March 23, 2015 / 7:47 PM / 4 years ago

UPDATE 1-U.S. FCC inches toward reforming airwave auction discounts

(Adds Dish comment, 9th paragraph)

By Alina Selyukh

WASHINGTON, March 23 (Reuters) - U.S. regulators are moving forward with plans to change the rules for government airwaves auctions to prevent big companies from tapping a discount program intended for small businesses, according to an FCC official familiar with the matter.

Federal Communications Commission Chairman Tom Wheeler on Monday circulated a so-called “public notice” to the rest of the commissioners, seeking further comments on specific proposals for how to reform a bidding discount program that has recently come under fire, the official said.

The program rules drew fresh scrutiny earlier this year after two partners of Dish Network Corp received $3 billion of discounts in the FCC’s latest auction of wireless spectrum. The issue has taken on added importance as the FCC prepares for what is expected to be its most complex and biggest auction yet in 2016.

In a relatively common process for FCC auctions, Dish and partners invested in separate companies with little to no revenue that can receive a 25 percent discount as so-called “designated entities.”

The agency is now reviewing those entities’ legal and financial independence from Dish to confirm the discount. The FCC is expected in coming days to begin accepting petitions from the public to reject Dish partners’ auction applications as part of the regular review process.

The FCC has faced an outcry from Dish’s competitors and Republican commissioners who say the rules create unfair loopholes.

Wheeler told lawmakers in the U.S. Senate last week that he intended to “fix” the program’s rules to ensure that designated entities don’t serve as cover for big companies that should not qualify for discounts.

Monday’s action moves the FCC closer to developing a specific plan for how to change the rules so that they help small, rural and minority-owned businesses compete against big companies in auctions.

A Dish representative in a statement on Monday said the company looked forward to working with the FCC as the rules for the upcoming incentive auction are evaluated. (Reporting by Alina Selyukh, editing by Christian Plumb and Tom Brown)

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