It was decision time for Dish, SNR and Northstar on whether they would pony up an extra $3.3 billion after the FCC declined to give SNR and Northstar that much worth of bidding credits in the AWS-3 auction, and the answer was no.
Dish had put up most of the money for the two to bid $10 billion on wireless spectrum licenses in the AWS-3 spectrum auction. The licenses were actually worth $13.3 billion, but SNR and Northstar sought designated entity bidding credits in that amount as diverse owners.
The FCC denied that credit due to Dish's investment and plans to run the network.
In letters to the FCC Thursday-- a decision was due by 3 p.m.--SNR and Northstar said they would relinquish spectrum equal to the additional $3.3 billion they would have to have ponied up, either in a check Thursday or a letter of credit guaranteeing payment by December. That amounted to selective defaults, which resulted in the $413 default payment.
They had the option of paying the money, or selectively declining licenses and paying a penalty.
The FCC will have to re-auction that $3.3 billion of spectrum, said an FCC official speaking on background, which will likely happen after the March broadcast incentive auction. The official said the declined licenses are in "pretty valuable" markets, and so it should be "a rather successful" re-auction.
The FCC won't lose out in the transaction, the official said, since if the re-auctioned spectrum sells for any less than the $3.3 billion, SNR and Northstar would have to make up the difference.
Those companies could also insure that $3.3 billion take by bidding again themselves. The FCC says they will be eligible to bid since they have so far paid all they needed to--the $10 billion the FCC already has and now the $413 million penalty. They could still owe some of the returned spectrum does not fetch $3.3 billion, of course, but that won't be determined until the re-auction.
The FCC official said the re-auction should have no impact on the completed portion of the AWS-3 auction, which raised over $40 billion, and points out that re-auctioning is nothing new for the commission.
In August, the FCC voted to deny bidding credits to two Dish-related companies in the AWS-3 auction of wireless spectrum earlier this year, which raised over $40 billion for various programs and the U.S. treasury.
The order concluded that Dish's majority financial interest in the companies are controlling interests that should be attributable to Dish, which means the companies are ineligible for the $1.9 billion (Northstar) and $1.4 billion (SNR Wireless) bidding credits they had applied for.
The order explained that the credits were denied because Dish had provided the two minority-owned companies the majority of their capital and had contracted to build out and run their wireless network, which the FCC concluded was a controlling interest that invalidated the small business designated entity (DE) bidding credits NorthStar and SNR had claimed.
“DISH appreciates the diligent efforts of the FCC staff, and particularly the efforts of the Wireless Bureau, in working with DISH, Northstar Wireless and SNR Wireless regarding these arrangements," that company said in a statement.