Taxpayer Victory: FCC Auction Cheats Must Repay $3.3 Billion

WASHINGTON--()--Citizens Against Government Waste (CAGW) today applauded the Federal Communications Commission (FCC) for its unanimous ruling that two companies improperly attempted to obtain $3.3 billion in discounts for spectrum while masquerading as small businesses.

During the AWS-3 spectrum auction for wireless broadband that ended on January 29, 2015, which raised more than $40 billion, Northstar Wireless, LLC and SNR Wireless LicenseCo, LLC filed as designated entities (DEs) and qualified for a 25 percent reduction in their bids. As a result, their winning bids of $13.3 billion were discounted by a total of $3.3 billion. However, the FCC concluded that they should not have received the discount since DISH Networks owns 85 percent of the two companies.

Immediately after the FCC opened its investigation into whether the two DEs complied with the rules for the auction and asked for public comments, CAGW joined with five other organizations in calling for the agency to find that the companies were not eligible for the discount on the winning bids. The May 11 letter said Northstar and SNR were not legitimate small businesses and “were created only to serve as bidding ‘vehicles’ for DISH.” The letter also stated that the rules were supposed “to prevent the use of DEs as mere conduits for delivering discounted spectrum to larger corporations. … If the FCC doesn’t address DISH’s abuse in a meaningful way, it does so at the peril of its already diminishing credibility. First, the FCC must deny the licenses won by DISH’s DEs or deny the $3.3 billion, taxpayer-funded discount. Second, the FCC must reform the DE program to prevent DISH or others from abusing it during future auctions, such as the upcoming incentive auction.”

Following the FCC’s ruling against the two DEs, FCC Commissioner Ajit Pai noted in his comments that there were nearly 4,000 instances of coordinated bidding between Northstar and SNR, which gave them a significant advantage over others in those bidding rounds. Commissioner Pai said that the FCC’s ruling that the DEs must pay back the $3.3 billion “is the right answer under the law, and it is a win for taxpayers and legitimate small businesses.”

CAGW President Tom Schatz welcomed the ruling as follows: “We are pleased that the bogus bids have been nullified. The FCC auctions are a valuable method to increase the availability of spectrum, increase innovation, and raise money for taxpayers. The process must meet the highest standards of fairness and integrity. The FCC must therefore ensure that this does not occur again in future auctions. CAGW’s auction reform recommendations, which were submitted to the FCC on February 20, 2015, include a prohibition against joint bidding agreements between DEs and non-DEs as well as ensuring that bidders are not proxies for larger entities that would not otherwise qualify for discounts.”

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

Contacts

Citizens Against Government Waste (CAGW)
Curtis Kalin, 202-467-5318

Release Summary

Citizens Against Government Waste today applauded the FCC for its ruling that two companies improperly attempted to obtain $3.3 billion in discounts for spectrum while masquerading as small businesses

Contacts

Citizens Against Government Waste (CAGW)
Curtis Kalin, 202-467-5318