FCC Again Dish DE Bidding Credits for AWS-3; No $3.3B Repayment Needed

Dish Network still has de facto control over SNR Wireless and Northstar Wireless. The two designated entities remain ineligible for $3.3 billion in DE bidding credits they sought for licenses they won in the AWS-3 auction. They don't owe the FCC that amount, having defaulted on 197 licenses and paid full price for the remaining spectrum they won in the 2015 auction. That's according to an order on remand Monday by the full commission regarding the U.S. Court of Appeals for the D.C. Circuit upholding in 2017 the FCC's denial of AWS-3 auction bidding credits to the DEs but giving them a chance to negotiate a solution (see 1708290012).

While agreeing with the outcome, Commissioner Mike O'Rielly dissented in part as a criticism of what he called "the extremely flawed process." It "has inexplicably been mishandled and dragged out for over five years," he wrote. "Entities need to be able to make business decisions not only about their spectrum needs but about capital expenditures, and we keep them in limbo by failing to adequately respond in a timely fashion. ... Everyone deserves better."

Concurring, Commissioner Geoffrey Starks said the Dish/SNR/Northstar agreements fell short of agency de facto control rules. But he supports the DE program and its aims of "creat[ing] economic opportunities so that our country’s wireless spectrum isn’t strictly controlled by a few large carriers," he wrote. "We must do better." Fellow Democratic minority Commissioner Jessica Rosenworcel also concurred but didn't issue a statement. Her office didn't provide an explanation.

Dish Chairman Charlie Ergen in a statement called the decision "a setback for an emerging competitor and we are disappointed. The ruling hurts, in part, because we have enormous respect for the FCC commissioners and their public service. We believe that DISH, Northstar, and SNR addressed all the de facto control issues raised by the FCC in its 2015 Order. We are discouraged that the agency declined multiple meeting requests over the past two-and-half years so that Northstar and SNR’s applications could be further amended if for any reason they were found to imply de facto control. The refusal to be transparent about these requirements departed from decades of precedent governing how the FCC has treated other designated entity arrangements." Ergen applauded O'Rielly's dissent and said the company "appreciate[s]" Starks' concurrence.

Despite the ruling, Ergen said "we are fully aligned with the FCC on the importance of 5G to grow the economy, promote competition, spur innovation, provide essential network security, and create jobs. This ruling will no doubt complicate our efforts, but it will not affect our resolve. We remain committed to building out the nation’s first Open RAN cloud-native broadband network and restoring American leadership in telecommunications.”

“We are disappointed with the FCC’s decision and the unfair process used to reach it," SNR Manager John Muleta said in a statement. He said SNR's submitted fix "addressed every de facto control issue raised by the FCC in its 2015 decision denying the bidding credits. The terms of our relationship with DISH are far more favorable to SNR’s designated entity ('DE') control group than those reflected in applications granted bidding credits since the FCC’s 2015 decision. The FCC’s de facto control concerns could have been addressed quickly and efficiently if the agency had done what the DC Circuit required and provided SNR with the same process for curing used since the DE program’s inception. Instead, the Commission fashioned a new process designed to ensure that the bidding credits would not be granted, regardless of SNR’s cure proposal. That process took almost three years to complete, prevented SNR from meeting with Commission staff with expertise on de facto control issues, lacked any pretense of transparency, attempted to hide the Commission’s consideration of the order and forced a vote on a very complicated order without allowing any Commissioner adequate time for review. This decision ensures that a large amount of valuable mid-band spectrum will continue to lay fallow for several more years as the litigation continues.” Northstar didn't comment.

The fixes that Dish, SNR and Northstar worked out still preserve Dish control over the others, said the order. The commission cited Northstar and SNR being required to operate under five-year business plans that Dish crafted or had a hand in crafting when it was unquestionably in de facto control and Dish's ability to shut off alternative business strategies. Also problematic is Dish's continued responsibility for financial aspects of the DEs, including their access to funding needed to build and operate wireless networks, it said. Work to restructure Dish's financial stake in the two doesn't change that they still owe Dish $500 million in debt, plus sizable amounts of interest and other payments, it said.

"In one bold stroke, the FCC has upheld the integrity of both its spectrum auction processes and its designated entity program," said Michel Guite, CEO of VTel Wireless, which opposed the bidding credits for the DEs (see 1810240022). "It’s fitting that this decision comes on the heels of the Nobel Committee’s recent decision to award the Prize for Economics to two men -- Paul Milgrom and Robert Wilson -- who advanced critical improvements in auction theory. Their work has been foundational to the FCC’s decades-long success in raising hundreds of billions of dollars for the American taxpayer. Today’s decision makes clear their work is about more than just raising auction revenue; it’s also about ensuring that auctions are transparent and fulfill the public interest in the broadest possible sense.”