DISH Moves In

on February 4, 2015

DISH Network is a company that has not gotten a lot of attention in the internet business. After all, it mainly exists as a cable TV competitor, suppling service to about 14 million customers through satellite dishes. But, pushed along by founder Charlie Ergen (left), it is moving in on the business, starting up new internet television services and elbowing its way into U.S. wireless channels.

The satellite-based internet service doesn’t draw a lot of envy from customers except those who have no better way of reaching the net. It has about 550,000 customers of what it calls “broadband” service, not enough to qualify for the term under the Federal Communication Commission’s new definition of 25 megabits per second. But DISH is making its way based on facilities of landline and terrestrial wireless services.

Aggressive DISH. The latest has been an aggressive movement into the most recent auction of wireless service. DISH is spending about $10 billion for wireless spectrum, most recently $3 billion in the FCC’s Advanced Wireless Services (AWS-3) auction. “That spectrum, combined with the wide-ranging spectrum licenses that DISH already owns, will turn Charlie Ergen’s company into a spectrum powerhouse,” writes Phil Goldstein of FierceWireless.

DISH is no stranger to controversy and this deal is no exception. It was able to get bargain prices on some of the AWS bids by working through two small companies, Northstar Wireless and SNR Wireless, which were eligible for a discount program. DISH owns 85% of the companies. According to the Wall Street Journal, Republican FCC Commissioner Ajit Pai will ask Chairman Tom Wheeler to investigate the action, which he claims “makes a mockery” of the small business program.

DISH has not yet laid out plans for the new spectrum it is acquiring, but it seems a safe bet it is not about to get into the wireless telephone business. Its aggressive bidding increased prices in the auction for competitors Verizon and AT&T. Maybe it’s hunting for a deal with the hungry Sprint or T-Mobile, or perhaps outright acquisition of one of these second tier companies. Or it could be building a network for a new land-based video service.

DISH’s new ideas. One description of the video idea is DISH has been looking for ways to expand its current TV services over the internet. In 2007, EchoStar, DISH’s parent company, acquired Sling (original model below), a device that accesses your cable TV system so you can watch service on any internet capable device in any location. ((Sling was the invention of Blake and Jason Kirkorian and sold for $380 million. One of its key functions was its ability, in pre-Netflix days, to adjust its service to capture the best available bandwidth.))

SlingAlthough Sling remains a separate product, DISH has incorporated the technology in several ways. Hopper, originally a feature for moving cable service to different TVs in the house, now has Sling capability that lets you move content from your cable device to any device on the wired or wireless internet (as the ad points out, so the kid can watch the big game on his phone while making a visit to his TV-less aunt).

Now, a new service called Sling TV will be launched to compete head-on with an internet-based service available on PCs, mobile devices, and several plug-into-your-TV systems (detail for Insiders). A $20 monthly subscription will provide a variety of programing. The basic service is very close to what is available on Roku, Google TV, Xbox, and other internet-based services, either free in the basic subscription or, such as Netflix, at extra subscription costs.

But the difference that makes it a standout from the crowded field of internet delivery competition is the availability of ESPN and ESPN2. The inability of non-cable carriers to present live sports events has been a big disadvantage. Customer insistence on live sports kept them as cable service customers. While DISH has yet to demonstrate the success of its service, it has a real chance to make a dent in the existing cable business.

Cable competition. DISH, and Ergen, are well positioned for a cable and TV business that is changing in fundamental ways. The cable carriers are holding their share of the market–there have been slow decline in TV subscribers, but each year their landline business is developing more and more into providing internet (broadly defined as all TCP/IP traffic) rather than video channels. The wireless carriers are seeing less and less voice traffic and more and more data and video. Their growing LTE service runs on TCP/IP that is more like the traditional wireline but available anywhere. Cable carriers programming began mainly with broadcast channels and ESPN. Then it added enhanced networks, first paid channels such as HBO, then original programming on ad-supported ones such as AMC and Lifetime.

The companies that own most of the businesses–from CBS to Comcast to Verizon–move slowly, seeking to replaced their expensive services. It’s hardly a surprise HBO is prepared to offer its shows over the internet to buyers who are not already cable subscribers after Time Warner unloaded Time Warner Cable from the business. In a field marked by this turmoil and with real room for change, it is potentially a fine market for a daring company like DISH.