Dish Firm On 5G Costs

Dish Network is on the verge of its most dramatic transformation yet, and the opportunity to become a viable nationwide mobile network operator was not lost on company executives and analysts during its fourth-quarter 2019 earnings call.

“We’re not going to convince anybody until you see our first market and you can touch it, and feel it, and see why it’s different,” said Charlie Ergen, chairman and co-founder of Dish.

The satellite TV provider previously said it would deploy its first trial market for 5G service by the end of 2020, and Ergen remains optimistic about that timeline but left open the possibility that launch may not occur until 2021.

The company already owns vast amounts of unused spectrum and is slated to gain more, in addition to roughly 9 million prepaid customers from Sprint through a complex three-party transaction that will see T-Mobile US merge its operations with Sprint. Per the settlement agreement with the Department of Justice and Federal Communications Commission, Dish will also have access to the newly enhanced T-Mobile network for seven years.

Dish Faces Tall Order

Now, after an intense period of dealmaking and some reprieve on FCC deadlines it faced to finally begin using its spectrum licenses, Dish needs to execute on its plan to build a nationwide, cloud-native, fully virtualized 5G network riding on open source technology and open radio access network (RAN) standards.

It’s a tall order and follows a framework that’s still unproven at scale in today’s mobile landscape.

“Our expectation, unfortunately, is that Dish will encounter some heavy sledding in wireless,” analysts at MoffettNathanson wrote in a research note. “Managing their soon-to-be inherited prepaid business is going to be hard enough. But actually building a network, whether virtualized or not, will prove much harder.”

Analysts at MoffettNathanson and elsewhere are also skeptical that Dish can build its network for $10 billion, which is how much the company has projected to spend on the effort. While virtualization will significantly reduce Dish’s cost of equipment, that only represents about 20% of the cost of building a mobile network, according to the firm.

“The costly part of building any network isn’t equipment, it’s public works,” the analysts wrote.

Ergen compared Dish’s approach to wireless in the same context under which it entered the satellite TV market, as the first fully digital provider. “We’re terribly different in terms of architecture of where networks are today, and it’s very similar to when we started satellite,” he said.

“It’s not the first time we’ve started working on wireless. We’ve been at it for a long period of time, and we’ve put a lot of building blocks in place for it,” Ergen said. He also argued that many analysts are relying on old models to calculate the costs of building a network.

Dish Eyes ‘Paradigm Shift’ in 5G

“Some big incumbents today spend as much money in a year or two just to maintain their networks as we’ll spend to build the network. The reason is that the legacy is so hard, and so complex, and not automated so you need a lot of people to do it,” he said, likening the effort to a modern data center that can be maintained with a handful of employees.

“Verizon and AT&T have each spent something like $200B over the past decade on building their networks. Both are now considerably virtualized. And each spends more on annual maintenance, on networks that are already built, than Dish is planning to spend on building a network from scratch. Dish’s coverage buildout requirements don’t provide much insight,” analysts at MoffettNathanson concluded.

Much will have to occur before then, and Dish recognizes but also embraces some aspects of uncertainty in its vision. Ergen admits that the company doesn’t have all the answers yet, but he boasted confidence in the executive team and staff it’s assembling to reach its goal.

“It’s just a big paradigm shift. Going from analog to digital is the one we capitalized on a long time ago, and this one’s every bit as big or bigger in terms of virtualizing the network,” he said.

Marc Rouanne, executive vice president and chief network officer, said that all of the software Dish intends to use in its network will be cloud native and that will enable the company to adapt to new services quickly. “We will have the same type of native software capable services that you can stitch together and apply to any use case, so the capability to differentiate is very big,” he said, adding that agility, speed, and adapting to specialized use cases are the key benefits of the cloud.

“This is without question how a modern network should be architected,” Ergen said. “When you start looking at some of the security concerns in this country with Chinese vendors and things like that, the way to compete is to build a better network, not to build the same network using old technology.”

Open RAN Gains Momentum

Rouanne also highlighted Dish’s decision to use open RAN technology, describing it as a “consumption driven architecture” that can be used for automation and network slicing at lower costs. Dish’s adherence to open source also provides the company with direct access to software and other technology that RAN vendors like Nokia and Ericsson have built themselves and sold as a proprietary offering, he explained.

Dish’s near-term focus is on integrating Sprint’s prepaid business with its operations, finalizing the architecture of its 5G network, and working to finalize contracts with vendors before initiating deployments, explained Tom Cullen, executive vice president at Dish.

“Once we unleash nearly 100 MHz on a market-by-market basis we’re going to enjoy owner economics where our cost per [gigabit] will be so much lower than both the [mobile virtual network operator agreement] and the incumbents that we’ll be incented to price aggressively and compete aggressively,” Cullen said.

Throughout 2020, Dish will be working on zoning, permitting, and radio frequency architecture for cell towers and other sites. As such, it has cut capex guidance for much of 2020 and expects capex costs to rise considerably in 2021.

“Every month that goes by our cost goes down and the technology is a little bit better. We don’t know enough to know where that sweet spot is,” Ergen said, but he added that network deployments will likely gain momentum once 3GPP’s Release 16 for 5G standards is readily available in equipment and software.―SDX Central