Back to the future for DISH and DirecTV

Implications: DISH has not stopped believing that its long term future lies in a merger with DirecTV, and the SATS spinoff was made with this in mind. The WSJ analysis (http://online.wsj.com/article/SB121784781012209687.html) indicates that a merged company would market "a potential broadband offering" in urban areas, which presumably means revisiting wireless broadband options such as ATC (Ancillary Terrestrial Component), the 700 MHz D-block and the AWS-3 auction.

Analysis: From late 2005 through mid 2006, there was considerable speculation that DirecTV and DISH would enter into a broadband JV to deploy wireless broadband via the acquisition of spectrum in FCC Auction 66 or by partnering with Skyterra, an MSS (Mobile Satellite Services) operator with Ancillary Terrestrial Component (ATC) authorization. A key rationale was the competitive parity this would give the DBS providers in facing the threat from both telco TV/cable bundling. and the associated potential for churn reduction. 
This broadband push lost momentum with the sale of DirecTV to Liberty, as Murdoch had been one of its strongest supporters. However, DISH continued to believe that ultimately wireless spectrum would prove valuable to the company, perhaps for broadcast mobile TV, so it invested in mobile TV ventures in Korea and China, and made further investments in 700MHz spectrum and in TerreStar, another MSS-ATC player in the US. It also spun off SATS, which would focus on these new developments, positioning DISH for either a merger with DirecTV or a sale to AT&T.
As DISH faces increasing competitive challenges, as it anticipated back in 2006, and mobile TV appears much less attractive than originally expected, it now appears to be revisiting wireless broadband and the prospect of a broadband JV with DirecTV, as part of a full merger of the two companies. However, it still faces a challenge covincing Liberty to move into broadband, because DirecTV is having much more success with the large number of HD national and local channels enabled by its new Spaceway Ka-band satellites.
Since Harbinger is willing to throw billions of dollars at MSS-ATC spectrum plays (and is partnering with SATS to fund TerreStar), ATC may provide one option to move forward. However, there are alternatives in the form of the upcoming 700MHz D-block reauction and the AWS-3 auction. If Echostar wants to get the FCC onside then a move to support the D-block auction, conditional on approval of a merger with DirecTV, could be a very clever way to cut through the Gordian knot that faced XM and Sirius in their merger approval process.