- - Monday, April 6, 2015

If you use a wireless phone or Internet service – and if you don’t belong to a cult or live in a cave, chances are pretty good that you do – you want the companies that provide those services to be able to give you the best coverage possible. That’s why the FCC’s recently concluded “AWS-3 spectrum auction” was extremely important, even if you didn’t hear about it.

A spectrum auction may sound about as exciting as dusting your blinds. Even Wall Street veteran and former NYC GOP Comptroller candidate John Burnett recently admitted that “talk about spectrum auctions may seem like an arcane matter.” But, as Mr. Burnett points out, “the terms of these government auctions – how much spectrum is sold and to whom at what price and under what conditions – has the potential to impact the lives of hundreds of millions of Americans who rely on wireless networks to power communications on our mobile devices, smartphones and tablets daily.”

With mobile technology expanding to connect everything from health devices to automobiles to the Internet, this scarce resource remains critical to ensuring the continued transformation of the way we live.

Due to the immense success of the recent auction – it amassed $45 billion for the U.S. Treasury, double the predicted total – pundits widely hailed the sale as a success. Yet given the ability for the top bidder – Dish Network – to abuse a flawed government policy and walk away with $3.3 billion in taxpayer-funded corporate cronyism, perhaps it is now time to re-evaluate what really happened and change the way the agency treats “small businesses.”

Dish bought more licenses – 44 percent –than anyone. But it did so through a loophole designed to help small businesses – something Dish clearly is not. “Through sleight of hand and aggressive use of partners and loopholes, Dish turned itself into that very small business, distorting reality and creating an unfair advantage,” the New York Times reported in February.

In short, Dish set up shell companies that qualify under the Federal Communications Commission’s Designated Entity program – designed to help “small businesses, businesses owned by members of minority groups and/or women, and rural telephone companies” – to flood the auction with Dish bids and undercut wireless companies to secure spectrum at a fraction of the cost. In the lead up to the auction, two companies sprouted up – Northstar Wireless and SNR Wireless – which Dish owns 85 percent of.

Through its big-business backing, the two “small companies” that were receiving subsidies to make buying spectrum cheaper were able to win more auctions and spend more money than every other bidder except AT&T.

For a huge company to set up small companies to scam the system is outrageous – and it’s a case of corporate cronyism at its most despicable.

Dish blatantly funded companies to short the taxpayer, and in reality, consumers hungry for better wireless services. “In other words,” Steve Forbes wrote, “through the subsidy, small businesses pay only 75 cents on the dollar, giving them a leg up on competitors with assumedly deeper pockets.”

Fortunately, some powers-that-be are taking notice. Congressman Frank Pallone, New Jersey Democrat, introduced legislation to combat future abuse. But that’s not enough. The FCC should act now and deny Dish its ill-gotten discount. Because as Taxpayers Protection Alliance President David Williams recently noted, if the FCC doesn’t stop Dish’s scandalous behavior “the end result raises serious concerns about the structure and continued efficacy of the [Designated Entity program] and the FCC’s ability to conduct future auctions.”

Followers of the FCC know the agency is increasingly rogue in nature, behaving in ways that would alarm any individual concerned with government overreach and instituting policies destined to hurt the American consumer. Its chairman, Tom Wheeler, however, recently said that he is “against slick lawyers coming in and taking advantage of a program designed for a specific audience and a specific purpose,” promising that he “is going to fix this.”

If Mr. Wheeler is serious about cleaning up abuses of a program intended to help small businesses, denying Dish the multi-billion taxpayer subsidy it swindled would be a good place to start.

Drew Johnson is a senior fellow at the Taxpayers Protection Alliance, as well as a columnist, a leading government waste expert and the founder of Tennessee’s free-market think tank.

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