Dish Gets FCC Nod For Flexibility Of Frequencies; Will Bid For H-Block Auction In Jan 2014

The Federal Communications Commission (FCC) has extended the deadline for Dish Network ( DISH ) to complete a national wireless broadband network, and given the company flexibility in how it can use wireless frequencies. In return, Dish has pledged to bid at least $1.56 billion in the FCC's H-block auction of frequencies scheduled for January 14, and to lower the power of transmissions on some former TV-station analogue frequencies Dish bought in 2008.

This is a welcome move for Dish. It gives the company until 2021 to build this nationwide network; and it increases the company's flexibility to use its already owned airwaves for uplink. Apart from the H-block auction, Dish is also eyeing the LightSquared spectrum. In a recent move, private equity firm Centerbridge abandoned the plan to bid for LightSquared (See - Another Roadblock Cleared For Dish As Centerbridge Backs Out From LightSquared Bid ). With the FCC agreement, the value of Dish's spectrum holdings could grow far more than it actually will end up paying. Dish's current spectrum is already valued at around $11 billion.

See our complete analysis for Dish

Why FCC Allowed This?

In February 2012, Congress enacted "The Middle Class Tax Relief and Job Creation Act of 2012," containing landmark provisions to create a much-needed nationwide interoperable broadband network that will help police, firefighters, emergency medical service professionals and other public safety officials. The law's governing framework for the deployment and operation of this network, which is to be based on a single, national network architecture, is the "First Responder Network Authority" (FirstNet). FirstNet will hold the spectrum license for the network, and is charged with taking all actions necessary to build, deploy, and operate the network, in consultation with Federal, State, tribal and local public safety entities, and other key stakeholders. Thus the network auction is crucial for FCC.

Dish's commitment to place minimum bids in the H-block auction ensures that the FCC will see some money raised for its national emergency response agency radio network idea, FirstNet. The FCC has tried before to raise the money in an auction for FirstNet, but the auction received no bidders. Dish's bid for H-block gives FCC a minimum reserve price of $1.56 billion in the auction scheduled next month. Moreover, the FCC wants owners of the former TV frequencies to reduce the power of transmissions on those frequencies to avoid interference with other users. Dish has agreed to the FCC request for restrictions on some former broadcast TV frequencies that Dish bought in 2008.

Why Dish Is Bidding For H Block Auction?

The H Block is a 10 MHz block of paired airwaves that runs from 1915-1920 MHz (for the uplink) and from 1995-2000 MHz (for the downlink). Dish controls spectrum adjacent to a portion of the H Block, called AWS-4, which runs from 2000-2020 MHz (for the uplink) and 2180-2200 MHz (for the downlink). Dish has asked the FCC to let it use the 2000-2020 MHz band for downlink operations instead of uplink. Now that the FCC has given the nod for Dish's request, it will have more spectrum for downlink operations, assuming the company wins the H Block auction.

Dish is also eyeing LightSquared spectrum and has a $2.2 billion bid in place for the same. (Read - Dish Eyes More Spectrum With LightSquared Bid ) However, it has been learned that Fortress Investment Group is in talks to acquire LightSquared out of bankruptcy proceedings. It will be interesting to see how things unfold from here and if Dish manages to acquire the LightSquared and H Block spectrum. Macquarie estimates that the auction purchases, with a positive FCC decision, could add a minimum of $6.6 billion of value atop the unused spectrum Dish Network already controls.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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