Verizon and a company it bought just paid $614M in biggest FCC fine ever

The Federal Communications Commission today collected a $614.3 million fine from Verizon and Straight Path, a company that Verizon just bought.

The merger and fine are related. Straight Path held about 1,000 FCC spectrum licenses but failed to use them. Straight Path thus entered a settlement with the FCC requiring it “to sell its licenses and remit 20 percent of the overall proceeds of the transaction to the US Treasury,” the FCC said in its announcement today.

Verizon struck a deal to buy Straight Path in May 2017 for $3.1 billion and completed the acquisition today. Verizon and its new subsidiary were responsible for paying the $614.3 million, which “is the largest civil penalty ever paid to the US Treasury to resolve a Commission investigation,” the FCC said.

Verizon reported $126 billion in operating revenue in 2017.

The settlement between the FCC and Straight Path “resolved an investigation into allegations that Straight Path failed to use the spectrum it was awarded and thus violated the Commission’s buildout and discontinuance rules in connection with approximately 1,000 licenses in certain millimeter wave spectrum bands,” the FCC said. “These high-frequency bands have been identified by the Commission for use in the next-generation evolution of wireless technology or 5G.”

Straight Path owned spectrum licenses covering the entire United States in the 39GHz and 28GHz bands.

The $614.3 million penalty “is in addition to $15 million that Straight Path previously paid to the US Treasury and its earlier relinquishment of 196—approximately 20 percent—of its licenses to the Commission that were not included in its transaction with Verizon,” the FCC said.

Straight Path will become a wholly owned subsidiary of Verizon, the company said in its merger announcement today.

Verizon topped AT&T in bidding war

Straight Path was a hot commodity last year among carriers looking for spectrum to bolster future 5G services. AT&T announced a deal to buy the company in April 2017, but Verizon then outbid AT&T.

The FCC approved the transfer of licenses from Straight Path to Verizon in an order last month, despite objections from consumer advocacy groups and small wireless carriers.

Letting Verizon acquire Straight Path’s spectrum “could thwart competitive carriers’ efforts to deploy next-generation technologies in some of the most rural and remote areas of the United States,” the Competitive Carriers Association said in August 2017.

The lobby group for small carriers wanted the commission to block the sale “and instead make Straight Path’s licenses available to all carriers through competitive bidding.”

Consumer advocacy groups also called for the licenses to be auctioned, saying that an auction would generate revenue for the Treasury and make sure the spectrum is awarded to companies that value it most highly.

Verizon plans to use 5G technology to bolster its mobile broadband network and to deliver new fixed wireless Internet services to residential customers.