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DISH balancing spectrum build-out deadlines with legal delays

DISH Network Corp. has spent years acquiring spectrum, but now the timelines for how and when the company may use its purchased spectrum are not lining up.

According to a Form 10-Q filed Aug. 3, DISH, since 2008, has directly invested more than $11 billion to acquire certain wireless spectrum licenses and related assets. In addition, it has invested more than $10 billion in noncontrolled entities, for a total of more than $21 billion spent over nine years. While some of the spectrum acquired over the years is subject to looming build-out deadlines from regulators, other spectrum will not be available for use for years.

Specifically, the 700 MHz E Block licenses DISH purchased in 2008 and the AWS-4 licenses acquired in 2012 are subject to build-out requirements from the Federal Communications Commission stipulating the satellite company must build out a network that covers at least 70% of the population in each of its license areas by March 2020. And the 2 GHz H Block spectrum acquired in 2014 is subject to an interim build-out requirement, which states that by April 2018, DISH must offer service to at least 40% of each license area.

If the interim deadline is not met, final build-out requirements get pushed forward two years, meaning that DISH must provide reliable signal coverage and offer service to at least 75% of the population in each license area by April 2022 rather than the original deadline of April 2024.

At the same time, however, the 600 MHz spectrum DISH purchased this year will generally not be clear and available for wireless use until the FCC completes the repacking process, moving the TV stations currently occupying the spectrum to lower bands. The repacking process is set to take more than three years. Additionally, the AWS-3 spectrum licenses purchased by entities in which DISH has made noncontrolling investments is tied up in litigation.

Speaking during an Aug. 3 earnings conference call, DISH CEO and Executive Chairman Charlie Ergen said the combination of deadlines and delays has made for a complicated timeline.

"Our dream would be to go to the tower one time and build out our spectrum in the 5G standard," said Ergen. "Because there's tremendous cost savings in doing that ... every time you climb the tower it costs you thousands and thousands of dollars."

The reason that dream is impossible, Ergen said, is because of the build-out deadlines from the FCC.

"We are building the network using our E Block and AWS-4 spectrum. And we're doing that by the next 947 days, not that I'm counting," Ergen said.

At the same time, though, he noted, "The hardware for 5G is not ready, and our 600 MHz spectrum is not ready, and our AWS-3 spectrum is still in litigation. So it's hard to plan for those."

As a result, DISH sees its network build-out occurring in two phases. The first phase, he said, is building a narrowband network specialized for low power machine-to-machine communications. This network will be designed to support the internet of things. The second phase, according to Ergen, will be to layer in 5G connectivity as the technology advances and hardware becomes available.

"We won't even start planning [5G] in that network until we've got our IoT network planned, which should be totally planned by 2018. And then we can start thinking about phase two," the CEO said.

In terms of the competition DISH will face as it enters the wireless market, Ergen said he is not concerned as he sees enough room in the industry for DISH's specific strategy to succeed.

"Obviously AT&T [Inc.] is getting more heavily into the content side of the business. Verizon [Communications Inc.]'s got more of a small cell strategy. And T-Mobile [US Inc.] is just taking away a lot of the [consumer] pain points that are out there," Ergen said during an Aug. 3 earnings conference call, adding, "There's no reason that each of those strategies can't work."