Dish blasts FCC's rules for its AWS-4 spectrum

The FCC is moving forward with rules that will allow Dish Network to build an LTE Advanced mobile network in its MSS spectrum. However, the agency's proposal will include technical rules that could affect up to 5 MHz of Dish's spectrum.

In response, Dish blasted the agency's proposal as "significantly flawed." Dish said the FCC's rules ultimately "could add years to a process that has already lasted 20 months."

Separately, the FCC also said it will propose auctioning the H Block of PCS spectrum in 2013, which Sprint Nextel (NYSE:S) has said it wants for its LTE network.

"Chairman Julius Genachowski today shared proposals with his colleagues that will unleash up to 50 MHz of spectrum for mobile broadband, including LTE," said an FCC spokesperson. "Specifically, the chairman proposes final action to enable terrestrial use for AWS-4 spectrum, and moves forward with implementation of Congressional direction to auction the H Block, slated for 2013."

The FCC didn't provide details on the proposals, which the five-member commission must still vote on in order to put them into action. The FCC will hold its next open meeting Nov. 30.

Dish Network has been pushing the FCC for much of this year to allow terrestrial services in AWS-4 spectrum. 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 in that spectrum. Dish has said it plans to launch an LTE Advanced network on the spectrum by 2016 if the FCC allows terrestrial services.

Although it appears likely that Dish will gain approval for terrestrial-only services in its spectrum, the FCC said it will put in place technical rules on the spectrum that will prevent interference between Dish's spectrum and the H Block that the FCC plans to auction. The technical rules will likely shift Dish's spectrum at 2000-2020 MHz up by 5 MHz to 2005-2025 MHz (an FCC spokesperson didn't respond to questions on the exact details of the proposal). Dish has strongly argued against such a shift, contending that the move would delay the rollout of its network and make it more difficult for the company to obtain devices for its planned network.

Indeed, Dish issued a fiery press release blasting the FCC's actions.

"While the FCC would grant full terrestrial rights, its proposal to lower our power and emissions levels could cripple our ability to enter the business," said  R. Stanton Dodge, Dish's executive vice president and general counsel. "Until we know how to manage issues like interference from the H Block, we may have to put on hold activities like radio design and network build out while we wait for the H Block rulemaking and another 3GPP process to be completed."

Dish said the FCC's order will disable 25 percent of its uplink spectrum "and impair another 25 percent of that spectrum to accommodate possible future use of neighboring H Block spectrum by Sprint."

Sprint has said it supports the shift in order to protect the PCS G Block and H Block from interference.

Despite Dish's negative tone, a number of analysts said the move was ultimately positive for Dish. 

"In our view, even if the FCC were to require Dish to make concessions for getting the terrestrial waiver, it nonetheless validates the value of DISH's spectrum," wrote Thomas Seitz, an analyst at Jefferies, in an investor note. "In aggregate, Dish has 40 MHz of AWS-4 spectrum nationwide that it had acquired under bankruptcy proceedings for about $3 billion in mid-2011. ... we believe the value of the spectrum would be about $7 billion, or $15 per Dish share."

"Even if today's order is approved, the core value of Dish's spectrum remains mostly intact, as the vast majority of the utility of Dish's spectrum is associated with its downlink, which remains untouched," wrote Stefan Anninger of Credit Suisse in a note.

Dish's stock remained relatively unchanged after the FCC's announcement; reports in recent weeks hinted that the FCC would require a shift in Dish's spectrum.

In other FCC news, Genachowski will also push forward a proposal that he said would "enable new commercial use of 100 MHz of spectrum in the 3.5 GHz band, while protecting government missions that are vital to our national interest.  This proposal promotes two major advances that enable more efficient use of radio spectrum: small cells and spectrum sharing.  The proposed approach builds on the Commission's experience in promoting spectrum sharing and innovative licensing models, and broadly reflects recommendations made in a recent report by the President's Council of Advisors on Science and Technology (PCAST)."

For more:
- see this Dish release

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Article updated Nov. 21 with analyst commentary.