EchoStar Sues to Block AWS-3 Auction Rules, Fears Shortfall Payment
If the re-auction brings in less than about $3.3 billion, EchoStar is on the hook for the difference.
WASHINGTON, Sept. 2, 2025 – EchoStar is suing to block the Federal Communications Commission’s rules for an upcoming spectrum auction, arguing they could leave the company on the hook for billions in penalty payments.
Echostar Petition for Review
Addopted in July, the auction rules “potentially place EchoStar on the hook for a default payment penalty of billions of dollars” following the auction, the company wrote in a Friday petition. The company sued in the U.S. Court of Appeals for the Tenth Circuit in Denver.
The auction at issue is a re-auction of 200 licenses in the AWS-3 band, the vast majority of which were returned by Dish, now owned by EchoStar. The FCC found two smaller companies that actually did the bidding – so-called designated entities that received a discount because of their size – were financially too close to EchoStar. The company handed them back rather than pay the full price and was hit with a $515 million fine.
Dish had spent more than $13 billion total at the auction in 2014, but the affected licenses amounted to about $3.3 billion. If the re-auction of those licenses doesn’t raise the $3.3 billion Dish paid, EchoStar is on the hook for any shortfall.
That’s what the company fears happening this time around. The FCC changed its designated entity rules for the AWS-3 re-auction, bringing them in line with more recent auction rules that limit investment in multiple designated entities and cap bidding credits, among other things.
“Many of the Commission’s reforms were intended to expand the range of businesses eligible for [designated entity] benefits while simultaneously ending practices that had incentivized larger players to manipulate the [designated entity] regime,” the agency wrote in its order.
EchoStar said during the rulemaking process that it fears fewer designated entities will bid under those rules, and that might cause the proceeds to fall short of the $3 billion necessary for the company to avoid fees. The company had repeatedly asked for the agency to either stick with its 2014 rules or relieve the company of any liability for shortfall payments.
The FCC wrote in its order updating the rules that it would have been “irresponsible” not to change its procedures after a decade, and argued the auction may well bring in more than $3 billion, effectively making the complaints moot.
“Thus, we decline at this time to consider” EchoStar’s request, the agency wrote.
EchoStar asked the court Friday to vacate the order and demand the agency adopt the original designated entity rules, or remove EchoStar’s liability if those rules are changed. The company said changing the rule for the re-auction violated its agreement with the agency, something the FCC disputed.
The company's petition for review was signed by Pantelis Michalopoulos, partner at Steptoe LLP, which is representing the company.
The 2014 AWS-3 auction brought in more than $40 billion, with the AT&T spending $18.2 billion and Verizon spending $10.4 billion. T-Mobile spent a comparatively small $1.8 billion. Much of the value in the licenses being re-auctioned come from those covering New York, Chicago, and Boston.
EchoStar is already in a major dispute with the FCC. The agency is probing whether the company met requirements related to some of its spectrum licenses, something EchoStar has described as putting its entire business in jeopardy. The company reached a deal last week to sell $23 billion worth of licenses to AT&T, which EchoStar said was a crucial step toward ending the FCC inquiries.
FCC Chairman Brendan Carr has made clear he thinks EchoStar isn’t putting its spectrum assets to use.
The FCC had its auction authority reinstated in July, but the AWS-3 re-auction was authorized as a one-off late last year. It’s a means of raising cash to pay for the agency’s Rip and Replace program, which reimburses smaller providers for swapping blacklisted Chinese gear out of their networks. The program was facing a $3 billion shortfall before Congress allowed the FCC to borrow the necessary cash and pay the Treasury back with auction proceeds.
By law the auction has to start by June 23, 2026, although it could come sooner.
Member discussion