09.29.10

More costs for the 2GHz players

Posted in ICO/DBSD, Operators, Regulatory, Spectrum, TerreStar at 4:35 pm by timfarrar

The FCC has just released its ruling on cost sharing rules for the 2GHz BAS relocation, which requires that the 2GHz MSS players will have to pay their pro-rata share of the costs incurred by Sprint Nextel in clearing the band. Back in 2009, Sprint Nextel estimated these expenses would be about $100M for each MSS operator.

The FCC ruled that MSS operators would have 30 days to pay these costs after Sprint Nextel presented them with a bill (which could happen very soon after the ruling becomes effective, sometime in November). If the costs were not paid, then the Commission could take enforcement action, although it would not automatically suspend an MSS operator’s license as Sprint requested. In addition, joint and several liability for the costs would continue in the event that a license was transferred to another party (although the Commission did not address how this liability would be impacted by a bankruptcy filing). With respect to ICO Global’s potential joint liability with DBSD for its relocation costs, the Commission outlined certain principles which would apply to this question, but indicated that Sprint Nextel would have to pursue litigation against ICO Global to resolve this claim.

Though this ruling presents certain issues for DBSD, related to its emergence from bankruptcy, it also has a definite impact for TerreStar, as it is now likely that Sprint Nextel will seek to claim $100M+ from TerreStar by the end of the year. Of course, TerreStar Networks might wish to file for bankruptcy to try and avoid this liability just like DBSD (perhaps after the claim is presented rather than before?) and it remains unclear whether TerreStar Corporation would also be subject to joint and several liability. However, if TerreStar is to monetize its 2GHz spectrum in the future (e.g. through an incentive auction) for which it will very likely need the FCC’s cooperation, it seems rather unlikely that the FCC would also allow it to escape this reimbursement obligation, reinforcing that the FCC has numerous levers to ensure that the 2GHz spectrum question is resolved in the way it wants.

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