February 21, 2013
Dish Network Corp. reported a 33% drop in fourth-quarter net income, as subscriber growth slowed and programming expenses rose, highlighting why the satellite-TV operator is looking to diversify into wireless broadband.
On a call to discuss the earnings, Dish Network Chairman Charlie Ergen made his case for why Sprint Nextel Corp. should accept Dish's offer for its half-owned wireless affiliate Clearwire Corp. He argued that if Sprint accepted Dish's offer for Clearwire, it would provide capital to both Clearwire and Sprint, and Sprint would be Dish's "most likely partner" in a wireless network. But he said if Dish doesn't succeed with the bid, "then Sprint's probably not a likely partner."
Dish has confirmed that it made an offer to buy Clearwire for $3.30 a share late last year, along with offering to pay $2.2 billion for a chunk of Clearwire's spectrum. The takeover offer is pitched as an 11% premium to the offer that Sprint made late last year. Sprint owns half of Clearwire but doesn't exercise control of the company. Mr. Ergen said because Sprint doesn't control the board, Dish has "an actionable item" in front of Clearwire. "Sprint and Dish match up pretty well with where our spectrum is," Mr. Ergen said. "Sprint has publicly talked about a network vision to build a network to be shared by other people."
A Sprint spokesman said the "Dish offer is highly conditional" and that "we have an agreement with Clearwire, and we are moving forward with government and shareholder approval." He said Clearwire wasn't Dish's only option. Mr. Ergen said that Dish will have a better indication of the competitive landscape come June, once the other merger deals in the wireless industry come up for shareholder vote. "As these mergers and partnerships...go through, the FCC will weigh in and ultimately" will signal to Dish "'yes, we want Dish in the business or no, we don't care,'" Mr. Ergen said. "Then obviously selling the spectrum becomes more of a reality."
Mr. Ergen also confirmed that Dish had looked at creating an Internet-TV service, but "that doesn't seem to be the path the major programmers want to go down." He said the big media companies are embracing a different route known as "TV Everywhere" that makes programming available over the Internet to customers who prove they are already cable-TV subscribers.
Dish Chief Executive Joe Clayton reiterated that there is a market, "mostly 18- to 28- year-olds, that we're missing today in the pay-TV industry" who are "not going to pay $100 per month for content and they're not going to watch 250 channels." Mr. Clayton said that market, which might pay $10 to $20 to watch 20 channels, has "compelling interest not only for us but for the programmers, especially as the pay TV market matures going forward." Dish reported a profit of $209.1 million, or 46 cents a share, for the fourth quarter, down from $313 million, or 70 cents a share a year earlier. Revenue declined 1.2% to $3.59 billion. The satellite operator added 14,000 pay TV subscribers, compared with 22,000 in the year-ago quarter. Wall Street Journal
The Federal Communications Commission took a step on Wednesday to relieve growing congestion on Wi-Fi networks in hotels, airports and homes, where Americans increasingly use multiple data-hungry tablets, smartphones and other devices for wireless communications. The commission proposed making a large portion of high-frequency airwaves, or spectrum, available for unlicensed use by devices like the Wi-Fi routers that many Americans use in their homes. The new rules, after they receive final approval, would allow for transmission speeds of up to 1 gigabit per second - more than 100 times as fast as the Internet connection in the average American home.
The agency's five commissioners also expressed hopes that the new unlicensed airwaves would unleash further innovations, just as unlicensed spectrum in the past has made possible such devices as cordless phones, garage door openers and television remote controls. Most of the public airwaves, like those used for television and radio broadcasting, or for cellphone signals and satellite transmissions, are licensed to specific companies, which then control that band of the electromagnetic spectrum. Unlicensed airwaves, however, can be used by anyone, and they are increasingly used by wireless phone carriers like Verizon and AT&T, which divert nearly half of the data traffic off their systems and onto Wi-Fi networks to eliminate congestion caused by video downloads and similar bandwidth-hungry uses.
After a public comment period, the commissioners will try to devise final rules and regulations, a process that could take a year or more. But all of the commissioners expressed hope on Wednesday that the new airwaves could be put to use without unnecessary delay. "These airwaves can be a colossal catalyst for new innovation," said Jessica Rosenworcel, an F.C.C. commissioner. "It features enough continuous spectrum to unlock the full potential of a new Wi-Fi standard," known as 802.11ac. "Undoubtedly," she added, "cool new ways of connecting await." Possible roadblocks do exist, however, mainly because some of the airwaves proposed for the new applications are already in use by private organizations and government agencies, including the United States military.
Congress has mandated that the F.C.C. undertake the expansion of unlicensed spectrum, and the Obama administration has urged the freeing up or sharing of airwaves currently allocated to the federal government. Under the proposal, up to 195 megahertz of spectrum will be made available, the F.C.C. said, increasing by as much as 35 percent the total amount of airwaves available for unlicensed use in the 5-gigahertz spectrum band. But various government agencies, including a division of the Commerce Department, have warned against allowing consumer uses to interfere with current government applications.
Lawrence E. Strickling, assistant commerce secretary for communications and information, said in a letter delivered late Tuesday to the commission that the Pentagon, the Department of Homeland Security and NASA each used parts of the same airwaves for communication between aircraft and ground stations. Those communications enable activities like drug interdiction, combat search and rescue, and border surveillance, Mr. Strickling said. Private groups also voiced concern. The Intelligent Transportation Society of America, a trade group representing automakers, design companies and transportation lobbying organizations, warned that its current tests of "connected driving" technology used part of the spectrum that the F.C.C. was considering opening to unlicensed use. Connected driving systems, which are being tested by the Transportation Department, allow cars to communicate with one another by radio signal, warning drivers of potential collisions and other hazardous road conditions. If unlicensed devices are also using the same airwaves, the group said, the potential for interference could adversely affect the driving systems.
Julius Genachowski, the F.C.C. chairman, said he was confident that the commission's engineers would be able to work with the affected government and private entities to solve interference problems. "It's very important for the country that we all lean into this in a problem-solving way," Mr. Genachowski said. "This is not a new challenge for the commission to address." While the effort "will require significant consultation with stakeholders" to solve the interference problem, he added, "consultation can't be an excuse for inaction or delay." The commission also voted unanimously to approve a regulation allowing consumers and companies to use approved and licensed signal boosters to amplify signals between wireless devices, like cellphones and the wireless networks on which they operate. Those boosters, millions of which are currently used in ungoverned applications, help consumers and businesses improve coverage where cell signals are weak. Boosters are also used by public safety departments to extend wireless access in tunnels, subways and garages. The order, which takes effect March 1, 2014, creates two classes of signal boosters, for use by consumers and businesses, each with distinct requirements to minimize interference with wireless networks. New York Times
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