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GOP Rep Says DISH Drove Small Companies Out Of Spectrum Bids

The Federal Communications Commission may not have gotten approval for rules that DISH exploited to earn billions in small business credits at the last wireless spectrum auction.

In a letter sent to FCC Chairman Tom Wheeler Monday, Republican Rep. Steve Chabot, the House Small Business Committee chairman, notes that the agency requested approval from the Small Business Administration to adopt different small business size standards than the SBA normally uses, but never disclosed whether that approval was granted.

At the recent AWS-3 spectrum auction, DISH was the largest beneficiary of credits under the so-called “designated entity” (DE) program, which provides qualifying small companies a taxpayer-funded rebate for 25 percent of the purchase price to help them compete against their larger rivals when bidding for spectrum. (RELATED: DISH Set Up a Bunch of Companies to Claim Billions in ‘Small Business’ Credits)

The FCC has since acknowledged that DISH took advantage of the program by creating two shell companies that would be eligible for the subsidies, using its vast financial resources to keep competitors at bay before dropping out to allow one of the spinoffs to win the license (and the credits).

The strategy enabled the DISH entities to claim about $3.3 billion in DE credits, meaning the company only had to pay $10 billion for spectrum on which it had bid $13.3 billion.

The FCC has responded to DISH’s tactics by promising to review the rules for the DE program, and has even suggested that it might reject DISH’s claim to the credits, but Chabot’s letter suggests that the agency itself might be to blame. (RELATED: Legal Battle With FCC Not Worth $3 Billion, Advisers Tell DISH)

Chabot points out that in its own Auction Order, the FCC “requested … SBA approval of its final rule adopting small business size standards differing from the SBA’s size standards,” which opened the door to DISH’s actions.

“However, no mention is made of a response from the SBA,” so Chabot is formally requesting that Wheeler share copies of both the FCC’s request and the SBA’s response with the Small Business Committee.

According to Chabot, “a number of smaller companies that bid in the auction have raised concerns that they were squeezed out of the bidding on spectrum licenses at the auction by the actions of DISH and its two DE’s.” (RELATED: NAACP, Steve Forbes Accuse DISH of Bilking Taxpayers Out of $3 Billion)

One such company is VTel Wireless, which had successfully won spectrum at previous auctions, but claims that it was deceived into withdrawing bids at the AWS-3 auction by DISH and its shell companies, who “made it appear that three other bidders were competing for the license to VTel when in fact it was only the DISH entities.”

A group of rural telecom companies has similarly complained that DISH “systematically and quickly drove most of the Telecos out of the auction.”

“When Congress established the Commission’s auction authority,” Chabot points out, “it also required the Commission to ‘ensure that small businesses, rural telephone companies, and businesses owned by minority groups and women are given the opportunity to participate in the provision of ‘spectrum-based services’.”

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