It isn’t often that NAACP President Cornell William Brooks and Americans for Tax Reform President Grover Norquist agree on anything. But both agree that Dish Network — the television mega-provider — is not a small business. Republicans and Democrats on Capitol Hill also agree on this. Why? Because Dish isn’t a small business.
Dish Network is trying to claim $3.3 billion in tax discounts from the FCC — money that is meant to help small businesses purchase wireless spectrum at auction. The FCC is expected to make up its mind soon, and Dish is working feverishly to defend itself, submitting letters to Senate Commerce Committee Chairman John Thune, R-S.D., and the FCC.
The FCC, as an independent agency, must heed common sense and the bipartisan consensus on Capitol Hill by rejecting this alarming case of corporate cronyism. Beyond ripping off taxpayers, the proposed Dish “small business” discount sets a remarkably dangerous precedent for future auctions — and by extension, the future of the U.S. wireless industry.
In January the FCC concluded an auction of wireless spectrum — a finite resource that serves as the invisible road for wireless communications. Because spectrum cannot be created, the sale of spectrum, both owned by government agencies and private companies such as television broadcasters, is extremely important. In fact, given the explosion of wireless communications and the move to a cloud-based environment, such auctions might be the FCC’s most important function today.
The January auction was a success, amassing nearly $45 billion for the government. But as the New York Times reported, “Dish Network bid for licenses through a newly formed vehicle that claimed to be a ‘very small business’ under the [FCC] rules and was entitled to a 25 percent discount.” Dish, the second largest satellite provider with $14 billion in revenue and 22,000 employees, used two companies — Northstar and SNR — defined as “small businesses,” to bid in the auction and thus get a discount. Dish owns 85 percent of these two companies. Neither company even existed until a few months before the auction.
“This well-intentioned program now helps Goliath at David’s expense,” FCC Commissioner Ajit Pai said in prepared remarks before a House hearing about the FCC’s 2016 budget last week. “Small business discounts are now being used to give billions of dollars in taxpayer-funded subsidies to Fortune 500 companies and to make it harder for legitimate small businesses to compete in the wireless market.”
Indeed, that is why the FCC’s next step, to reject the discount, is so critical. The decision will set the proper standard for the next auction in 2016. Will every mega-corporation form new “very small” front-companies to buy their spectrum?
Dish, along with T-Mobile and Sprint, are currently petitioning the FCC for special treatment. They argue — despite massive revenues and growing market presence — that without a large “set-aside” for small business, they can’t compete.
If the current farce and fraud with Dish proves anything, it is that the FCC needs to be vigilant. To the extent that special programs are needed, applicants must be aggressively screened and monitored to protect the integrity of the program.
Should history repeat itself with Dish, T-Mobile, and Sprint in the 2016 spectrum auction — a very real possibility — we will all be subsidizing spectrum purchases by well-financed multinational corporations that are easily capable of paying market value for a valuable modern commodity.
With a decision on Dish looming, it is my fervent hope that the FCC, and those following the issue, will begin looking at these prior efforts to “game” the auction process. The Dish ruse in this year’s auction has shown how easily policies aimed at helping deserving companies can be abused, harming the very consumers they are designed to help.
Christopher D. Coursen is owner and president of the Status Group, a technology and telecommunications consulting firm. He formerly served as Majority Communications Counsel for the Senate Commerce Committee and as an advisor in both the Reagan and George H.W. Bush Administrations. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
