Dish to Thune: Investigate All FCC Auction Joint Bidding Arrangements with DEs

The Telecommunications Law Resource Center is the most comprehensive reference and news platform for communications law, covering broadcasting, cable, broadband, telephony and wireless;...

By Lydia Beyoud

May 19 — Dish Network Corp. said the Senate Commerce, Science and Transportation Committee should consider investigating all joint bidding agreements and designated-entity (DE) structures in prior FCC spectrum auctions, and not just theirs, according to a letter to committee Chairman Sen. John Thune (R-S.D.).

The May 18 letter is a response to the committee's investigation into Dish's use of the Federal Communications Commission DE program, intended to help minorities, women and small businesses generally enter into the wireless market. Through the program, Dish, via its proxies, was able to gain a $3.3 billion credit on the licenses won .

Dish said its coordination during the FCC's record-breaking AWS-3 auction, which netted $41.1 billion in revenue, didn't violate the agency's anti-collusion rule, because the plans for the joint bidding agreements and the ownership structures of the companies were fully disclosed on pre-auction short form applications. Dish had an 85 percent non-controlling stake in both SNR Wireless LicenseCo, LLC and Northstar Wireless, LLC.

“The Anti-Collusion Rule expressly allows parties to bidding consortia or joint bidding agreements (“JBAs”) that are disclosed in the bidding parties’ pre-auction short-form application to cooperate and collaborate on, discuss, and disclose to each other, bids, bidding strategies, and settlement agreements–and that applies to applicants who apply to bid on the same licenses,” Dish said.

The second-largest satellite TV company told Thune that JBAs are commonplace and have been used at least 36 times in prior auctions, including by Verizon Wireless, Inc., AT&T, Inc. Cingular Wireless, U.S. Cellular, and many others. Verizon and AT&T have both said Dish abused the commission's designated entity program, which provides bidding credits to qualified auction bidders in order to promote competition.

Such criticisms “are essentially challenges to the FCC’s underlying auction processes and its rules governing DEs that should be raised in the context of general rulemaking proceedings (such as the FCC’s pending rulemaking proceeding that is addressing precisely these issues),” Dish said.

“We would respectfully suggest that if the Committee seeks to investigate joint bidding agreements and bidding activities in prior FCC spectrum auctions, then the investigation should be opened to include all previous joint bidding agreements and DE structures that have been utilized in such auctions,” it said.

FCC Review Under Way

Northstar and SNR filed oppositions May 18 to the 13 petitions to deny both of their auction applications.

The FCC announced April 29 that it was accepting petitions to deny their applications—as well as other DEs participating in the auction—as part of its regular review process. In an accompanying blog post, Wireless Telecommunications Bureau Chief Roger Sherman noted the applications seeking small business bidding credits are the most complex.

Both Northstar and SNR said their respective managers have de facto control of their companies, and said the petitioners' criticisms focus more on the FCC's competitive bidding rules as currently structured.

“The Commission should dismiss or deny the Petitions, which fail as a matter of law and primarily raise policy concerns inappropriate for a licensing proceeding involving a single applicant,” Northstar said in its filing. SNR said much the same in its filing.

AT&T also filed a May 18 partial opposition to the petitions to deny to address “the limited issue of remedy” out of concern that some petitioners' requests would harm its AWS-3 acquisitions as well.

In the event the FCC determines that Dish and its DEs did violate the anti-collusion rules, AT&T said it would be arbitrary and unfair of the FCC to pursue remedies to address the situation in a way that selectively alters some portion of the auction rules.

Generally, the FCC's available remedies would be to disallow the total $3.3 billion credits for Northstar and SNR, refer the matter to the Enforcement Bureau for possible forfeiture penalties or refer the matter to the Justice Department for investigation of possible antitrust violations.

Specifically, “there is no precedent or lawful grounds for a reauction of a portion of the licenses as a ‘remedy' for misconduct during the auction, nor is there any basis for simply handing some of those licenses to whichever bidder placed the second-highest bid,” as some petitioners have suggested, AT&T said.

It would be impossible to reconstruct how the auction might have gone but for Dish's JBA, AT&T said. “Contrary to the suggestion of certain Petitioners, it would be patently arbitrary to retain the results of some portions of the auction, while selectively undoing–or re-doing–other portions of the auction,” it said.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

Text of Dish's letter is at http://op.bna.com/der.nsf/r?Open=sbay-9wnnr5.

Text of Northstar's opposition to petitions to deny is at http://tinyurl.com/ml5ukyb.

Text of SNR's opposition to petitions to deny is at http://op.bna.com/der.nsf/id/sbay-9wnrty/$File/xattachmentViewRD.jsp.pdf.

Text of AT&T's partial opposition to petitions to deny is at http://op.bna.com/der.nsf/id/sbay-9wnrtk/$File/attachmentViewRD.jsp.pdf.