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26 February 2015

Dish continues to tantalize the US market with wireless plan hints

The AWS-3 auction may be over, and the bickering over the 600MHz incentive auction just starting, but there are still plenty of mysteries about how those expensively purchased airwaves may be used by one of the big winners, Dish.

The satellite TV company and its chairman Charlie Ergen (now also taking the CEO role) have tantalized the US markets for several years now with hints of possible strategies – mobile, quad play, rural, wholesale. Dish has conducted trials of rural satellite-backhauled services and this week announced that Artemis would be using its spectrum to run a trial network, based on the start-up’s radical pCell technology, in California. A quick source of fees revenue, or  a sign that Dish is interested in leapfrogging traditional rivals by embracing brand new technologies with, if successful, brand new economics.

Or will it just retreat and sit on its spectrum, trading it as an asset? Despite amassing a sizeable amount of admittedly non-mainstream frequencies in the mobile satellite and PCS H Block bands, Dish has been open that it needed more spectrum – now acquired – but also probably a network partner to host its LTE infrastructure, in order to make the numbers add up – whether the services were purely a wireless element for its existing portfolio, or an attempt to be a new entrant in the US cellular game.

It failed to win bids for Sprint or Clearwire, though those companies – now merged and Softbank-controlled – could still be spectrum or network partners, especially as Dish is in a more powerful negotiating position after its accumulation of AWS-3 holdings. On the company’s Q4 earnings call, Ergen said Dish might be willing to purchase yet more spectrum – perhaps  some of the excess 2.5GHz licences Sprint has hinted it may sell. That would add to the existing Dish holdings – 40MHz in AWS-4 (formerly used for mobile satellite and acquired from two bankrupt MSS providers); 10MHz of 1.9GHz PCS H Block; and 25MHz in AWS-3 (assuming those licences are confirmed).

Ergen also said he was open to partnering with a mobile operator like T-Mobile or even a company from outside the cellular space.  TMo is “ a company we think highly of,” he said, while the US cellco’s CEO, John Legere, recently remarked: “I think Dish is a great opportunity, both for the country and for possibly T-Mobile.”

However, Ergen is clearly exploring various options still, at least until the AWS-3 licences are confirmed and he can push the FCC to ensure this band is interoperable with Dish’s AWS-4.  The firm does not feel under pressure to “do something tomorrow”, he told the investors. “We are going to entertain those things that will provide competition to this market place. We will entertain those things that are good for our shareholders,” he said. He remained vague about actual plans, beyond emphasizing that an innovative mobile video service would be “at the core” of any wireless service, harnessing its Sling TV over-the-top video offering.

He added: “If that’s going to happen then we have to have the infrastructure to do that. And so part of that foundation for any wireless project that we can envision that we would do would involve a … heavy dose of video and content and we believe we’ve developed a platform that’s precursor to do that on a wireless network [with Sling]”.

The conditions attached to the AWS-4 holdings are that Dish covers 40% of the population served by that spectrum by 2017, and 70% by the end of 2020. In a client note from research house Jefferies, analysts wrote that Ergen “specifically pointed out that build-out requirements can be extended to 2020, giving the company plenty of time to find the most value maximizing opportunity. We continue to think retention of ownership through leasing is the most ideal outcome given the difficulty in earning proper returns in the currently unsustainably competitive wireless industry.”

That would enable Dish to fulfil its coverage requirements by leasing airwaves to a third party rather than incurring the costs itself, at least until a market or technology change improved the outlook for a new network deployer. It could also run its wireless video services on that third party system as part of a two-way agreement. There has also been some speculation that Dish might lease some of its new AWS-3 spectrum to Verizon, and the latter’s CTO Tony Melone said recently that the firm would be open to leasing if the deal were structured in the right way.