The fallout over DISH Network’s involvement in two designated entities (DEs) that posted $13.3 billion in gross winning bids during the Advanced Wireless Service (AWS) 3 auction continued as FCC Chairman Tom Wheeler promised ranking House Energy & Commerce Committee member Frank Pallone Jr. (D-NJ) that the FCC will closely scrutinize bidding arrangements between DISH and the DEs in question and “will not grant licenses to any party that does not strictly adhere” to the agency’s rules.  

Wheeler made his pledge in a February 27 letter to Pallone, which was released by the FCC late last week in response to Pallone’s earlier recommendation that the FCC “take a fresh look” at 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.”  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 defense of its AWS-3 auction strategy, DISH reminded the FCC 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.”  

Noting that the FCC launched proceedings last fall to consider modifications to competitive bidding rules that include the rules pertaining to DEs, Wheeler told Pallone “we are keenly aware that we must also look to lessons learned from . . . the recently-concluded AWS-3 auction,” as he emphasized:  “we take seriously concerns that parties may seek to capitalize on our rules in order to receive benefits intended for small businesses.”  As he assured Pallone that the FCC “will thoroughly review and scrutinize each application to ensure that granting each license is in the public interest and that each applicant has complied with the Commission’s rules,” Wheeler maintained:  “our rules must preserve the integrity of the Commission’s auction process and ensure that bidding credits are available only to eligible entities.”  

Meanwhile, in reply comments that pertain to the competitive bidding rulemaking proceeding, Verizon Communications cited concerns raised recently by AT&T over DISH’s bidding strategy in urging the FCC on Monday to restrict joint bidding arrangements in future spectrum auctions.  Like AT&T, Verizon took issue with “extensive coordinated bidding” among DISH and its affiliated DEs in which “double and triple bidding may have created the false signal that there was more competition for certain licenses than was actually the case.”  Agreeing with AT&T and other parties that such coordinated bidding “undercut[s] the integrity” of the AWS-3 sale, Verizon said the FCC “at a minimum should reinforce the existing prohibition against collusion by prohibiting all joint bidding arrangements or other communications about bids or bidding strategies among two or more applicants for the same licenses.”  On behalf of DE interests, however, Council Tree Investors countered that “the robust, record-setting results of the recently-concluded Auction 97 compellingly illustrate why a viable DE program very much enhances competition.”  As such, Council Tree advised the FCC that “changes to facilitate the growth of the DE program should be adopted” while “those . . . intended to clip the DE program’s wings should be rejected.”