Dish Network Has No Plans to Sell Spectrum, CEO Clayton Says

Dish’s wireless strategy hinges on it getting FCC approval for both a proposed acquisition of DBSD North America and TerreStar and a waiver of satellite spectrum rules that would allow it to operate a terrestrial wireless service using a 2 GHz band. The FCC is expected to make a decision on the applications in a short timeframe, sources familiar with the process said. In addition to the 40 MHz of spectrum that TerreStar and DBSD control, Dish also bought 700 MHz licenses for $712 million in 2008. “Our plan is not to sell” spectrum and “we are going to use it as our investment into the wireless space because that is where the future is going,” Clayton said. “You have to be in that space if you want to grow."

Clayton declined comment on reports Dish had discussions with AT&T or T-Mobile about buying assets if the FCC requires the companies to divest spectrum or subscribers as a condition of approval of their proposed $39 billion deal. T-Mobile separate from AT&T or Sprint also would appear to be a potential partner. Sprint recently dropped its opposition to Dish’s FCC application after finding that the satellite service provider’s proposed 4G network wouldn’t interfere with its own operations. The two companies will use spectrum adjacent to each other and Sprint was concerned about interference.

Dish also agreed earlier this year to pay Sprint $114 million to settle a legal battle tied to TerreStar and DBSD. AT&T also has resold Dish’s satellite service in the past and Clayton and AT&T CEO Randall Stephenson have known each other since Clayton’s stint as Frontier Corp. CEO in the 1990s following his departure from Thomson. Frontier and Windstream are among the telcos that resell Dish Network service. “We have discussions with everybody,” Clayton said. “The government will determine, even if the deal went through, what they may have to discard and anybody’s thought on that is a guess. So you have to follow it very closely.” Dish Chairman Charles Ergen is heading up the company’s wireless strategy, Clayton said.

Verizon’s recent agreement to buy Spectrum Co. and its 122 AWS licenses in the 1700/2100 MHz band for $3.7 billion from Bright House Network, Comcast and Time Warner Cable “validates” Dish’s wireless strategy, Clayton said. “We feel pretty good about that,” said Clayton, referring to Verizon’s proposed purchase. “Who knows how this is going to shake out because we can’t do anything until we get FCC approval. That doesn’t mean we aren’t looking at possible options and combinations, but everybody is doing that. The whole telecom wireless landscape is going to be reshuffled regardless of what we do and we think that plays to our advantage because we have the spectrum. There are a lot of moving parts that might be interesting to us moving forward."

As Dish drafts a wireless strategy, Clayton, who was named CEO in July, is revamping his company’s management ranks with a heightened focus on marketing. Clayton hired Stan Kozlowski, who worked for him at Thomson, as vice president of national accounts (CED Nov 10 p2) and also has added management to head up social media and e-commerce, he said. Dish Chief Marketing Officer Ira Bahr recently left the company and Clayton said he plans to fill that post. Dish also has appointed managers for broadband, wireless, commercial and new products, Clayton said. “There was no investment in marketing,” Clayton said. “We were the first in DVR, HD and Sling and we never told anybody about it. Brand is important and if you are the lowest price provider you are never going to get your revenue per user up."

While Dish leases much of its equipment to customers, Clayton said he hasn’t “given up the sales model” he used for RCA DirecTV satellite receivers when he headed Thomson’s U.S. CE division. While a large share of Dish’s business comes from direct sales, the satellite service also is sold through 50-100 Costco stores, RadioShack, Sears and a host of satellite dealers.

"I have to find the right product” to sell at retail, Clayton said. “In the old days when we sold satellite TV, we would make money on the set-top box, content, service contracts, accessories and installation. Tell me how many products Best Buy has today with five sources of revenue. The lease model shut out a lot of the big box retailers.”