Dish Network’s presence on the mobile sidelines is growing

The Federal Communications Commission’s auction of AWS-3 spectrum has raised $36 billion in just the first eight days. The auction may eventually fetch well north of $40 billion, more than doubling the forecasts of $15 billion to $20 billion some analysts predicted before it began. While bidding activity remain confidential during the auction, the action appears to be driven primarily by the nation’s two largest carriers — AT&T and Verizon, namely — and, to a lesser extent, T-Mobile. And Dish Network likely is joining in on the fun as well.

Dish, of course, is already sitting on a pile of unused spectrum, and the value of those airwaves is increasing thanks to the current auction. Dish has seen its shares rise 19 percent since the auction began roughly two weeks ago due to perceived inflation of spectrum values. Meanwhile, both AT&T and Verizon have seen shares slide due to concerns about the amounts they may eventually shell out to garner those airwaves from the FCC.

These developments have fueled increasing speculation about the motives of Dish, which continues to be a central figure in the wireless spectrum market although it has yet to offer mobile service. (The company dominated the FCC auction that was completed in March.) It’s impossible to know what Dish has in mind, of course, particularly given Chairman Charlie Ergen’s unpredictability, but here are a few options the company could be pursuing:

  • It could build its own network. Dish may accrue sufficient spectrum to build out its own nationwide (or even semi-nationwide) network, but Ergen has long claimed Dish needs an established carrier partner to join the wireless game. Due to prohibitive build-out costs, the odds of a Dish network built from the ground up remains very slim. Earlier reports of a partnership with Google to provide a major disruptive mobile service are intriguing, such an endeavor would be an enormous gamble for both companies in a competitive market where multiple players are well entrenched.
  • It could sell its spectrum treasure trove. Many industry onlookers have long speculated that Dish simply invests in spectrum to sell high after its value inflates, and some have suggested the company may be bidding in the current auction only to increase the amount it could ask for its current airwaves. But Ergen’s desire to join the mobile industry seems sincere, and cashing out on that opportunity – even to the tune of billions of dollars – isn’t in his nature.
  • It could acquire or merge with an existing carrier. I’ve long believed a partnership with T-Mobile is Dish’s best route into the mobile industry: Dish has a load of extremely valuable spectrum sitting on the shelf, while T-Mobile has an increasingly impressive nationwide network but needs airwaves to continue to improve its nationwide coverage. Speculation of a tie-up between the two has only increased following SoftBank’s failed bid to swallow T-Mobile, but despite the apparent synergies there’s no indication the two companies are moving closer to a deal.

As Tim Farrar of TMS Associates wrote last week (and as Fierce Wireless’s Phil Goldstein later reported), Dish may be raising stakes in a poker game that it could win regardless of outcome: It could win the current auction and sell the spectrum to existing carriers under the condition that the AWS-3 spectrum will be interoperable with Dish’s AWS-4 licenses, or it could step aside and allow other carriers to continue to try to outbid each other, which presumably would lead to an increased value of its current holdings. Dish’s shadow continues to grow in a mobile market it has yet to join. So it’s potential impact if and when it finally joins the industry continues to grow as well.