Dish Network chairman and CEO Charlie Ergen said that the satellite giant has no current plans for the wireless spectrum it has been trying to amass over the past few months, but added that it has value as both a straight investment and as a strategic play.
Dish made an offer to purchase 20 Megahertz of S-band wireless spectrum from bankrupt DBSD earlier this month for $1 billion. Former affilaite EchoStar Corp., of which Ergen also is chairman, is said to be in a leading position among creditors of TerreStar Networks, which owns another 20 MHz block of S-band frequencies. EchoStar also made an offer for Hughes Communications, which operates satellite broadband provider Hughes Network Systems, on Feb. 14 for $1.3 billion. While none of these deals have been finalized, analysts have speculated that Ergen could use it to create his own wireless broadband offering.
On a conference call with analysts to discuss fourth quarter financial results Ergen said that he has no current plans for the frequencies.
"We think Spectrum has value," Ergen said of the spectrum. "If you can do something strategic with it, it has more value or less value if you invest in the wrong way. If you accumulate spectrum that fits together, you create even more value."
Ergen said that the offer for the DBSD spectrum is in part an attempt to protect its investment in the company - Dish is listed as a creditor of DBSD, which had planned to build a nationwide hybrid satellite terrestrial broadband network but ran out of cash.
"There's not a grand strategy at this point other than we've been an investor in the company for a long time, we lost money on our investment and we are trying to get the company moving in the right direction," Ergen said. "They have a management team, they have a satellite, they just need some capital. It's an area we know pretty well, so we think it makes a lot of sense for us to do this and it makes sense for others to do that. There is no guarantee that our plan will be accepted by the judge."
Asked if the spectrum could be used to power a video-over-the-Internet option, Dish executives were somewhat vague in their answers, adding that any such offering depends on the individual programmers.
Dish executive vice president sales, marketing and programming Tom Cullen said that Dish currently offers an IP video product for its international channels called Dish World and that in its U.S. programming negotiations the satellite giant has pushed for broader digital rights. But asked whether eventually that would lead to a video product delivered solely over the Internet, Cullen stopped short of a definitive answer.
"That in large part is due to the position the largest programmers take in regard to streaming rights," Cullen said. "Our agreements are confidential, but you can see plenty of evidence of programmers pursuing new forms of delivery. We want to be assured of equal footing as those developments occur."
Ergen added that programmers have already granted digital rights that have eaten into their core subscription businesses, and gave Starz Entertainment's agreement with Netflix as an example.
"My gut feel is that some programmers will grant over the top rights that will probably undermine their core business," Ergen said. "Starz is a good example in that they sold some over the top rights fairly inexpensively, and you know that that has hurt our premium business. I think people will experiment."