Is Dish Network the Next Major Cell Phone Company?

Reviewed: June 10, 2015
By FinanceWeb

DISH Network (NASDAQ: DISH) has become a major spectrum power player. For example, in the recent January, 2015 FCC auction of radio frequency blocks, DISH backed two small companies that succeeded in taking substantial amounts of radio frequency spectrum in major metropolitan areas. The bidders qualified for small business discounts that reduced the costs of acquiring the spectrum assets. While each bidder separately lacked a national network, combined, the two bidders succeeded in national coverage.

DISH Moves to the Forefront

In connection with its role as a provider of satellite entertainment to millions of subscribers, DISH has spent billions of dollars over three decades to build a vast potential national network of spectrum coverage. In the recently completed FCC auction, DISH won by proxy $13.5 billion in spectrum rights. Now under review and subject of bid protests, the FCC will rule on the question of the discounts. However, the bigger question remains, what will DISH do with its substantial spectrum assets.

A Long Journey to Cell Phone Readiness

DISH Network has accumulated radio spectrum space rights to blocks of radio frequencies since 2007. This acquisition program has included purchases of failing satellite companies and winning bids at FCC auctions of radio frequency spectrum rights. As a result of spending more than $5 billion, DISH owns or controls frequencies in enough areas sufficient to provide cell phone service across the United States. In 2012, the FCC approved DISH Networks satellite and spectrum assets for cell phone service. Specifically, it permitted the land use of its satellite assets and spectrum. DISH owns forty megahertz of spectrum in uplink and downlink modes called AWS-4. The FCC’s approval of AWS-4 for cell service included coverage conditions. DISH had until 2016 to offer wireless service to 40 percent of the population areas in AWS-4, and until 2019 to cover 70 percent of the population areas.

The Need for Speed and Spectrum

Spectrum is the essential asset for telecommunications. It is comparable to an interstate highway. The road can become clogged with consumer traffic to the point of slowing. Adding new lanes or new roads eases congestion and everyone has a faster trip. DISH wishes to be the new highway that pulls traffic at high speeds to its destinations. The unused spectrum owned by DISH could change the entire dynamics in many big metropolitan areas where Verizon and AT&T compete for subscribers by offering greater speeds and capacities. One must remember, the cutting edge for gaining market share is to offer greater speeds and capacity to consumers, and this requires additional spectrum space.

Buying-In to Cell Phone Service

DISH has tried to purchase some large cell providers including Sprint. Their efforts have been pointed and determined but so far unsuccessful. In The January, 2015 AWS-3 auction, DISH acquired assets in key areas and major markets where spectrum is in short supply including Washington DC, New York, Atlanta, and LA. Many experts feel that DISH seeks to force a buyout by the major competitors AT&T and Verizon. Already working with cell phone providers in a few markets, some analysts predict that DISH will sell or lease its assets to established providers. A growing number of the comments point to T-Mobile, and the German company Deutsche Telekom. They think that Deutsche Telekom would like to sell T-Mobile and that DISH would like to buy it to complete its ambitions to use its satellite and ground-based assets for a major cell phone service. The physical locations of T-Mobile’s infrastructure provide coverage across the United States and compete with the major cell service providers in densely populated major metropolitan areas

Is DISH the Next Big Cell Service

Many analysts feel that DISH is not about to build a network. They point to the idea that DISH could have used its $10 billion in spectrum bid monies to build infrastructure, and provide cell service through assets it had before recent FCC auction. Acquiring T-Mobile would be an excellent vehicle for DISH. The ingredients are in place, and there would likely be a fierce effort from Verizon and AT&T to acquire T-Mobile and solidify their market advantages. Since DISH and T-Mobile are relatively smaller that the giant competitors, the regulatory approval of any sale of T-Mobile would likely favor DISH. It could well be the next big mobile and TV player.