The $5 billion, 10-year deal involves an MVNO arrangement, AT&T providing 5G transport for Dish, and more

Dish Network and AT&T recently struck a $5 billion deal to move Dish’s wireless customer traffic — including customers of its Boost Mobile, Ting Mobile and Republic Wireless brands — to AT&T’s network, instead of Dish continuing the wholesale agreement that had been worked out to use T-Mobile US’ network as part of the settlements that allowed the T-Mo’s acquisition of Sprint to move forward. Dish has been feuding with T-Mobile US over the shutdown of T-Mo’s 3G network, which it said was premature and impacted its ability to successfully transition customers. Dish is in the process of building out its own network, but it is going to need wholesale network access — a mobile virtual network operator (MVNO) arrangement — to support customers until it actually has a wireless network that can support them.

AT&T executives fielded a number of questions about the deal during the company’s quarterly results call. Here’s a breakdown of what the two companies have publicly said about the network services deal, and its implications for AT&T and Dish’s businesses.

What do we know about the deal itself?

Dish provided some details in a filing with the Securities and Exchange Commission and a press release. It’s a 10-year network services agreement worth a minimum of $5 billion — that’s at least $500 million a year.

The agreement isn’t exclusive and doesn’t restrict Dish’s ability to deploy equipment in markets where its users will be accessing AT&T’s network. Dish agreed to activate “at least a minimum percentage” of MVNO subscribers on AT&T’s network; the percentage was not specified. It covers both Dish’s prepaid and postpaid customers.

If either party terminates the agreement, there is a two-year transition period; one of the possible conditions of termination for AT&T is if there is a “qualifying change in control” of Dish, such as if other U.S. wireless, cable providers or large technology companies were to buy more than 50% control of Dish. Dish said it will file a copy of the network services agreement with the SEC along with its quarterly report in September.

Dish also said that the agreement “accelerates [its]expansion of retail wireless distribution to rural markets where Dish provides satellite TV services.” Dish reiterated its commitment to build out an Open RAN-based 5G network that reaches more than 70% of the U.S. population by 2023.

“Teaming with AT&T on this long-term partnership will allow us to better compete in the retail wireless market and quickly respond to changes in our customers’ evolving connectivity needs as we build our own first-of-its kind 5G network,” said John Swieringa, DISH COO and group president of retail wireless. “The agreement provides enhanced coverage and service for our Boost, Ting and Republic customers, giving them access to the best connectivity on the market today via voice, messaging, data and nationwide roaming on AT&T’s vast network, as well as Dish’s 5G network.”

What does it mean for AT&T’s network?

In the press release, AT&T emphasized the investments that it has been making into its wireless and wireline networks over the past five years to support demand — including a callout of its C Band build-out plans, and also said that the agreement “allows AT&T the opportunity to use a portion of Dish’s spectrum in various markets to help support Dish customers on AT&T’s network.” That aspect of the deal doesn’t sound altogether different from AT&T’s arrangement with FirstNet, in which AT&T builds out FirstNet’s 700 MHz spectrum while also providing network access beyond 700 MHz to FirstNet first responder customers — and AT&T has successfully leveraged the FirstNet contract to become a serious competitor for public safety telecom business, while also piggybacking its own network upgrades on the FirstNet deployment for efficiency.

“Teaming with Dish on this agreement is not only a testament to the strength of our network, but it further validates the investments we’ve made in our fiber and wireless infrastructure,” said Thaddeus Arroyo, CEO of AT&T Consumer, in the release. 

AT&T CEO John Stankey explained that arrangement was set up so that Dish had a place for its traffic as it continues to build out its own infrastructure, so the contract is likely to be “more front-end loaded than back-end loaded,” — i.e., Dish’s MVNO network service needs will decrease as it becomes an actual mobile network operator (MNO). “You should also think about it in terms of, Dish has established with us a minimum annual commitment. That’s not necessarily the annual commitment, or the maximum annual commitment, and a lot of this will be based on our effective performance with them, and ultimately what they choose to do in the market. But frankly, we’d aspire to possibly see [it]be something greater than what those minimum levels are, that have been put in place,” Stankey said.

How is AT&T thinking about Dish as part of its wholesale strategy?

The wireless wholesale landscape has been hotly debated over the past couple of years, particularly in light of the Sprint/T-Mo deal, because Sprint had a history of being the MNO that has been the most open to hosting MVNOs and providing them with relatively advantageous terms for wholesale network access.

Stankey said that AT&T has been a wholesale provider for years and that it’s “a very important element of how we manage our returns” and that the company tries to “maintain a balance” between percentages of retail and wholesale traffic on its network while striking “relationships that we think are win-win relationships for the parties involved.” He sees the Dish deal as a continuation of that.

In addition, Stankey said, “I believe that Dish is going to be a company that, in their business model, what they choose to do moving forward, is going to be successful one way or the other. … When we start thinking about wholesale businesses, when somebody is going to be successful, it’s always nice for us to be successful along with them.

“I think that’s a good thing for AT&T over the long haul, given the nature of our business and what we’ve done, and the balance that we like to keep between retail and wholesale traffic,” he added. Going forward, Stankey said that due to the trend in the U.S. market for competition to be focused among facilities-based providers, “the number of wholesale options … in the future are going to become a little bit more concentrated. So you’re probably to see … fewer options to go out pursue different [wholesale]partners.” So AT&T is ensuring it has the wholesale partner that it wants, to whom it will also provide 5G transport for the new network. Stankey added that the relationship is also “a broader wholesale capability beyond just the wireless business … which is really attractive to us as an infrastructure provider and something we do in our core. There are opportunities for us to think about … where they go for us to do some things that I think are complimentary and helpful to both businesses.

“I don’t think anybody around here is upset about taking $500 million a year out of a competitor’s pocket, either,” Stankey said at one point in the call. 

Will Dish customers need new devices for the transition?

Jeff McElfresh, AT&T Communications CEO, said that the two companies are getting ready to start migrating traffic toward the end of this year.

Stankey confirmed that in order for Dish to transition its customers, there is a “segment” of them who will require a new device, although he didn’t talk numbers. McElfresh said that some can be transitioned by changing out SIM cards, which is an easier transition.

What’s the spectrum aspect to this?

The network services deal “provides an avenue for AT&T to deploy portions of Dish’s spectrum to support Dish customers on the AT&T network, by allowing AT&T the right, but not the obligation, to request to use portions of Dish’s spectrum in different markets for an agreed upon period of time, subject to certain terms and conditions,” according to the SEC filing. Exactly which spectrum that would be, out of Dish’s significant holdings, has not been specified in public remarks.

Pascal Desroches, AT&T’s CFO, pointed out that during the pandemic, various players (including Dish) were able to share spectrum under special authorization to support broadband needs — so as he put it, there are “certain spectral assets that are already engineered with our antennas and our radios that are deployed today,” making it easy for AT&T to turn up support for Dish’s spectrum without having to replace hardware. According to Aurora Insights, Dish provided licenses in the 600 MHz band to T-Mobile US to address pandemic-related broadband needs and likewise provided 20 megahertz of its AWS-4 (Band 66) and all of its 700 MHz spectrum to AT&T. Asked about whether that might meet Dish’s commitments to the FCC for build-out, Desroches declined to comment.

The post Breaking down the AT&T/Dish network services deal appeared first on RCR Wireless News.