Deal or no deal?

Posted in Financials, ICO/DBSD, Operators, Regulatory, Spectrum, TerreStar at 11:52 am by timfarrar

After the FCC’s release yesterday evening of the agenda for the March 22 Commission Meeting, we are soon going to find out if DISH has struck a deal with the FCC to secure a waiver of the ATC restrictions in the 2GHz MSS band. Some commentators have seen the FCC agenda as a negative sign, pointing to potential delays in DISH’s deployment, based on the comments made by Charlie Ergen last week.

However, another way to look at this announcement is that the FCC is simply moving to implement the provisions in the spectrum bill signed by the President last week (including the proposal for “an alternative band plan…at 1695-1710 MHz”), which as I pointed out, clearly indicates that DISH would potentially give up 10MHz of spectrum and move its uplink band up by 5MHz to enable use of the PCS H-block.

Assuming that DISH gives up half of its uplink spectrum and this is converted into an additional 10MHz unpaired downlink at 2000-2010MHz (with an implicit guardband at 2010-15MHz), thereby maximizing the value of spectrum to be included in a future auction (and allowing Sprint the possibility of a 10x20MHz LTE Advanced network), then a rulemaking would certainly be needed to develop service rules for this new band configuration. However, it seems unlikely that the FCC would want to go back on what appears to have been a carefully engineered compromise passed by Congress just a couple of weeks ago. Given that Sprint’s agreement to settle its litigation against DISH back in October was also likely founded on a desire to gain access to the H-block spectrum, it wouldn’t just be DISH that would be upset by such a decision.

The proposed rulemaking may also achieve a couple of other purposes for the FCC. First of all it allows any deployment timetable to be keyed off the point when the new rules become final, thereby solving the arguments over whether the clock should start running on DISH’s buildout now or in 2015. Secondly it may help to push any bid by AT&T to buy DISH out beyond the November 2012 election and provide time for DISH to pull together an alternative consortium of partners (which might include one or more of T-Mobile, MetroPCS, DirecTV and America Movil). The wholesale access conditions contemplated by the Commission could then ensure that AT&T would not be able to unwind other partners’ access to this network in the future.

UPDATE (3/2): The FCC has just approved the transfer of control for DBSD and TerreStar this evening, but denied DISH’s application for the waiver, deferring this issue to the NPRM which will be considered at the Commission meeting on March 22. It appears that the FCC still wants to pursue the path outlined above, but was worried about the ramifications of granting the waiver without consideration of the proposed deal in a full public rulemaking, especially in the context of impending litigation from LightSquared. This also should allow the Commission to push any prospective bid from AT&T for DISH beyond the November 2012 election. However, with DISH noting in their results call that a refusal to grant the waiver could cause them to significantly change their plans, it will be very interesting to hear DISH’s reaction and see whether they will take this proposed deal off the table (for example by returning to the dual mode handset model contemplated by the original ATC rules), thereby torpedoing the FCC’s chances identifying 15MHz of additional spectrum to auction as Congress mandated last month.

FURTHER UPDATE (3/2): It sounds like the FCC is doing its best to reassure DISH that the outcome of the rulemaking is going to result in the band being redesignated for terrestrial-only services, and that a ruling will come before the end of the year. DISH’s response (with its reference to delaying “the advancement of some of President Obama’s and the FCC’s highest priorities”) appears to hint at the real reason for this delay, that after the LightSquared debacle, the White House simply doesn’t want any more trouble before the November 2012 election, and certainly doesn’t want to contend with an AT&T takeover bid for DISH in that timeframe.

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