Dish affiliates in rules scuffle will return a few spectrum to FCC

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 confirmed in a statement that it had surrendered licenses worth $3.3 billion and said it loaned its two affiliates $413 million for the penalty from its balance sheet. Dish and its affiliates will be on the hook to pay the difference if the total bids in the re-auction are below $3.3 billion, the official added.

The deadline for the two companies to pay up the $3.3 billion was on Thursday, the official said.

In August the FCC ruled that Dish is not entitled to those discounts.

They had the option of paying the money, or selectively declining licenses and paying a penalty. The official said the declined licenses are in “pretty valuable” markets, and so it should be “a rather successful” re-auction.

“Dish and the entities in which it has invested are expected to have an average of approximately 75 MHz of spectrum nationwide”, the satellite operator said.

FCC rules also require that they pay a fee for defaulting on their obligations – roughly $413 million in the case of the two companies.

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.

Dish Network affiliates nearly received $3.3 billion in small business discounts from a spectrum auction early this year, only for the FCC to take the discounts away when it became clear the “small business” discounts would go to businesses under Dish’s control.

The action dispels uncertainty around whether Dish and its affiliates would make a full payment of $3.3 billion to the government.

By returning the 197 spectrum licenses, DISH Network Corp (NASDAQ:DISH) and its partners reduced what they owed by about 27%.

The ruling was a blow for Dish Chairman Charlie Ergen, who has been amassing a hefty holding of spectrum despite not offering wireless service to customers.