The news about the latest waltz in the telecom sector (between Dish Network and AT&T) has been seen on just about every media outlet by now. Just in case you missed it, they have inked a new, long-term strategic Network Services Agreement (NSA) (said to be worth upwards of $5 billion) making AT&T the primary network services partner for DISH MVNO customers.
One comment was that this deal is simply a swap-out of T-Mobile for AT&T in Dish’s plans going forward. But there is a bit more to it than just that.
One of the key issues surrounding this agreement is that Dish is under a federal mandate to have wireless service to the rest of the country after 2023. This deal makes Dish an MVNO “indefinitely,” and has to potential to let Dish off the hook for fulfilling its federally mandated requirements should it falter (and there is substantial belief that it may). Not a bad plan for Dish to find some breathing room (rumor has it that T-Mobile was not willing to discuss extending their agreement past 2027).
Drilling down on that hard stop in 2027, while that seems like a lot of years for Dish to accomplish its goals, some analysts believe Dish would not have been able to meet federally imposed deadlines on its wireless buildout. Perhaps they are more concerned than they let on and saw that as a potential problem if things do not go according to plan. The AT&T deal adds six more years (to 2023) to that when all is said and done.
This is significant because Dish is obligated, under the terms of the consent decree between Dish, T-Mobile, Sprint, the DOJ, and the FCC, to build out wireless facilities covering 70 percent of the U.S. population by 2025. Dish notes that they are not worried that this goal can be reached since that 70 percent is collected in less than three percent of the U.S. landmass. Without an MVNO agreement to fall back on, Dish would have to build out the rest of the country, of which the next 25 percent occupies nearly ten times the landmass of the first 70 percent. And the number goes downhill from there. That is the real rub. So, this new arrangement gives Dish some breathing room, basically, and here is why.
There are two issues with “coverage.” That, defined by the FCC, and that defined to achieve customer satisfaction. And it is not just semantics. FCC coverage is loose. It is a broad stroke that just means coverage is available, even if it is slow and spotty. The satisfaction coverage is a completely different animal. It means that coverage is ubiquitous, i.e., residences, enterprises, venues, open areas, dead spots, malls, parks, you name it. That is where Dish is looking ahead to the deadline of 2027 with some trepidation.
While this seems to have more honey than vinegar, it is by no means a slam dunk. And not all opinions are on the same page. An analyst or two makes note that accomplishing part of what Dish must do is somewhat difficult – the Partial Economic Areas (PEAs). The main issues with these tend to be geography (not so much) and RoI (much). There are challenges with the infrastructure as well (power, backhaul, terrain, etc.). This will be the make or break for Dish under the agreements and the FCC’s watchful eye.
Now, Dish has more flexibility and time for implementing its own buildout. Even after it meets all of its FCC commitments, it has some work to do to fully blanket the nation with its own network coverage. Now they can rely on the T-Mobile MVNO deal as a safety net for a few more years while it builds out its own network and meet the customer requirement of fully blanketing the country with its own network.
Additionally, there is speculation that that the deal also was some insurance for AT&T’s DirecTV satellite TV business.
That makes some sense as well. After years of the satellite industry showing little growth and promise, the recent uptick of Non-geostationary Orbit (NGSO, the latest term for LEO satellites) is breathing new life into the satellite business. Even the GSO satellite business (where Dish has its birds) is seeing some resurgence. This gives Dish another content source, if that is something they are thinking about, going forward and such a vector fits into the MVNO landscape at some point.
In the end, it is a good deal for AT&T, not so good for T-Mobile, and a win for Dish. The reasons have been analyzed to death, with all kinds of theories as to why the players did what they did. Several analysts have analyzed the financial implications. Others the motives of Dish, AT&T, and T-Mobile. But when it comes down to counting the chips it is all about keeping as many of them as they can and keeping the revenue stream, wherever it is, running. It will be interesting to watch how this plays out in the next few years.