Small Companies Directly Hurt by Dish's Use of Bidding Credits in AWS-3 Auction, FCC's Pai Says
Dish Network’s use of two designated entities to buy spectrum at discounted prices in the AWS-3 auction was directly harmful to many small businesses, FCC Commissioner Ajit Pai said in a statement Monday. Pai has called for an investigation of Dish’s use of DEs in the auction (see 1501300051). Dish worked with two DEs in the auction, Northstar Wireless and SNR Wireless, successfully winning $13.3 billion worth of licenses for $10 billion (see 1501300051).
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“The evidence of abuse continues to mount,” Pai said. “DISH recently disclosed that it made approximately $8.504 billion in loans and $1.274 billion in equity contributions to those two companies -- hardly a sign that they were ‘very small businesses’ that lacked access to deep pockets. Moreover, we now know that DISH’s abuse of the program had an enormous impact on actual small businesses serving actual customers.”
Among the examples Pai cited, Glenwood Telephone Membership Corp., serving rural parts of Nebraska, was the provisional winning bidder for two licenses but was outbid by a Dish-controlled DE, he said. “As a result, it did not win a single license in the auction. Glenwood has gross annual revenues of just over $13 million, which are 1,052 times less than DISH’s.” Pai also cited the Rainbow Telecommunications Association, serving rural parts of Kansas, also outbid by a Dish-controlled DE and left with no licenses from the auction. “Rainbow has gross annual revenues under $14 million, which are 1,025 times less than DISH’s,” Pai said.
The examples cited tell only part of the story, Pai said. “There were over 440 licenses in the auction for which the DISH entities outbid smaller companies or ones that were not providers of nationwide service that had been winning the licenses,” he said. “That’s more than three times as often as those smaller providers were outbid by AT&T, Verizon, and T-Mobile combined.”
A Dish spokesman fired back in an emailed response. “We respectfully disagree with the criticism of the Designated Entity program, and we are confident that we fully complied with the DE rules in the AWS-3 auction, which were unanimously approved by the full Commission," the spokesman said. “The DE program has been successful in providing much smaller entities the ability to access stronger capital structures, which has facilitated their meaningful participation in an auction process from which they would otherwise be precluded.” The company representative said Dish’s approach, disclosed ahead of the auction, “was based on DE investment structures that have been approved by the FCC in past wireless spectrum auctions, including structures used by AT&T and Verizon.”
Meanwhile, parties opposing the bids by the two DEs will have to wait a while longer to file oppositions. The FCC sought comment last week on various long-form applications by winning bidders, but Northstar and SNR weren't on the list. Nine of the 10 winning bidders on which the FCC didn’t seek comment are DEs, an agency official said Monday. FCC Chairman Tom Wheeler said in a Feb. 27 letter to House Commerce Committee ranking member Frank Pallone, D-N.J., that the agency is looking closely at the AWS-3 results (see 1503060060). The commission “takes seriously concerns” that some AWS-3 winners “may seek to capitalize on our rules” as a way to “receive benefits intended for small businesses or to game the auction process,” Wheeler said.