Dan Hesse

Early Monday morning, satellite TV innovator DISH Network threw a monkeywrench into Softbank’s plans to acquire a 70 percent interest in Sprint. It did so by offering a 13 percent premium over Softbank’s bid, and rather than buy a majority of Sprint, DISH is proposing a full merger.

For those of you who really want to understand the thinking that went into this, watch the AllThingsD video interview with DISH chairman Charlie Ergen. It’s a long video, but damn, you have to admire the straight-up answers Ergen gives to the audience. 

My take on the whole thing is pretty simple.  DISH Network is part of the old world, just like cable TV, except that it has no easy way to deliver broadband access. Cable companies, at least, have DOCSIS networks. So even if the whole planet starts to cut the cord and adopt an over-the-top Internet TV model, cable companies can still get paid for the plumbing.  Satellite? Not so much. Without adapting a new business model, these guys are dying a slow death.

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DISH has been very clear about its desire to own a wireless network. But it's also acknowledged the difficulty in building out such a network without a customer base to help finance it. A partnership has always been something that made more sense to DISH, based on all the public commentary. 

DISH even bid $5.15 billion for Clearwire about 3 months ago. But Sprint had already bid for the 49 percent of Clearwire that it didn’t own, and being the majority shareholder, it was seen as unlikely that DISH’s bid would matter at the end of the day.

So what’s a satellite guy to do? Go big or go home. Step up the bid and make a play for the entirety of Sprint.  Assuming the Clearwire acquisition by Sprint closes, DISH would end up with a Dan Hessemonumentally huge spectrum asset as well as a huge customer base on which to justify an incredible LTE build out.

We all know that the future of TV is over the top. And we all know that mobile data is being used more and more to watch video. If DISH owns Sprint it can conceivably get creative in how it charges its customers for access to video. While most wireless providers are charging a hefty premium for high bandwidth plans (to accommodate video), I imagine DISH would be able to offer unlimited streaming of its programming to mobile devices provided that those devices were connected via Wi-Fi or Sprint’s network. 

Sprint and DISH, together, would have about 70 million customers, minus whatever portion of DISH’s existing 14 million subscribers are also shared with Sprint. So the scale they could achieve, together, is significant. By comparison, Netflix has about 27 million streaming customers in the United States.

That said, Netflix has a very different model.  There are no channels on Netflix.  There is just programming. There is no concept of live TV at all. And the price is right at $7.99 per month. Today’s kids are not growing up as subscribers to Pay TV such as DISH or Cable TV. So the old world video guys need to change their model. 

Yet Netflix (and Amazon, and Hulu and others) do not have access to live sports or news. The over the top video model is not complete.  Neither the new-world streaming players nor the old-world cable and Satellite guys have a full solution.  They’ll both likely fight to migrate towards a complete model.

Unless Softbank raises its bid, or someone else comes into the game, I think the DISH bid for Sprint will succeed. It is a very logical business combination. And it could shake up the TV market in a good way. It could make Sprint far more relevant in the wireless game. It could force other wireless players to reduce bandwidth restrictions to maintain a competitive stance.  It will likely spur more partnerships or acquisitions. 

Overall, I think this is good news for U.S. consumers -- and that includes mobile users. Things are about to get very, very interesting.