Dish Plan for 700 MHz Band Still Uncertain, Says Ergen

Dish Network remains uncertain of how it will use its large holdings of 700 MHz spectrum, Dish CEO Charlie Ergen said Friday during the company’s Q3 conference call. Dish paid about $712 million for 168 E-block spectrum licenses in 2008, covering most of the U.S.

The company also recently encouraged the FCC to update spectrum bidding rules before the next auction, a possible indicator it’s considering bidding on more 700 MHz spectrum. Some believe Dish plans to use the spectrum for mobile video, though Ergen raised the possibility of a sale of the spectrum somewhere down the road. Dish’s revenue grew 10.9 percent to $3.2 billion compared to Q3 last year. Net income more than tripled from the previous year to $245 million. The revenue and income gains came despite the fact that the company lost 29,000 net subscribers in the quarter.

The timing for the 2008 purchase may have been off because the technology wasn’t ready to “take advantage of the spectrum” and “still may not be,” said Ergen. The spectrum may still serve as a building block for something Dish wants to do in the future and it continues to be a good “inflation hedge,” he said. One small success has been Dish’s resisting the temptation to build out the spectrum without a concrete plan, he said. At some point, the spectrum will be valuable to somebody, he said. Ergen declined to detail EchoStar’s role in TerreStar’s bankruptcy during the call. EchoStar recently said it would provide the mobile satellite services provider $75 million in debtor-in-possession financing.

Ergen offered praise for the FCC’s net neutrality efforts, though he noted that codifying rules may have gotten more difficult with Republican gains in the election. Dish has been vocal in its support for net neutrality as necessary to increase innovation and competition. Ergen also said spectrum should be divided up in a more rational way, though he said he supported the agency’s current efforts to increase spectrum efficiency.

Dish has some more work to do before Internet connectivity through the set-top box is seen as a necessary component, said Ergen. He said Dish is training technicians to hook up the boxes to the Internet during other installations, but costumers don’t seem to be convinced its worth the “hassle” to connect the boxes so far. Although current hardware makes it generally easy to do, the operating system needs improvement, he said. Also, customers are starting to connect through other means, such as Internet-ready TVs, said Ergen.

Elsewhere, ViaSat has started taking design proposals from manufacturers for its second satellite, ViaSat-2, the company said during its Q2 conference call. The company is following a similar path with the satellite that it took on its ViaSat-1, expected to launch next year. It will likely look to ViaSat-2 to add new coverage or capacity or both to higher density regions, CEO Mark Dankberg said. In these preliminary stages, the company is simply looking for confirmation from manufacturers that a new satellite will be able to meet the objectives, he said. Broadband stimulus funds won by ViaSat subsidiary WildBlue likely won’t start flowing until next year as the Rural Utilities Service completes an eligibility database, said Dankberg. The funds are to be used to subsidize broadband service to unserved regions. Revenue grew 23 percent to $197.9 million in the quarter while net income fell 14 percent to $7.8 million.