Sprint Fight for 2 GHz Band Costs Could Continue as Dish Network Takes Over TerreStar, DBSD

Sprint’s continued vigilance in protecting its long-time claims against the mobile satellite service companies DBSD and TerreStar could be a headache for Dish Network as it moves forward in buying those S-band licensees out of bankruptcy. Sprint is trying to recoup more than $200 million in costs the wireless company took on when clearing broadcast auxiliary spectrum (BAS) from the 2 GHz band. The issue could also come up again once the FCC asks for comment on the transfer of control of either company to Dish, said an industry executive.

The issue has become a major consideration in Dish’s efforts to buy DBSD and TerreStar out of bankruptcy. Dish recently received bankruptcy court approval to buy DBSD, though the deal still needs FCC approval. The TerreStar deal received bankruptcy court approval Thursday and also needs FCC approval. Dish and Sprint declined to comment.

How the bankruptcy courts rule in resolving the claims could potentially put the issue to rest, though Dish hasn’t seemed willing to pay out the full Sprint claims without a fight. Sprint last week filed an objection to the DBSD purchase over a provision in the bankruptcy plan that Sprint said would change the legal consideration of its claim (CD June 30 p9). The filing came after Dish declined to include language that would have left Sprint’s claims intact after the bankruptcy, Sprint filings said. Meanwhile, Sprint is also engaged in litigation with a group of banks who say they hold a lien on TerreStar’s FCC spectrum licenses. That lien would give those creditors secured status under bankruptcy law, giving them a higher priority than Sprint’s claims. Sprint says that as a public resource, a lien can’t be placed on spectrum and the banks’ claims should be considered unsecured.

The fight between Sprint and the MSS companies stems from the carrier’s clearing of BAS spectrum and expectation of reimbursement for clearing fees by users of the spectrum, based on the FCC’s emerging technology policy. The BAS clearing was part of the 800 MHz relocation. Sprint is arguing its case in five separate court proceedings and has been in litigation over the BAS issue since 2008, when it sued DBSD and TerreStar in the federal court for the Eastern District of Virginia. That case has been stayed pending the bankruptcies.

In addition to the bankruptcy proceedings, a 2010 FCC declaratory ruling that was part of the Eastern District of Virginia suit and largely reaffirmed agency policy on spectrum relocation reimbursement is under appeal from DBSD parent company ICO Global and TerreStar. Sprint has used that declaratory ruling as the basis for many of its arguments, bankruptcy filings show.

Sprint is required to pay the government for the spectrum that it uses as a result of the relocation, though it can take a credit for the costs it took on for the reconfiguration of the 800 MHz band, which included the BAS clearing. Once the credit equals what it owes the government,it won’t have to make a payment to the government. If that’s the case, the 2 MHz reimbursement costs may end up in Sprint’s bottom line, said another industry executive. Given the incentive for claiming higher relocation expenses “a close review is warranted,” the executive said.