FCC Establishes 2.4 Billion Trust Fund to Protect 5G Infrastructure Providers

The FCC’s Wireless Bureau approved EchoStar’s sale of spectrum licenses to AT&T and SpaceX.  Critically for many, the sale is conditioned on EchoStar establishing a trust fund of $2.4 billion dollars to ensure that the tower companies, backhaul providers, and construction firms responsible for building Dish Wireless’s 5G network would retain some recourse for contracts terminated and monies owed.  While that trust fund is an important security for the infrastructure providers, there are important processes and considerations for companies looking to recover for terminated contracts. 

As with all things, the devil is in the details, so potential claimants should familiarize themselves with the entire trust fund and claims process and evaluate how best to position themselves in line with their strategic goals.  In particular, companies need to pay close attention to these two things: (1) claims eligibility requirements and (2) the claims categories, priorities and timelines.  

1. Eligibility requirements: To file a claim an infrastructure provider must have one of the following:
   1. a final judgment from a court,
   2. an arbitration award, or
   3. a settlement agreement with EchoStar (or one of its subsidiaries or affiliates – including Dish Wireless).

• What this means is that it is not sufficient to have a contract on which Dish has defaulted or has otherwise been terminated.  Before an entity can file a claim with the Fund Trustee a claim of default or breach of contract must have been fully adjudicated in court (or arbitration) or settled the merits of such a claim directly with EchoStar (or Dish).
• Thus, to benefit from the fund, any potential claimant must either proactively negotiate with, or litigate against (or both), EchoStar or Dish.

2. Claims Categories, Priorities, & Timelines: Potential claims are categorized into three buckets based on both amount of the claim and the underlying components of the claim.

1. Claim limits:  A claimant can only file a single claim against the Fund – either a Type A claim or a Type B claim (though a Type B claim may include both B-1 and B-2 components).
   1. Claim priorities:
      • Type A claims get paid first,
      • Type B-1 claims get paid second (and on six month intervals), and
      • Type B-2 claims, which will be the largest dollar value claims, are the last priority and do not get paid until after five years (assuming the fund is not exhausted by the Type A and B-1 claims).   

• Practically, this means that:
  • Entities pursuing Type A claims will likely be pushing for settlements – as litigating or arbitrating to final disposition may not be worth a claim of $100,000 or less.
    • Entities pursuing Type B claims should ensure that any court judgment, arbitrator award, or settlement agreement appropriately allocates and distinguishes as between the B-1 and B-2 components.  Even if the B-1 components are not as financially impactful, that money will be available first, and by the time the B-2 components are scheduled to get paid there is a chance the fund will be exhausted or depleted enough to trigger pro rata distribution.  

Ultimately, the Trust Fund mandated by the FCC provides some security that funds will be there for infrastructure providers with valid claims against EchoStar and Dish Wireless.  However, accessing those funds will still likely require significant time, diligence and effort.

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