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Dish faces loss of spectrum after quiet FCC ruling

The FCC says two partner companies didn't qualify for $3.3 billion in discounts.

The FCC says two partner companies didn't qualify for $3.3 billion in discounts.

(Image: Dish Network Corporation/Graphic: The Desk)

Satellite TV company Dish Network could lose more than $3 billion worth of valuable mid-band spectrum after federal regulator quietly determined two partner companies were ineligible to receive small business discounts during a 2015 auction for the licenses.

The loss of the licenses could result in a significant financial and operational setback for Dish Network as the company works to build out a commercial 5G wireless network that is slated to compete against Verizon, AT&T and T-Mobile.

The issue stems around a 2015 auction over a certain amount of licenses that cover frequencies allocated for use by advance wireless services, or AWS. Two years earlier, the Federal Communications Commission (FCC) allocated a set range of frequencies for next-generation wireless service. The spectrum was called AWS-3, and the licenses were put to auction.

To make the auction competitive, the FCC allowed smaller companies to receive substantial bidding discounts. Two companies, SNR Wireless and Northstar Wireless, partnered with Dish Network to place bids during the auction and ultimately won $13.3 billion worth of spectrum licenses — a price that was reduced by 25 percent.

After the auction, federal regulators determined Dish Network had a controlling interest in both companies that made them ineligible for the small business discount. Dish Network agreed to surrender $3.3 billion in licensed spectrum while it appealed the FCC’s decision in court.

A judge overseeing the case ordered Dish to restructure its business dealings with SNR Wireless and Northstar Wireless so they comply with the FCC’s auction discount guidelines. Dish Network said it completed the reorganization two years ago, and the FCC has been deliberating on whether that effort was enough to receive the discount.

This week, two financial journalists reported via unnamed sources that the FCC had once again found against Dish Network. The order has not yet been made public, and both Dish Network and the FCC have refused to comment on the reports.

Analysts say Dish Network is expected to bring the issue before a judge again, who will likely have the ultimate say on the matter. If Dish Network loses in court, the licenses will return to the auction block; if the winning bid doesn’t reach $3.3 billion, Dish Network will have to make up the difference.

In an recent filing with the Securities and Exchange Commission, Dish Network said it expected to participate in a re-auction process should it come to that. Analysts say Dish Network’s closets wireless competitors would likely also participate.

On a recent conference call with investors, Charles Ergen, the co-founder and chairman of Dish Network, said the issue was frustrating because the licenses in question had “been in limbo for five years now.”

“In any business, you like to have certainty — whatever that certainty is, you’d like to have certainty,” Ergen said. “[It is] just better than uncertainty.”

If Dish Network ultimately loses the licenses, it wouldn’t spell the end of the company’s ambition to build a 5G wireless service because it still possesses radio spectrum that could be used toward that effort. But it might make whatever 5G service is rolled out less attractive to consumer, business and government customers because additional spectrum offers faster, more-reliable data connections and helps alleviate network congestion.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).