Late last week, Dish Network agreed to purchase spectrum, customers and MVNO access from T-Mobile for $5 billion. The Department of Justice signed off on the transaction because it positions Dish to replace Sprint as the nation's fourth nationwide wireless network operator.
That is, if Sprint and T-Mobile actually do merge. Their transaction still faces a serious legal obstacle from roughly a dozen state attorneys general. There's no telling what's going to happen next.
Regardless, all eyes are now turning to Charlie Ergen's Dish Network: Is the struggling satellite TV provider really going to reinvent itself as a 5G disrupter?
Based on comments from Dish executives over the past few days, here's the tick-tock on the company's 5G plan:
1. Stop building an NB-IoT network
Dish confirmed it has already halted work on its NB-IoT network. The network represented "phase one" of Dish's previous wireless plans. However, Dish's opponents -- including, ironically, at one time, T-Mobile -- said the network is simply a placeholder that Dish was building only to meet the FCC's network-buildout requirements for its spectrum licenses.
In fact, Dish's Ergen practically confirmed that view in his comments this week on Dish's earnings call with investors: "It never was a great experience," he said of the NB-IoT network, noting T-Mobile already offers nationwide NB-IoT services. "It wasn’t the network to be proud of."
But Ergen said Dish would restart work on its NB-IoT network if Sprint and T-Mobile are not able to consummate their merger.
2. Get money to pay for the construction of a 5G network
Dish's Ergen said he expects to spend around $10 billion building a 5G network -- though some analysts have said that's not nearly enough. Nevertheless, Ergen has made it clear that he believes financing for Dish's 5G endeavor could come from a wide variety of sources, including from raiding Dish's satellite TV profits or from tapping into the capital markets. Dish also could potentially make money from leasing its 600MHz spectrum to T-Mobile; the companies will be obligated to enter negotiations over such an agreement if the Sprint/T-Mobile merger is approved.
Ergen -- ranked by Forbes as the world's 144th richest person, with a net worth of roughly $11 billion -- even said he would personally help fund the business if necessary.
According to various reports, companies including Google and Amazon also may be interested in funding the construction of Dish's 5G network, presumably in order to gain cheap access to it when it's up an running. Already Google was among the companies that funded Clearwire before Sprint acquired the business.
"We don’t doubt that they [Dish] will find the capital to fund their plan," wrote the analysts at Wall Street firm New Street Research in a note to investors.
However, there are provisions in Dish's deal with T-Mobile geared toward preventing another company from gaining more than 50% ownership of Dish.
3. Become an MVNO
If Sprint and T-Mobile merge, Dish will immediately become the nation's second-largest MVNO, by taking control of 9.3 million Sprint prepaid customers stretching across the operator's Virgin, Boost and Sprint Prepaid brands. An MVNO essentially piggybacks on an existing wireless network -- the MVNO provides services including activation, customer support and billing, while the network operator provides the underlying connectivity. Only TracFone will be bigger than Dish. TracFone is an MVNO with 21.4 million US customers owned by billionaire Carlos Slim's America Movil that offers service through brands including Straight Talk, TracFone, Total Wireless and others.
Importantly, Dish will become an MVNO of the merged Sprint and T-Mobile, which means it will get access to the combined operator's network, including its 5G network. That means Dish will activate new MVNO customers on T-Mobile's network, not Sprint's network. "Since the T-Mobile network is far superior to the Sprint network, particularly in terms of coverage, it opens up new geographically diverse markets for us," Ergen explained.
And Dish executives hinted that, as an MVNO, Dish would be able to launch services not only on the Boost or Dish brands but on other brands -- like maybe Sling Wireless.
"We intend to continue to grow the Boost brand in presence, but we do have the capability to create new brands as well as bundle that with third-party products and cross market with third-party partners," Dish's Erik Carlson said during the company's conference call this week.
Regardless, there's little doubt Dish will add some kind of video service to its MVNO offering, likely in the form of its Sling TV streaming service.
And what of the financial details of Dish's MVNO? Although none of the companies has provided concrete details on the topic, T-Mobile executives confirmed Dish will pay T-Mobile for the MVNO, while Ergen said Dish's MVNO deal with T-Mobile is "very competitive" compared with the MVNO agreements that America Movil has. Ergen also said Dish expects to be profitable with its MVNO.
"Dish got a good deal on this asset," wrote the New Street analysts of Dish's MVNO deal with T-Mobile.
Finally, what kind of wireless provider will Dish be as an MVNO? Will the company quietly enter the industry with standard MVNO pricing, or will it seek to make a splash? "As far as wireless pricing, yes, we do think we’d be disruptive, day one, as I said, not only because of attractive rates but also bundling capabilities that are addressed in the deal," said Dish's Tom Cullen.
Dish has also promised to offer postpaid services via its MVNO within a year of the Sprint/T-Mobile merger closing.
4. Build a core wireless network
Dish's MVNO deal with T-Mobile, which expires in seven years, is basically just a temporary step on the way to Dish building its own 5G network. The first step of that effort involves building a "core" network, which is basically the brains of the network. Ergen said Dish would build its wireless core within a year after the close of the Sprint/T-Mobile merger.
In doing so, Dish would join Altice as an MVNO with a core network. MVNOs traditionally do not operate core networks, but Dish said building a core will allow it to route traffic, provision new customers and conduct traffic analysis, putting it on the path to operating its own network.
Importantly, Dish's core will also be able to handle eSIM technology, which Ergen said is important because such technology will allow customers to switch operators without having to physically change the SIM card in their phone. So far only Google (Pixel) and Apple (iPhone) support eSIM technology in their phones, but Dish and T-Mobile have pledged to support the technology more broadly if the Sprint/T-Mobile merger is approved. eSIM technology could potentially make it easier for Dish to steal customers from AT&T and Verizon, as long as customers' phones are paid off, compatible with Dish's MVNO, and support the proper spectrum bands.
Other operators including cable company Charter are eyeing the eSIM opportunity.
5., Build a 5G wireless network in big cities
After Dish builds a core network, it can then begin the actual work of constructing a really real 5G network. That's where the work becomes expensive, because Dish will need to invest in backhaul, antennas and space on cell towers. Per the company's agreement with T-Mobile, Dish will get first dibs on 20,000 towers that T-Mobile and Sprint plan to decommission as they merge operations.
However, Dish is ahead of the game to some degree because it spent around $20 billion over the past decade acquiring roughly 100MHz of spectrum around the country. That's almost as much spectrum as Verizon owns. It's a lot of spectrum.
Initially Dish said it will build its 5G network in big cities, where most of the network traffic is. Then it will expand that effort to rural areas. Ergen said he expects Dish to spend around $1 billion building a core and its first few cities. Dish has promised to cover 20% of the US population by June 2022.
As Dish builds out its wireless network, its MVNO payments to T-Mobile will shrink. But Dish customers shouldn't notice a difference because -- under the terms of the companies' deal -- customers are supposed to be able to seamlessly roam from Dish's network to T-Mobile's network without dropping their calls.
What's more interesting here is that Dish isn't planning to build a conventional cellular network. Instead, it's planning to build a "cloud-native" network -- like Rakuten is planning to do in Japan -- which means that Dish will install antennas on towers but most of the rest of the functions of its network will run in a data center. As a result, Dish executives said they expect to spend at least 25% less than if they were to build a regular cellular network.
Importantly, Ergen named Cisco, Intel, Red Hat and Altiostar as Rakuten vendors that Dish would consider for its 5G network. That's noteworthy considering Ericsson, Nokia and Samsung are the big wireless equipment vendors in the US for the 5G networks from T-Mobile, Sprint, AT&T and Verizon.
6. Wholesale 5G
Dish has made it very clear that smartphones are only one part of its 5G ambitions. The company also wants to connect autonomous cars, robots, smart city applications and other high-tech stuff. Ergen said that one slice of Dish's 5G network -- 30% or so, might be devoted to "retail" offerings, including smartphones. Other slices would be devoted to wholesale applications.
For example, Amazon might purchase a slice to remotely pilot drones for Amazon Prime deliveries.
That wholesale aspect only comes into play with Dish's own network, not with T-Mobile's MVNO.
That said, Dish isn't the only company hoping to wholesale slices of 5G. Other carriers, including AT&T and Verizon have discussed similar plans. But Dish will be the only carrier with lots of unused spectrum hoping to wholesale slices of 5G. And with all that excess capacity, there's a good chance Dish's 5G will be a lot cheaper than Verizon's 5G.