Verizon's McAdam: We're open to talking to Dish about spectrum -- but won't buy whole company

Verizon Communications (NYSE: VZ) has no interest in buying Dish Network (NASDAQ: DISH) but is open to discussing how Verizon could get access to Dish's wireless spectrum or forge some kind of wholesale arrangement, according to Verizon CEO Lowell McAdam.

McAdam

McAdam said Dish's satellite TV business is "not consistent with a strategy of where we see the market going," especially with Verizon's nascent Go90 over-the-top mobile video product. However, McAdam acknowledged during an appearance at the Goldman Sachs Communacopia Conference that "we've had discussions about how we could provide [Dish Network Chairman and CEO Charlie Ergen] with megabytes and how he could pay for it with spectrum."

McAdam indicated Verizon would be happy to have discussions about reasonable commercial terms for Dish's spectrum assets but that Verizon would not purchase Dish just to get access to its spectrum.

Dish controls 40 MHz of mid-band AWS-4 spectrum and 10 MHz of 1900 PCS H Block spectrum. Tom Cullen, Dish's executive vice president of corporate development, said in August the 3GPP is currently working to incorporate Dish's AWS-4 spectrum into a new band that would also include AWS-1 and AWS-3 spectrum. He said that is on track to be "confirmed and finalized in December of this year."

Dish's AWS-4 spectrum runs from 2000-2020 MHz (for uplink operations) and 2180-2200 MHz (for the downlink). However, Cullen noted that Dish has the option, until June 2016, to decide whether to convert its uplink spectrum into downlink spectrum, which it is likely to do.

Meanwhile, Dish's designated entity partners acquired 702 AWS-3 spectrum licenses for around $10 billion, winning 25 MHz of total spectrum including 13 MHz of paired spectrum. However, the FCC has said that the DE companies are on the hook for $3.33 billion in additional payments because they did not qualify for 25 percent bidding credits.

Dish has not indicated how or when it will deploy its spectrum but Ergen and Cullen have consistently said it would like to partner with an existing wireless company.

McAdam also touched on the carrier's Go90 service, which is currently an invitation-only service for select Verizon customers but will be rolled out nationwide to all wireless consumers later this month. The Verizon chief said 25,000 customers have been beta testing the service, and Verizon sent out invitations to 5 million of its customers.

The Go90 service is aimed at millennials, roughly aged 18 to 32, and McAdam said the content in the service is specifically designed to cater to that audience. There will some sports, McAdam said, including National Football League content that can be streamed using LTE Multicast technology, as well as college sports. McAdam promised more sports content as well, and noted that the company is partnering with DreamWorks Animation's AwesomenessTV on exclusive content. That kind of content, including from Vice Media and HuffPost Live, will be snackable and episodic and will "bring people back to the service more and more."

Additionally, McAdam noted that Go90 users will be able to follow their friends and see what shows and content they are watching and get access to that content, as well as share the content on social media. "It's not only the type of content, it's how you interact with the content that is going to be a hit with this generation," he said.

Verizon plans to make money off of Go90 on two levels, McAdam said. For Verizon proper, the focus is going to be on getting customers to buy larger data bundles to accommodate more video usage. The Go90 business aims to make most of its money by serving highly targeted advertising as well as selling subscriptions to some content and services, such as concerts at specific concert venues.

To keep pace with growing video traffic, Verizon has been deploying small cells in major urban markets around the country, McAdam said, including Chicago, New York City and San Francisco. "The capacity advantage that we've gotten has been better than advertised," he said.

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