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DISH’s Duplicitous Auction Tactics Spur Action By FCC

The Federal Communications Commission is taking action to close loopholes that allowed DISH Network to receive $3 billion in “small business” tax credits at a recent spectrum auction.

Reuters reported Monday that, “U.S. regulators are moving forward with plans to change the rules for government airwaves auctions to prevent big companies from tapping a discount program intended for small businesses,” reacting to public outrage over abuses of the program.

The designated entity program provides qualifying small companies a taxpayer-funded credit for 25 percent of the purchase price to help them compete against their larger rivals when bidding for spectrum, but in the FCC’s most recent auction, DISH took advantage of the program by creating two shell companies that would be eligible for the subsidies.

DISH established a joint bidding arrangement with the companies, using its vast financial resources to keep competitors at bay, and then dropping out to allow one of the spinoffs to win the license (and the credits). (RELATED: NAACP, Steve Forbes Accuse DISH of Bilking Taxpayers Out of $3 Billion)

“The FCC is expected in coming days to begin accepting petitions from the public to reject Dish partners’ auction applications,” Reuters claims, but Chairman Tom Wheeler also circulated a public notice Monday to the rest of the commissioners seeking input on specific proposals for reforming the program so that such investigations will not be necessary in the future.

The tactics employed by DISH are reminiscent of other actions the company has taken, notably a 2001 bid by parent company EchoStar Communications to buy DirecTV, which was widely seen as a disingenuous offer designed mainly to prevent a takeover by News Corp.

Commentators have pointed out that while federal regulators were never likely to approve the deal to combine the nation’s two largest satellite television companies (which was indeed blocked), EchoStar still emerged a winner because its bid took News Corp out of competition while also allowing it to review DirecTV’s books—a major competitive advantage.

The FCC, on the other hand, may be hoping that by taking a strong stance against the DISH shenanigans, it can dispel charges that it caved to pressure from President Barack Obama with its recent decision to regulate the Internet as a public utility under Title II of the Communications Act. (RELATED: Chaffetz Accuses FCC of Caving to Obama on Net Neutrality)

DISH co-founder and Board Chairman Charles Ergen is a major political donor who has given hundreds of thousands of dollars to Democratic candidates and party committees, making him a valuable ally of the president’s party.

In fact, Fox News reported in December that one DISH executive, Chief Operating Officer Bernard Han, even complained that Ergen pressured him “to donate to a Democratic candidate and/or party in 2009/2010,” implying that he would face consequences for failing to follow the instructions. (VIDEO: Ergen Returns as CEO of DISH)

Han also alleged that money was regularly deducted from his pay between 2009 and 2012 for donations to the company’s DISH Network PAC, which then funneled the contributions to Democratic candidates such as Rep. Debbie Wasserman Schultz and Sen. Dianne Feinstein.

According to Reuters, DISH released a statement in response to the FCC’s decision saying, “the company looked forward to working with the FCC as the rules for the upcoming incentive auction are evaluated.”

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