Opinion: Prevent abuses in FCC spectrum auctions

That large corporations use their high-priced lobbyists on Capitol Hill to rig the game in their favor is not new to most Americans. But a recent tactic taken by the satellite provider DISH to acquire valuable wireless spectrum at the taxpayer expense of more than $3 billion will shock Americans to their core about the depths a company will stoop to exploit a well-meaning government program.

Think of wireless spectrum as the invisible building blocks of the information highway. It powers the wireless devices we use every day. It is a valuable, finite resource and as Americans grow increasingly dependent on wireless devices and services, communications companies are scrambling to acquire enough spectrum to meet their consumers’ growing appetite for mobile broadband.

So when the Federal Communications Commission recently conducted an auction to make more spectrum available for commercial purposes, many companies participated including Illinois-based Geneseo Communications. The proceeds from auctioning off the spectrum would then return to the federal government to fund a myriad of vital programs and services.

Little did regulators know at the time, DISH was rigging the auction against other companies and the public before it even began. To ensure smaller or minority-owned businesses can compete for spectrum against the nation’s largest communications companies, the FCC operates the Designated Entity program, which provides a 25 percent bidding credit to small businesses so they too can acquire spectrum. DISH hijacked this program.

DISH used the guise of two shadowy small companies, which they had an 85 percent ownership stake in, to qualify for the FCC’s Designated Entity program. They jointly bid on and ultimately acquired what could amount to $13.3 billion worth of spectrum. And through its abuse of the Designated Entity program, DISH is expected to get that spectrum at a 25 percent discount paid for by our tax dollars. They will ultimately only have to pay $10 billion for $13.3 billion worth of spectrum. Mind you, DISH has a $33 billion market capitalization.

DISH’s manipulation of this program at an independent government agency is an especially troubling sign that crony capitalism has escalated into full-blown regulatory capture. An agency and program designed to act in the public interest has been misused to advance a strictly commercial interest.

Consider the worthwhile things the $3.3 billion discount DISH is getting could be used for right here in Illinois and around the country: public education, Pell Grants for college students, infrastructure investments, or healthcare services, just to name a few. And while there are some who may not share my views on spending priorities, surely we could all agree that the last thing we should do is give a wealthy company that used questionable tactics to game the system an undeserved $3.3 billion break.

Fortunately, lawmakers and regulators are equally outraged by DISH’s actions. FCC Chairman Tom Wheeler has indicated the agency will rightly reform the Designated Entity program to prevent these abuses in the future. What’s more, four lawmakers from our state – Representatives Rush, Shimkus, Schakowsky, and Kinzinger – sit on the House Energy and Commerce Committee, which is considering a legislative solution. Just reforming the rules for future auctions is not enough though.

The FCC acknowledged the shortcomings that led to DISH’s exploitation of the rules, but more must be done now. The FCC should thoroughly review DISH’s bidding practices and that of the two small businesses it clearly controls. For if they do, I believe they will find proper justification to deny DISH the $3.3 billion discount it is slated to receive. DISH should not be able to profit at the taxpayers’ expense. Then, the FCC could begin the important work of reforming the rules before any other wireless auctions take place.

Lynda DeLaforgue is Co-Director of Citizen Action and has been advocating on behalf of consumers and the public interest for more than 28 years.