When is a Defaulter Not Really a Defaulter? And Other Auction 97 Questions

During the week of Sept 28, the latest chapter of the saga that is Auction 97 unfolded in all its messy, unpredicted and unpredictable glory -- Dish and its affiliate Designated Entities (DEs) surrendered over $3 billion of AWS-3 licenses back to the Federal Communications Commission. That same week, we saw a company worth over $27 billion, that has been rumored for months to be raising capital for an aggressive acquisition strategy, apparently could not manage to scrape together either sufficient capital or a proper letter of credit to pay its Auction 97 debt (color me skeptical). Dish instead defaulted on billions of dollars of licenses that it had aggressively -- some would say relentlessly -- bid on to buy.

The FCC accepted the default consistent with its rules, imposed the mandated 15 percent penalty and re-auction deficiency measures and declared that, because the post-default debt was timely satisfied and there had been no bad faith conduct, Dish and its entities would not officially fall under the FCC’s former defaulter rules and were fully qualified to participate in future auctions – including (drum roll) the re-auction of the surrendered licenses. If there is one thing we’ve learned the hard way it’s that no matter how much you prepare, every auction contains an element of surprise. The entire Auction 97 book makes us wary of the surprises that await us in Auction 1000. Dish has taken all earnest auction participants to school on how to exploit every rule and every loophole to game an auction. We can only hope that Auction 1000 doesn’t become a master class in the same.