Dish Is Facing Questions From FCC on Network Build-Out Plan

(Bloomberg) -- Dish Network Corp. is being asked by federal regulators to provide details about its wireless network plans, a not-so-gentle reminder that the company has less than two years to use some of its $40 billion in airwaves or lose them.

The Federal Communications Commission wants specifics like what network equipment and chips Dish will use, which wireless frequencies it will operate on and what types of devices it plans to sell, according to a July 9 letter from the agency. Dish missed three earlier deadlines and faces an accelerated timeline to have a network built by March 2020, a year earlier than originally.

The prodding highlights the pressure Dish and its co-founder and Chairman Charlie Ergen are under to hang on to the airwaves that the company has accumulated. It also needs to convince investors that there’s still a big payoff for that investment. Dish failed to make deals with wireless operators T-Mobile US Inc. and Sprint Corp. that would have let Ergen combine rather build a new network.

Dish plans to build its wireless system in two phases. The initial project, targeted for 2020, is a $1 billion so-called Internet of Things, or IoT network, that will allow connections between machines, devices and sensors. The second stage is a $10 billion fifth-generation, or 5G, voice and data network.

“We appreciated the opportunity to discuss with the FCC our progress to meet the build-out milestones,” Dish attorney Jeff Blum said in statement. “As requested, we will continue to update the FCC about the progress of our narrowband IoT build-out.”

Shares Decline

The delays have agitated investors. Dish fell as much as 4.3 percent in New York. The stock was down 27 percent this year as of Tuesday.

Jonathan Chaplin, a New Street Research LLC analyst, sees the FCC questions as a sign the commission is “being sensitively proactive” because it wants “to see the spectrum deployed in a useful fashion.”

Dish’s response will help regulators assess whether the company really intends to deploy the spectrum in a way that meets the FCC’s obligations.

“If Dish’s intentions are real, then the request for information doesn’t put any additional pressure on them,” Chaplin said. “If Dish is looking to flout the rules, then they just received notice from the FCC that they ought to reconsider. I very much doubt that Dish expected any lenience from this FCC.”

Chaplin said Dish has too much at stake to risk losing the licenses. The analyst, however, thinks the FCC is trying to stay ahead of the situation, “rather than waiting for Dish to do whatever they are going to do, and judging them after the fact.

“As such, I doubt the FCC letter changes anything materially,” he said.

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