrow or trust fund obligation on EchoStar as a condition of approving the transactions. The agency said in its decision, “a number of entities have argued that EchoStar has indicated that it will not pay companies for work—the construction of a new facilities-based nationwide 5G network, including the leasing of space on towers and rooftops to house its antennas—that it was required to undertake as a condition on those licenses. At the same time, EchoStar disputes claims that have been raised by those companies.”

The Commission states, “With the attached condition, the FCC continues to allow the relevant parties and, if necessary, courts or other bodies, to adjudicate or settle these issues. The Commission’s unique role in the underlying series of events creates a precedentially novel fact pattern and cognizable public-interest harms specific to this transaction that we find necessary to resolve here.”

Within 30 days of the transactions closing, EchoStar must create a trust fund and deposit $2.4 billion into that fund “to help pay obligations potentially incurred in connection with the construction, operation, maintenance, building, decommissioning, and/or provisioning of goods or services related to or arising out of the communications sites and/or communications network associated with certain of the licenses being assigned or transferred in this transaction.” The agency says it finds such a condition is necessary “to conclude that the proposed transaction serves the public interest.”

After the FCC’s decision was announced on Tuesday, EchoStar acknowledged the FCC’s approval of its spectrum sales to AT&T and SpaceX but criticized the mandated $2.4 billion escrow requirement as an “unprecedented involuntary” condition. EchoStar said in a statement it’s evaluating next steps. It previously warned that such a condition could jeopardize the deals, Inside Towers reported.

Crown Castle is a member of the American Wireless Builders Coalition that pressed the FCC to impose conditions on the deals. The company said in a statement to Inside Towers, “We are thankful to Chairman Carr for his leadership. By requiring an escrow as part of [the] order, the Chairman has acted in the interest of consumers, the U.S. wireless industry and the workers and companies that serve as the backbone of our wireless ecosystem, economic growth, and job creation – the same ones that helped EchoStar build its network. We look forward to this spectrum being put to good use, and we will continue to do everything we can to protect the interests of our shareholders.”

Other items of interest in the FCC’s decision on the deals include:

 A Future for Boost Mobile: AT&T and EchoStar will create a hybrid Mobile Virtual Network Operator arrangement that they say ensures the continued viability of Boost Mobile.

• Tech-Neutral Innovation: The FCC is granting a series of “pathbreaking” waivers for SpaceX that anticipate and address the growing convergence of wireless and satellite broadband and break down regulatory silos. The decision allows SpaceX to use its new spectrum flexibly for terrestrial, space-based, and hybrid network architectures. That flexibility is subject to what the FCC calls “first of-its-kind performance obligations” designed to be technologically neutral. SpaceX must meet “demanding” standards “to use its spectrum intensively and provide meaningful, reliable connectivity to the public—whether D2D, terrestrial, or both—within years,” the agency says.
• “Stringent” Buildout Conditions: To ensure that spectrum is used intensively for consumers, the FCC is requiring AT&T to build its greenfield 600 MHz network years faster than what the company originally requested and what the FCC’s rules ordinarily require for builds after auction. AT&T receives no buildout extension for its 3.45 GHz spectrum, which is already deployed in large part, according to the Commission.

By Leslie Stimson, Inside Towers Washington Bureau Chief