Ergen: We May Have to Sell Wireless Spectrum - Broadcasting & Cable

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"
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Dish Network chairman Charlie Ergen is urging the government
to OK his company's wireless broadband play so he can try to replicate his
satellite success in that growth market.

"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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