Time to Reform FCC’s Designated Entity Program | Citizens Against Government Waste

Time to Reform FCC’s Designated Entity Program

The WasteWatcher

There is a problem when a large business is able to use a federal program designed to help small and minority-owned businesses in order to obtain discounts from the government. Unfortunately, that may have occurred during the recent Advanced Wireless Services (AWS-3) spectrum auction conducted by the Federal Communications Commission (FCC). In November 2014, the FCC commenced competitive bidding for licenses previously held by federal agencies. The proceeds of the auction will be used to help build an interoperable first responder network, also known as FirstNet. When the bidding ended in January 2015, the AWS-3 auction netted the federal government nearly $45 billion to fund the FirstNet first responder network. It also provided much needed spectrum for private mobile use, as well as an infusion of cash for debt reduction. However, during the AWS-3 auctions, DISH Network Corporation utilized three of its affiliated companies, SNR Wireless LicenseCo LLC, Northstar Wireless, and American AWS-3 Wireless I LLC to purchase more than $13.3 billion of spectrum, potentially qualifying for $3.3 billion in taxpayer-funded discounts through the FCC’s designated entities program. Two of the three companies affiliated with DISH Network did not exist until a few months prior to the auction and reported to the FCC that they did not have any gross revenues. Yet, they were able to place more bids than T-Mobile, U.S. Cellular, and Verizon combined. Qualified designated entities receive a 25 percent discount on the purchase of spectrum through the FCC’s auctions. FCC rules do not currently restrict joint bidding arrangements between designated entities and other entities, including coordinated bidding, agreeing not to bid in particular markets, or other potentially collusive conduct between large and small businesses. However, these arrangements convert what is supposed to be a program to help boost small businesses into a taxpayer-funded subsidy for larger companies, who can bid through the designated entities and reap the benefits of bidding discounts. The FCC is currently finalizing the rules for the upcoming broadcaster incentive reverse auction that was included in the Jobs Act. As part of the rules for this auction, the FCC should both prohibit joint bidding agreements between designated entities and non-designated entities and ensure that bidders are not proxies for larger entities that would otherwise fail to qualify for the discounts.

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