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Dish Chairman Ready to Back Up Wireless Bet

Jeff Baumgartner
8/8/2012
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3:35 PM -- Dish Network LLC (Nasdaq: DISH) will develop wireless handsets that support both satellite and terrestrial links no matter how things shake out as the Federal Communications Commission (FCC) considers new rules on how the company's Mobile-Satellite Services (MSS) spectrum can be used, Dish Chairman Charlie Ergen said on Wednesday's second-quarter earnings call.

Dish wants a rule that would lift the satellite requirement if it were to build a wireless network based on its swath of MSS spectrum licenses. As the current rules apply, Dish would have to create handsets that support both satellite and terrestrial communications. "It's not ideal because that increases our cost per handset" and impairs battery life, Ergen said. But he acknowledged that Dish is prepared to move ahead with that as an option.

Even if the FCC lifts the satellite burden, Ergen believes there's a "minor" market for satellite-capable handsets, identifying targets such as first responders and people who live in rural areas that are beyond the reach of cellular connections. (See Dish Stashing Cash for Its 4G Run and FCC Keeps Dish Spectrum Plan Alive .)

Dish has teamed with Qualcomm Inc. (Nasdaq: QCOM) to develop a new chipset that can operate in both terrestrial and satellite modes in the 2GHz/AWS-4 bands. Ergen's using this as hedge just in case the FCC doesn't let Dish use its spectrum with terrestrial-only wireless devices. (See Qualcomm to Make Dish's Mobile Broadband Chip .)

Dish is still waiting for the FCC to act, hopeful that the Commission will enable Dish to enter the U.S. wireless market and create a Long Term Evolution (LTE) alternative. "It's an industry that we think is in need of some creativity and new entrants," he said, adding that the regulatory process has "has been frustratingly slow" but "I like the odds on us being successful."

Ergen said the decision and the speed at which it is made will determine if Dish will build a wireless network on its own, partner up or sell off the spectrum. Some analysts still think the notion of Dish building out a wireless network on its own is a bluff.

During the call, Ergen was asked if a $396 million strategic investment revealed in the company's second-quarter 10-Q filing was for the purpose of purchasing some Clearwire LLC (Nasdaq: CLWR) debt. The filing only identified that it was for a "single issuer" that "has indicated that it will need substantial additional capital to meet its business and financial obligations beyond the next 12 months."

Ergen danced around the question, noting only that there's "nothing unusual" about Dish making strategic-level investments from time to time. An earlier report suggested that Dish recently bought up some LightSquared debt. DirecTV Group Inc. (NYSE: DTV), meanwhile, has asked the FCC to force Clearwire's erstwhile cable partners to sell their stakes in the WiMax company as a condition of their proposed sale of Advanced Wireless Services (AWS) spectrum to Verizon Wireless . (See Dish Snaps Up Some LightSquared Debt and DirecTV Wants Cable to Dump Clearwire Stakes .)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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