Dish Smartphone Service Wins Approval by U.S. Regulators

A proposal to allow Dish Network Corp. (DISH) to offer smartphone service was approved unanimously by the U.S. Federal Communications Commission, whose chairman called it a “major step” to boost mobile competition.

The second-largest U.S. satellite-TV provider needed FCC approval to start a wireless service that could compete with the largest U.S. mobile provider, Verizon Wireless, and No. 2 AT&T Inc. (T) Dish has built up its spectrum holdings as it seeks to decrease its reliance on the satellite-TV business, which is losing subscribers.

The vote is “a major step to free up spectrum for mobile broadband and to drive new services, new competition in the mobile sector,” FCC Chairman Julius Genachowski said at a news conference at the agency’s headquarters in Washington today.

Dish had objected to the order’s requirement limiting power for its planned network, saying that would cripple its ability to enter the wireless business. The requirement was intended to prevent interference with government-owned frequencies known as the H block, which is slated to be auctioned.

“The commission has taken an important step toward facilitating wireless competition and innovation,” Jeff Blum, Dish senior vice president and deputy general counsel, said in an e-mailed statement. “Following a more thorough review of the order and its technical details, Dish will consider its strategic options and the optimal approach to put this spectrum to use for the benefit of consumers.”

Dish, based in Englewood, Colorado, rose 65 cents today, or 1.8 percent, to $36.67 in Nasdaq Stock Market trading.

‘Transformative Outcome’

“No matter how you slice it, this is a transformative outcome for Dish to expand beyond its pay-TV business,” Paul Gallant, Washington-based managing director at Guggenheim Securities, said in an interview. “Even if Dish loses the spectrum interference battle it’s been fighting, it still got most of what it wanted from the FCC.”

Responding to the FCC’s proposal, Dish last week offered to let part of its spectrum be used as a so-called guard band to preserve the H block. Sprint Nextel Corp. (S), which may seek to acquire the H block at auction, responded that Dish’s offer still “would substantially reduce” the value and utility of that block of frequencies.

Dish Chairman Charlie Ergen met with Genachowski and his staff Nov. 29, and Sprint Chief Executive Officer Dan Hesse spoke by telephone with the FCC chairman Dec. 5, according to filings with the agency.

Dish Plans

Genachowski declined to comment on how the FCC would react if Dish moves to sell the spectrum. “Our expectation is that Dish will do as it has announced, but our focus is on freeing up that spectrum for mobile broadband,” he said.

Sprint has approached Dish in recent months about a potential partnership that would allow the satellite-TV company to offer mobile-phone service over Sprint’s network, with Sprint getting access to Dish’s mobile airwaves, according to two people familiar with the matter, who asked not to be named because they aren’t authorized to speak publicly.

Sprint called the commission’s move “a balanced and equitable decision,” according to an e-mailed statement last night from the Overland Park, Kansas-based company.

“By allocating this spectrum for commercial broadband use, the commission is helping to bring more wireless broadband directly to consumers,” Larry Krevor, Sprint’s vice president for government affairs, said in the statement.

Mobile Demand

An earlier attempt by Genachowski’s FCC to designate satellite airwaves for smartphone use foundered. The agency in February reversed its tentative approval to LightSquared Inc. after officials said the mobile service would interfere with global positioning system-based navigation gear, and the company filed for bankruptcy.

The FCC is trying to accommodate rising demand for mobile Internet service as consumers turn to smartphones and data- hungry tablet computers. The agency in 2010 voted to ease restrictions on smartphone use of the airwaves Dish now owns.

Dish first asked for FCC approval in August 2011 after paying about $3 billion for airwaves from bankrupt satellite companies DBSD North America Inc. and TerreStar Networks Inc. in deals announced last year.

The agency in March approved Dish’s taking control of the airwaves, and said it would write the rules that the commission approved today.

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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