Dish Network has been thwarted on several occasions this year, in its bid to become a major and disruptive force in US mobile and quad play markets. The satellite TV provider failed in bids to take a controlling stake in Sprint and/or Clearwire, but has made it clear it is still on the look-out for partnerships. An alliance with T-Mobile or a network/spectrum sharing agreement with Sprint itself could still be options, but the company may also continue with its initial policy of buying up underused mobile satellite spectrum, and even bid in the biggest US spectrum auctions since 2008, taking place next year. If so, it could come close to Sprint/Clearwire’s massive holdings, assembling a warchest of up to 100MHz, according to calculations by New Street Research.
The firm already has 40MHz of 2GHz S-band spectrum, acquired in 2012 from bankrupt mobile satellite operators TerreStar and DBSD. It has received a waiver from the FCC to run terrestrial-only LTE technology in frequencies which were originally allocated for satellite, but the regulator will tread carefully after the debacle of LightSquared ‘ whose similar plan was green-lighted over-eagerly by the regulator, but foundered on the rocks of GPS interference claims, driving the start-up into bankruptcy protection. And Dish chairman Charlie Ergen has said the firm’s current spectrum holdings are not sufficient to support its plans for an LTE-Advanced network, which will provide mobile services to its TV customers but could also support wholesale activities. He has made it clear that more frequencies are needed, by acquisition or sharing deals, and also that the economics will work far better if Dish has a network infrastructure partner rather than building everything from scratch.
New Street’s Jonathan Chaplin says in a new report that Dish could acquire more spectrum in the coming year than any other company, around 60MHz to add to its existing 40MHz. Based on the current market positions and statements of all the operators, Chaplin speculates that Dish is likely to win the bankruptcy auction of LightSquared’s spectrum in the L-band. He also predicts that Ergen’s company will win the auction of PCS H Block spectrum set for early 2014, since Sprint and T-Mobile have said they will not participate. The H Block is adjacent to Dish’s existing holdings.
Then the TV provider could also participate in the larger FCC auctions scheduled for next year ‘ in AWS-3 and the broadcast incentive sale in 600MHz. That could potentially result in Dish holding as much as 100MHz of spectrum, though this would be a patchwork of different frequencies between 600MHz and 2GHz. That, in turn, would put pressure on Dish to invest quickly in LTE-Advanced technologies for carrier aggregation, and could present some challenges in device availability ‘ an issue also faced by Sprint, which has an idiosyncratic collection of frequencies itself.
If Dish were to assemble spectrum holdings on this scale, it could mount a serious quad play challenge, biting at the big two operators and threatening Sprint and TMo, neither of which have its content and TV subscribers and alliances. It could also make Dish into an acquisition target for Verizon or AT&T, though the logical development would be an alliance with the third or fourth cellco to boost the viability of a challenge to the two leaders.
Of course, Dish’s options will depend partly on how the FCC finalizes its auction rules. Next year will see the biggest sale of new licensed spectrum in the US since 2008, with the FCC preparing its incentive auction for frequencies held by broadcasters. An important staging post has been passed, with a deal between the broadcast industry and the Department of Defense (DoD), to clear some of the band earmarked for the AWS-3 auction next spring.
The National Association of Broadcasters (NAB) and the Pentagon have come to an agreement which will enable the FCC to free up the 1755-1780MHz band as part of the planned auction, which will be the most significant opportunity for operators to increase their licensed spectrum capacity for six years.
The government technology and spectrum body, the NTIA, sent a letter to the FCC detailing the deal, under which the DoD has agreed to move its operations out of the 1755-1780MHz band to the 2025-2110MHz band. That move is enabled by a spectrum sharing pact with the broadcasters, which currently use the higher band for remote news gathering, including video footage transmitted from emergencies.
In March, the NTIA recommended that the 1755-1780MHz spectrum be refarmed for commercial wireless broadband services on a shared basis, and that could pave the way for these two bands to be paired. Scott Bergmann, VP of regulatory affairs for the operators’ trade body, the CTIA, said in a statement: “We are hopeful that the 1755-1780MHz band is ready in time to pair with 2155-2180MHz band, as the industry has long sought. Pairing these bands will maximize their value to industry and consumers alike, and generate significant revenue for the US Treasury.”
The next step will be to work out the details of continued sharing in the AWS-3 frequencies. In its letter, the NTIA said it “appreciates the FCC seeking comment on options for preserving federal users’ access to the AWS-3 bands on federal lands and military training ranges in unpopulated areas that are generally unserved by commercial wireless networks.” It said the DoD sometimes needs spectrum for ‘intermittent or geographically limited tactical and training operations that may not hinder the nationwide implementation of wireless broadband services’.
The recommendations reflect a broader move to a more flexible approach to spectrum allocation in the US, which will influence international policies too. This includes more sharing or refarming of frequencies which are currently controlled, but underused, by a single entity, often a government body or satellite provider. The same thinking has been seen in recent policies around licence-exempt spectrum such as the TV white spaces, which are open for unlicensed wireless broadband applications provided there is no interference with broadcast incumbents.
The NAB’s EVP for strategic planning, Rick Kaplan, told the Reuters news agency: “In July, we knew that the Department of Defense had a plan to move [from the 1755-1780 MHz band] and now it has a place to go. It was sort of a surprise. I’m happy we were able to work together.”
The FCC is seeking further input from the industry on the full AWS-3 auction and its rules, which will include the Pentagon proposals. The cost of relocating the defense services is estimated to cost about $3.5bn.