Dish affiliates in rules scuffle will return some spectrum to FCC

The two affiliates of Dish Network that made headlines and miffed regulators when they claimed discounts on wireless spectrum meant for small businesses will forfeit their right to use some of the frequencies and will pay a penalty.

The Federal Communications Commission decided in August that the two companies, Northstar Wireless and SNR Wireless, were not entitled to the $3.3 billion in discounts because of their links to the larger Dish. Dish argued that it had obeyed the rules and used a legitimate strategy to reduce its costs in a spectrum auction that closed earlier this year.

{mosads}They had until 3 p.m. Thursday to decide whether they wanted to pay for the value of the withdrawn discounts.

They will default on some of their payments, according to notices posted by the FCC, forfeiting their rights to some of the licenses but keeping others. The bill for the licenses that the companies are keeping will amount to roughly $10 billion.

The licenses that the two companies gave up will be auctioned off at a later date.

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

If the spectrum doesn’t draw as a high a price when it is resold as it did when the two companies bought it, they will also pay for the difference in revenue. Among the licenses is spectrum in valuable markets including Boston, Chicago and New York, according to an FCC official.

However, assuming the spectrum is sold, Dish stands to spend less money than the full $3.3 billion in discount.

“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,” said R. Stanton Dodge, Dish’s executive vice president and general counsel, in a statement.

The AWS-3 auction that closed earlier this year was initially reported to have brought in $44.9 billion. The eye-popping sum is reflective of the need for spectrum among wireless carriers who want to meet a growing demand for the mobile data consumed by smartphone users.

The next auction of spectrum is scheduled to take place in March. Broadcasters will sell some of their spectrum to the FCC, which will then resell it to wireless carriers.

In July, the FCC approved reforms to the discount program for spectrum auctions that was partially intended to stop larger companies from bidding through smaller entities in order to get discounts.

—Updated at 8:35 p.m.