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Dish Network spectrum buy perplexes

By PETER SVENSSON, AP Technology Writer Tue Mar 25, 4:38 PM ET

NEW YORK - A mystery surrounds satellite broadcaster Dish Network Corp.'s surprise, $712 million winning bid in the government's recent auction for radio spectrum reclaimed from television stations. ADVERTISEMENT

Will Dish start a mobile video service? Will it try to offer interactive services to better compete with cable companies? Or will it simply wing it?

The company is mum. It is barred from talking about its plans until the close of business on April 3, which is the deadline for down payments on the auction winnings. The winners in the auction were announced last week.

Dish won the old UHF channel 56 in the whole country, except for New York, Los Angeles, San Francisco, Philadelphia and Boston. That lets Dish cover three-quarters of the U.S. population, making the $712 million price tag a bargain compared with the combined $16 billion that Verizon Wireless and AT&T Mobility is paying for larger chunks of the airwaves.

The wireless carriers will use that spectrum to expand broadband services for cell phones, laptop cards and other gadgets, but Dish's spectrum is likely too narrow to support a competing service, analysts say.

So what is Dish thinking?

"There's more questions than answers at this point," said Craig Moffett, an analyst at Sanford C. Bernstein.

There were even questions about who was doing the buying. The company known as EchoStar Communications Corp. changed its name to Dish Network Corp. at the beginning of the year, while spinning off its equipment-making arm to a separate company, EchoStar Corp. But the initial filing to take part in the auction was made last year, under the EchoStar name, causing some investors to believe it was the equipment arm that was participating.

Analysts at Stifel Nicolaus noted that while the 6 megahertz of bandwidth that Dish is buying isn't ideal for two-way service like broadband, it's great for a one-way broadcast. That could mean that the Englewood, Colo., company plans to start a video service for cell phones and other mobile gadgets.

But the reasoning behind such a move isn't clear, either.

Qualcomm Inc. already operates a mobile TV network for some of the cell carriers, and it snatched the remaining channel 56 licenses in the auction.

TV broadcasters are looking at setting up their own, competing service for mobile gadgets, and they already have towers from which to broadcast.

Either way, the cell-phone carriers maintain strict control over the applications that show up on the handsets they sell (though they are loosening up) and would probably not look kindly on a service that bypasses them.

Moffett said Dish could probably launch a TV service, but that would be taking a big risk for a type of service that has seen "underwhelming" demand from consumers.

Another possibility is that Dish Network plans to use the purchase to mitigate one of the big drawbacks of satellite broadcasting: that it's all one-way, from the satellite to the subscribers' dishes.

The set-top boxes don't send anything back up to the satellite, which prevents the broadcaster from duplicating some of the interactive features that cable providers are introducing.

But the boxes could communicate with a terrestrial network that uses the acquired spectrum. For instance, a customer wouldn't need to hook the set-top box up to a phone line to order pay-per-view movies. The boxes could also report on customer viewing habits, providing valuable data for advertisers.

Using the spectrum for a set-top box return path looks like a long shot, however. It would require replacing customer set-top boxes and building a network of towers to receive their signals.

"It's more money than anyone would likely spend for a simple backchannel for something like set-top box viewing data," Moffett said.

A remaining possibility is that Dish doesn't have a definite plan for the airwaves. A consortium of cable companies led by Comcast Corp. bought spectrum for $2.4 billion in 2006, and hasn't yet said what it will do with it.

Wireless technologies could be important to either industry in the future, said Victor Schnee, telecom expert at Probe Financial Associates. "But I don't get a sense that either one of them has a clear idea of how to use it or where they'd like to wind up," he said.

He said both satellite and cable companies, facing markets that are maturing after decades of growth, could be casting about for ways to navigate the future.

"These are very successful companies ... and the world around them is changing. In a way it immobilizes strategic thinking when you say 'I have to do something really new,'" Schnee said.

Schnee said Dish ought to simply partner with a wireless company like Sprint Nextel Corp.

"When you get into the wireless area, going off and doing something on your own, at this point in the industry ... is very daunting," he said.

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