Dish Seen Avoiding Interference That Hurt Falcone in Probe

Dish Network Corp. (DISH), the satellite- TV company seeking government approval for mobile-phone service, will probably avoid the interference concerns that thwarted a similar plan by LightSquared Inc., executives and analysts said.

Charlie Ergen, chairman of the second-largest U.S. satellite-TV company, is seeking Federal Communications Commission clearance to offer wireless service in competition with AT&T Inc. and Verizon Wireless. He wants to convert satellite airwaves to provide voice and data service over land- based towers, a strategy similar to that of hedge-fund manager Philip Falcone’s LightSquared, which was shot down by the FCC amid opposition from global-positioning systems providers.

Ergen is likely to avoid a similar fate because his airwaves, or spectrum, have certain advantages over Falcone’s. The frequencies Dish owns sit further away from those used by GPS devices than LightSquared (SKYT)’s, and there’s a narrow space between Dish’s spectrum and other frequencies, helping mitigate interference with rival carriers’ signals.

“It’s not as close to GPS, so it’s unlikely to interfere,” said Matthew Desch, chief executive officer of Iridium Communications Inc. (IRDM), which operates more than 60 satellites. “But the approval is going to take some time. The FCC is going to make sure they don’t have another LightSquared problem on their hands.”

LightSquared Reversal

Dish must wait until regulators write new rules that allow airwaves now used by satellites to be approved for high-traffic ground-based networks, the FCC said this month. The so-called rulemaking period allows the FCC to examine competitive and technical issues, including potential GPS interference.

The FCC gave LightSquared a partial go-ahead to convert satellite-only airwaves in January 2011, only to say this year it will block approval after tests showed the network would disrupt GPS devices. LightSquared has said it is studying options including legal fight to be able to build its network.

Dish will probably gain approval in six to 12 months, said Bryan Kraft, an analyst at Evercore Partners Inc. in New York.

While Ergen insists Dish’s plan is to become a wireless provider, the spectrum’s good quality would also make it easier for Ergen to sell the asset. Analysts including Wells Fargo & Co.’s Marci Ryvicker have said he may seek to divest the spectrum rather than spending billions building a network. Dish’s spectrum portfolio may be worth about $7.3 billion, according to Barclays Capital Inc.’s James Ratcliffe.

‘All Options’

Dish said it is reviewing alternatives after the FCC didn’t grant it immediate approval on March 2. In February, Ergen said “all options would be on the table for how we move forward with the company and the spectrum” if the FCC “went to rulemaking.” Dish spokesman Marc Lumpkin declined to elaborate further on those options.

Dish shares have advanced 35 percent in the past 12 months amid investor speculation the company or the spectrum assets will be sold. The stock fell 0.3 percent to $31.43 at 4 p.m. New York time.

Dish, based in Englewood, Colorado, acquired spectrum in deals for bankrupt TerreStar Networks Inc. and DBSD North America Inc. at a cost of about $3 billion. That’s approximately the same amount Falcone has invested in Reston, Virginia-based LightSquared through his Harbinger Capital Partners hedge fund.

Guard Band

The FCC grants businesses licenses to transmit signals on certain frequencies. LightSquared’s airwaves were once reserved primarily for satellites and are adjacent to spectrum used by GPS providers, at around 1,500 to 1,600 megahertz. The Dish licenses are for frequencies around 2,000 megahertz and above.

What’s more, the narrow space around Dish’s spectrum -- a so-called guard band -- keeps it separate from other frequencies, said Mike Marcus, director of Marcus Spectrum Solutions LLC, an adviser on engineering and policy issues.

“I’d say there’s no problem,” he said. “But it depends on what handset carriers like AT&T (T) have sold or have plans to sell in the next few years, with respect to their sensitivity to being close in frequency.”

In a Jan. 26 letter to the FCC, AT&T Inc., which according to Marcus owns bands that lie close to Dish’s in some markets, said the buildout requirements for Dish’s spectrum should be comparable to those imposed on LightSquared. The second-largest U.S. wireless carrier said it wants regulators to impose certain conditions on Dish, including being subject to existing interference rules.

Unique Problems

The U.S. GPS Industry Council, representing navigation-gear makers that fought LightSquared’s proposal, told the FCC it doesn’t object to Dish’s planned use of its airwaves.

“LightSquared had unique interference problems that cropped up in the middle of the waiver process,” Paul Gallant, a Washington-based analyst with Guggenheim Partners, said in an interview. “As far as anyone can tell, Dish doesn’t have those problems here. This should be a much smoother path for Dish.”

The rulemaking process allows any individual or company to voice concerns to the FCC about Dish’s strategy, said Vijay Jayant, an analyst at ISI Group in New York.

One of the issues that’s almost sure to arise is Dish’s buildout schedule, Jayant said. Dish has said it’s beneficial for it to delay spectrum deployment until more advanced long- term evolution technology will reach “widespread availability” in 2015, according to a Feb. 2 letter to the FCC. AT&T wrote a response letter last month urging regulators to force Dish to use the spectrum earlier to “serve the public interest.”

The conditions FCC imposed on LightSquared in 2010 required that carrier to build a network that covers at least 100 million Americans by the end of 2012 and 260 million by the end of 2015.

Black Eye?

Dish CEO Joseph Clayton said on a conference call last month that Dish’s motives were based on providing customers with “wireless video, wireless voice, and wireless broadband.”

Regulators may also set limitations on a future sale of the spectrum, affecting Dish if it attempts to flip it for profit instead of putting it to use, Jayant said. The LightSquared spectrum license requires the owner to seek approval before leasing capacity to the largest or second-largest wireless provider.

If the government sets rules that limit how Dish can use the spectrum, Ergen may choose to hoard it, said Jayant, which could be antithetical to the government’s mission of promoting wireless competition.

“Dish isn’t a patsy for the government,” Jayant said. “Dish’s attitude is, ‘Make the rules fair and we’ll do the right thing. Make them unfair and we’ll sit on the spectrum,’ and it will be another black eye for the government.”

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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