Verizon's McAdam urges Congress to take hard line on spectrum bidding credits, curb FCC's net neutrality rules

Verizon Communications (NYSE: VZ) CEO Lowell McAdam wants Congress to take a tougher stance on rules governing bidding in spectrum auctions, and called out Dish Network (NASDAQ: DISH) in particular for its bidding strategy in the AWS-3 auction. In a letter to key lawmakers, McAdam also urged Congress to be more proactive in regulating telecommunications, curb the FCC's recently approved net neutrality rules and rewrite and update the Telecommunications Act.

In a letter to the Republican chairmen and Democratic ranking members of the Senate and House commerce committees, McAdam focused in part on the FCC's "designated entity" program, which is designed to ensure that small, rural and minority-owned businesses can compete with large companies in auctions.

Dish Network (NASDAQ: DISH) has been widely criticized by carriers, lawmakers and others for manipulating the program in its bidding strategy for the AWS-3 spectrum auction to get discounts. Dish has repeatedly argued against that, and has said that it followed the FCC's rules.

McAdam wrote that the program, if used correctly, "has merit and gives smaller companies and diverse entrepreneurs an opportunity to enter into new business opportunities."

However, McAdam noted that Dish, a $33 billion company, partnered with two designated entities to win 44 percent of the licenses up for auction and secure a 25 percent discount worth $3 billion. The FCC is still reviewing the DE credits that were awarded and has said no spectrum will be granted to entities that violated the auction rules.

In the letter, McAdam noted that over the years the FCC has repeatedly granted Dish's requests to make its spectrum holdings more useful and therefore more valuable. He wrote that the FCC has granted Dish's request to turn its S-band satellite spectrum into AWS-4 spectrum that can be deployed for terrestrial use, and has let it convert uplink to downlink spectrum and extended buildout timelines.

McAdam wrote that despite Dish now being one of the largest holders of spectrum, Dish has "not invested one dollar or created a single job by building networks or using this spectrum to serve customers. Meanwhile, the FCC is creating rules for the upcoming incentive auction that will intentionally withhold spectrum from the very companies that are investing, creating jobs and servicing customers. Congress should ensure that our spectrum policies are aligned with the overall economic interests of the country and are not subject to abuse to serve the interests of particular entities."

A Dish spokesman did not immediately respond to a request for comment.

Last week FCC Chairman Tom Wheeler circulated a public notice to his fellow commissioners on how best to change the agency's rules on designated entities ahead of next year's incentive auction of 600 MHz broadcast TV spectrum. The FCC currently does not plan to vote on the public notice at its April meeting, so May is likely the earliest it will do so. After that, the agency will likely review public comments on the topic for months.

In the letter, McAdam noted that the FCC's net neutrality rules, which reclassified broadband, including mobile broadband, as a telecommunications service under Title II of the Telecommunications Act, "will spawn years of uncertainty and litigation."

In response, McAdam urged Congress to pass a bipartisan bill that "protects the open Internet in a way that avoids the collateral damage that will results from the FCC's actions." More broadly, McAdam thinks Congress should update the laws governing communications, likely through a rewrite of the Telecommunications Act, which was last amended in 1996.

For more:
- see this McAdam letter (PDF)
- see this The Hill article
- see this Ars Technica article

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