DISH Network’s participation in two small business designated entities (DEs) that posted gross winning bids of $13.3 billion in the FCC’s Advanced Wireless Service (AWS)-3 auction is the subject of criticism by AT&T, which claimed in a blog post last Friday that the results of the AWS-3 auction show “how the legitimate purposes of the DE program can be distorted.”

Under FCC auction rules, participants with average annual gross revenues of $15 million or less may qualify as very small business DEs that receive a 25% bid credit on any licenses they win. During the AWS-3 auction, SNR Wireless LicenseCo and Northstar Wireless—both very small business DEs in which DISH holds non-controlling stakes of 85%--bid successfully for 702 licenses that qualify provisionally for a 25% bid credit, which would reduce the companies’ combined gross bid by $3.3 billion. In Friday’s blog post, AT&T Vice President Joan Marsh charged that “the DISH DEs simply do not seem like the type of entities that the FCC had in mind when the DE framework was adopted,” as she noted that both entities “were majority financed by DISH and other institutional investors and the discounts will ultimately inure to their benefit.” Noting that a DISH subsidiary that failed to win any licenses also participated in the auction, Marsh further alleged that “DISH and the two DEs routinely triple bid licenses (inflating demand) until DISH dropped out of the auction, and then the DEs double bid them routinely thereafter. Looking ahead to next year’s incentive auction, Marsh thus advised that “the competitive bidding rules clearly need to be revisited,” adding that “fixes can be as simple as requiring joint bidders to participate at auction as a single entity or prohibiting joint bidders from placing competing bids on the same license.”

Meanwhile, along a similar vein, ranking House Energy & Commerce Committee member Frank Pallone Jr. (D-NJ) urged FCC Chairman Tom Wheeler in a letter last Friday to “take a fresh look” at the rules for the upcoming incentive auction out of concern that “major corporations have been able to game certain FCC rules designed to aid small businesses.”

Drawing a contrast between FCC rules that deem joint sales agreements (JSAs) between broadcast stations to be attributable ownership interests and the agency’s treatment of DISH in the AWS-3 auction, the National Association of Broadcasters protested the agency’s “disparate restrictions on the multiple and cross-ownership of television and radio stations” that “do not apply to competing video and audio providers.” In defense of its AWS-3 auction strategy, DISH told the FCC in documents filed on Monday that “investments in DEs have been a longstanding practice of incumbent wireless carriers, and DISH’s participation followed a path that has been available for 15 years.”