By Malathi Nayak
(Reuters) - Dish Network Corp's affiliates on Thursday surrendered 197 spectrum licenses to the U.S. government after they were declared ineligible for $3.3 billion in small-business discounts earlier this year, according to a senior U.S Federal Communications Commission official.
Dish's affiliates, Northstar Wireless LLC and SNR Wireless LicenseCo LLC, on Thursday paid a penalty of $413 million for defaulting on the licenses worth $3.3 billion that they decided not to pay for, the official said.
The deadline for the two companies to pay up the $3.3 billion was on Thursday, the official said. The FCC notified both affiliates about their obligation to pay a penalty for defaulting on the payment through two separate letters on Thursday.
The 197 licenses will be re-auctioned after the FCC's auctions of broadcast airwaves scheduled for early 2016, the official said. Dish and its affiliates will be on the hook to pay the difference if the total bids in the re-auction are below $3.3 billion, the official added.
The two affiliates will acquire the remaining 505 licenses worth $10 billion, which they have already fully paid for, of the $13.3 billion in licenses they won in an auction, the official said.
Dish was not immediately available for comment.
In August, the FCC concluded a months-long review of Dish's financial and operational ties to the two companies. The commission then denied them the $3.3 billion discount for their bids in the record-setting auction that ended in January.
In a relatively common process for FCC auctions, Dish and partners invested in separate companies with little to no revenue. Such companies are considered "very small businesses" that can receive a 25 percent discount in auction bidding. The discounts are supposed to help new entrants to the industry compete with incumbents.
(Reporting by Malathi Nayak in New York; additional reporting by Ramkumar Iyer in Bengaluru, editing by Maju Samuel and David Gregorio)