Why Verizon is happy to pay half a billion to the FCC

You may have picked up on the story yesterday. The largest fine ever paid to the FCC came in the form of Verizon’s payment of $614,000,000 yesterday, and I have a feeling that they were more than happy to sign the check.

Verizon, as I am sure you recall, bought a company called Straight Path Communications last year even though AT&T had been working with Straight Path for some time and it was generally expected that AT&T would purchase them. Verizon came in at the last minute with the winning bid of $3.1 billion dollars. That’s not including the $614m I just told you about, either.

What did they get for that cash, and why are they so happy writing a check? A lot of 5G licenses, that’s what.

Straight Path Communications was a holding company for acquiring licenses in the 39GHz and 28GHz bands, which are expected to be used for 5G communication. Of course 5G is the hot keyword now with everyone preparing to roll it out in the next 18 months or so.

Straight Path had been holding onto all these licenses and not using them, which is a strict nono as far as the FCC is concerned. They “squatted” on them for so long that the FCC ordered that the licenses be sold and 20% of the profits go to the FCC itself as a penalty. That’s how seriously they take this whole licensing thing.

Now, you’ve probably read my articles about how the current FCC, led by chair Ajit Pai, has taken a very different approach to communications law than any FCC before it. While a previous FCC might have required the licenses to be sold before the company was liquidated, the current group of commissioners said it was OK for someone to buy the company, keep the licenses, and just pay the fine to the FCC. Then, whomever bought the company would still have to use those license pretty quickly of course.

And that’s just what Verizon did. AT&T had plans to do the same, perfectly legally. The total cost of those licenses at $3.7 billion (including the fine paid) must pale in comparison to their value. 5G is the biggest thing to happen to cellular communication in a decade or more and obviously the carrier who can succeed in delivering it is going to have a big advantage in the future.

Now that all the bills have been paid, Verizon says it plans to use those licenses for “fixed wireless” applications, meaning 5G to the home to replace wired internet.