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Should Echostar Bid On 700 MHz? It Depends On How You Look At The Issues

December 6, 2007

Harold Feld of technology news and commentary site Wet Machine has some sharp views on the fact that one of the two prominent direct broadcast satellite providers is participating in next months 700 MHz spectrum auction while its chief rival is staying on the sidelines.

That would be Echostar (which does business as the Dish Network) and DIRECTV.

"Echostar has decided to bid in the 700 MHz auction, despite DIRECTV sitting this one out," Harold writes."This raises the obvious question. Is Echostar founder and CEO Charlie Ergen a 'brave little toaster,”'oldly defying the odds and the nay sayers to reap a well-deserved reward in the end? Or is this another example of the stubborn idiocy that earned the proposed Echostar-DIRECTV merger the distinction of being the first merger in living memory actually rejected by the FCC because he refused to pull it when it became obvious it was doomed?

Harold then makes the case that both of these arguments have some merit.

 

He mentions that DBS Wireless, a short-lived partnership between the two rivals formed last year to bid for AWS Spectrum was unsuccessful. Yet even if that had succeeded, serious business differences between the two would have made matters rough.:

To take one glaring example, Echostar has sought to have conditions placed on the transfer of DIRECTV from Murdoch's News Corp. to John Malone's Liberty Media. These things don't make it impossible for companies to work together; and they continue to work together on common interests such as expanding the availability of spectrum to enhance their video offerings.

But you really don't want to go into a multibillion dollar partnership together when you and your potential partner increasingly have “issues.” Like trying to save a dissolving relationship by getting married and having a baby, it usually ends up with both parties getting screwed and a rather costly divorce.

Meanwhile, Echostar could have a good case for playing in part of this market by feinting a bid for the C block of this spectrum while actually competing for some A & B block licenses in that spectrum. In a perfect world scenario, doing so might box out any competitive bids from rural telcos looking to become national players by cobbling together A &B bids.

And in a perfect world, Echostar pulls that off and becomes a nationhal player in the 700Gz space themselves.

I have watched EchoStar and their CEO Charlie Ergen for well over a decade. So you can be assured that if Charlie Ergen decides to keep making a play for 700 MHz, Ergen would once again prove himself strategically smarter than virtually all his cable, satellite and telco competitors. So going for 700 MHz spectrum isn't as dumb as it seems.




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