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The U.S. Court of Appeals for the District of Columbia Circuit upheld the FCC’s earlier determination that Dish had de facto control over two designated entities (DEs) that placed billions worth of winning bids in the 2014 AWS-3 spectrum auction, but also handed the case back to the Commission to allow those entities a chance to recoup some of their forfeited licenses.

Back in 2014, SNR Wireless and Northstar Wireless racked up $13.3 billion in winning bids during the FCC’s AWS-3 spectrum auction. The entities, in which Dish had an 85 percent majority stake, then sought to take advantage of the FCC’s small business credit to shave their $3.3 billion off their total.

But when the FCC denied Northstar and SNR the bidding credits, based on the Commission’s finding that the DEs were controlled by Dish and thus had revenues exceeding the $40 million limit for small business standing, the entities said they couldn’t afford to foot the bill for all of the licenses won. Consequently, in 2015, Northstar and SNR agreed to give up around $3.4 billion in winning licenses, while purchasing the remaining $9.8 billion they won.

The court found that “the FCC reasonably applied its longstanding precedent to determine that DISH exercised a disqualifying degree of de facto control over SNR and Northstar.”

“(But) the Commission did not give SNR and Northstar adequate notice that, if their relationships with Dish cost them their bidding credits, the FCC would also deny them an opportunity to cure,” the court opinion continued. “As result, we remand this matter to the FCC to give petitioners and opportunity to seek to negotiate a cure for the de facto control the FCC found that Dish exercise over them.”

A spokeswoman for FCC Chairman Ajit Pai hailed the decision as a win for taxpayers.

“Today’s D.C. Circuit decision explains in painstaking detail why the Commission reasonably determined that DISH abused a program designed to help small businesses. This is an important victory for American taxpayers,” Tina Pelkey, press secretary to FCC Chairman Ajit Pai, comments. “In the AWS-3 auction, the two entities claiming over $3 billion in taxpayer-funded discounts were not independent small businesses, but rather under the control of DISH. Going forward, we need to make sure that this program is available only to legitimate small businesses that actually control their own destinies.”

Jefferies analysts observed that the Tuesday ruling likely preserves the status quo.

“While we believe there could be an opportunity to lessen the default payments (or future payments, we note the remedies, if any, will be at the FCC’s discretion,” the analysts note. “Not likely a positive, given the fact they will be facing a Chairman who has been critical of Dish’s activities in the auction.”

Dish, for its part, was happy with the decision.

“We are pleased this has been referred back to the FCC,” Dish comments in an emailed statement. “We look forward, along with Northstar and SNR, to working with the FCC to address any concerns they may have.”

Investors also appeared to be pleased. Dish shares rose more than 4 percent Tuesday on the news.

 

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