By Ryan Knutson
Verizon Communications Inc. says rival Dish Network Corp.'s
coordinated bidding with two affiliated entities in an Federal
Communications Commission spectrum auction went too far and may
have violated the agency's rules.
The complaint, voiced in a filing with the commission late
Friday, adds a new wrinkle to the debate over Dish's aggressive
strategy in the record auction that drew $45 billion worth of bids
and closed in January.
Rivals have already complained that Dish distorted the results
and unfairly claimed $3.3 billion in discounts set aside for small
businesses. Now, Verizon is alleging that the company's complex
bidding strategy may have violated antitrust rules.
Dish has said it followed the FCC's rules and that the auction
was fair. Some analysts have said in the end that Dish's entities
submitted winning bids that rivals could have topped had they
chosen to and that the auction's record $45 billion in bids
accurately reflected demand for spectrum amid a surge in wireless
Internet use.
"We are confident that we fully complied with all legal
requirements," a Dish spokesman said, "including antitrust
law."
Dish entities won $13.3 billion in bids at the auction, behind
AT&T Inc.'s $18.2 billion but ahead of Verizon's $10 billion.
Verizon, the country's largest wireless carrier, said the bidding
got out hand and that it will rely on new technologies to reduce
the need for additional spectrum in its network.
Dish's surprising performance has drawn the ire of wireless
carriers and scrutiny from lawmakers and some FCC commissioners.
Dish didn't technically win any of the spectrum licenses, but
worked with two small companies that it backed financially and in
which it owned 85%. Those entities were eligible for a 25% discount
aimed at small businesses, allowing Dish and its partners to save
the $3.3 billion.
Dish disclosed ahead of the auction that it would coordinate its
activities with the two entities--called Northstar Wireless and SNR
Wireless--which is allowed under FCC rules. But the rules also say
that disclosure of bidding agreements "will not insulate a party
from enforcement of antitrust laws."
In a meeting with the FCC Wednesday, Verizon told agency
officials that Dish and its partners suppressed competition,
divided markets and coordinated in ways that reduced their overall
bill, based on a Verizon analysis of auction data.
During the auction, the identities of the participants were
anonymous. Dish, SNR and Northstar placed coordinated bids that
gave other participants a false impression there was more
competition than there actually was, Verizon said in an FCC filing
that described its meeting with the agency.
Dish, SNR and Northstar all participated in the auction, but
only SNR and Northstar won licenses, and only SNR and Northstar
were eligible for the small business discounts.
In 190 instances where both SNR and Northstar submitted
identical winning bids, the company accepted the outcome of the
FCC's random choice of a winner, Verizon said. That only happened
five other times throughout the auction for all other bidders,
suggesting the Dish entities had planned to coordinate and allocate
licenses between them, Verizon said.
SNR and Northstar's combined spectrum winnings allowed them
together to cover the entire U.S., even though there were broad
areas where each didn't win any licenses. "This result is virtually
impossible to explain in the absence of coordination and
collusion," Verizon said.
The FCC is still reviewing SNR and Northstar's applications for
the licenses they won. Earlier this month, the agency approved the
applications for Verizon, AT&T and T-Mobile.
Both Verizon and AT&T complained to the FCC earlier this
year that Dish's tactics in the auction distorted prices.
Write to Ryan Knutson at ryan.knutson@wsj.com
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