Ergen Bullish on 700 MHz Despite Proposed Buildout Rules
Proposed FCC build-out requirements for the 700 MHz band, which Chmn. Martin calls “the most stringent,” will hurt new entrants in the band, EchoStar CEO Charles Ergen told analysts in a Thurs. Q1 earnings call. That won’t necessarily stop EchoStar from participating in the auction, he said: “We are used to doing impossible things and those rules would not be a reason to not participate.” The Commission wants to require operators to serve 25% of their license areas in 3 years, 50% in 5 years and 75% in 8 years or risk losing authority to serve unserved areas.
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Participation in the 700 MHz auction would continue a trend of EchoStar involvement in FCC spectrum auctions, Ergen said. EchoStar bid $57 million for 1.4 GHz band licenses in a Q1 auction, according to its SEC filing (CD March 5 p8). The FCC still is reviewing the licenses, said EchoStar. EchoStar belongs to the 4G Coalition, along with DirecTV and Silicon Valley heavyweights, which hopes the FCC ultimately structures the 700 MHz band plan to allow a licensee to have a nationwide footprint (CD March 7 p9).
EchoStar’s Dish Network can carry as many HD channels as it deems worth carrying, Ergen said: “We carry 30-plus HD channels and there are probably a half dozen additional channels that are worth anything.” In an unsubtle reference to plans by rival DirecTV to offer 100 HD channels later this year, he said “there are not 100 channels that are worth anything.” HD programming is so compelling that everyone will gravitate to it, as viewers did to color TV, he said.
Echoing comments in DirecTV’s Wed. call (CD May 10 p14), Ergen said as subscribers sign up for digital video recorders (DVRs) and other advanced services, customer service issues increase “because [DVRs] can from time-to-time lock up and sometimes even fail.”
Countering views expressed at the recently-concluded NCTA convention in Las Vegas, EchoStar Pres. Carl Vogel said the DBS industry isn’t dead: “Between DirecTV and EchoStar, we had 75% of the net additions for pay-TV. That is not a broken business… Not everybody is looking for a triple play.” Both EchoStar and DirecTV seem to show some strain in the face of cable’s triple play, Sanford Bernstein analyst Craig Moffett said in an investor note: “Although to be sure the wheels show no signs of falling off of subscriber growth for either company.” For customers seeking a triple play, EchoStar is relying on telco partners, including AT&T, which offer Dish service, DSL for broadband, landline and sometimes even wireless, Ergen said.
EchoStar Q1 revenue grew 15% to more than $2.6 billion, it said. Net income was up $10 million to $157 million. Dish added 300,000-plus new subscribers during the quarter, for a customer total exceeding 13 million, EchoStar said. Ergen and Vogel both danced around questions about rumors of broadcast station acquisitions or a possible merger with AT&T.