Blog: Firm saves billions by exploiting Native 'loophole' at FCC

Charles W. Ergen, the billionaire who controls the satellite TV provider Dish Network, and his company are about to make a cool $3.25 billion — courtesy of the American taxpayer.

This windfall came from a recent successful auction of wireless spectrum that raised more than $40 billion for the American treasury. But it will be $3.25 billion less than it ought to be, if Mr. Ergen and his clever lawyers have their way.

The reason is that Dish Network bid for licenses through a newly formed vehicle that claimed to be a “very small business” under the Federal Communications Commission rules and was entitled to a 25 percent discount.

At this point you may be scratching your head. How can Dish, a company with a $34 billion market value, be a “very small business”? Indeed, to qualify for the discount, a very small business must have revenue not “exceeding $15 million for the preceding three years.” Dish in its last full fiscal year had almost $14 billion in revenue.

For the first loophole, the lawyers went to Alaska.

Doyon is an Alaska Native regional corporation, created as part of a federal government settlement of native land claims back in the 1970s.

Based in Fairbanks, Alaska, Doyon has more than “19,000 shareholders, and is the largest private landowner in Alaska,” according to its website. It has at least 12 different operating companies, including one that operates seven drilling rigs on the Alaskan North Shore. It purpose is to serve the Native American community in central Alaska, and its shareholders are all Native American descendants.

Doyon owns 15 percent of Northstar, a stake it acquired for $120 million; Mr. Ergen’s Dish owns the other 85 percent. Even though Dish is the majority owner, Doyon was designated as the manager of Northstar.