T-Mobile EBS License Suit Is its ‘Hail Mary Pass’ to Stave Off Competition, Says WCO

Defendants WCO Spectrum, founder Gary Winnick and CEO Carl Katerndahl seek the dismissal of T-Mobile’s fraud complaint for failure to state a claim upon which relief can be granted, said their memorandum Monday (docket 2:23-cv-04347) in U.S. District Court for Central California in support of their motion to dismiss.

The case involves educational broadband service wireless spectrum in the 2.5-GHz band that the FCC historically has licensed to schools (see 2306030002). T-Mobile leased much of that spectrum from the schools that hold the licenses so it could build out its 5G nationwide cellular and data network.

T-Mobile alleges WCO, Winnick and Katerndahl conspired with five co-defendants to form an illegal enterprise in which they make “sham offers” to schools to buy spectrum licenses “intended to be conveyed to T-Mobile.” It alleges WCO simultaneously makes “secret side agreements” with the schools in which WCO “pockets a kickback,” and the conduct defrauded T-Mobile out of more than $10 million.

WCO calls the matter “a business dispute.” WCO is an investment company interested in buying FCC spectrum licenses held by educational nonprofits, “many of which serve underrepresented minorities and first-generation students,” it said. WCO’s potential license purchases “constitute an existential threat” to T-Mobile, it said. T-Mobile leases bandwidth from the nonprofits at “bargain basement rates,” and holds “a virtual monopoly in the space,” WCO said.

WCO filed a motion Aug. 17, seeking an order staying discovery in the case, pending resolution of its forthcoming motion to dismiss (see 2308180002). That motion to dismiss came Monday.

T-Mobile for years has leased spectrum to power its 5G network at below-market rates from nonprofit schools that hold licenses to the spectrum “but lack the leverage to obtain a fair price,” said WCO’s memorandum in support of its motion to dismiss. That changed in 2020, when the FCC authorized the schools to sell their licenses to commercial entities like WCO, it said.

WCO began bidding for the licenses throughout the country, “aiming to deliver fair market value to the license holders now, and to turn a profit later when the time came to renegotiate T-Mobile’s leases,” said the memorandum. To avoid paying fair prices for its leased spectrum, “T-Mobile has spent the past two years blocking WCO’s purchases,” either by exercising contractual rights of first refusal or through litigation, it said. T-Mobile’s lawsuit, “alleging an illogical, self-defeating fraud, is T-Mobile’s Hail Mary pass to stave off the threat of competition,” it said.