Charles Ergen, chairman and co-founder of Dish Network Corp

Jonathan Alcorn | Bloomberg | Getty Images

For nearly a decade, Dish Network hasn't really had a plan. Today, it has one.

Yes, Dish has had ideas about a plan. It has bought billions of dollars of wireless spectrum but hasn't actually put it to use. It tried to buy Sprint in 2013. It thought about buying T-Mobile. It considered merging with DirecTV. It looked at buying bankrupt wireless broadband company LightSquared.

But for the most part, Dish co-founder and Chairman Charlie Ergen has talked about the company's "optionality " without committing to anything, all the while fighting a 2020 build-out deadline the U.S. government placed on it to actually build a network and put its spectrum to use.

The only thing Ergen has consistently discussed is an overarching goal to transition his aging satellite TV provider into a mobile wireless distributor that doubled as a digital video operator. Dish owns Sling TV, its over-the-top internet video service, and has about 2.5 million subscribers. Dish has just below 10 million satellite TV customers and loses hundreds of thousands of subscribers each quarter as subscribers cancel video service in the face of ballooning costs.

"We'd like to own a wireless network," Ergen said in 2013. "About five years ago, I realized that the model as we knew it was going to get us to over $100 a month for programming costs, in which case things were going to change. That's when we decided the wireless side was probably a place we needed to go."

That's all changed now. Ergen has negotiated with the Department of Justice and Federal Communications Commission to give him two more years to build a 5G network. Dish must build a 5G network that covers 20% of the country by June 2022 and 70% of the U.S. population by June 2023. If it doesn't, Dish will have to pay the U.S. Treasury as much as $2.2 billion.

Dish's old plan, as CNBC explained here, centered on meeting an FCC 2020 deadline by building a so-called narrowband internet of things (IoT) network that would connect "people and sensors and microprocessors." Then it would move to phase two to meet later deadlines by building a 5G network. Many analysts speculated Ergen would likely just sell his spectrum or the entire company instead of building out a 5G network, which would cost the company tens of billions of dollars.

That entire proposal is now out the window if the Sprint-T-Mobile merger closes. (The deal is still in question. It's being challenged by 13 state attorneys general and a trial has been scheduled for October, though it may be delayed). The 2020 deadline will no longer exist, replaced by the new 2022 and 2023 timelines.

And Dish will scrap its IoT plan and focus purely on 5G, which the government has always wanted in the first place, according to a person familiar with the matter. (Dish hasn't totally abandoned its old plan yet because the deal still hasn't closed).

That's why regulators hand picked Dish to be the third party that was most likely to provide real competition to AT&T, Verizon and a merged Sprint-T-Mobile. Dish already has the spectrum, and regulators already had Dish locked up by a deadline he may or may not have met. Ergen has successfully pushed that deadline back two years, giving him more time to find a partner to help fund the cost of building a new competitive network. Dish is paying $5 billion for a combination of divested assets including spectrum Boost Mobile and Virgin Mobile, all of which will be divested by the new T-Mobile. T-Mobile and Sprint must also provide Dish with 20,000 cell sites and hundreds of retail locations.

Reuters reported this week that cable company Charter submitted a bid to play Dish's role as the interloper that would buy Boost Mobile and other divested assets, and the DOJ never even responded. Dish's patience, or possibly intransigence, with the use of its hoards of spectrum helped it become the government's top choice to be the nation's new number four carrier.

But just how competitive Dish will actually be remains an open question as the state attorneys general lawsuit moves forward, said MoffettNathason telecommunications analyst Craig Moffett.

"Will this satisfy the State AGs? My guess is that it won't," Moffett said. "And unanswered in anything we've seen so far is whether the staff at the DOJ supports the current deal, or if the deal was approved by Bureau Chief [Makan] Delrahim without staff-level support. That will be important for understanding the prospects of the lawsuit."

Dish's new wireless service

Assuming the deal does close, Dish will not be able to use its own spectrum on the Sprint-T-Mobile network. The company's seven-year network-sharing agreement with the new T-Mobile will allow Dish to start selling wireless service immediately (upon closing), but the deal isn't a spectrum hosting agreement. Instead, Dish wireless customers will slowly get access to Dish's unused spectrum (and therefore theoretically faster service) as Dish builds out its own network.

For example, if Dish builds out its 5G network first in, say, Dallas, Dish customers in Dallas would be connected to Dish's spectrum on Dish's new network. And if they then go to another city that doesn't have a Dish wireless network in range, the customers would then get its service on the T-Mobile network via the sharing agreement.

"It would have been great if they had a full network hosting deal with T-Mobile," said New Street Research analyst Jonathan Chaplin. "Network hosting would have a lot of economic value for Dish, and it would have cut the risk on the deployment tremendously. I actually think a network hosting deal would have been good for T-Mobile too in that it would have undermined the states case [against the merger]."

Just to make sure Ergen is serious about following the government's build-out dates, Dish can't sell its spectrum for six years. That locks him in as having to find a partner to build a new network, and it could negatively impact the company's shares if Dish has to foot most of the cost (and subsequent network upkeep) itself.

"It will be interesting to see how the market responds to the prohibitions on Dish selling its spectrum," Moffett said. "Now we'll find out whether the market really believed Dish was going to build a network or not."

The rationale of the agreement with Dish and the T-Mobile-Sprint merger for the DOJ is straightforward: The government wants to move as fast as possible on 5G. That's why the government is allowing four nationwide wireless carriers to shrink to three — to make Sprint and T-Mobile a more competitive 5G provider. The Dish deal is the government's best effort to get Ergen moving on that goal.

More than eight years ago, Ergen said his company's strategy was the like the end of a "Seinfeld" episode, where all the storylines come together in the final minutes.

This has been a very, very long episode. Maybe now we have the semblance of an ending.

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