Dish Network 2015 Annual Report Download - page 48

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DISH Network Non-Controlling Investments in the Northstar Entities and the SNR Entities Related to AWS-3 Wireless
Spectrum Licenses
Through our wholly-owned subsidiaries American II and American III, we have made over $10.0 billion in certain non-
controlling investments in Northstar Spectrum, the parent company of Northstar Wireless, and in SNR HoldCo, the
parent company of SNR Wireless, respectively. Northstar Wireless and SNR Wireless each filed applications with the
FCC to participate in Auction 97 (the “AWS-3 Auction”) for the purpose of acquiring certain AWS-3 Licenses. Each of
Northstar Wireless and SNR Wireless applied to receive bidding credits of 25% as designated entities under applicable
FCC rules. In February 2015, one of our wholly-owned subsidiaries received a refund from the FCC of its $400 million
upfront payment made in 2014 related to the AWS-3 Auction.
Northstar Wireless was the winning bidder for AWS-3 Licenses with gross winning bid amounts totaling approximately
$7.845 billion, which after taking into account a 25% bidding credit, is approximately $5.884 billion. SNR Wireless was
the winning bidder for AWS-3 Licenses with gross winning bid amounts totaling approximately $5.482 billion, which
after taking into account a 25% bidding credit, is approximately $4.112 billion. In addition to the net winning bids, SNR
Wireless made a bid withdrawal payment of approximately $8 million.
On August 18, 2015, the FCC released a Memorandum Opinion and Order, FCC 15-104 (the “Order”) in which the FCC
determined, among other things, that DISH Network has a controlling interest in, and is an affiliate of, Northstar
Wireless and SNR Wireless, and therefore DISH Network’s revenues should be attributed to them, which in turn makes
Northstar Wireless and SNR Wireless ineligible to receive the 25% bidding credits (approximately $1.961 billion for
Northstar Wireless and $1.370 billion for SNR Wireless) (each a “Bidding Credit Amount” and collectively the “Bidding
Credit Amounts”). Each of Northstar Wireless and SNR Wireless has filed a notice of appeal and petition for review of
the Order with the United States Court of Appeals for the District of Columbia, challenging, among other things, the
FCC’s determination that they are ineligible to receive the Bidding Credit Amounts. We cannot predict with any degree
of certainty the timing or outcome of these proceedings. An adverse ruling against Northstar Wireless or SNR Wireless
in these proceedings could potentially result in fines and/or revocation of the Northstar Licenses or SNR Licenses,
respectively.
On October 1, 2015, DISH Network, American II, American III, Northstar Wireless, SNR Wireless, and certain other
entities holding certain interests in Northstar Wireless and SNR Wireless, entered into a series of arrangements with
respect to the AWS-3 Licenses, as further described below.
Letters Exchanged between Northstar Wireless and the FCC Wireless Bureau. As outlined in letters exchanged between
Northstar Wireless and the Wireless Telecommunications Bureau of the FCC (the “FCC Wireless Bureau”), Northstar
Wireless paid the gross winning bid amounts for 261 AWS-3 Licenses (the “Northstar Licenses”) totaling approximately
$5.619 billion through the application of funds already on deposit with the FCC. Northstar Wireless also notified the
FCC that it would not be paying the gross winning bid amounts for 84 AWS-3 Licenses totaling approximately $2.226
billion.
As a result of the nonpayment of those gross winning bid amounts, the FCC retained those licenses and Northstar
Wireless owed the FCC an additional interim payment of approximately $334 million (the “Northstar Interim Payment”),
which is equal to 15% of $2.226 billion. The Northstar Interim Payment is recorded in “FCC auction expense” on our
Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2015.
Northstar Wireless immediately satisfied the Northstar Interim Payment through the application of funds already on
deposit with the FCC and an additional loan from American II of approximately $69 million. As a result, the FCC will
not deem Northstar Wireless to be a “current defaulter” under applicable FCC rules.
In addition, the FCC Wireless Bureau acknowledged that Northstar Wireless’ nonpayment of those gross winning bid
amounts does not constitute action involving gross misconduct, misrepresentation or bad faith. Therefore, the FCC
concluded that such nonpayment will not affect the eligibility of Northstar Wireless, its investors (including DISH
Network) or their respective affiliates to participate in future spectrum auctions (including Auction 1000 and any re-
auction of the AWS-3 Licenses retained by the FCC). At this time, DISH Network (through itself, a subsidiary or