FCC's Wheeler: Decision on discount for Dish-affiliated companies won't derail incentive auction

FCC Chairman Tom Wheeler said the commission's decision over whether or not to grant a $3.3 billion discount related to the AWS-3 auction to two "designated entities" affiliated with Dish Network (NASDAQ: DISH) will not derail the upcoming incentive auction of 600 MHz broadcast TV airwaves that is scheduled to begin in the first quarter of 2016. 

Wheeler also said that he doesn't believe the agency will have to re-auction AWS-3 spectrum either. Wheeler was asked about a potential re-auction during a press conference after the FCC's May meeting. "If there is a decision made that that is inappropriate," he said, according to Broadcasting & Cable, "the issue is $3 billion more dollars" rather than re-auctioning the spectrum.

According to the report, Wheeler later conceded that the ultimate penalty could be re-auctioning the spectrum, but he said that "the rules as they stand right now are: 'pay three billion dollars more.'" 

The AWS-3 auction raised a record $44.9 billion in gross winning bids, and is considering one of Wheeler's major achievements as chairman. 

Dish participated in the AWS-3 auction through three entities: American AWS-3 Wireless, Northstar Wireless and SNR Wireless. American AWS-3 Wireless is a wholly-owned, direct-subsidiary bidding entity for Dish, and it did not win any spectrum in the auction, though it did make bids. Northstar Wireless and SNR Wireless, however, made $13.3 billion in gross provisional winning bids. Both Northstar and SNR bid as DEs, a designation that receives a 25 percent discount on spectrum purchases. Dish's designated entities bid for 702 licenses, winning 25 MHz of total spectrum including 13 MHz of paired spectrum. Dish holds an 85 percent economic interest in Northstar and SNR. 

The DE rules are aimed at helping small businesses, rural telephone companies, and businesses owned by members of minority groups and women participate in spectrum auctions. Thus, the Dish designated entity partners are seeking $3.3 billion in DE discounts, though the FCC has not yet granted the discounts and is reviewing the DE's applications for the licenses.

The FCC will be accepting comments on the matter until May 26 and then will make a decision on whether to grant the discounts.

In its comments on the DE rules, Verizon Wireless (NYSE: VZ) argued Dish and its two DE partners engaged in a "bidding ring, intended to drive out competitors and then suppress rivalry among the ring members." Verizon alleged that Dish and the two DEs bid against each other to create a "false perception that multiple other parties were interested in those licenses," and then when other bidders dropped out of bidding they avoided bidding against each other.

"This result is virtually impossible to explain in the absence of coordination and collusion," Verizon said in a recent filing with the FCC. 

Dish has denied the charges and said that it and its two DEs followed the FCC's rules.

The FCC's is currently soliciting comment on changes to the DE rules going forward and is seeking comment on whether to adopt a presumption that "equity interests of 50 percent or more represent de facto control of the [DE] company."

For more:
- see this Broadcasting & Cable article

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