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FCC Delays Decision on Dish Waivers

The FCC Friday approved Dish's purchase out of bankruptcy of satellite licenses from TerreStar and DBSD, but put off for another day a decision on whether to grant Dish a waiver to use them to deliver terrestrial cell phone service.

While the FCC said its broadband plan made it clear it wanted to remove regulatory barriers to mobile broadband, it said it did not have sufficient basis in the current proceeding to grant the waivers, but said they would be considered in a separate docket.

In a statement, DISH said it was disappointed and argued that the denial would delay the "advancement of some of President Obama's and the FCC's highest priorities -- namely freeing up new spectrum for commercial use and introducing new mobile broadband competition."

The FCC recently moved to rescind a similar waiver from LightSquared due to GPS interference issues.

Like LightSquared, Dish wants to be able to provide both the hybrid satellite-terrestrial receivers, as well as terrestrial-only to those who do not want the satellite function. "Allowing TerreStar and Dish to provide single-mode terrestrial terminals to customers who have no need for satellite functions will achieve significant public benefits, and will do so by better serving the important, underlying policy," Dish told the FCC in its application last August.

Satellite operators have long coveted the bundled service offerings of video and fixed broadband that have turned cable operators into some of the nation's largest ISPs. Dish says it wants to be a check on the market power of mobile providers present and future.

Dish said Friday it hoped to close on the deal ASAP and would continue to work with the FCC in that separate proceeding to help achieve the goal of helping relieve the spectrum crunch.

Dish has spent around $3 billion acquiring about 40 MHz of wireless spectrum from two bankrupt entities -- DBSD North America and TerreStar. The satellite giant has said that it plans to build out its own wireless network with the licenses, most likely with a partner.

Dish chairman Charlie Ergen has said that he would consider selling the spectrum if the FCC waivers were not granted, but most analysts believe that although the recent agency action is a disappointment and reduces the utility and value of the spectrum, it should only postpone the satellite giant's plans by about 6-to-9 months.

In a research note, Credit Suisse media analyst Stefan Anninger said that any proposed rulemaking will come with strings attached.

"In return for granting Dish the flexibility to use its spectrum terrestrially, the FCC (1) will establish a timetable by which Dish will need to "build out" its spectrum, (2) will likely require Dish to make some throughput on its network available for use by other CMRS players, (3) could impose a "windfall tax" beyond build requirements (e.g., spectrum giveback)," Anninger wrote. "The windfall tax will be one of the most important elements of the NPRM, as it could largely determine the net value of Dish's spectrum."

Dish shares were down about 2.8% (83 cents) in early trading to $28.44 per share.

Mike Farrell (Multichannel News) contributed to this report