Dish Network remains the wild card. It holds a large portfolio of spectrum in various bands and is building an NB-IoT network – which it labels 5G – primarily to satisfy FCC requirements to put spectrum to active use. It has talked about more ambitious 5G plans – but it did the same about 4G, and failed to deploy a network. Many have assumed it was sitting on the spectrum as assets to be sold at the right moment, but analysts at MoffettNathanson recently downgraded Dish shares (from neutral to sell), on the basis that the company had missed its opportunity to sell its airwaves.
Craig Moffett believes a spectrum sale is the only good outcome from Dish’s “bewilderingly complex” decision tree, which also includes assorted network build-out scenarios – but that this will now be impossible for a key portion of the portfolio, in the AWS-4 band.
“A spectrum sale (and at a price above that which is already implied in Dish’s stock price) is the ONLY positive scenario for the stock,” Moffett wrote in a research note earlier this month. “Whether by choice or by necessity, it now appears Dish has no alternative but to build a network. For all intents and purposes, the window for a spectrum sale before Dish’s March 2020 AWS-4 build-out deadline has already closed.”
This is because, in Moffett’s view, there would not be enough time for a buyer of the spectrum to clear FCC regulatory hurdles, including a public interest review, while also satisfying the build-out conditions associated with the band. Even Dish has acknowledged that the FCC may not find its phase one build-out in the band, focused on NB-IoT, adequate. That would push Dish to accelerate its far more expensive phase two plan, based on actual 5G – or risk forfeiting its most valuable spectrum back to the FCC. Moffett calculates that there might be a “fleeting” opportunity to sell these airwaves, in which case they would be worth about $26.4bn. But if Dish were to forfeit the spectrum, its equity would be worth zero. He believes that a full acquisition of Dish – much mooted a few years ago – is now unlikely, as the potential acquirers have moved on to other things (Sprint owner Softbank and T-Mobile in particular).
The head of the FCC’s wireless bureau, Donald Stockdale, recently contacted Dish “to request updates and more detailed information on your build-out plans for the 53 MHz of low- and mid-band spectrum that is apparently lying fallow in these bands”. This suggests that the FCC is considering action against Dish for buying spectrum and then not using it. Dish told the FCC earlier this year that it had not met the interim build-out deadline for its licences in three bands – AWS-4, 700 MHz Lower E Block and H Block.
As a result, Stockdale has asked Dish for more details on its build-out timelines (and potential extra delays), technology, coverage plans, and handset strategies. Dish chairman Charlie Ergen has said the company will spend $500m to 1bn between 2018 and 2020 on its NB-IoT deployment and at a trade show in May, he offered some additional details, saying: “We’re not going to spend at least $10bn or more on a 5G network. We don’t have that kind of capital on our balance sheet today.” Instead, Dish would operate like a start-up, building to meet specific opportunities, much as it did when it entered the satellite market.
At that time, the FCC had offered a summary of Dish’s proposed two-phase plan, saying that “in phase 2, Dish would deploy using its other spectrum holdings, and would ‘upgrade and expand network to full 5G to support new use cases in addition to mobile broadband services.’ They also discussed plans to: (1) take delivery of network equipment and begin installation of the network this year, and (2) delay the completion of its phase 2 deployment in low- and mid-band spectrum until after 600 MHz spectrum is cleared on a nationwide basis in July 2020.”
As with the cablecos and other new entrants to the wireless market, Dish’s opportunity to behave like a start-up will lie in targeting enterprise and wholesale business cases which have been neglected by the major MNOs. Verizon and AT&T have significant programs for certain verticals, such as automotive, but there are many other, smaller IoT and enterprise segments which will be better met by specialist service providers, which could ride on a neutral host, IoT-optimized network.
Amazon – which is trying to increase its position in the wireless industry, especially by championing shared spectrum options – would be a key strategic partner for Dish, or another new entrant. The thinking behind a tie-up between Dish and Amazon, according to reports which surfaced last year, is that the retailer would help fund the build-out of a network in Dish’s spectrum. For Amazon, that would bring it a mobile network which could be optimized for its own ends, from internal IoT usage to AWS services to supporting mobile Prime services.
This would come at far lower cost than seeking its own spectrum, but with better control than an MVNO or WiFi approach. For Dish, the investment and the anchor tenant would make the economics work at last, and it could also launch mobile options to its TV customers in bundles, to make it more competitive with AT&T’s DirecTV and with cable providers.
One way in which such a venture could deliver more than the sum of its parts would be in the IoT. Dish already plans an NB-IoT roll-out, and while this looks largely designed to address FCC build-out demands associated with some of its spectrum, it could be expanded in scope to provide the first US network fully optimized for machine-to-machine purposes, rather than bolted onto a mobile broadband platform and business model.
The resulting network could be used by Amazon, as the anchor customer, for its own logistics purposes (it is an increasingly heavy user of wireless delivery and tracking, including drones); and to offer IoT services to enterprise AWS customers. AWS could layer new services onto a wireless network over which it had significant control. The recently launched AWS Greengrass edge cloud platform could be an effective way to address low latency IoT requirements, for instance, if integrated into the mobile network via ETSI MEC (Multi-Service Edge Computing).