Dish's Ergen vows to undercut the wireless competition on pricing
Dish's co-founder "looks forward" to competing with T-Mobile if the merger is approved.
Dish Network's Charlie Ergen at a press conference to launch Google TV. On Tuesday, he detailed plans for his company's wireless network in New York court as a witness called by T-Mobile to get its Sprint deal approved.
Dish co-founder Charlie Ergen is known for being a poker player. As a witness called by T-Mobile in its trial to get its pending $26.5 billion Sprint merger approved, he laid his cards on the table.
Dish is set to become a new, fourth wireless player, acquiring divested Sprint assets should the acquisition get past the 14 state attorneys general suing to block the deal. In testimony Tuesday, Ergen publicly detailed some of his company's plans for what happens if the merger is approved and Dish acquires the Sprint assets.
While he didn't reveal exact pricing, Ergen told the court that his new wireless service will be priced lower than where the marketplace is today, adding that he's "looking forward" to competing with the new T-Mobile that will be created.
Dish plays a pivotal role in T-Mobile's bid to complete its merger with Sprint. Thanks to a deal brokered in part by the Department of Justice, Dish will be able to run fully on T-Mobile's network for three years while it builds out its own 5G network. Ergen said he'd been negotiating for some access to T-Mobile's network, but the government was able to get him unlimited usage, prompting the Dish boss to tell the court that the DOJ's people "were better negotiators than we were."
Dish, Ergen said, will be able to go live with a wireless offering within 30 days of the T-Mobile deal closing.
Under the agreement, T-Mobile cannot raise the price on Dish while Dish builds out its own network, with regulators putting a "monitor," former Facebook general counsel Ted Ullyot, in place to make sure the companies adhere to the terms of the deal.
As Dish builds out its network, Ergen said, the first city will go live in 2020, and its customers will be migrated from T-Mobile's network. Dish's users will still be able to tap into T-Mobile's nationwide network when traveling to places that Dish's network doesn't cover. Ergen said the networks will be so connected that switching from Dish's service to T-Mobile's won't cause a dropped call.
As for the funds to build out a network, Ergen revealed that the company has received "highly confident" letters from Morgan Stanley, JP Morgan and Deutsche Bank that said they could each provide $10 billion to help fund the building of the new network. As part of the DOJ-brokered agreement, Dish could also work with another company, such as a cable provider, to offer Dish's service.
Dish has been acquiring spectrum for years, spending billions of dollars accumulating an amount that Ergen says rivals the holdings of Verizon and T-Mobile. That spectrum trove, which has deadlines imposed by the Federal Communications Commission to use it or risk losing it, made Dish an interesting partner for the DOJ, which was looking for a fourth carrier to replace Sprint.
As part of the deal with T-Mobile, Dish will be able to acquire additional low-band 800MHz spectrum that Sprint currently uses, though it won't get that spectrum for three years.
The lack of use of this spectrum has led some to question Ergen's motives and whether Dish can be counted on to be a true wireless competitor.
When asked if the company can be trusted to build out a 5G network, Ergen cited potential fines and lost spectrum, saying that "it'd be financial suicide" if the company failed to meet the guidelines, and that Dish is "not suicidal."
In continued testimony Wednesday morning, California Deputy AG Paula Blizzard cross-examined Ergen, further questioning whether Dish could be counted on to fulfill its promises given its history.
Blizzard brought up a 2015 FCC release where then-FCC commissioner Ajit Pai called Dish's participation in an auction designed to help small companies gain spectrum "a mockery." Dish, the FCC claimed, gained "over $3 billion dollars in taxpayer-funded discounts" when buying the spectrum using two companies that it had an "85% ownership stake" in.
The FCC found that Dish did control the smaller companies that were purchasing the spectrum, but Ergen said that an appeals court ruled that Dish wasn't given a proper chance to renegotiate the deal. The matter is currently awaiting a final judgment at the FCC.
Pai is now chairman of the FCC and has since approved the T-Mobile merger with Sprint. In August, Pai called Dish's planned 5G deployment to "be in the public interest."
US District Judge Victor Marrero questioned Ergen on whether Dish would be able to adequately compete with T-Mobile given that it will be relying on T-Mobile for service while it develops its own 5G network.
"They are not going to want Dish to get customers," Ergen said, adding that that Dish's growth would not only stop T-Mobile from gaining subscribers themselves but also prevent T-Mobile from raising prices.
He said T-Mobile "will try" to push Dish out of business, but added that if T-Mobile lowers the price of its own offerings Dish would be able to go lower as well thanks to a price deflator baked into the companies' agreement. "There is a formula that protects us."
As for why Ergen switched his perspective from originally opposing the T-Mobile and Sprint deal to now testifying for it, the Dish boss told the judge that his company "was concerned" about the industry dropping from four major carriers to three.
Had Sprint been thriving, Dish may have had a different approach to its 5G network than the consumer network it's now planning, with Ergen mentioning a potential wholesale 5G network. That has all changed with the state of Sprint, with Ergen acknowledging that Sprint was "a stronger company" when he first opposed the deal compared to where it is now.
Originally published at 6 a.m. PT
Update, 10:44 a.m. PT: Added additional details from Wednesday's testimony.