The Chairman of the Federal Communications Commission said Tuesday morning the FCC is ready to investigate how a company partly owned by Fairbanks-based Doyon won licenses to use the wireless spectrum while claiming it was entitled to billions of dollars in discounts. Critics say Doyon’s big corporate partner, Dish Network, is taking advantage of a program meant to help small businesses. Doyon says the program worked exactly as intended.
When the FCC wants to sell licenses to use the public airwaves it holds a spectrum auction. Spectrum is the real estate the wireless industry is built on. Dish Network, a big satellite TV company, did well at a spectrum auction that concluded early this year. Dish holds an 85 percent stake in two companies that placed the winning bids on many of the licenses sold at that auction.
Combined, the Dish-owned companies bid more than $13 billion. But the companies say they only have to pay $10 billion, because they qualify as small enterprises – or “designated entities” as they’re called in FCC rules — and thus entitled to a 25 percent discount.
FCC Commissioner Ajit Pai told a Senate panel it’s outrageous.
“What was once a well-intentioned program designed to help small businesses has become a playpen for corporate giants,” he said at a Senate Appropriation Subcommittee Hearing. “The FCC’s recent … spectrum auction is a shocking case in point.”
Commissioner Pai says the FCC should reform its “designated entity” program so this never happen again. And he says, the Commission should reject the discounts if it finds Dish didn’t comply with the rules.
“To be frank, I’m appalled that a corporate giant has attempted to use small business discounts to rip off American taxpayers to the tune of $3.3 billion,” he said.
FCC Chairman Tom Wheeler told senators he agrees with Pai on this. Before the next auction he said he hopes to update the discount program.
“I was around when it was created in 1993,” Wheeler told the senators. “It has the right kind of philosophy, and it’s a mandate from the Congress that we need to make sure that there are opportunities created for small businesses. And the problem is that the world has changed a lot since then and our rules haven’t.”
Monday was the deadline for filing petitions objecting to the last auction. Seven objections are now pending against the two Dish-owned companies, SNR and Northstar Wireless. Now that the deadline has passed, the case is finally in the FCC’s hands, Wheeler said.
Northstar is 15 percent owned by Doyon Limited, the Alaska Native Corporation for the Interior region, and Doyon says it controls Northstar. Allen Todd, Doyon’s general counsel, says Northstar followed the rules. Todd also says the ownership percentage of Northstar is similar to that of past FCC bidders that received the “designated entity” discount.
“In Washington, occasionally success gets punished as much as doing something wrong and I suspect that the success in this case is what’s attracted a lot of attention,” he said.
Todd says there was no ripoff of the taxpayer at the auction. One of the goals of the designated entity program is to increase competition. Analysts had predicted the auction would attract no more than $20 billion in bids. Instead, it drew double that. The Doyon attorney says the “designated entities” helped bring in more bidders and more money.
“So we can certainly focus on $3.3 billion in bidding credits that were awarded,” Todd said in a telephone interview, “or we can focus on the U.S. Treasury, net of bidding credits, receiving an additional $23 billion in proceeds.”
The Senate Commerce Committee is also investigating the bid discounts.