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Marketplace

This phone and TV merger is all about spectrum

Adam Allington Jun 4, 2015
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There once was a time when we got our phone service from the phone company, and our cable TV from the cable company, and our wireless from a cellphone company.

Then, along came bundling. But these days, market growth for everyone hinges on one factor — wireless spectrum, the capacity to stream loads of content to customers.

So now entire companies are getting bundled. Merger talks between Dish Network and T-Mobile are the latest in a flurry of deals that could reshape the telecommunications industry.

“The deal makes sense. It makes sense for both of them,” telecommunications analyst Jeff Kagan said.

What all of these deals come down to is reaching consumers on their wireless devices.

“Instead of it being new and a novelty, all of the competitors are going to be jumping into the same space offering the same kind of delivery methods because that’s what customers want, and if you don’t offer it, you’re going to go out of business,” Kagan said.

But unlike previous mergers, say, between your internet and cellphone company, to roll out wireless streaming you need spectrum—lots of it. Think of it as the invisible signal that delivers the content to your device.

“You’re really seeing a bit of an arms race right now, or maybe a land grab, in terms of getting some of the spectrum under ownership,” William Blair and Company senior analyst Jim Breen said.

Spectrum, Breen notes, is a finite resource, there is only so much, and Dish has been buying up spectrum at government auction for years.

What Dish doesn’t have is a wireless carrier. T-Mobile has the wireless network and wants more spectrum.

“It would put them on par with AT&T and even slightly ahead of Verizon in terms of the total spectrum capacity that they have,” Breen said.

Breen said this marriage of a TV company with a wireless carrier has raised concerns from regulators in the past. Those fears seem to be waning, as many expect the government to soon okay the proposed $49 billion merger of AT&T and Direct TV.

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