No Regulatory Pressure on Dish to Begin Terrestrial Buildout
Dish Network isn’t under the gun to immediately begin building out its terrestrial wireless network, but it must carefully decide whether it will proceed with a buildout and bid for the adjacent H block, said some wireless and satellite analysts. The FCC’s granting of AWS-4 spectrum to Dish, allowing it to use spectrum for a terrestrial service, put restrictions on its out-of-band-emissions limits to protect H block and buildout requirements (CD Dec 19 p5). The buildout timeframe isn’t tight and gives Dish time to plan its next move carefully, observers said.
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What Dish decides to do for the H block is interesting, said Tim Farrar, a mobile satellite services analyst. Dish can aggregate additional downlink spectrum above 2000 MHz and make more use of the H block even if the uplink spectrum is relatively restricted, he said. “Any decision to make changes would make the H block much more interesting for Dish, and it would also prompt, presumably, Sprint Nextel to be much more interested in that part of Dish’s spectrum.” Sprint was a natural partner for Dish’s buildout, said Paul Gallant, Guggenheim Partners analyst. “Dish is probably frustrated that it [Sprint] is going forward with Clearwire,” he said, referring to the carrier’s agreement to buy 49 percent of Clearwire (CD Dec 18 p7). Last week, Dish bid for Clearwire spectrum (CD Jan 10 p1). “Dish can always roll the dice on some type of deal with AT&T where they can make another run at buying Metro PCS,” Gallant said.
The buildout timeframes give Dish ample time to figure out its strategy, analysts said. The FCC order directs Dish to offer terrestrial service to at least 40 percent of its license areas’ population within four years and at least 70 percent in seven years (http://xrl.us/boasvp). “The good news for Dish is the buildout deadlines are pretty manageable and they have time to talk to everyone and figure out what they want to do,” said Gallant. “Dish now owns a very scarce asset and they'll monetize it one way or another,” he added. “Dish doesn’t have to move incredibly quickly to a buildout because the deadlines are not that tight,” Farrar said. “But it does have to make some decisions about how it’s going to move forward."
Sprint and Dish are the likely bidders for H block, said economist Coleman Bazelon of the Brattle Group, who has consulted for CEA and CTIA on spectrum. The H block is more like the G block “in that it works well with PCS spectrum and everybody thought Sprint would be the favored bidder, but an auction wouldn’t work if there were only one bidder,” he said. Other carriers could use it for the extra capacity, but maybe not quite as efficiently, he said. Any restrictions placed on a band of spectrum are going to reduce its value, he said. “If you fully protect the MSS operation, that’s going to degrade what you can do with the H block. ... If you fully protect the H block, that’s going to require MSS operations to be reduced around the border."
The H block is less easy to use as an isolated block because there are going to be restrictions on the uplink above 1917 MHz, Farrar said. “So what you're getting is potentially 5 MHz of downlink and a couple of MHz of useful uplink spectrum,” he said. “That makes it much less valuable than adding it to Sprint’s existing G block network and making it 7 MHz up and 10 MHz down."
Although H block has some constraints, other carriers can still benefit from its capacity, Bazelon said. “Spectrum is scarce, so even if it’s not somebody’s first choice, it’s potentially a lot better than some non-existent option or a far more expensive option.”