What do the two TV entrepreneurs have in common? They are both betting that the future lies in spectrum and the Internet of Things. They just envision different ways of realizing the vast potential. The real question is can they get a return on the hefty investments they will have to make so that they can compete is the space.
Ergen And Smith: Thing 1 And Thing 2
Charlie Ergen said last Tuesday that he would be stepping down as CEO of Dish Network, the satellite TV operator that now counts 13.2 million subscribers and more than $14 billion in annual revenue. Ergen remains chairman, while COO Erik Carlson moves up to CEO.
Charlie watchers say there is less than meets the eye in the announcement, that he will continue to keep his hand in the operational affairs of Dish. He did not heap up $18 billion in net worth by delegating the big decisions.
But it makes sense for him to step away from the day-to-day doings of Dish’s TV biz, despite a shrinking subscriber roll that needs watching.
His attention is needed badly elsewhere — the $21 billion in spectrum he has accumulated, including $6.2 billion worth of old TV spectrum from this year’s FCC incentive auction. That’s a lot of capital to be sitting fallow.
Ergen claims he has a plan, although he has revealed little about it. Rather than compete directly with Verizon, AT&T and others in the consumer-facing wireless voice and data business, he talks about providing the wireless grease for the so-called Internet of Things, or IOT.
In a recent FCC filing, Dish says: “The agriculture, manufacturing, bio-technology, transportation, education, energy and health sectors, among others, will demand substantial [wireless internet] connectivity in the coming years.”
And with its spectrum, it says, it will supply that “massive connectivity” on a wholesale basis.
Now where have I heard this kind of talk before?
I’ll tell you: Hunt Valley, Md., right outside Baltimore, the home of the Sinclair Broadcast Group.
Executive Chairman David Smith, like Ergen, is planning to use the excess spectrum he has gathered from buying TV stations to provide wireless connectivity for the Internet of Things.
He sees what he calls datacasting as the first and best use of the ATSC 3.0 standard that the FCC authorized last month and that he can start putting to work early next year.
I’ve never heard Smith use the phrase “Internet of Things,” but that is what he is talking about.
Smith, like Ergen, believes IOT is a big market for wireless wholesalers. The example he and his lieutenants usually give is sending mapping and other data to autonomous, or self-driving, cars. Cars are definitely things.
Ergen and Smith are two smart entrepreneurs who have proved themselves time and again and, so, if they both say there is a business in serving the IOT, you have to give it a lot of credence.
Wikipedia devotes a page to describing the expanding universe of the IOT and quotes sources saying that it will encompass 30 billion devices and be worth $7.1 trillion by 2020.
The IOT is sometimes disparaged as a bunch of gimmicks. Does the world really need internet-connected refrigerators? But it is far more than that. As Dish said in its FCC filing, it has applications in manufacturing, energy, education, medicine, transportation, bio-tech and agriculture that could be transformative.
Media, too. TV sets are things and with our barely noticing, many have become smart, they have become connected to the internet.
If Ergen and Smith had the market to themselves, they would certainly prosper. But they do not.
The IOT has grown so far on the back of existing and pervasive internet links. If I wanted, I could run down to Home Depot this afternoon, buy and install a smart thermostat and control the temperature of my home with my smartphone via Verizon wireless, Verizon FiOS and wi-fi. No need to wait for newcomers to make it all go.
Verizon, AT&T and other wireless carriers see the IOT future, too, and they are continually expanding their capacity with better compression and greater cell density to make sure they are a big part of it.
This is not to say Ergen and Smith can’t compete. They can. The real question is can they get a return on the hefty investments they will have to make so that they can compete is the space.
On this question, Smith is in better shape. His basic infrastructure — transmitters and towers — is already up and running. It simply has to be upgraded with 3.0 and enhanced with single frequency networks that bolster the signals.
Smith doesn’t quite have the national footprint he needs because of FCC station ownership limits, but he is partnering with other broadcasters to piece it together.
By contrast, Ergen has spectrum, but not much else. To enter the market, he will have to build a national network from the ground up — billions of dollars. And he has made a point of saying he doesn’t want partners. It’s daunting, but, I suppose, not more so than entering the satellite TV business in the 1990s.
Of course, the Ergen network would be far more capable than the 3.0-based network Smith has in mind. It would have more capacity, it would be fully interactive and it would be compatible with smartphones, critical for most any consumer IOT applications.
So, Ergen and Smith are on the same path, one that diverges from the business that made them wealthy — television — but one that has possibly greater potential.
When people write about Ergen they often end by saying something like: “Hey, it’s bold, but don’t bet against Charlie.” As the risk of being unoriginal, I’ll end by saying: It’s bold, but don’t bet against Charlie — or David.