Court Rules Two Airwaves Bidders Can Get Another Shot

By John D. McKinnon Features Dow Jones Newswires

A federal appeals court ordered the Federal Communications Commission to give two firms affiliated with Dish Network Corp. another chance at success in an airwaves auction where the FCC determined they were ineligible for crucial small-business discounts.

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The ruling means that the companies, SNR Wireless LicenseCo LLC and Northstar Wireless LLC, will have a shot at getting back hundreds of millions in penalties they paid to the government due to the failure of some bids, according to lawyers involved in the case. The companies even could receive the discounts and spectrum they were forced to forgo two years ago. But the extent of the companies' victory was far from clear.

The controversy arose after SNR and Northstar submitted winning bids totaling $13.3 billion for a significant chunk of the spectrum the government was auctioning in 2014. The two companies asked the FCC for $3.3 billion in the small-business credits, which are designed to reduce the cost to smaller firms competing against larger players for valuable airwaves.

The FCC later determined that SNR and Northstar were ineligible for the credits, because the companies were "not simply partners with Dish, but were under Dish's control," according to the court's opinion. The two companies bought some of the licenses at full price, but were forced to relinquish other spectrum licenses they had won in the auction, which also triggered penalties totaling hundreds of millions of dollars.

In its decision on Tuesday, the appeals court held that the FCC was within its rights to decide that the two companies were too closely tied to Dish, which was providing financial backing for their participation in the auction. But the court added that the agency didn't make it clear to the companies ahead of time that they wouldn't be able to modify -- or "cure" -- their agreements with Dish, in the event that the agency objected that the satellite-TV giant had too much control over them.

Now the FCC must give the companies another chance to modify their agreements, the court held.

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But the decision by the U.S. Court of Appeals for the District of Columbia Circuit leaves the FCC with significant discretion, and it could simply touch off another round of litigation.

"Nothing in our decision requires the FCC to permit a cure," Judge Nina Pillard wrote for the three-judge panel. "That choice lies with the FCC. But if the very opportunity to seek one is to be foreclosed, applicants must have clear, advance notice to that effect," particularly given the hundreds of millions of dollars at stake, Judge Pillard said.

FCC officials took comfort in the court's determination that their denial of credits for SNR and Northstar was justified under the agency's rules. Agency officials suggested they would focus on protecting the discount program from abuse.

"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," FCC spokeswoman Tina Pelkey said in a statement. "This is an important victory for American taxpayers....Going forward, we need to make sure that this program is available only to legitimate small businesses that actually control their own destinies."

Dish cheered the decision, saying in a statement: "We are pleased this has been referred back to the FCC. We look forward, along with Northstar and SNR, to working with the FCC to address any concerns they may have."

SNR said in a statement that "it is pleased that the court found that the FCC did not give SNR fair notice of its decision not to afford SNR the opportunity to cure concerns the FCC had about SNR's contractual arrangements with DISH and has remanded the case back to the FCC to allow SNR to cure those concerns."

Northstar couldn't immediately be reached for comment.

Write to John D. McKinnon at john.mckinnon@wsj.com

(END) Dow Jones Newswires

August 29, 2017 16:56 ET (20:56 GMT)