By Ryan Knutson 

Dish Network Corp. responded Monday to critics of its bidding strategy in a recent auction of wireless licenses, saying it followed all the rules and helped competition.

The company came under fire from rivals and some lawmakers after it won big at the $45 billion auction that ended in January. Dish itself didn't win any licenses, but the two firms it bankrolled placed $13.3 billion in winning bids--second only to AT&T Inc.'s $18.2 billion--then claimed $3.3 billion in discounts aimed at small business.

Dish's reply came in a response to a letter sent last month by Sen. John Thune (R., S.D.), who suggested Dish's strategy may have violated auction rules. AT&T and Verizon Communications Inc. have also argued that Dish's coordination with the firms suppressed competition in some instances and created the false impression of increased demand in others.

Dish said auction rules allowed it and the two firms, called SNR Wireless and Northstar Wireless, to collaborate on bids and discuss strategy during the auction because it disclosed the arrangement in advance. Dish also pointed to past government auctions where other carriers have collaborated in similar fashion with smaller firms.

The company said its participation in the auction was good for competition, and its collaboration with SNR and Northstar helped the firms beat out industry giants AT&T and Verizon for some licenses they may otherwise have lost.

"Some critics have taken a very narrow view of the auction and claim that Northstar and SNR cost the American taxpayers over $3 billion," Dish wrote. "But that approach takes the bidding credits out of context and ignores the results of the auction as a whole."

Dish said its collaboration with SNR and Northstar allowed the firms to compete more aggressively and therefore increased the auction's overall haul by as much as $23 billion. "That result should be applauded," Dish said.

"The fact that some auction participants are unhappy because they did not win certain spectrum in the auction at the prices they wanted is not evidence that competition was harmed," Dish wrote.

The airwaves at auction are used to carry signals sent to and from cellphones. They are at a premium now as soaring use of cellphones to send and watch videos is forcing carriers to boost capacity.

Dish doesn't offer wireless service but says it is exploring the possibility. Owning these airwaves, it wrote, could increase competition in the wireless industry by supporting a new service provider.

The Federal Communications Commission, which administered the auction, is currently reviewing Dish's application. The Wall Street Journal reported last month that agency officials were skeptical of Dish's tactics and could reject the $3.3 billion discount.

Write to Ryan Knutson at ryan.knutson@wsj.com

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