5G-2Decision has 5G implications

Wow—FCC enforcement actions don’t get any juicier than this:  an anonymous whistleblower, alleged misrepresentations to the FCC, and a complex $100 million fine to Straight Path Communications, Inc. for apparently misrepresenting that it had constructed 28 and 39 GHz licenses on applications to renew those licenses! All this is revealed in a Consent Decree between Straight Path and the FCC’s Enforcement Bureau.

This is a situation that has been brewing for years. When the FCC auctioned 39 GHz licenses back in 2000, applicants bid over $400 million for the opportunity to operate in this band. But initial equipment shortages, and a lack of a clearly profitable business plans, led many winning bidders to seek construction extensions or default on their licenses. As off-the-shelf equipment became available, and millimeter wave fixed microwave began to be seen as useful for backhaul, particularly of cellular telephone traffic, construction and use of this band commenced. More recently, though, the FCC has acted with urgency to make more spectrum available for so-called “5G” services, and opened up bands above 24 GHz, specifically including 28 and 39 GHz.

The case began in November 2015 when someone using the pseudonym “Sinclair Upton” published a report alleging that Straight Path was able to get the FCC to renew the company’s 39 GHz band licenses by submitting filings incorrectly claiming that the company had actually constructed its 39 GHz systems. The FCC abhors spectrum squatters; the agency requires license holders to actually use their licensed spectrum and verify that use in “substantial service” filings to the Commission. In July 2016, Straight Path told the FCC its internal probe found that equipment had been deployed only for a short period of time at the original transmitter locations, but the gear was “no longer present” at those locations when the investigation was conducted, according to the Consent Decree.

The Enforcement Bureau looked into allegations that Straight Path violated the Commission’s buildout and discontinuance rules for some 1,000 licenses in the 39 GHz and Local Multipoint Distribution Service 28 GHz spectrum bands —being explored for 5G. To settle the case, Straight Path agreed to pay the U.S. Treasury a $100 million civil penalty, surrender to the Commission 196 of its licenses in the 39 GHz spectrum band, sell the remainder of those licenses, and remit 20 percent of the proceeds to the Treasury as an extra penalty.

The $100 million fine may not actually come to bear, though. Straight Path will pay $15 million upfront; $85 million will be suspended if Straight Path sells the rest of its 39 GHz licenses or surrenders them to the FCC within 12 months.

Of course, it is never a good idea to be anything less than truthful on an FCC application. Doing so opens up the licensee to risks of fines, loss of licenses, and disqualification for holding other FCC licenses.  The attorneys at Fletcher Heald can provide guidance on alternatives when wireless construction deadlines are approaching. If you have questions on these issues, please call us.