Can Dish take down AT&T?
The satellite provider has plans to build a nationwide wireless network, but needs to clear some regulatory hurdles first.
Can Dish Network (DISH) make it as a wireless provider? The company hopes so. It's sitting on valuable wireless spectrum, and has ambitions to build a nationwide high-speed wireless network.
It's unclear whether the company intends to launch a full mobile-phone service. But after a speculated venture with T-Mobile and other rumored plans never came to fruition, Dish is now mulling at least a fresh wireless network of its own. It won't be easy. Federal regulators have decided to address the issue in formal deliberations that could last all year, The Wall Street Journal recently reported.
Why the sudden interest? First of all, Dish has the capability. It acquired the spectrum when it bought two satellite providers out of bankruptcy last year. But there's more to it than that. Chairman Charlie Ergen thinks the company needs to bundle a wireless option with its pay-TV services to stay competitive with cable and phone companies, the Journal reported.
That would make AT&T (T) Dish's chief competitor.
Once known primarily for its home phone service, AT&T has since become one of the nation's largest wireless carriers, helped by a deal with Apple (AAPL) that allowed it to carry the iPhone exclusively for three years. Like most telecommunications companies, AT&T has its own broadband Internet service, and it's also branched into pay-TV with U-Verse. While those latter businesses have the potential to be strong revenue generators, AT&T earns the majority of its profits from its wireless services.
With only four major wireless providers in America -- AT&T, Sprint (S), Verizon (VZ) and T-Mobile -- Dish could provide some much-needed competition. But it may also be entering the market when costs are on the rise for both the provider and the consumer.
Most wireless carriers raised their rates in 2011 or will do so in 2012. Even smaller companies like MetroPCS (PCS) are inching away from flat-rate, unlimited data and talk plans. Companies that still offer unlimited data could follow in the footsteps of AT&T and slow the speeds of anyone it deems a data hog.
The data quandary is a tough one for Dish. It's unlikely to enter the market with an unlimited data or minutes plan. Without any such option, what reason would consumers have to switch to Dish?
When Comcast (CMCSA) announced its home phone service, it had a competitive advantage. For a low monthly fee, users were given unlimited local and long-distance calling. AT&T and other companies have since adjusted their prices and launched digital phone services of their own. But when Comcast first launched the service, it was viewed as a unique (and cheaper) alternative.
Granted, Comcast entered the digital phone market with a massive ad campaign that trained consumers to believe it was the first to offer a service of that caliber. As the nation's leading cable provider, Comcast has a lot more money to burn than Dish. If Dish is going to succeed in building a wireless network of any kind, it's going to need some very convincing promos.
Even then, the battle will be far from easy. Dish may initially be tempted to take a loss and offer a stellar plan (10 or 20 gigs of data) at a very low rate. But if consumers are going to lose out later on, what's the point?
Dish needs to realize that while it would be nice for consumers to have more choices -- and for another competitor to knock some sense into the current crop of cellular providers -- we don't actually need a fifth wheel. If Dish can't drastically change and (for lack of a better word) "disrupt" the industry for the better, the company shouldn't even bother.
Some consumers might be tempted to switch to Dish if they can pay for a whole host of services on one bill. (Why that's so appealing, I'll never know). But most people will go with the services they want most, regardless of how many individual bills they create.
If nothing else, Dish could offer subscribers one tantalizing proposition: unlimited data for streaming Blockbuster @Home on their wireless devices. If executed properly, that could be enough to get users to switch.
Roughly 12 months ago, Dish acquired the ailing video-rental chain Blockbuster Video. Since that time, the company hasn't made too many big announcements. But if Dish's financials are any indication, the Blockbuster deal has already paid off, adding 22,000 subscribers in the fourth quarter alone. This accounted for a 24% boost in profits.
While it does not appear that Dish's gains have been at the expense of Netflix (NFLX), which is viewed as the primary competitor in the streaming and on-demand video market, it is unclear how Dish might impact the competition going forward. With Comcast and Verizon entering the streaming video market, the whole industry is starting to get very crowded.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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