- SpaceX is acquiring EchoStar’s unpaired AWS-3 spectrum in exchange for about $2.6 billion worth of shares the company
- The acquisition of additional spectrum on SpaceX’s part raises more questions about Elon Musk’s intentions to upend the mobile industry
- EchoStar still owns more AWS-3 paired spectrum and it’s not clear where that’s headed
Surprise, surprise. A lot of people in the wireless sphere pegged Verizon as the most likely buyer of EchoStar’s AWS-3 licenses, but SpaceX is acquiring the licenses for about $2.6 billion in SpaceX stock.
Update: Check that. SpaceX is acquiring EchoStar’s unpaired AWS-3 licenses. EchoStar still holds onto paired AWS-3 spectrum licenses, which is said to be the spectrum that Verizon reportedly was interested in. So, we stand corrected.
SpaceX’s latest deal is on top of the 2 GHz/AWS-4 spectrum that SpaceX agreed to buy from EchoStar for $17 billion in September. That spectrum is geared for mobile satellite services (MSS), whereas the AWS-3 spectrum is designated for terrestrial use.
So far, SpaceX hasn’t said what it plans to do with the AWS-3 spectrum licenses, and the sale still must pass regulatory approvals. However, it’s sure to stoke rumors that Elon Musk plans to upend the mobile industry beyond the direct-to-device (D2D) moves he’s made thus far with mobile network operators (MNOs).
With the addition of AWS-3 spectrum, “he can cobble together a network with that,” said industry analyst and Recon Analytics founder Roger Entner.
Roy Chua, founder and principal of AvidThink, agreed that the acquisition of the unpaired AWS-3 spectrum licenses from EchoStar will provide SpaceX with a relatively contiguous, nationwide swath of mid-band airwaves that's ideal for D2D or direct-to-cell (D2C) phone services.
“This simplifies their harmonization of terrestrial and non-terrestrial D2C services and raises the bar for competitors while giving them more leverage in their negotiations with their MNO partners,” Chua said.
But he’s still not certain that SpaceX will go all out to create its own nationwide non-terrestrial and terrestrial networks. “I expect they will continue to partner with MNOs for D2C services, but leverage the spectrum for other more niche use cases in the enterprise/IoT/OT space,” he said, as opposed to becoming a full-fledged fourth mobile network operator.
Even though Musk is the richest man in the world and could seemingly conquer all, “coming in and trying to have scale is going to be very difficult,” Entner told Fierce.
EchoStar CEO talks about scale
Indeed, scale is one of the things that held EchoStar back in its attempt to become a fourth facilities-based mobile operator with the Boost Mobile brand. EchoStar Chairman and CEO Charlie Ergen said as much during today’s EchoStar’s Q3 earnings call.
After FCC Chairman Brendan Carr brought down the hammer earlier this year, Ergen said it was like going through various stages of grief – anger, denial, depression – and he’s now at a level of acceptance.
In fact, following conversations with the FCC, EchoStar is “on the same path” and working with the agency to get more spectrum out of EchoStar’s vault and into the hands of more Americans, Ergen said.
“It’s hard to argue with that vision,” he added. “Now we're in lockstep with where the FCC wants to go, and it's our job to now work with them and make sure that all our assets get put to the best use for American public.”
EchoStar still owns paired AWS-3 licenses and it’s not clear where those will end up. Meanwhile, through the magic of a temporary license arrangement and an MVNO deal with AT&T, EchoStar’s Boost is already using mid-band spectrum that it sold to AT&T.
Rather than operate its own network, Boost Mobile is now a “hybrid” mobile network operator, using AT&T’s radios and its own 5G core, which serves as the “brains.”
Ergen said he thinks the market underestimates the value of Boost’s hybrid situation.
“We don't have the burden of building and maintaining the towers, which normally wouldn't be a problem, but our scale was so small … that was a challenge for us,” he said.
Any company that comes in as a fourth or fifth player needs to offer something different than what the existing operators provide, he said.
EchoStar is now doing that on the technology side, having made the move with SpaceX to give Boost customers access to worldwide connectivity via D2D for voice, text and broadband. That will take a couple years to achieve, but it provides differentiation, he said.
EchoStar CEO big believer in SpaceX
Even though Ergen’s companies spent many years in legal and regulatory arguments with Musk’s companies, Ergen sees his investment in SpaceX as the safest bet out there.
When it comes to AI, it’s not at all clear who the winners and losers are going to be. In the space industry, there are some companies doing interesting and creative things. But it's clear that SpaceX is the leader, he said.
“I think it’s pretty obvious … SpaceX is going to be the leader for the foreseeable future, because they have the most efficient launch capability and satellite manufacturing capability,” Ergen said. “They're the most obvious winner.”
Article updated November 7 to call out EchoStar's unpaired vs. paired AWS-3 spectrum.