As anticipated, the FCC adopted a Memorandum Opinion and Order (MO&O) on Monday denying $3.3 billion in bid credits accrued by a pair of DISH Network-affiliated designated entities (DEs) during the Advanced Wireless Service (AWS-3) auction earlier this year.  In rejecting the bid credits, the FCC concluded that the DEs in question, Northstar Wireless and SNR Wireless LicenseCo, “have a financial dependency on DISH of unprecedented size and scope” and that investor protections provided by DISH to Northstar and SNR “extend well beyond those deemed necessary by the other investors in both Applicants.” 
Together, Northstar and SNR posted gross winning bids of $13.3 billion for 702 licenses in the AWS-3 auction.  DISH contends that the 85% economic interest it holds in both Northstar and SNR constitutes a non-controlling stake.After evaluating Northstar’s and SNR’s eligibility as DEs and the circumstances of DISH’s involvement in both companies, however, the FCC determined that DISH controls or has the power to control SNR and Northstar either directly or indirectly. According to the FCC, evidence of such control includes DISH’s (1) “significant ownership interest” in Northstar and SNR, (2) control over the companies’ policy and financial decisions, (3) control over the AWS-3 bidding process, and (4) “domination of financial matters.” The FCC also said Northstar and SNR “have each entered into a management services agreement under terms and circumstances that give DISH authority with respect to a wide range of their technology, network design, construction, operation . . . and other functions.”  As such, the FCC determined that these and other circumstances not only give DISH “de facto control over and the power to control SNR and Northstar,” but also make DISH’s revenues “attributable to each of the Applicants.”  

The FCC concluded that “the cumulative effects of the controls imposed on the Applicants by DISH limit their independence to such a great extent that the Commission must deny the requested bidding credits.”  The agency, however, rejected arguments presented by various petitioners that the FCC must also deny Northstar and SNR the licenses they won in the AWS-3 auction.  Affirming that Northstar, SNR and DISH adequately disclosed management, bidding and other agreements in advance of the AWS-3 auction, the FCC determined that the parties’ activities during the auction “did not violate . . . FCC rules.”  

Under the provisions of the MO&O, Northstar and SNR are required to submit full payment of their winning AWS-3 auction bids or a letter of credit to cover the full amount no later than September 17.  Although executives of Northstar and SNR offered no comment, DISH executive vice president R. Stanton Dodge voiced dismay with the FCC’s decision as he promised to “review the order . . . as we consider our options going forward.”