Dish may need partners for wireless network gambit

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Phil goldsteinDish Network fleshed out its wireless plans with a filing to the FCC on Monday, essentially formalizing its desire to be the nation's next 4G wireless carrier.

In the filing, Dish asked the FCC to allow it to combine the spectrum licenses it acquired from TerreStar Networks and DBSD North America in bankruptcy proceedings--40 MHz of 2 GHz S-Band spectrum. Dish also wants the FCC to grant it a waiver to offer terrestrial-only devices to customers on a proposed hybrid satellite-terrestrial mobile broadband network using LTE-Advanced network technology--similar to the conditional waiver the FCC granted wholesale LTE provider LightSquared.

Dish said that its planned network would "consist of mobile, portable, or fixed broadband services individually or a combination thereof. Dish expects that the consumer equipment will include broadband-capable tablet computers, among other devices. Once the network is deployed, consumers will be able to use their devices for high-speed Internet access as well as a myriad of IP-based, over-the-top applications, including video. Dish anticipates offering broadband services both on a stand-alone basis and in a consumer-friendly bundle with its multichannel video services."

There are still numerous unanswered questions about the proposed network. One major sticking point is what the buildout requirements for the network will be. Dish is deliberately vague in its filing, though the company said it is prepared to work with the FCC on developing a buildout schedule "consistent with FCC precedent and based on the buildout principles established" in Sprint Nextel's (NYSE:S) combination of its spectrum assets with Clearwire. According to BTIG Research analyst Walter Piecyk, the Sprint buildout requirements were 15 million POPs in four years and 30 million POPs within six years, substantially less than what LightSquared committed to in order to get its waiver for its L-Band spectrum. Pointedly, in its filing, Dish said its 2 GHz S-Band spectrum "will not raise the technical issues that have hampered the use of the MSS L-Band, such as the interleaving of the operators' assignments and the severe interference claimed by systems operating in adjacent spectrum."

"It's a first step in the negotiation," TMF Associates analyst Tim Farrar told me. He said that to get the waiver, Dish will have to commit to a buildout target that is "dramatically greater" than 30 million POPs over six years. The FCC has declined to comment on the topic, but has made it clear in its National Broadband Plan that S-Band spectrum holders cannot just sit on their airwaves.

If Dish gets the FCC approval that it needs, what is next? SNL Kagan analyst Mariam Rondeli pointed out that Dish will need a lot of money and possibly outside engineering expertise to build its network. As Clearwire (NASDAQ:CLWR) has shown, it is extremely difficult to build a greenfield network without incurring significant costs. Dish, which shelled out close to $2.8 billion for the S-Band spectrum, can't afford to plow an endless amount of money into the venture. The most logical solution would be for Dish to find a partner. Already, Dish CEO Joseph Clayton said earlier this month that the company would be open to wireless partnerships. But what wireless company would make a good partner for Dish? 

Farrar said he could imagine the FCC mandating some kind of wholesale arrangement or partnership as a condition of the waiver. He said MetroPCS (NASDAQ:PCS) might be a natural partner. Moreover, it's in Dish's interest to partner with a company with existing infrastructure, especially if it needs to meet aggressive buildout timetables. "They [Dish] are not going to commit to something the FCC would find attractive in terms of scale without partners," Farrar said.

Already, LightSquared has teamed with Sprint to defray the costs of building its own planned LTE network--Dish might wish to do the same. "There's an aversion by investors to Dish spending billions of dollars on their own," Piecyk told me. He said it's not necessary that Dish find a partner, but said, "if they, in fact, want to build, I would say it's likely."

It's too soon to say how Dish's plan will progress. The initial roadmap the company submitted to the FCC will likely change before it's finalized. However, it seems clear to me that if Dish wants to be the latest to show up at the 4G ball, it will have to find a dancing partner. --Phil