Report: FCC may restrict part of Dish Network's spectrum holdings

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The FCC is close to finalizing rules for the satellite spectrum Dish Network owns, and is likely going to allow Dish to deploy terrestrial-only service, according to a report in the Wall Street Journal. However, the report said the FCC's rules will also include interference protections for the PCS H Block, a move Dish has argued could threaten the viability of a portion of its spectrum.

The report, citing unnamed sources, said that the FCC may require Dish to shift its spectrum holdings to avoid interference with the adjacent H Block, which Sprint Nextel (NYSE:S) hopes to bid on and use for LTE service. Dish has argued repeatedly against such a move. Dish Chairman Charlie Ergen told the Journal last week that such a move "would be a game changer for us," making his bid to enter the wireless industry "increasingly risky."

An FCC spokesman did not immediately have a comment on the report.

Dish controls 40 MHz of MSS S-band spectrum in the 2 GHz band, which the FCC has renamed AWS-4. Dish received approval from the FCC in March to get access to the mobile satellite spectrum, but the FCC did not grant it a waiver to offer terrestrial-only services on the airwaves, pending its final rules. Ergen has bemoaned what he describes as a sluggish regulatory process, a situation he has said might force him to sell the spectrum.

Dish's spectrum specifically runs from 2000-2020 MHz and 2180-2200 MHz. Dish hopes to launch an LTE Advanced network with its spectrum by 2016, but has been awaiting rules from the FCC on its spectrum as well as word on whether the FCC will shift its holdings at 2000-2020 MHz up 5 MHz to 2005-2025 MHz.

Congress has mandated the FCC auction the H Block of spectrum by February 2015; the H Block is paired spectrum from 1915-1920 MHz and 1995-2000 MHz. Sprint has said repeatedly it supports Dish's plans but wants to protect both the PCS G Block and H Block from interference.

Sprint made its position plain in an FCC filing in October: "Sprint is actively deploying 4G LTE mobile broadband communications services nationwide in the nearby PCS G Block (1910-1915 and 1990-1995 MHz)," Sprint wrote. "Thus, Sprint's primary interest herein is ensuring that terrestrial S-band uplink operations at 2000-2020 MHz do not cause increased interference to Sprint's G Block downlink operations at 1990-1995 MHz and do not make the H Block a de facto Dish guard band."

Ergen said the changes sought by Sprint are "draconian" and that they would cause Dish to essentially lose 25 percent of its spectrum due to interference protections. 

If the Journal report proves to be correct, Dish could still build out its wireless network, but Ergen's statements indicate the company will need to reassess its options. "In other words, the FCC is placing a higher priority on ensuring Sprint has sufficient LTE spectrum (i.e. can extend its 5x5 MHz G block LTE network to a 10x10 MHz network) and moving forward with an auction of the H block to raise $1B+ than they are on trusting Dish to become a new entrant in the wireless market," wrote TMF Associates analyst Tim Farrar in a blog post.

The report comes on the heels of separate reports that Dish made a $4 billion bid over the summer for MetroPCS (NYSE:PCS), which eventually inked a deal with Deutsche Telekom's T-Mobile USA. The Journal reported that after several months of talks Ergen in August offered to buy MetroPCS for $11 a share, to be paid in 30 percent cash and 70 percent stock.

For more:
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this TMF Associates blog post

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