Ergen defends lower projected costs of Dish 5G network architecture

Dish Networks Chairman Charlie Ergen on Wednesday countered some views that the projected $10 billion cost to build its new 5G network is too low, stressing the company’s automation and cloud-native, software-focused network approach will make construction and operation much less expensive.

“We’re terribly different in terms of architecture of where networks are today,” said Ergen speaking on the satellite TV provider’s fourth-quarter earnings call.

MoffettNathanson is one firm that has previously expressed skepticism about the $10 billion figure. Analysts pointed earlier to the comparatively high amounts major carriers like AT&T and Verizon have spent to build and maintain their current networks, noting equipment only accounts for around 20% of network build costs.

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Ergen said that Dish, which has decided it will build a virtualized O-RAN compatible network, has a different approach that is “a lot less expensive to build the network, a lot less expensive to operate the network, and with less people because of automation and the fact that our network is primarily going to be software in the cloud.”

He said the reason some large incumbents today spend as much money in a year to maintain their networks as Dish expects to spend on a completely new one, is that legacy systems are very complex and not as automated, again requiring more workers.  

“You have 2G, 3G, 4G that you have to maintain, while you have to be backwards compatible with everything, so the cost of that is just astronomical compared to a more modern network,” he said.

“In a modern architecture with automation we just need a lot less people to run the network,” he continued. “When you have a clean sheet of paper and automation you can do that, so our costs are materially less.”  

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Since a federal judge ruled last week to allow T-Mobile and Sprint to move ahead with their merger, Dish is pushing forward with its related agreements to enter the wireless market and ultimately become a nationwide competitor. Related to the T-Mobile/Sprint transaction, Dish is acquiring Sprint’s prepaid Boost Mobile business including about 9 million subscribers and will first operate under a 7-year MVNO agreement that lets new and existing customers ride on the new T-Mobile’s network as Dish continues its own 5G build.

While Dish is obligated to a number of FCC buildout deadline requirements, the MVNO deal with T-Mobile gives Dish “a pretty big safety net,” Ergen said, in terms of more leeway in how it decides to build the network, and the opportunity to experiment and work with newer vendors.

“We can use providers that maybe aren’t household names in the U.S, that have done great things in the lab or great things in other parts of the world,” he noted.

This could be a nod to certain U.S.-based providers that have been championing open RAN, such as Mavenir, Parallel Wireless, or Altiostar.

RELATED: Mavenir goes commercial with its OpenRAN system

Marc Rouanne, former president of mobile networks for Nokia who Dish hired last year as its chief network officer, said that Dish has been working on O-RAN for the last few months and is starting to see that market get ready.

Still, from a hardware and software perspective, Ergen noted that some of the technology they’re working with is in production, but not off the shelf yet, so there will be a bit of a waiting period.

While Dish hopes to start its first network deployments later this year, it won’t be a big year in terms of actual network building.

Dish guided for wireless capital expenditures between $250 million and $500 for 2020. That will first be focused on RF planning, site acquisition and permitting, they said.

“That’s sort of the long-pole of the tent, so there’s not a lot to build this year because we’ve got to get those permits, zoning, structural and all of those things and the civil works you need to do,” Ergen said.

Zoning and permitting is expected to be finished well ahead of Dish’s first build-out requirement to cover 20% of the U.S. population by 2022, and then the company plans to build accordingly depending on the state of hardware and software.

“Again, the good news is we have a pretty big safety net today, and we can now make mistakes and survive some of our mistakes,” Ergen added.