Alaska Dispatch News - FCC chairman chides 'slick' legal work on Dish-Doyon wireless deal

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By: Dermot Cole

The chairman of the Federal Communications Commission has joined critics challenging the means by which the Dish Network partnered with a Fairbanks-based regional Native corporation to qualify as a "very small business" and secure billions in bid discounts.

"I am against slick lawyers coming in and taking advantage of a program that was designed for a specific audience and a specific purpose," Tom Wheeler, the FCC chairman, said Wednesday at a Senate Commerce Committee hearing on FCC oversight in Washington, D.C.

The slick legal work concerns two entities largely owned by Dish -- a company with $14 billion in annual revenues -- that qualified for $3 billion in federal incentives intended for "very small companies." A former Cook Inlet Region Inc. executive, now living in Texas, helped put the deals together, according to the Wall Street Journal.

One of the two entities is Northstar Wireless, which is 85 percent owned by Dish and largely bankrolled by the satellite TV giant.

Dish has contributed $750 million in equity and $5.001 billion in loans to the firm, but technically it does not control the company, Dish says in its filings with the Securities and Exchange Commission.

Rather, the business is controlled by Doyon, which owns 15 percent of Northstar, according to FCC filings. The involvement by Doyon means it qualifies as a "very small business" under FCC rules, eligible for 25 percent bid discounts in a recent auction for wireless licenses. Since 1993, the FCC has had a policy that Alaska Native corporations are "very small businesses," regardless of their assets or revenues.

Northstar had winning bids totaling $7.8 billion, but the cost was cut to $5.9 billion with the discounts for so-called "designated entities." The bids are under review by the FCC to see if the rules were followed. For its part, Dish said it met the requirements set by the FCC and followed a process used by other large companies in the past, including AT&T and Verizon, who are now among its chief critics.

But the link between Dish and Doyon, which attracted national attention in February, drew sharp words from a selection of senators and FCC commissioners at the hearing.

"We are going to fix this. These are rules that have been in place since the Bush administration," said Wheeler, one of three Democrats on the commission.

"We are going to issue a new public notice on this to make sure that this specific issue is teed up. And we are going to make sure that this -- that designated entities have the opportunity to participate and not to have designated entities as beards for people who shouldn't," Wheeler said.

The reference to "beards" deals with the business entities largely owned by Dish, but not controlled by Dish.

Alaska Sen. Dan Sullivan, a member of the committee, did not address the designated entity program during his questions to the FCC commissioners. Asked Friday about why Sullivan did not raise the issue, his spokesman said: "As attorney general and DNR Commissioner, Senator Sullivan had a broad policy of recusing himself from commenting or having any decision-making power over issues that would exclusively impact Doyon Limited, given that his wife and daughters are Doyon shareholders. As a U.S. senator, he's continuing that policy."

Doyon Chief Executive Officer Aaron Schutt has defended the program as being good for Doyon, consumers and the national treasury, adding that the competition generated about $20 billion more in bids.

The critics say the bidding preferences allowed Dish to inflate the totals and force out smaller companies that actually have facilities in place. It helped Goliath at David's expense, as FCC Commissioner Anjit Pai said, calling it a "rip off" of $3 billion.

Missouri Democratic Sen. Claire McCaskill, who has long questioned Alaska-specific provisions championed by the late Sen. Ted Stevens, said it is "outrageous" that an Alaska Native corporation is regarded as a "very small business."

"One of the entities used was an Alaskan Native corporation -- they don't have any rules about being small. So it is insult to injury because Alaska Native corporations are multibillion-dollar, multinational corporations that get special deals under our law," she said. Doyon has annual revenues of about $300 million.

New Hampshire Republican Sen. Kelly Ayotte asked the FCC to revise the rules, saying, "This isn't benefiting truly small or disadvantaged businesses."

Pai, the senior Republican commissioner on the FCC, said the agency adopted rules in October that made it easier for giant companies to abuse the designated entity program. It has become a "playpen for corporate giants," he said.

He said if the FCC is not willing to crack down on this "corporate welfare," then Congress should do so. In his prepared remarks, Pai said the billions provided by Dish to Northstar shows it is not a small business without access to deep pockets.

But Pai's complaint about the FCC policy -- taken under Wheeler's leadership -- drew a surprising endorsement from the Democratic chairman.

Responding to Pai's comments about reform, Wheeler said, "We could make news. Commissioner Pai and I are going to agree."

"There are people back here who are falling off their chairs," Wheeler told the Senate committee.

"I am glad we can agree on that," Ayotte said.

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