Dish – the Newest Cellular Carrier

One of the primary reasons that the T-Mobile and Sprint merger got approved was the agreement that Dish Networks will become the fourth nationwide cellular carrier. Now that the merger has been completed, Dish is off and running to take the steps needed to launch a new nationwide 5G network.

Dish is preparing to launch the cellular business with a lot of spectrum. The company is already sitting on 600 MHz and 700 MHz spectrum that covers most of the country. The company also owns blocks of 1,700 MHz AWS spectrum that is the workhorse in cellular networks. As part of the merger arrangement, Dish is purchasing Sprint’s 800 MHz spectrum.

The company envisions a new ‘virtual’ network that will be 100% software-driven, which would give the company the most modern cellular network in the country. If the network can be built quickly enough, the company should have an advantage for speed-to-market as new 5G features are introduced into the cellular network.

Like with any new venture, the company’s biggest challenge is going to be cash. Dish already paid T-Mobile $1.4 billion for the prepaid cellular company Boost Mobile. Dish is also paying $3.6 billion for the 800 MHz spectrum from Sprint. Meanwhile, Dish’s existing core satellite business continues to lose customers and revenues – the company lost 511,000 customers in 2019, and another 132,000 in the first quarter of this year – that’s 6.5% of its customer base.

Dish faces an immediate liquidity problem that has become complicated by the COVID-19 crisis. The company had enough cash on hand to pay off debt of $1.1 billion that will be due in May. But the company still faces debt retirements of $2 billion due in both June 2021 and 2022. Additionally, the company needs to raise an estimated $9 billion to build the new cellular network. The company needs to raise at least several billion in equity in a hurry if it wants to attract the needed new debt. That will be challenging due to the COVID-19 crisis as many big investors are sitting on the sidelines waiting for the markets to stabilize.

To really complicate things, Dish is operating under a tight time clock. As part of the merger agreement, Dish agreed to build over 15,000 cell sites by June 2023 that will cover 70% of the US population. That commitment not only requires Dish to raise the needed funds, but to get major construction started while the country is dealing with the COVID-19 crisis. The company faces fines of up to $2 billion for failure to meet that commitment. Dish has been battling with the FCC for years due to its failure to use its spectrum holding, so the deal comes with the tight timeline to ensure that the spectrum finally gets used to serve customers.

One of the interesting challenges the company faces is getting onto existing towers. Many of the most desirable urban towers are already full. It seems logical that T-Mobile will be decommissioning duplicative Sprint tower space over time, but that’s not something that will happen overnight, particularly with the COVID-19 crisis. It also seems likely that Dish will get caught up by the various supply chain issues that are cropping up everywhere in the industry due to the coronavirus.

Anybody who has ever launched a new broadband venture knows the other challenges facing the company. All of this growth much be done by a company that is just now hiring the staff who will pull it off. Deploying to 15,000 cellular sites in two years would be an intimidating challenge for any existing cellular company, and the idea of being nimble with a company that is adding the needed staff during the build-out period is frankly scary. Dish will obviously have to rely on outsourcing a lot of the cell site acquisition and construction – but in an industry that already has full employment, there aren’t hordes of skilled technicians sitting on the sidelines waiting for work. One of the key positions that is massively short-handed nationwide is experienced tower climbers.

Every detail of making this work is an intimidating task. For example, the company will need to arrange for 15,000 fiber backhaul connections to provide the needed bandwidth. Dish will have to conduct 15,000 load analyses on towers – something that is unique to each tower and that is done to make sure a tower can safely accommodate the new dishes and that the tower will hold up in windy conditions. Dish also needs to build one or more gigantic network operations centers to operate the new network. I can’t recall any equally ambitious telecom project.

Cellular customers everywhere should be rooting for the company to pull this off. Dish president Charlie Ergan has promised to compete vigorously on price to win market share – something that will be good for customers even if they don’t change to Dish.

The chances are high that the company won’t make its June 2023 deadline. The already overaggressive business plan will be further complicated by COVID-19 issues which likely means it will take longer to raise the needed money while dealing with issues like dealing with social distancing for the staff and supply chain delays. If the company meets some decent percentage of the plan, I hope the FCC will let them off the hook for fines. The country could use a new cellular network, particularly one that is technically superior to the other carriers and that wants to set low prices.

The Resurgence of Voice

One of the most interesting outcomes of the COVID-19 crisis has been a huge resurgence of telephone calls. While broadband usage is up 40% or more in some markets, the volumes of traditional voice calls have skyrocketed.

Verizon says it’s now seeing an average of 800 million calls per day, which is double the number of calls made on the last Mother’s Day. Verizon also says the average length of calls has increased by one-third over recent averages. AT&T is seeing similarly increased volumes of cellular calls which are up 35%. They have also seen the volume of WiFi calls made using home broadband on cellphones double in recent weeks. The carriers said they are handling the volumes of calls well and have only had to make a few network adjustments. I’m quoting these statistics from Cecelia Kang in the New York Times, but I’ve been hearing a few similar stories from my smaller clients as well.

Voice has been on a steady decline for years, particularly with young people who communicate by texting or by the use of apps like WhatsApp. There are plenty of kids who will tell you they rarely use their phone to initiate phone calls. There was a time when my daughter was a teenager that it seemed like torture to expect her to talk on the phone.

But the COVID-19 crisis has turned the way we communicate on its ear. People need to call a lot more as part of working from home. Conversations that were done by walking down the hall now need to be done phone or computer.

I’ve been on a lot of computer meetings and calls in the last few weeks. I happen to have decent broadband and the quality of Zoom or GoToMeeting works great at my end, but I’ve connected to a lot of people who are struggling with poor quality broadband. A lot of people are connecting into computer meetings by phone out of necessity. The carriers report that the biggest surge in voice traffic is now in the daytime, which has historically been the time when phone traffic from residential neighborhoods was at its lowest. Call volumes now seem to have surged because of remote working.

A lot of the surge of voice traffic likely comes from people reaching out to friends and relatives they can no longer visit. I’ve seen a big increase in solo walkers in my neighborhood who are getting out of the house by taking a walk. The big majority of walkers are now talking as they walk – something that used to be fairly rare.

Most people are surprised to hear that over 40% of homes still have a traditional landline. Many households have ditched landlines completely for cellphones over the last decade. A number of homes with landlines have no choice because they live in areas with poor or no cellular coverage. These households are worried every time they hear something bad about their carrier, like with the recently announced Frontier bankruptcy. While many homes are struggling with poor broadband connections when being forced to stay home, there are millions of homes with no broadband and for whom the traditional landline is their only connection to the world. Many of these people have commuted to places where cellphones work and where the office has broadband, and being stuck at home with only a landline is a throwback to the days before dial-up.

It’s almost certain that voice volumes won’t stay this high after the end of the crisis. However, voice calling probably also won’t revert quickly to old volumes. I think there are likely to be a lot of people who will continue to work from home. I’ve been hearing from folks who say they’ve never been so productive before and will continue to work at home more when the crisis is over. I know that’s what drove me to work from home years ago.

We’ll probably adopt new habits. Young people who are calling and talking to family now might continue to do so when the crisis is over. People who have reconnected with old friends or began talking to existing friends daily by phone might continue to do so. This will all be made easier if the FCC is successful in finally tamping down the volume of nuisance calls we all get.

For the most part, this is a temporary situation, a throwback to the old days when the family phone was in use for most of each evening. It’s interesting to those of us who grew up in the voice business to see this resurgence.