SNR Wireless License Co, LLC v. Federal Communications Commission.

• Author: Macapinlac, Tess

868 F.3D 1021 (D.C. CIR. 2017)

In SNR Wireless LicenseCo, LLC v. FCC (213), the District of Columbia Circuit Court of Appeals held that the FCC had reasonably applied precedent when considering whether or not DISH had a disqualifying degree of de facto control over SNR Wireless LicenseCo (SNR) and Northstar Wireless, LLC (Northstar). (214) However, the Court also held that the Commission did not give SNR and Northstar sufficient notice regarding the possibility that if their relationships with DISH cost them their bidding credits, the FCC would also deny them the opportunity to get discounted [?]. (215) The Court then remanded the case to the FCC in order to give SNR and Northstar the chance negotiate a cure for the control that DISH has over them. (216)

1. BACKGROUND

   Under the Communications Act of 1934 (the Act), the Federal Communications Commission (FCC) has the ability to grant licenses to private companies for the use of the electromagnetic spectrum. (217) This spectrum consists of "the electromagnetic radio frequencies used to transmit sound, data, and video across the country" (218) and can be used by private companies to provide television, cellphone, and wireless internet services to consumers. (219) In 1993, Congress gave the FCC the power to award licenses through auctions. (220) FCC regulations allow the Commission to give "bidding credits," or discounts, to designated entities, including small businesses, to cover part of the cost of licenses that these entities may win. (221)

   This case began with Auction 97, announced by the FCC on May 19, 2014 and held on July 23, 2014. (222) The Notice for the Auction (Notice) explained that small businesses were eligible for bidding credits in this auction, with the size of the bidding credits depending on the entities' "attributable" revenue over the preceding three years. (223) Entities that had less than $40 million in attributable revenue got a fifteen percent discount on the license price, while entities with less than $15 million in attributable revenue got a twenty-five percent discount. (224)

   Notably, attributable revenue of an entity included the revenues of both the small business itself and any other entity with de facto control over the small business. While the FCC does not set a clear line between acceptable influence and de facto control, in the past, the FCC has considered factors such as the authority of someone other than the small business to determine the nature, types, or prices of services offered, as well as control over appointments to the board, and general involvement in management decisions. (225) In the Notice in question, the FCC directed entities to examine the Commission's earlier decisions regarding the definition of designated entities, and pointed to the context dependent definition of de facto control on which the Commission had long relied. (226)

   To verify the entities' qualifications for bidding credits, prior to the auction, each entity filled out a short form listing its attributable revenue, under punishment of perjury. (227) After the auction concluded, each entity that successfully obtained a license filled out a long, more comprehensive form that would be reviewed by the FCC to ensure eligibility for bidding credits.

   SNR Wireless LicenseCo, LLC ("SNR") was formed two weeks before the application deadline for this auction, while Northstar Wireless, LLC ("Northstar") was formed eight days before the application deadline. (228) Neither company had officers, directors, or revenue, and both claimed they qualified for the twenty-five percent discount on licenses. (229) Both companies also disclosed on their short applications that their capital for the auction came from DISH, in exchange for an indirect eighty-five percent ownership interest of each company, a position as operations manager at both entities, and adopted various joint bidding protocols and agreements with each entity. (230)

   Both SNR and Northstar had successful bids at the auction, gaining 43.5% of the licenses available. (231) With the designated twenty-five percent discount, SNR and Northstar together would save a little over $3 billion dollars. (232) SNR and Northstar then filled out the longer, more thorough applications required by the FCC. (233) Once these applications became...