Ergen: We May Have to Sell Wireless Spectrum
But also says it is growth business he wants to be in; calls video "mature" and "very competitive"
By John Eggerton -- Broadcasting & Cable, 10/3/2012 2:26:25 PM
"This is going to be a tough project for us, but it's not our first rodeo." said Ergen at the PCIA: wireless Infrastructure Association convention in Orlando Wednesday.
The "project" is getting into the mobile broadband business. Dish bought 40 MHz of spectrum from a pair of bankrupt companies and asked the FCC to allow it to use the spectrum to deliver terrestrial wireless broadband service. The FCC put that request on hold until it issued its own proposal to loosen up rules on satellite spectrum use, which it has now done.
Dish bought 40 MHz of spectrum from a pair of bankrupt companies and asked the FCC to allow it to use the spectrum to deliver terrestrial wireless broadband service. The FCC put that request on hold until it issued its own proposal to loosen up rules on satellite spectrum use, which it has now done.
One of the things making it tough was the FCC's inactivity on that initial request, he suggested.
Dish had contemplated partnering with another company, for example, but a couple of those potential partners, T-Mobile and MetroPCS have just agreed to merge.
Ergen said one thing you need when dealing with regulatory uncertainty is more than one strategy.
"It is not a surprise that there would be consolidation in the industry. We hoped that we would have had our license before consolidation started to happen because that would have allowed us to participate and you certainly have more options when there are a lot more people on the table that you can potentially partner with."
He said that it was "disappointing" that Dish was not yet in the game when the SpectrumCo cable spectrum was on the table and now the T-Mobile/MetroPCS plan, but he also said that Dish still had a lot of options. One of those may not be building a network from scratch. He said sharing networks, sharing towers, and sharing infrastructure makes sense.
"We really hoped when we started this project that we would actually build a network from scratch, but the timing doesn't make a lot of sense anymore."
Ergen was asked whether he might sell the spectrum to AT&T, something it was suggested an FCC under a President Romney would look favorably on.
Ergen responded: "We may end up selling the spectrum. I am not saying that is an impossibility. We are not suicidal." He said the company had a responsibility to its shareholders, adding that he was one of the bigger ones. But he said he would not be giving a speech at PCIA if he intended to get out of the business. "We prefer not to sell the spectrum," he said, adding that was because wireless was a business he wanted to be in.
Ergen said that with the video marketplace having matured, where he suggested there was plenty of competition, he was ready to move into a mobile broadband market where bit consumption was doubling annually.
"We are in a business today where people are not watching more hours or minutes of TV. There are four competitors in almost every market. There's the cable company, the phone company, DirecTV and us, and there's the Internet with an unlimited number of players. So, it's a very competitive market." He called it "a decent business, but a mature one."
Why would our board of directors want us to "keep going" in the video business, that's not growing, and not get into the wireless business, which is doubling every year. "why wouldn't you want to get into that business?"
But with only 40 Mhz of spectrum, Ergen said that was not enough to become the disruptive force in the wireless space he wants to be. He said his spectrum was good for re-use or densely populated areas but "horrible spectrum" for rural America, so Dish will need more. He said so, too, do Leap, and Sprint, and T-Mobile and MetroPCS. What about AT&T and Verizon? "There are only two guys that only need more spectrum," he said. "They say they do, but they don't."
Ergen said he would be interested to see what the FCC does about spectrum caps since "not all spectrum is equal." The FCC has opened a proceeding to revise its approach to regulating spectrum concentration.
"The government does pick winners and losers," he said, and what keeps him up at night is what the government may do. "Policy sometimes gets caught up in politics," he said, citing LightSquared, though he said some of their problems were of their own making.
Ergen said he also wanted to get in the business because he thought he could come up with a better phone and apps for how to use it. "We're certainly not as experienced or as knowledgeable or have the scale of some of the bigger players. Now that I understand more about the business, they have done a great job of building out their networks."
Asked if the FCC gave Dish the green light tomorrow how long it would take to monetize Dish's investment, Ergen couldn't say, but he did say the company was ready to invest billions. Dish has invested $4 billion already for the spectrum licenses, and has $6 billion on the balance sheet. He did say, to a smattering of laughs, that he would try to get higher returns than a money market or T-bill. He also said that if Dish partners with someone, the return would be faster. "If you build it from scratch it would take much longer and might be impossible.
Cable operators in the SpectrumCo. partnership that sold spectrum to Verizon earlier this year said they had initially planned to build out a network, but concluded there was not a business plan in that overbuild.
Ergen suggested DISH's wireless play could hardly be a tougher plan than the one that created Dish.
"I am telling you, this has got to be easier than a business plan of launching a satellite to compete against General Motors (which then owned DirecTV), the largest industrial corporation in the world. We are going to compete against TCI, AT&T and Comcast. We can't get any programming; we don't have local [TV] channels. We launch on a Chinese rocket that has a 50% success rate. And that was my business plan." As bad as the wireless business plan may sound to some people, he said, "it's better than that plan."
Ergen called that wireless "plan satellite TV, take two" (he avoided the "2.0" label).
Ergen did not reference the FCC's current proposal to sunset the program access rules, but he did put in a plug for them. The rules were created to help spur the growth of satellite TV. "Government was able to pass program access laws that said: 'cable companies, you must sell to other competitors. That is where government and private business work."
He said that was good for cable companies because it forced them to become more competitive, including becoming a virtual monopoly in broadband. "They really have a great product."
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