FCC Casts Uncertainty on Dish Network’s Wireless Plan

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PARIS — U.S. regulators on March 2 denied a request by Dish Network Corp. to bypass rules on the creation of a satellite-terrestrial wireless broadband network in the United States, deferring the issue to a future regulatory ruling even as they approved Dish’s purchase of two bankrupt satellite companies.

It was unclear whether the move by the U.S. Federal Communications Commission (FCC) represented a serious blow to Dish’s plans to operate a 2-gigahertz, or S-band, wireless broadband network using satellites purchased in bankruptcy proceedings of DBSD North America and TerreStar Networks. Neither of the S-band mobile communications companies had been able to survive despite having a combined 40 megahertz of spectrum.

The FCC suggested that this same wireless spectrum would be useful for a terrestrial only system. Regulators will be looking at the disposition of S-band at a hearing scheduled for March 22 in Washington.

Englewood, Colo.-based Dish has spent more than $3 billion purchasing the spectrum licenses, satellites and other assets of DBSD and Terrestar in hopes of adding a wireless-broadband service to its existing satellite television business.

Dish asked that, in addition to approving the transfer of the DBSD and TerreStar licenses to Dish ownership, the FCC approve two modifications to the current rules governing satellite-terrestrial networks.

First, Dish asked that the FCC allow Dish to sell handsets that have terrestrial only capability to keep costs down for those users who will not need the satellite links. These users, including those in densely populated areas, would avail themselves of a network of S-band base stations, or Ancillary Terrestrial Component (ATC). For these subscribers, there would be no need for a satellite.

Secondly, Dish asked that the requirement that the service launch a backup satellite within a year of starting commercial operations be waived given that the DBSD and TerreStar satellites could back up each other, even if they were built for different companies.

The FCC denied both waivers, but said the March 22 hearing would revisit the issue as part of a broader rulemaking on the future of S-band as a wireless broadband frequency.

Dish issued a statement March 2 expressing its disappointment with the decision, saying it will delay the introduction of mobile broadband, which U.S. President Barack Obama has said is a national priority.

 “As we review our options, we will continue to work with the FCC on the forthcoming 2-GHz Notice of Proposed Rulemaking to achieve those goals as expeditiously as possible. … We expect to close the DBSD and TerreStar transactions as soon as practicable.”

Charlie Ergen, who owns Dish Network, said in a Feb. 23 conference call with investors that a denial of the waivers, or a serious delay in granting them, would deal a serious blow to Dish’s plans and could force the company to write down the value of its DBSD and TerreStar investments, or even scrap the whole idea of building out a network.

Ergen compared the waiver requests to the launch of the company’s first direct-broadcast satellite aboard a Chinese Long March rocket. A launch failure then, he said, would have torpedoed Dish’s satellite television plans.

Similarly, he said the FCC decision on the waivers “is a little bit like the Chinese rocket in the sense that the FCC really has their hand on the button. That waiver is either going to be granted, or they’ll push the destruct button for our business plan.”

Ergen said deferring the waiver request to a rulemaking procedure would mean delaying the start of commercial service. Depending on the length of the delay, Dish would be forced to reconsider its plans.