The Federal Communications Commission reportedly plans to reject $3.3 billion worth of discounts Dish Network was set to receive after placing spectrum auction bids through subsidiaries to qualify for "small business" price cuts.

Dish's strategy allowed it to make winning bids on $13.3 billion worth of wireless spectrum while only committing to spend $10 billion. FCC Commissioner Ajit Pai quickly cried foul after the auction, which ended in January, saying that "two companies in which Dish Network has an 85 percent ownership stake claimed over $3 billion in taxpayer-funded discounts. Those discounts came through the FCC’s designed entity (DE) program, which is intended to make it easier for small businesses to purchase spectrum and compete with large corporations. Dish, however, has annual revenues of almost $14 billion, a market capitalization of over $32 billion, and over 14 million customers."

It turns out that Pai and FCC Chairman Tom Wheeler, who are often on opposite sides of contentious issues, agree that Dish shouldn't be able to get these discounts. The Wall Street Journal reported last night that FCC staff has "concluded that the $13.3 billion in winning bids by two companies backed by Dish didn’t qualify for the small-business discounts because their bidding conduct violated the broad spirit of the auction’s rules" and that Wheeler has circulated a draft order to his fellow commissioners to rule on the matter.

The FCC voted to impose new restrictions on small business discounts yesterday, but they don't apply retroactively. It isn't clear exactly how the FCC would justify a decision to reject Dish's discounts. Wheeler's office declined to comment when contacted by Ars today.

Dish told Ars when the controversy first arose that it "fully complied" with the FCC's rules and that its approach "was based on DE investment structures that have been approved by the FCC in past wireless spectrum auctions, including structures used by AT&T and Verizon."

"A rejection of the discounts would leave SNR and Northstar [Dish's subsidiaries, or 'designated entities'] on the hook to pay the additional billions," the Journal also wrote. "They won’t simply be able to walk away. However, Dish said in earlier filings prior to the auction with the FCC that it could take over the spectrum entirely, dropping the complex structures of the designated entities."

Dish has been buying spectrum licenses for years, but it hasn't yet offered cellular service to go along with its satellite TV and Internet. Dish is reportedly trying to buy T-Mobile US, but no deal has been completed.

The auction raised $41.3 billion in total, after subtracting Dish's $3.3 billion discounts. $7 billion will be used to create a nationwide public safety wireless broadband network, and more than $20 billion will be applied to reducing the nation's deficit. The rest will go to other government projects.