Dish loses its appeal related to $3.4B in bidding credits for spectrum

Yesterday, the U.S. Court of Appeals for the D.C. Circuit ruled in favor of the Federal Communications Commission (FCC) and against Dish and its affiliated Designated Entities (DEs) in a long and winding case that may finally be winding down.

If Dish declines to continue its appeals, the FCC will be free to reauction some spectrum licenses that have been in dispute for a number of years.

New Street Research’s policy analyst Blair Levin provided investors yesterday with a succinct background to the complicated dispute.

He explained that in the 2014 AWS-3 auction, the FCC provided bidding credits to DEs as part of an effort to help very small companies and new market entrants obtain spectrum. The rules required DEs to demonstrate that they were independent enterprises and not simply sham companies set up by larger companies to purchase spectrum more cheaply.

However, Dish created some DEs — Northstar Wireless and SNR Wireless — that entitled them to approximately $3.4 billion in bidding credits. After the auction, the FCC found that Dish possessed de facto control of the DEs, and the FCC forced the DEs to forgo the bidding credits, wrote Levin.

Dish defaulted on 197 licenses — equal to the bidding credit amount — and it paid in full for some licenses it kept. But Dish also sued in regard to the DE issue, and that case was determined in the FCC’s favor yesterday.

Dish may finally decide to give up on this issue, in which case the FCC will be able to reauction the spectrum licenses in question. However, the FCC may not have time to do that immediately.

Dish had been pursuing its legal strategy to try and get a boon of about $3.4 billion in bidding credits. In terms of costs, Dish did have to pay $515 million in fines back in the early days of its DE dispute. And, of course, its legal fees would have added up over the years.

At this point, Levin doesn’t see any major downside to Dish from the fact that it tried, but lost, its appeal.