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Dish gets more flak for spectrum strategy

FCC Commissioner Ajit Pai (R)

FCC commissioner Ajit Pai isn’t letting go of his opposition to the way Dish gained access to a large swath of wireless spectrum from last month’s AWS auction. And he’s again calling on his fellow commissioners to pull the plug on the existing terms of the sale.

Pai’s statement comes as the FCC is working to finalize the rules for the next year’s incentive auction of broadcast spectrum that is far more valuable to wireless telcos.

Dish was able to pick up spectrum at a discount through two “designated entities” in which it had a non-controlling interest. Instead of paying $13.3 billion, the two companies paid $10 billion by tapping into the FCC’s auction rules giving bidding credits to “small facilities-based bidders.”

“If it turns out that the Dish entities did not comply with the FCC’s rules, the agency must, at a minimum, deny them any small business discounts. And whether or not they violated our rules, the FCC must take immediate action to ensure that this abuse never happens again,” said FCC commissioner Ajit Pai in a statement Monday.

Dish countered that it doesn’t have control over what the companies might do with the spectrum. “We were unsuccessful as Dish to acquire spectrum; the price just got too high. But we were fortunate to work with two designated entities. But we don’t control those companies. While we think we’re one of the few that could use the unpaired uplink spectrum, there’s no guarantee they will want to work with us,” Charlie Ergen, Dish founder and CEO said during the company’s Feb. 23 year-end earnings call.

According to Pai, DISH recently disclosed [in its 10K] that it made approximately $8.504 billion in loans and $1.274 billion in equity contributions to those two companies. “[This is] hardly a sign that they were “very small businesses” that lacked access to deep pockets,” Pai said.

AT&T and Verizon, which spent $18.2 billion and $10.4 billion in the auction respectively are annoyed that Dish used the FCC’s rule to snap up nearly half the licenses in the auction, and at a substantial small-entity discount. For the big two, Dish’s actions are proof-positive why the FCC should eliminate set-asides and bidding credits for the upcoming broadcast incentive auction.

“DISH’s performance in the auction demonstrates the risk of unintended consequences that flow from attempts to favor certain participants. The FCC should focus instead on putting spectrum in hands of those who will put it to use to serve America’s consumers,” said Kathleen Grillo, senior vice president, federal regulatory and legal affairs for Verizon in a recent blog.

AT&T agreed: “Preferences and set asides can tilt the auction playing field in very unexpected ways,” wrote Joan Marsh, vice president of federal regulatory for AT&T in a recent policy blog post. “And history has shown us time and again how government preferences in a dynamic, rapidly changing industry can easily lead to perverse results.”

But smaller wireless carriers, like T-Mobile see it differently. “AT&T and Verizon showed they can, and will, dig into their deep pockets to corner the market on available spectrum at any cost. If the government wants a competitive wireless market, they need to establish rules to reflect that,” T-Mobile John Legere wrote in a recent blog post. Legere is urging the FCC to set aside at least half the available spectrum in the broadcast incentive auction for smaller carriers.