Double Standards, DISH and Designated Entities

The FCC should have been taking a victory lap following its $45 billion AWS-3 auction, which closed in late January. Instead, the agency was left fending off widespread criticism that “loopholes” in its auction rules effectively gave billions of dollars in subsidies to one of the largest corporations in the country.

These criticisms arose from disclosures that two companies in which DISH Network reportedly has an 85 percent stake claimed about $3 billion total in “bidding credits” when acquiring licenses in the FCC’s AWS-3 auction. Bidding credits allow a bidder to reduce by some percentage its actual payment on its winning bids following an FCC auction. In this instance, DISH’s interests in Northstar Wireless and SNR Wireless – smaller companies with “designated entity” status under the FCC’s auction rules – will allow DISH to reduce its bill to the Treasury from around $13 billion to about $10 billion. Unsurprisingly, the headlines generated across the political spectrum decried these “government handouts” to large corporations and the “rip[ping] off” of U.S. taxpayers.

While the public reaction focused on the massive subsidies afforded to DISH, broadcasters in particular were left scratching their heads. Less than a year ago, the FCC decided to treat a broadcast TV station that sells more than 15 percent of the advertising time of another TV station in the same market as owning that second station. As a result, stations in most markets are forbidden from selling more than 15 percent of the ad time of another station under the FCC’s decades-old broadcast ownership rules.

How in the world does the FCC square its treatment of various forms of ownership? Why can’t a small TV station in South Dakota or South Carolina sell 20 percent of the advertising time of another station without the FCC saying it “owns” that station, when DISH can possess an 85 percent interest in a company without the FCC counting that as ownership?

These diametrically opposed policies cannot be reconciled or justified. The FCC decided to attribute TV joint sales agreements (JSAs) under its broadcast ownership rules due to the supposedly significant influence that the joint sale of even small amounts of advertising time would provide one TV station over another. Indeed, the FCC is so convinced of the supposed harms of these JSAs that even long-established agreements expressly approved by the Commission must now be unwound, regardless of the detriment to the two stations.

But now, remarkably, the FCC appears poised to determine that DISH’s 85 percent interest does not so significantly influence the two designated entity companies, thereby resulting in a free $3 billion to DISH in the AWS-3 auction. Even for broadcasters unfortunately inured to inconsistent, unfair and anti-competitive regulatory treatment, this outcome reaches a new low.

NAB and its members have for decades fought the FCC’s disparate restrictions on the multiple and cross-ownership of television and radio stations – restrictions that do not apply to competing video and audio providers, including cable, satellite and online. The FCC must stop this unfair treatment if it truly cares about competition, diversity and localism. Rather than imposing uncompetitive ownership structures on broadcast stations that provide free local service, while at the same time shelling out billions in subsidies to pay-TV operators that charge consumers ever-higher subscription fees, the Commission should reform its rules to let broadcasters compete on equal footing.