Dish's 5G Plans Should Rouse Cablecos
Dish plans to leapfrog 4G and jump straight into 5G service delivery with the long-awaited build-out of a next-generation wireless network using its existing spectrum holdings. The news comes by way of an FCC filing published earlier this week and has major implications not only for Dish's future in the wireless industry, but also the futures of many of the nation's top network operators.
The FCC filing appeared this week because Dish Network LLC (Nasdaq: DISH) is under the gun to share its deployment strategy for the spectrum assets it owns. Per a mandate by the Federal Communications Commission (FCC) , Dish either had to meet an interim deployment milestone this month with a final deployment milestone achieved by 2021, or agree to meet an "accelerated final milestone" by March 2020. Dish has agreed to do the latter and says it will use its spectrum to build a 5G-capable network to support Internet of Things applications. The decision is noteworthy because it makes Dish the first operator to pursue a 5G deployment strategy without a legacy 4G network.
Dish's spectrum holdings give the satellite company a way to diversify its business in the face of competitive pressure in the pay-TV market. But the company's strategy has also come to light at a time when all of the other major network operators are likewise trying to plan their next moves in the wireless industry.
The top telecom companies have gotten aggressive about planning for 5G even as they look to extend the life of their 4G networks. (See Verizon Says Its Fixed 5G Will Arrive in 2018, Mobile in 2020 and AT&T Lab Tests DirecTV Now Over 5G.)
And the major cable operators see 5G as a possible opportunity to build momentum in the mobile market after many past failed attempts. (See Comcast: Our Network's Ready for 5G.)
What makes an entry into the wireless sector different this time around for cable companies is the fact that the cablecos have a growing WiFi footprint, and, even more importantly, that the cable operators have substantial fiber infrastructure already deployed. Those fiber assets promise to be crucial for supporting high-capacity, short-range wireless communications services like those expected to be powered by future 5G networks.
For now, both Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. -- the two largest US cable operators -- have committed to launching wireless services running on a combination of their own WiFi networks and cellular connectivity provided by Verizon Communications Inc. (NYSE: VZ) through an MVNO agreement. However, the two cable companies will logically look for ways to limit the amount of time their customers spend on Verizon's infrastructure in order to minimize their costs. One of the ways to do that would be to acquire access to additional spectrum, either through purchase (per Comcast's participation in the recent 600MHz spectrum auction), or perhaps through some other type of mutually beneficial partnership. (See Analysts More Than Bullish on Comcast MVNO and Comcast May Be Lone MSO Wireless Bidder.)
Dish, for its part, has made very clear that while it's currently planning on moving forward with a wireless network build-out on its own, the company is also still exploring potential partnership opportunities. As BTIG analyst Walter Piecyk points out, Dish's spectrum could be very attractive to cablecos as a layer on top of their existing fiber plant. Although Piecyk estimates that it would cost at least $20 billion to buy a usable amount of Dish's spectrum outright, it's an open question as to whether there's another option that would see one or more of the cable companies making an agreement with the satellite operator that would in some way pair their fiber assets with Dish's spectrum.
Meanwhile, cable companies aren't the only ones interested in Dish's wireless holdings. The existing US wireless carriers are also hovering nearby, formulating their own plans for network expansion. Depending on the favorability of a deal, Dish could ultimately tie up with a cable operator, or form a partnership or merger with one of the major telecom companies.
For now, Dish says it has received responses to a Request for Information it issued to vendors late last year and is reviewing those submissions to determine next steps for its network deployment. Further information on the company's strategy -- and on whether Dish will seriously consider any partnership or buyout offers that come its way -- will likely emerge once the current quiet period imposed by the FCC surrounding its auction of 600Mhz spectrum comes to an end. That quite period is expected to reach its conclusion sometime in the next several weeks.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading