Verizon to Pay Gigantic, Record Fine as Straight Path Acquisition Closes

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from January.**

The Federal Communications Commission (FCC) has fined Verizon and one of its subsidiaries $614 million.

The government agency announced Thursday that Verizon is paying up for Straight Path Communications’ failure to use spectrum licenses allotted to it by the FCC. This comes on the same day as Verizon completes its acquisition of Straight Path.

It’s the largest civil penalty for a settlement in the history of the FCC.

The FCC said Straight Path possessed more than 1,000 licenses for 28 GHz and 39 GHz millimeter wave spectrum bands, which will be used to deploy 5G. Last year (prior to the acquisition announcement) the Chief Enforcement Bureau of the FCC dinged Straight Path for representing itself as fulfilling “build-out requirements”  for the 39 GHz services it was provisioned to perform. The two parties settled that case in January 2017.

“Straight Path admits that an internal investigation determined that the equipment deployed in connection with the build-out of its 39 GHz spectrum band licenses was put in place only for a short period of time and that a significant amount of the installed equipment was no longer present at the original locations at the time of the investigation. In short, the investigation found that Straight Path had not actually deployed equipment with any permanency,” read a statement from the Bureau.

Straight Path agreed to sell those licenses and “remit 20 percent of the overall proceeds of the transaction to the U.S. Treasury.” Straight Path paid the treasury $15 million, which is separate from the fine Verizon is shouldering.

BREAKING: As a result of a settlement between Straight Path and the FCC’s Enforcement Bureau, and the FCC’s approval of the Straight Path/Verizon transaction last month, this morning Straight Path and Verizon paid a civil penalty to the U.S. Treasury of $614.3 million.

— Matthew Berry (@matthewberryfcc) February 28, 2018

Verizon purchased Straight Path for $3.1 billion after outbidding AT&T. Verizon targeted Straight Path largely for its copious amount of spectrum. Jon Brodkin of ARS Technica writes that the Competitive Carriers Association resisted the acquisition because it would harm small carriers trying to deploy 5G in rural areas.

“Consumer advocacy groups also called for the license 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,” Brodkin said.

A Verizon spokesperson would not comment on the fine to Reuters, saying that “he settlement resolved conduct from before Verizon’s announced acquisition.”

For the nitty-gritty details of the settlement, read the FCC’s announcement, its memorandum concerning Verizon, and the settlement between Straight Path and the FCC.