A "spectrum," a section of the nation's wireless airspace, may be invisible, but it's immensely valuable to Internet and mobile companies — so valuable, in fact, that the Federal Communications Commission (FCC) recently reaped $45 billion by auctioning off spectrum.
However, while Dish Network bid $13.3 billion in part of the auction, it really spent only $10 billion of its own money, with the rest coming from taxpayers.
Dish Network, according to Sen. Kelly Ayotte, R-N.H., and FCC Commissioner Ajit Pai, "gamed" a section of FCC regulations called the "designated entity" program, designed to help small companies compete with corporate giants in bidding, to reap a $3.3 billion subsidy in taxpayer funds and enable the communications giant to come up with its winning bid, at taxpayer expense.
"To nobody's surprise, the biggest competitors have figured out a way to game the system," Ayotte and Pai
wrote in The Wall Street Journal.
Dish Network got around the rules like this: two companies, Northstar Wireless and SNR Wireless, which are only months old, have no gross revenue and are 85 percent owned by Dish Network, entered the auction, claiming that they were small enough that they qualified for "designated entity" status and, thus, for a 25 percent taxpayer subsidy for their bid, which beat out a competing bid from T-Mobile.
"Why were some big bidders using taxpayer dollars? Those Dish-owned entities aren't planning on paying full freight. They are counting on American taxpayers to kick in over $3 billion for their auction spending," Ayotte and Pai wrote.
The rules "invite arbitrageurs to make creative end-runs" around the guidelines,
Pai told PC Magazine.
"One of my fears was that the FCC was sending the message to big businesses that 'anything goes.' I didn't expect to be this right.
"We must change course, and soon, by closing loopholes that allow big businesses to rip off the American people to the tune of billions of dollars. The American people should be outraged with this. I certainly am. And I am determined to do everything in my power to stop it from happening again."
In a statement, Dish Network, which pulls in over $14 billion annually, responded, "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."
Ayotte and Pai want to change those rules.
"The FCC's rules are a labyrinth that only a lawyer could love. Even if everything was done by the book, why are the FCC's rules set up this way? Does it make sense to milk taxpayers to benefit corporate behemoths? Should the FCC allow companies that don't need the help to claim billions of dollars in taxpayer-funded discounts? Is it fair to deny designated-entity benefits to entrepreneurs who do need help entering the wireless business? We'd say no on each point," they wrote in the Journal.
"Nothing undermines confidence in government more than the perception that big, sophisticated and connected corporate interests can work the system at the expense of ordinary people. The FCC needs to do a top-to-bottom review of policies that aid billion-dollar interests at the expense of entrepreneurs. Congress should conduct oversight and put an end to this corporate welfare."
Pai, saying that the subsidy Dish Network received "makes a mockery" of the discount program at the expense of taxpayers, has called on FCC Chairman Tom Wheeler to review the bidding result,
Reuters notes.
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