Coalition Petitions FCC to Deny Subsidies in Spectrum Auction Designated Entity Program

Michi Iljazi

May 12, 2015

few months ago The Taxpayers Protection Alliance (TPA) submitted joint comments with Americans for Tax Reform, Center for Individual Freedom, and the National Taxpayers Union to the FCC calling on the Federal Communications Commission (FCC) to look into problems with the Designated Entity program and how some have taken advantage of it in spectrum auctions, at the expense of taxpayers. Senator John Thune recently began an investigation into this very issue, requesting documents from both the FCC and those involved in the auction using the DE program to get what amounts to a $3 billion subsidy for auctioned spectrum (read previous TPA blogs on spectrum here and here). Yesterday, TPA along with Americans for Tax Reform, Center for Individual Freedom, Citizens Against Government Waste, Media Freedom, and the National Taxpayers Union continued this fight by submitting a joint Petition to the FCC to deny the subsidy so that taxpayers won’t be taken advantage of by this form of corporate welfare.

Read the petition below:

May 11, 2015

Roger Sherman
Chief, Wireless Telecommunications Bureau
Federal Communications Commission
445 12th Street, S.W.
Washington, DC 20554

Re: Petition to Deny AWS-3 Licenses Won by Northstar Wireless, LLC and SNR Wireless License Co, LLC via Dish Network, DA 15-503

Dear Mr. Sherman,

We, the undersigned, have already raised serious concerns about the nature of Dish Network’s abuse of the Designated Entity (DE) program during the AWS-3 auction.[1] Today, we write to formally petition that the licenses won by Dish Network through two DEs – Northstar Wireless, LLC and SNR Wireless License Co – be denied.

As you stated in a recent blog post about the licensing process, “These are complex and important matters… [W]e will issue licenses only to entities that meet our eligibility standards… [and] we will award bidding credits only to those applicants who we find are eligible under the Commission’s rules.”[2]

According to the Wall Street Journal, Chairman Wheeler told staff to look into Dish’s DEs because “he thought something didn’t smell right.” [3] A review of their applications and bidding patterns confirms his suspicion.

FCC rules and procedures for the AWS-3 auction said that entities seeking to benefit from bidding discounts had to certify that they were, in fact, small businesses.[4] However, there is significant evidence to suggest that Northstar and SNR were created only to serve as bidding “vehicles” for Dish.[5] Public data shows that Dish owns an 85 percent financial interest in each company and provided nearly all of the funding for the licenses that each company won.[6]

There were also rules to prevent the use of DEs as mere conduits for delivering discounted spectrum to larger corporations.[7] Bidding analysis shows that Dish and its DEs colluded to win nearly half of the licenses up for auction at a $3.3 billion taxpayer-funded discount.[8]

If the FCC doesn’t address Dish’s abuse in a meaningful way, it does so at the peril of its already diminishing credibility.  First, the FCC must deny the licenses won by Dish’s DEs or deny the $3.3 billion, taxpayer-funded discount.  Second, the FCC must reform the DE program to prevent Dish or others from abusing it during future auctions, such as the upcoming incentive auction.  Specific recommendations for reform are enclosed with this letter.

Sincerely,

Katie McAuliffe
Executive Director, Digital Liberty
Americans for Tax Reform

Jeffrey L. Mazzella
President
Center for Individual Freedom

Thomas A. Schatz
President
Citizens Against Government Waste

Mike Wendy
President
MediaFreedom.org

Pete Sepp
President
National Taxpayers Union

David Williams
President
Taxpayers Protection Alliance

cc: Genevieve Ross and Peter Daronco

 


[1] TPA, ATR, CFIF, and NTU Joint Comments to FCC on the Designated Entity Program,  2/21/15, David Williams, “FCC Needs To Close Auction Loopholes,” CNBC.com, 3/16/15, [+ other relevant filings and/or earned media from signers]

[2] Roger Sherman, “AWS-3 Update: The Licensing Process Continues,” Official FCC Blog, 4/29/15

[3] Ryan Knutson, “Regulators May Reject Dish Entities’ Spectrum Discount Claims,” Wall Street Journal, 4/27/15

[4] “Auction of Advanced Wireless Services (AWS-3) Licenses Scheduled for November 13, 2014, Notice and

Filing Requirements, Reserve Prices, Minimum Opening Bids, Upfront Payments, and Other Procedures for Auction

97,” Public Notice, AU Docket No. 14-78, 7/23/14

[5] Shalini Ramachandran, Kate Linebaugh, and Ryan Knutson, “Behind Dish Wireless Coup, Ties to Alaskan Native Groups,” Wall Street Journal, 2/3/15

[6] R. Stanton Dodge, “Form 8-K Current Report,” Dish, 2/20/15 (submitted to the SEC)

[7] “Auction of Advanced Wireless Services (AWS-3) Licenses Scheduled for November 13, 2014, Notice and

Filing Requirements, Reserve Prices, Minimum Opening Bids, Upfront Payments, and Other Procedures for Auction

97,” Public Notice, AU Docket No. 14-78, 7/23/14

[8] Leslie Marx, “Economic Analysis of Coordinated Bidding in FCC Auction 97,” Bates White, 4/24/15 (submitted to the FCC)

Read the petition below: