Dish Network chairman Charlie Ergen wants to merge Dish’s satellite TV with Sprint´s wireless network to offer “anytime-anywhere” services and allow subscribers seamless access to media content both inside and outside their homes. This merger target follows a number of (smaller) acquisitions made by Dish and Echostar over the past several years that -at times- may have looked unrelated but that are poised to converge.
Ergen once said that investors will have to wait until the end for the long term strategy to surface but one can connect the dots and realize that, ultimately, even if Dish becomes a US wireless competitor, video transport efficiency will remain core to Dish´s long term strategy.
DISH Network Q1 Earnings Call – May 2, 2011
“We’re utilizing what I call the Seinfeld strategy… there are a lot of things that happen in the first 28 minutes [of the show]… but it seemed to all come together in the last couple of minutes. In terms of where we’re going strategically, you’ll have to just wait and see when it all comes together.”
Charlie Ergen, Chairman
Connecting the dots between Dish´s assets and services
- HughesNet: HughesNet provides means for fixed broadband independence via its consumer broadband satellite network in locations without competitively-priced terrestrial services. Aside HugheNet´s role as a broadband provider, its high-throughput satellite network (HTS) can also be used to fill in gaps in terrestrial network access. A good example is the recent introduction of HughesON Managed Network Services which bonds multiple broadband links at the IP-level for higher link speed and reliability.
Sprint purchases a lot of backhaul capacity from incumbent local exchange carriers and cable TV companies, which tends to impose competitive pressures on Sprint´s microcell backhaul deployments. Being backhaul one of the biggest costs to wireless operators, HughesNet´s high-throughput system could be leveraged for on-demand offloading of bandwidth-hungry video backhaul while cellular voice and data remain backhauled terrestrially or wirelessly.
- Sling Media & Move Networks: Sling Media´s place-shifting together with Move Networks´s adaptive bit rate technologies are central for Dish´s OTT extensions of their pay TV service. Place shifting allows users to take their household television feed and view it in remote locations on Internet-connected devices including tablets and smartphones with 3G or Wi-Fi. The technology matches well with users’ increasing expectations for anytime-anywhere digital lifestyles and resistance to pay twice for the same content.
- EchoStar Set Tops: EchoStar could creatively combine 700MHz, ATC spectrum, DVR set top manufacturing, Internet and satellite services in a potentially differentiated content delivery architecture, designed around the place-shifting paradigm.
- Echostar B2B services: Unlike Dish focused on consumer services, Echostar provides B2B fixed satellite video distribution services. Both companies could “platformize” their combined network resources to provide a B2B/B2C video delivery services to service retailers and last-mile access providers. There is indeed a precedent in this regard: Back in 2007 Echostar launched ViPTV, a ¨headend in the sky¨ IPTV delivery service targeted to small telecom operators entering the video business.
- Sprint Spectrum: Dish’s entry could disrupt a telecom industry dominated by Verizon Wireless and AT&T. Sprint would bring full mobility to Dish by leveraging its existing LTE network and the in-building penetration characteristics of its spectrum. However, Dish´s focus would unlikely be competing with Verizon Wireless and AT&T exclusively on the basis of voice and data plans. Sprint´s cellular services would strengthen service bundling but Dish´s competitive advantage would likely hinge around the efficient hybrid delivery of linear and non-linear TV and video.
- Terrestar ATC Spectrum: Ergen recently secured the long-sought-after regulatory approval to leverage satellite airwaves for a ground-based 4G LTE network. This spectrum together with the spectrum obtained in the 700Mhz band could be leveraged for a linear mobile TV platform. Echostar owns 6 megahertz for most of the country today in 700 megahertz, which combined with around 40Mhz coming from the Terrestar and DBSD would give Echsotar/Dish around 45 megahertz nationwide, which some believe is enough to get in the wireless business.
- Clearwire Spectrum: Dish tried unsuccessfully in 2012 to reach a partnership deal with Sprint in order to gain access to Clearwire frequencies. It is indeed believed that Clearwire´s spectrum is the key asset that Ergen is after but needs to own Sprint to control Clearwire. The Clearwire spectrum could be used in two ways:
- Fixed Broadband Access: The 2.5GHz Clearwire spectrum works best for fixed wireless broadband services. Dish can use Clearwire antennas installed on customer’s roofs next to their satellite dishes.
- Wireless Backhaul: The vast majority of US traffic from macrocells is currently backhauled over fiber, only around 10 percent of macrocells are using wireless backhaul. The vast amount of spectrum that would result from the combination of Sprint, Clearwire, 700Mhz and Terrestar/DBSD would allow uses such as using certain bands for wireless backhaul in specific locations.
- Blockbuster: Delays in having regulatory approval to use ATC spectrum terrestrially may have constrained Dish´s ability to use the Blockbuster video assets for Netflix-like delivery of on-demand video over a two-way last-mile. However, the combination of satellite broadcast and HTS resources, two-way wireless access and set top manufacturing, would allow Dish to play with tradeoffs that exist between pre-populating DVRs with popular content and managing long-tail content delivery via wireless streaming.
Connecting the dots hints at a hybrid, horizontally-integrated video platform but, with so many cards at hand, Ergen can explore different paths, including selling non-core assets if the bid for Sprint escalates. Indeed, Dish´s ideal long-term hybrid strategy surely has a Plan B and short-term deviations, mastered contextually by successful entrepreneurs like Ergen. As an example, Dish spent about $3 billion acquiring spectrum that is now estimated to be worth up to $12 billion.
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