Feature Article

June 26, 2014

Potential Verizon Purchase of Dish Network Mobile Spectrum Could Jeopardize Incentive Auction

Just how much spectrum could be made available in the Federal Communications Commission’s incentive auction remains unclear. Some believe it is reasonable that a total of 50 MHz to 60 MHz could be made available.

But with spectrum set-aside rules in place, as much as half of that would not be available for AT&T and Verizon to acquire. That implies, in most markets, only 10 MHz to 20 MHz could likely be acquired by any single bidder.

Consider then the alternative: acquiring 50 MHz of mobile-capable spectrum from Dish Network, without the need to participate in the FCC incentive auction of 600-MHz spectrum.

Dish Network has available about 46 MHz worth of spectrum, on average, in each of the top 100 markets. Consider that AT&T has about 94 MHz available in those same markets.

That has fueled speculation that Verizon Wireless might try and strike a deal to buy Dish Network spectrum, instead of relying on the incentive auction.

Dish Network would have to consider its strategic prospects were it to sell mobile spectrum to Verizon. In a consumer services market that already has become a triple-play bundle market, Dish Network, assuming AT&T wins the right to buy DirecTV, and that Dish Network sells its mobile spectrum, might be the only remaining provider of single-play services.

That prospect was why Dish Network began buying mobile spectrum in the first place. To be sure, Dish Network, which might be able to sell its spectrum for $20 billion, would potentially have other options to enter the mobile services market.

It could try to enter the market as a mobile virtual network operator, perhaps with advantaged rights as a Verizon MVNO. That is something observers think could eventually be the path chosen by Comcast as well.

What would seem least likely, should Dish Network decide to sell its mobile spectrum, and remain independent, is a retrenchment as a single-play video entertainment provider, with no mobile or broadband bundling.

Of course, Dish Network might try to sell itself, with or without the mobile spectrum. The issue is a diminished pool of potential buyers, with AT&T’s purchase of DirecTV. Ironically, even a rejection by antitrust or regulatory authorities likely would foreclose a sale of Dish Network to the two most-likely buyers, AT&T or Verizon.

If Verizon does buy Dish Network spectrum, one byproduct is that the FCC incentive auctions will have a tougher time succeeding. 

Edited by Allison Sansone

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