Dish Network’s Ergen Stands by His Company’s Spectrum Strategy

Dish Network’s play for spectrum comes down to having options, said Dish Chairman Charles Ergen. Dish is expected to end up with about a $5 billion investment in spectrum, he said Friday on Dish’s Q4 earnings call. He also said he’s worried about the media environment if a proposed merger of Comcast and Time Warner Cable is approved.

Nationwide, continuous blocks of 20 MHz spectrum are the “beachfront property of spectrum” and mid-band spectrum like S-band “is a good cross between propagation and capacity,” Ergen said. Dish would potentially have interest in participating in the 600 MHz auction, he said. Downlink spectrum is materially more valuable than uplink spectrum, he said. “We have as much downlink spectrum potentially as everybody other than Sprint.” Dish should end up “in theory, with a little over $5 billion investment in spectrum and have about 50 MHz of potentially downlink spectrum,” he said.

The forthcoming AWS-3 auction includes some uplink spectrum as well as paired spectrum which are frequency bands that are of interest to Dish, said Tom Cullen, executive vice president-corporate development. “We'll wait to see how FCC rules come out to see if the rules are favorable for us.” Dish plans to watch the progress toward the auction closely, he said.

Based on the agreement Dish reached with the FCC on its AWS-4 spectrum, Dish has flexibility to convert uplink to downlink, Cullen said. This requires another phase with Third Generation Partnership Project, he said. “We're really waiting to see what the totality of our spectrum position is, which may be influenced by upcoming auctions, including the H-block auction,” he said. Auction observers continue to see Dish as the victor in the auction, which has been ongoing since Jan. 22 (See separate report in this issue). The auctions this year will influence Dish’s thinking on what it will do with downlink spectrum, Cullen said.

Over-the-top content is probably going to happen in many forms and it will expand, said Ergen. Technology can provide a better customer experience, he said. “It’s going to bring an unlimited number of competitors in the marketplace because virtually anybody can start an OTT service.” Part of Dish’s wireless strategy could play into that, he said. “When you're outside the home, in many instances, the only way you can get access is through wireless.” Programmers have been fairly reluctant to transition, he said. “But a number of them and content owners are looking at that … There’s nothing imminent about a nationwide OTT service that I can see, but when they're ready, we'll be ready."

Although Dish hasn’t taken a formal position on the proposed deal between Comcast and TWC, Ergen said he doesn’t see it as a “positive” for certain players in the media landscape. Joining together the largest and fourth-largest providers puts pressure on everybody in the video and broadband businesses, he said. “There’s nothing that I can see that’s positive about it for anyone in the video or broadband or content business.” A combined entity doesn’t hurt the case for consolidation among satellite providers, Ergen said. If the largest provider partners with the fourth-largest provider, “it would be hard to see why you couldn’t put the number two and three providers together,” he said.

The merger could have implications for the retransmission consent process, Ergen said. Comcast and TWC compete for content and when they combine and buy content, they can buy content cheaper than anybody else, he said. The best example is retransmission consent, he said. “If Comcast/Time Warner had taken on CBS, the outcome would have been the exact opposite,” he said, referring to the dispute last year between TWC and CBS. Dish doesn’t have that kind of scale, he said. Comcast/Time Warner won’t have to send a check to broadcasters, he said. If the deal is approved, the environment will be materially different, he said. Dish is still negotiating a carriage deal with Disney, Ergen said. Each side is taking time to get it right, he said. Working toward a long-term deal makes it difficult “because you can’t predict the future in terms of technology,” he said.

Ergen said he’s impressed with Aereo’s innovation and Dish will continue to work with its broadcasting partners no matter the outcome of pending Aereo cases, he said. Aereo is starting a conversation about a better consumer experience, he said: “If they're successful, I think it will help us."

Dish reported total revenue of $13.9 billion for 2013, up from $13.2 billion in 2012, in a news release. Dish activated about 2.66 million gross new pay-TV subscribers, compared with about 2.74 million subs in 2012, it said. Dish also signed agreements last week with EchoStar to transfer five of Dish’s satellites and $11 million in cash “in exchange for shares of two series of preferred tracking stock, and for Dish to lease back certain satellite capacity on those five satellites,” it said.