*Ergen Rattles TV Industry With $50 Billion Binge on Bandwidth**
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**by Scott Moritz**
**Bloomberg News**
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**11:01 PM CST**
**February 19, 2015*
http://www.bloomberg.com/news/articles/2015-02-20/ergen-rattles-tv-industry-with-50-billion-binge-on-bandwidth
(Bloomberg) -- Charlie Ergen is using a new Web-entertainment service
and $50 billion in airwaves to upend pay TV as we know it.
The founder of Dish Network Corp. beat his rivals to market in February
with Sling TV, a $20-a-month online service that offers live channels
and sports at a fourth of the cost of a typical cable bundle. Including
the latest government sale of wireless airwaves, Ergen has also amassed
a trove of bandwidth that could let Englewood, Colorado-based Dish
compete for data and voice customers for the first time.
Like cable and phone companies, Dish has struggled to add TV
subscribers, and is stuck at about 14 million. Unlike those competitors,
which also sell phone and Internet service, the company offers little
else. A new wireless network would level the field for Dish, while Sling
TV jumpstarts the stalled TV business. Ergen, who controls the third
largest U.S. pay-TV service, may be pressed to outline his plans on Feb.
23, when Dish reports fourth-quarter results.
“Charlie is breaking apart the delivery from the content,” said Roger
Entner, an analyst with Recon Analytics LLC in Dedham, Massachusetts.
“This is an innocent start with profound implications.”
The wild card is Ergen’s wireless airwaves. That growing pot, including
bandwidth in New York, Chicago and Boston acquired in a U.S. auction
last month, has fueled a rise in Dish shares as investors weigh how
Ergen will proceed. Their value, put at about $50 billion by Bloomberg
Intelligence, tops the $35.7 billion market cap on Ergen’s entire company.
Dish rose 1.7 percent to $77.56 on Thursday in New York. The shares have
almost tripled in the past three years.
*‘Who’d Invest?’*
“Who would invest with a guy that has admitted that his core business is
in secular decline?” said Paul Sweeney, a Bloomberg Intelligence
analyst. “Dish is betting it can monetize its spectrum either by
partnering with another wireless carrier or by leasing it or selling it
at a profit.”
The company faces pressure to do something. Under FCC use-it-or-lose it
rules, Ergen must build a network with his airwaves covering 40 percent
of the U.S. by March 2017.
In addition, Dish’s biggest competitors are combining, with AT&T Inc.
poised to acquire DirecTV, the No. 2 pay TV company, and industry leader
Comcast Corp. seeking to buy Time Warner Cable Inc., the No. 4 U.S. player.
By selling an inexpensive TV service over the Internet, Ergen is firing
the first shot in what could become a price war in the $103 billion U.S
TV industry. Cut-rate options like Sling TV threaten to undermine profit
for cable and satellite distributors, including his own, and could spell
doom for some of the less-watched channels from Walt Disney Co. to Time
Warner Inc. that are now part of the $85-a-month pay TV bundle.
*Cord Nevers*
Sling TV is aimed at the 16 million or so U.S. TV households that don’t
have a typical cable package. It’s also vying for millions of others who
watch on Web-enabled TV sets, tablets and smartphones.
The service offers about 20 networks including ESPN, CNN, TBS, the
Disney Channel and AMC, providing some of the most popular sports and
shows, including “Monday Night Football” and “The Walking Dead.” This
week, Dish said it will add the Epix movie channel for an extra fee.
Ergen’s target is mobile video. During Dish’s failed takeover bid for
Sprint in 2013, he said a large spectrum holding would provide the
capacity to deliver mobile video that the larger, more congested
carriers didn’t have.
“Our strategy for video is built around wireless,” Roger Lynch, Sling
TV’s chief executive officer, said in an interview.
Ergen and Dish won’t have the TV market to themselves for long. Sony
Corp., Verizon Communications Inc. and AT&T are all gearing up to start
TV services this year that aim to pick apart the conventional TV
package. Apple Inc. is also said to be planning one, the news website
Re/code said.
*Verizon’s Plan*
New York-based Verizon, which already holds mobile rights to the NFL,
has acquired streaming technology and is licensing content to start a
video service this summer. Dallas-based AT&T said its goal is to deliver
video to any device, and expects to announce a plan soon after closing
its $48.5 billion purchase of DirecTV. Sony is set to offer Web-based TV
starting this quarter through its PlayStation consoles.
Media companies from CBS Corp. to Time Warner are also starting to offer
their channels a la carte on the Internet as well, following the success
of Netflix Inc. in pioneering the streaming video business.
And conventional pay-TV companies are cutting prices. DirecTV is
offering a 1-year 130-channel deal to new subscribers for a $19.99.
Ergen’s real goal may be to find a partner for Dish, one that lets him
get the most out of the assets he’s assembled, perhaps a wireless
company like T-Mobile US Inc. Dish is expected to report fourth-quarter
earnings fell to 43 cents a share, excluding items, with revenue rising
4.6 percent to $3.7 billion, the average of 18 estimates.
“I look at the spectrum portfolio and video content that Dish has as a
fascinating idea,” T-Mobile CEO John Legere said Thursday on a
conference call. “Dish is a great opportunity for the country and
possibly T-Mobile.”
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