T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

0m10s Speaker 0

Hello, and welcome to the two hundred and eleventh episode of the week with Roger, conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Antner.

0m21s Speaker 1

How are doing, Roger? I'm great. How are you?

0m24s Speaker 0

Good. So Roger Dish or rather I should say EchoStar now is back in the news with an extension the FCC granted for their five g build out. It's been a while since we talked about these guys. Do you wanna tell us what's going on?

0m36s Speaker 1

Well, Dish, as the operating entity here, filed a request with the FCC two Thursdays ago, about adjusting their build out requirement. And in record time, the next day the FCC approved it. We kind of predicted this, what, a year ago? That DISH would make its regular goal, build out goal, but would fail with the 75% of each PEA goal. And they argued that this is wasteful and doesn't matter and all of that stuff.

1m18s Speaker 1

And you know, massive kudos to Jeff Blum, who runs the policy operations in Washington, you know. Again, he pulled off a Jedi mind trick, and the FCC said yes. Yes, you don't need to build out in every PEA. There are 400 and what, 22 of them, roughly. You know, we allow you to build out as you proposed.

1m46s Speaker 1

And, you know, they requested, they only had to build out in certain markets, but there they would build out 80% or 85%, which is I think all the markets that are easy to cover anyway. And they probably have covered it already. So the FCC basically, and this is a bureau action, not a commissioner action, right? So the bureau, the wireless bureau signed off on it. The commissioners, if there are three commissioners who have serious questions, that can go up then to the commission.

2m22s Speaker 1

But considering that only, I only saw Commissioner Carr have doubts, That's not enough, right? So, we talked about this a year ago and said like, they're not going to make this. 75 of each PEA is really, really hard.

2m37s Speaker 0

It takes a lot of money, it takes a lot of people, it takes a lot of time. Yes. Right? And they've got a big bill coming due as well, right?

2m44s Speaker 1

They have a big bond payment of $6,000,000,000 that they need to pay. But when we focus on this, if we go all the way to the conclusion, it's like the FCC is bending over backwards not to be the obstacle that sinks fish. It gives them every leeway. The funny thing here is that a Republican administration under Ajei Pai approved this against the Democrats, with then Commissioner Rosenwortzl saying, oh, this might not be able to make it and make these buildout requirements, therefore I'm voting against it. Now, she leads the commission and who was previously against it is now bending over backwards to basically that her doubts will not come to fruition.

3m38s Speaker 1

Whereas, you know, at least Commissioner Carr who voted for it in the beginning is now saying, you know, what are we doing here? You know, both sides are flip flopping. It's really funny how when they changed seats, they also changed the relative position associated with the seat. So the majority opinion used to be Republican, it was like, yeah, let's do this. And the Democrats said, no, now it's the seats are reversed.

4m5s Speaker 1

And the bureau does basically what the chairman or chairwoman in this case wants. But what's really interesting is the other things that they committed to, to offer a low cost five gs plan and device to consumers nationwide, offering at least 30 gigs of data for no more than $25 both prepaid and postpaid customers. Well, news break for the FCC, they're doing this already. They're promising that they will build out from what 17,000, 18,000 sites to 24,000 sites by June 25. Manageable.

4m44s Speaker 1

And they're committing to GPP Release 17, that's five gs advanced, by June year. Shouldn't be a problem because they have a standalone network. But here's the other interesting thing. They're promising that 75% of new subscribers will be activated on the DISH Network, if the subscribers within accelerated markets. So basically, the accelerated market is where they have coverage, right?

5m16s Speaker 1

And the non accelerated markets where they don't have coverage. So it's really interesting because Dish has also an agreement with AT and T for roaming, right? They have an agreement with T Mobile. They have an agreement with AT and T. The AT and T agreement is a ten year agreement where they committed to $5,000,000,000 worth of spend over the ten year period.

5m39s Speaker 1

And a lot of that is for MVNO services. I think they can also spend it on-site services like backhaul, you know, using AT and T fiber and that stuff. But my question mark, and I really don't know the answer is, when they commit to 75% on their own network, you know, and I'm simply divided 5,000,000,000 to ten years, will they make their $500,000,000 spent commitment with AT and T? Or is AT and T going to either get a lump sum at the end, but EchoStar might be bankrupt by then? Or will they get 500,000,000 regardless?

6m16s Speaker 1

I don't know the contract. So I'm like, just like from the outside speculating here.

6m21s Speaker 0

But either way, I mean, training wheels have to come off the network at this point, right?

6m24s Speaker 1

Well, training wheels are off it. It's just like the training wheels have to come off their subscriber acquisition and marketing engine. Because we made always the case here, the network on one hand is a technical marvel, really admirable. It was tough, difficult, they did it. But they are failing completely on the acquisition side.

6m49s Speaker 1

They're not able to communicate why somebody should be on the Dish Network or have Boost service, right? And they're losing customers every single quarter. And that's the scary part here, right? It's like they're going to fail on this. We did way back when research on this, and what would it take for them to get to their, you know, remember five years ago, Charlie Ergen says like, you know, our goal is like 40,000,000 customers.

7m17s Speaker 1

And I'm like, what will it take them to get to not even 40,000,000, but to become a profitable operator? And I'm like, they need probably $510,000,000,000 above what they say, because they said like, oh, we can build this network on, what did they say, 10,000,000,000? My assertion then was, they also need that for marketing. And they never raised it. At that time, they could raise money at near zero interest rates, and an unlimited amount.

7m45s Speaker 1

And if this fell down on something, then it's raising enough money then to wither or to withstand better that interest rate tsunami that we're in now, right? I'm around, you know, thirty years of I remember interest rates, and the near zero interest rates we enjoyed for what ten, fifteen years? For me was an abomination. It was a nice vacation from normal interest rates. But we're now in a normal interest rate environment.

8m17s Speaker 1

And for people who didn't grow up in normal interest rate environment thought that the near zero interest rates where there was more investable money chasing opportunities than there were opportunities. That that was normal. And that's what kills this, right?

8m33s Speaker 0

Well, mean in some ways we're back to where we started, right? Like before the acquisition of Sprint by T Mobile, we had the fourth major player in the industry that was floundering and some of that has to do with network technologies that weren't compatible. And here we are down the road, right? With the fourth player in the industry, straddling network technologies, struggling to get customers, struggling to do the build outs they need to remain competitive, right?

8m58s Speaker 1

My argument in both cases, it was less the technology and more the marketing.

9m4s Speaker 0

The acquisition, right? Like the why, why should you be on this network?

9m8s Speaker 1

Why should you be on this network? And low price, yes. Now price is number one factor. But remember way back when, when Sprint gave out one year of free service and nobody came, because they're like, if you're offering free service for a year, there must be something wrong with you, right? It's too good to be true.

9m29s Speaker 1

And so Dish almost is starting to fall into this trap. But they can't articulate of why should I join this network?

9m37s Speaker 0

Well, some ways it's a continued story of where's the five gs killer app, right?

9m41s Speaker 1

Well, it doesn't even mean five gs killer app. It just means

9m46s Speaker 0

Standalone killer app or whatever, right? I mean like There's a to

9m49s Speaker 1

kill app.

9m49s Speaker 0

As you say, the network is a technical marvel, but like what can it do that's different?

9m54s Speaker 1

But it doesn't even need to be a technical marvel. Why do people join Verizon, AT and T, T Mobile, Comcast, Charter, you name it, right? Why do they join Mint? Mint is outgrowing, you know. Even when it was an MVNO, was outgrowing DISH, hand over fist.

10m13s Speaker 1

That's like this derelict failure to compete.

10m17s Speaker 0

Well, I mean they built it, but nobody came, right?

10m19s Speaker 1

Exactly. So I think in the end, the FCC will continue to bend back over to not be the one that syncs DISHEchostar. But the network build out is not syncing it. It's the lack of marketing. And it's the marketing spend that will kill it.

10m37s Speaker 1

Building the network is only the first step. Yes, it's expensive, but the marketing is really much more expensive. AT and T, Verizon, T Mobile are spending 2,000,000,000 to $3,000,000,000 a year on marketing. And they're not going to hold back to make Dish lives easier. But here, what's also going to be interesting is if DISH is not building out these certain markets, what's happening with the licenses?

11m5s Speaker 1

The FCC should repossess them, because it's a failure to build out. And if there's idle spectrum, the FCC as a first step should, you know, get it back. Yes, they don't have spectrum authority to put it then back into the market and give it to other parties who are interested in actually utilizing the spectrum, which is, you know, point to Capitol Hill for failing on spectrum again. What the FCC doesn't want is wait until bankruptcy to get the licenses back, because legal precedent shows that the FCC can't repossess it, but the reorganized EchoStarDISH will keep those licenses, right? So we'll see.

11m50s Speaker 1

It's interesting. Dish has the FCC buy a leash and, you know, it yanks the leash and the FCC moves. Good job.

11m59s Speaker 0

Well, mean, it's a it's a state of execution, but they still might be on death row, right?

12m3s Speaker 1

Yeah. But no other company gets this much leeway as this does. And then if we want to look at 12 gigahertz and things like that, it becomes really interesting. Because you know, with DBS, and there are apparently talks with DirecTV, which still is majority owned with AT and T, about putting those two assets together, so that the two drowning people are swimming together better as they cling to each other. Yes, it will they will be a little bit longer above water.

12m38s Speaker 1

But it will also be interesting how this opens up 12 gigahertz, and then you have here this huge argument between, right now it's like a free for all where everybody disagrees with each other. And you know, from the left enters Elon Musk, who also wants to do things in this band. And you know, it's interesting. Right now, Charlie Ergen gets mostly its way, if not all the time. The Carriers, not so much.

13m8s Speaker 1

Right? And right now, Elon Musk with Starling doesn't get it at all. You see how much they, at least the current FCC is talking about, like, you know, there was the BEAT example of him applying for BEAT. First they approved it, and then they took it away from him. It was very interesting to see how different parties get different treatment.

13m31s Speaker 0

Well, I'm sure we'll keep watching the soap opera. I'm sure there'll be more episodes on this one.

13m36s Speaker 1

Oh, I'm sure. You know, this is the gift that keeps on giving for quite some time.

13m41s Speaker 0

All right, Roger. We'll talk next week.

13m43s Speaker 1

Thank you. Talk to you next week.