Stanton Dodge - General Counsel Steve Swain - CFO Paul Orban - CAO Erik Carlson - President & COO Charlie Ergen - Chairman & CEO Roger Lynch - CEO, Sling TV Tom Cullen - EVP, Corporate Development

Tuna Amobi - S&P Capital IQ Brett Feldman - Goldman Sachs John Hodulik - UBS Jonathan Atkin - RBC Capital Markets Kannan Venkateshwar - Barclays Capital Phil Cusick - JPMorgan Michael Morris - Guggenheim Securities Marci Ryvicker - Wells Fargo Securities Walter Piecyk - BITG Alex Byers - POLITICO Jimmy Schaeffler - The Carmel Group Scott Moritz - Bloomberg

Good afternoon. My name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the DISH Network Corporation Q1 2016 earnings conference call. [Operator Instructions]. Thank you. Stanton Dodge, you may begin your conference.

Thanks, Chris. Thanks for joining us, everyone. I am Stan Dodge, General Counsel of DISH Network. Jason is out today but I am joined by Charlie Ergen, our Chairman and CEO; Erik Carlson, President and COO of DISH Network; Tom Cullen, our EVP of Corporate Development; Roger Lynch, CEO of Sling TV; Bernie Han, our EVP of Strategic Planning; Steve Swain, our CFO; Paul Orban, our Chief Accounting Officer; and Bob Toevs, our Vice President of Corporate Communications. Before we open it up for Q&A, we need to do our Safe Harbor disclosures. We ask that media representatives not identify participants or their firms in your reports. We also do not allow audio taping and ask that you respect that. All statements we make during this call that are not statements of historical fact constitute forward-looking statements which involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q. All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements that we make wherever they appear. You should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements which we assume no responsibility for updating. As part of the process for the broadcast incentive auction, we filed an application to potentially participate as a bidder for those spectrum aspects. Because of the FCC's anti-collusion rules, we're not able to discuss what, if any, spectrum resources we may intend to bid on and we will not be answering any questions about the incentive auction during today's call. Operator, we will now open up the call first for analysts Q&A and then media Q&A.

[Operator Instructions]. Your first question comes from the line of Tuna Amobi from S&P Capital IQ. Your line is open.

Just real quick, first, on interest expense, it seemed like there was a major swing there in terms of capitalized interest. I know you had alluded to that in the last call. But I'm wondering if this is the steady-state that you would expect for the rest of the year or are we likely to see other swings in the coming quarters for the rest of the year?

You're right. I mentioned it on last quarter's call. Because our total spectrum carrying value is approximately $15 billion, effectively all of our interest expense will be capitalized off of our income statement throughout 2016.

And is that likely to continue beyond 2016 or is that it?

It is likely.

This is Paul. It will continue as long as we're commercializing or developing a spectrum.

Okay. Separately, I know you recently launched your Hopper 3 DVR. I'm wondering if you can update us what you're seeing there and the strategy there. Any implications it might have for your upgrade expenses, et cetera, that would be hopeful. And is that a material -- I know there is some material enhancements in there but is this something that would move the needle in terms of potential upwards, as well? That would be helpful, thanks.

Obviously we want launched the Hopper 3 at the end of January and we're seeing good penetration. The Hopper 3 obviously is a good set-top box for us. It has 16 tuners, 2 terabyte hard drive and really has improved the television viewing experience for our customers.

Go back to expense and SAC, does it have an effect on us.

For the expense and SAC, it is a little bit of a more expensive box. But overall we're using a higher percentage of remanufactured receivers as a percentage of activations, so the overall equipment cost per activation is down on a year-over-year basis.

And Roger, can you talk about your recent launch of the multi-stream offering and what you are seeing there? Any potential impact that you expect it to have in terms of the overall economics of the service?

Sure. We launched it in beta just a week ago, so it is very early in the launch of it. The timing of that was important for us because we had the new Fox deal and baseball season starting, we have a lot of good baseball content on there. We expect, through the beta phase of it, we may add some more channels and probably keep it in beta maybe up to a couple of months, depending on feedback we get from customers and what we do with other launches. So, it's too early to really give much commentary on the launch.

But you can say consumer feedback on single. This is Charlie. Consumer feedback on single-stream was, many of them wanted a multi-stream product.

Sure, yes. And they wanted Fox channels so we answered that with multi-stream service, both of those questions.

Okay. And, lastly Charlie, can you update us on your current thoughts on the landscape? I know there is not much you can say regarding the auction, but there is probably some unresolved questions around the impact of the DE from the last auction. And I'm wondering, you've disclosed that you're going to be participating, have your views changed dramatically over the last several months as to how you see your role in the environment? And any updates you can provide strategically regarding your wireless options would be helpful. Thanks.

I think I'm pretty limited on talking about wireless. But the overall industry that we participate in as a company is pretty broad from terrestrial wireless to satellite and everything in between. Nothing has really changed there since our last conference call or two conference calls. We're going to talk a little bit more about it. Obviously linear television is a mature to a declining business, challenged in terms of ever-increasing programming prices and lower viewership, continued low viewership in general. Some people are doing a little better than others but there's, in general, lower viewership. There is obviously a whole generation that, they're either not paying for TV or if they're paying for TV it's more likely to be a Netflix or Prime or Hulu or some combination of those. So, there is opportunity there. And Roger and his team have positioned DISH quite well to work with current content providers to give them an avenue to go into that space and start to get that generation paying for more TV, particularly as they get into their first house or their first apartment and so forth. So, rather than lose that generation we want to go get that generation and I think we're well-positioned. There is also, one thing that is a little bit different about our industry, we're believers in the two-revenue stream, both advertising and a monthly fee for content. We still think that's a good model. It's a good model for our content providers and we think OTT can play a significant role there with more targeted ads, maybe a lighter ad load that's acceptable to consumers. Hulu has done a lot with that with some success. The other parts of the world, the world is becoming more and more in need of being connected and we're continuing to make the transition to a company that is a connectivity company. And we connect you through satellite and we're going to connect you through wireless. There is not another way to universally connect people. It's interesting to see that -- I think the report came out yesterday, 20% of people are connected totally wireless in their lives and don't have a physical wire to their house anymore. And that trend is increasing. And there is lots of new technologies that we're well aware of and even have some spectrum ourselves in terms of millimeter wave and things like that. We're quite optimistic about the building block that we have as a company, where we're positioned with those building blocks. Obviously we'll be able to talk a lot more about where we're going once the incentive auction is over. We've implied that we potentially will participate but whether we participate or not we're going to be in a quiet period until that auction is over. We like strategically where we're. It is up to us to execute. It is up to us to have the courage not to throw good money after bad. As an example, we no longer really have a $19.99 product. We really start off at about $50 a month for a customer. A $19 a month customer is not a profitable customer for us given the SAC, so it doesn't make sense to chase that just for a number on the balance sheet. We'd rather chase for a number that is positive cash flow and get some positive return for us. We don't care whether that is an OTT customer or linear customer. We think there is positive returns from both of them, although the trends are going to be more toward OTT, in our opinion.

Just for clarification, Charlie, on the connected theme that you just mentioned, the connected connectivity, do you see the connected car a future opportunity -- telematics, things of that nature or not?

Certainly cars are going to be connected. I'm pretty sure you're not going to connect a car to a cable or wire so the only way that I know you are going to connect a car is wirelessly. If it is going to be wirelessly, you're going to have to have some spectrum to do that. There is a lot of difference parts of that. Some is collision avoidance, some is the connection, what you're doing while you're in the car, particularly as you go to autonomous cars when you are not actually driving. We've thought about that, others have thought about that and we think we're positioned to participate in all kinds of connectivity and cars is just one of them. And I'd just further say, the world is about to change from 300 million handsets in the United States to 30 billion connected devices, that's a big change. And all those connected devices are going to potentially be income-producing for people in the industry. So, that's a big change in terms of where things are going.

Your next question comes from the line of Brett Feldman. Your line is open.

I'll go ahead and ask a question about Viacom. Based on your disclosure in the queue it sounded like they made the decision to walk away and that you guys are still pretty far apart. Could you give us maybe a little more color here? Is this simply a dispute over price or are you asking for different types of conditions in these carriage agreements as you think about how your business is evolving, particularly around Sling?

Normally, I don't like to negotiate in the press. Let me give you some background there. We were on a short term extension with them that kept rolling as we negotiated in good faith. I think that they also maybe decided, they had the right, as did we, to send final notice which they did. So, as midnight tonight our programming contract will expire which means that absent a new agreement we would take down their channels. It's no coincidence that our conference call is today because, to the extent that we obviously don't reach agreement, we're prepared to move on as Suddenlink and others have done, without the content. Having said that and last week I would say my impression was I didn't see a path with Viacom. I think that the tone on both sides, both Viacom and at DISH, has been more productive through the weekend and this week, so there actually probably is a path to continue carriage, but it's not done yet. And obviously the devil's in the details. The big difference is really philosophical. We look at real data. It's been seven years, I think, since we did the last Viacom deal. We look at viewer measurement for all their content over the last seven years and we look at the price we pay. And we evaluate that with other content providers we have. We try to protect our customers from two things, one a needless price increase and, two, paying for product that they are viewing other places. So, if you're watching some content but you also get it on Netflix or Hulu or Prime or you get it on the Internet or you get it on their website or whatever, it doesn't make sense to pay for it twice. In general, Viacom is not alone in this. Viewership for linear cable TV channels is down. In general, content is more widely available and therefore the value to us and to our customers is generally down. Now that's our side of the story. I think the content providers would say we're still giving you a very valuable product, it's great deal for the consumer when you think about all the content they get for the price they pay. And we have existing contracts and other things where we have people who have shown that they are willing to pay based on more historical rates than on viewing trends. So, you have to get together and go through that and we're in the process of doing that now. We don't know whether we will get to a deal, but I do see a path now that I didn't see last week. One of two things will happen at midnight tonight, is their program will be up or their program will be down. We're not mad at them. If they come down we're not mad at them. We've enjoyed the relationship. They been a good partner. Their content is good content. It's just that we couldn't get to an agreement. We get to an economic point of indifference, you can imagine, where there is a price where, if we paid a penny more we would say we actually make more money long term by taking it down. I think we're pretty good at analyzing those situations. And by the way, we would always overpay a little bit for content because of the disruption. But we wouldn't overpay astronomically to avoid the disruption because long term we would be in a stronger position than our competitors because we wouldn't have to raise prices to our consumers long term. Anything you do as a takedown is short term in nature if it is not the right deal. I think the people who have taken Viacom down in the past have done just fine. They certainly had some short term disruption but I think they've done just fine. And I won't will speak for them but to the best I can tell they don't regret the decision. We have a long history, we would like to get a deal done, we see potentially a path to get it done, but we don't have a deal done.

Do you feel like the experience at Suddenlink and some of those others had when they made that decision, is it a reasonable framework for thinking about what your business could go through over the next few quarters if you ultimately could not reach a conclusion with them?

I think we have real data, rather than rely on -- obviously they are one data point that's in general pretty positive. But the data we really look at would be the viewing, how many of our viewers view X amount of hours of Viacom content. Those are the people that are going to be impacted. And then the people who don't watch that much content would rather not have a price increase, so that's a positive. You have to balance those two things. I value the relationship. Steve and his team are looking at the math. I'm looking at it, is there a relationship with Viacom that helps us as a company and helps Viacom go forward for new sources of revenue in wherever the world is going. And is that a relationship that is worth continuing to pursue. And if it is then you've got to try to figure out how you make it work. But we don't get to make all the decisions. They are the ones that have sent us the termination notice.

One last follow-up on this, you generated a lot of cash in the first quarter, probably more than a lot of people thought. You are in a very good liquidity position. Are you comfortable that your cash position, your cash generation is sufficient to get you through the year regardless of the outcome of Viacom?

Yes. In fact, to some degree, probably that be -- anyway, we're comfortable with the cash position one way or the other.

Your next question comes from the line of John Hodulik from UBS. Your line is open.

Charlie, as you know AT&T announced that they're going to launch some over-the-top video service bundled with wireless in the fourth quarter. So, a couple of questions, one, how do you think that will change the competitive landscape in video? And do you think that kind of a bundle, putting over-the-top with wireless, makes sense? And, lastly, if that is the direction the industry is heading, given your mix of assets how does it change the equation for you? You have obviously a lot of assets on the video side but a lot on the spectrum side. How do you expect the market to evolve and how do you think it affects the value of those assets?

I think the one reason Roger started on OTT was, the original thing was to put the content to mobile phones. Obviously you know that mobile advertising is a huge part of the advertising ecosystem today. And we know that viewing for millennials and younger people is predominantly not on a television set now. But to do it you had to put everything in the cloud. So, as we got into putting everything in the cloud we realized there was actually a business there through a wire, as well. So, I think what AT&T is doing is logical. I think what they are doing will advance the industry. And I think that DISH thought about it five years before they did. I think we're well-positioned to compete against whatever it is they come up with. But I think AT&T is well-positioned. I think their acquisition of DirecTV gives them scale in video and gives them the ability to do some things with video that other people in the wireless industry can't do.

Do you think it eventually forces the cable companies to go out of region with their own over-the-top product?

That might be a logical move for them. That's not something that the cable industry has chosen to do in the past but perhaps they would this time. I don't know.

Your next question comes from the line of Jonathan Atkin from RBC Capital. Your line is open.

I was interested in the wireless spectrum around the carrier road map for 5 gig and 3.5 gig and how you view that as an interested outsider as it pertains to the AWS4 holdings. What are the puts and takes of those assets that are at carriers versus what you have? And then, secondly, if you could give us an update on the hardware or OEM ecosystem. How quickly would it take to develop terrestrial gear for cell-site deployment for AWS4. Thank you.

This is Tom.

You're probably going to be limited, Tom.

Yes. Again, we're being cautious about discussing spectrum and industry structure and so forth. But a couple comments, one, I think, given the consumption trends on wireless devices and the proliferation of video, most people in the industry believe you are going to have to really throw every resource you have at solving the problem in the long run. So, there is going to be a role for certainly in the mid-band capacity spectrum that we have but there are also roles for continued densification. Millimeter wave has gotten quite a bit of attention in the last few months. As Charlie said earlier, we're familiar with that. Not only have we been talking and meeting with a lot of people that are in that space today, EchoStar, our affiliate company, also owns some LNBS licensing. So, we may do some work around that. But clearly millimeter wave has its limitations. In today's world what's bringing more attention to it, I think, is massive MIMO, but that's certainly not a mobile architecture right now. It serves discrete purposes on point-to-point data or potentially small-cell back haul and things like that. Again, there's so many layers to the spectrum -- wedding cake, if you will -- that eventually they are all going to be deployed and put to use. As far as 3.5 specifically we're obviously very familiar with the proceeding. It will be a different licensing regime in terms of not only the term of the license but the size of the license areas. And then, of course, you have the unlicensed aspects of it, as well. It's a little hard to predict the timing on all those things. I think it's pretty widely believed that 5G standards will be defined around 2018 and devoid around 2020. And then between now and then you will see continuous improvement in 4G. There will be additional 3GPP releases every year between now and then. As far as our effort to 3GPP, there's really no significant update since the last time we discussed it. The band 66 was approved in December. We would expect infrastructure equipment supporting band 66 to be available later this year and devices to follow that. And band 77 is currently a work item and that continues to move through the 3GPP process.

Band 66, for those of you who don't know, is really our AWS 1, 3 and our AWS4 spectrum. So, that is going to be in virtually every phone in the not too distant future. That's a very big positive. And band 77 is our unpaired uplink with our AW--.

But the DE is unpaired uplink, paired with the other 20 megahertz of AWS4 as well as the downlink H block which is adjacent to it.

So, that's going through the approval process. I think we expect that's going to happen this year and then it's got to get into devices and equipment. 3G takes time, for sure, but we've made a lot of progress there.

Your next question comes from the line of Kannan Venkateshwar of Barclays. Your line is open.

Charlie, just a couple of questions, the first is obviously the Viacom issue is getting a lot of press and a lot of attention. But you also have a dispute going on with NBC which in many ways could be a bench line because it go through an arbitration proceeding. So, could you update us on how you're thinking about that process and what the timeline is around that? And, also you mentioned in one of your comments that when you're negotiating with companies like Viacom early hurdles is that content is available, in many cases, like Netflix. The DOJ and the FTC have frowned upon the distributors looking at MSN clauses which prevent content from going into OTT platforms How do you navigate the regulatory environment when you're looking at these depressions? Thanks.

The second part of the question is, there have been obstacles to deploying OTT that have been in the press. I don't believe that DISH has been involved in any of those obstacles. In fact, DISH has led the way to OTT. That is just something that content owners have to navigate through. I think that most content providers would like, as opposed to a few years ago when most content providers didn't want to experiment with OTT, most everyone wants to be certainly on the Sling platform today. And I think a lot of them are on the Sony platform and there are others. Ultimately that will all get resolved. As far as NBC, NBC is not really an issue for us in the sense that part of the consent decree, when Comcast bought NBC, was that, to the extent that distributors and content providers couldn't reach an agreement, there's an arbitration process where the content stays available to all consumers while it goes to an arbitration process. As opposed to Viacom where maybe you get a deal, maybe you don't. With NBC we're confident that our customers are going to be able to get a fair deal either through private negotiations or through an arbitration process and those contracts are up from time to time.

Your next question comes from the line of Phil Cusick from JPMorgan. Your line is open.

Hey, guys a couple if I can. Charlie, first on the DBS business, can you talk about the downsizing of that customer base? And is there a cohort of very price-sensitive customers who you feel like you are paring away as you take those interim prices up?\ And is there an end date to that erosion? Or is this a slow decline across all the customer bases that continues for quite a while?

The second part of your question I don't know the answer to. But the first part, we look at our customer, the total cost of that customer. It is the way we look at it. We look at, what does it cost to acquire that customer, how much programming did we give away free to that customer. And we add all that in. We add the cost of that programming into SAC. SAC numbers, in my opinion, are a little bit higher in our industry than people put on the SAC line on the income statement or on the 10-Q because typically in the past there has been free programming involved in that. And then we look at how often a customer calls and the variable costs that it costs to service that customer. Some customers haven't called us in 10 years and some customers call us every 10 days and it cost you X dollars to answer your call. You look at the churn. High correlation of churn based on credit score. You look at those factors and what we would like to do is get a profitable customer and let's don't take a 50/50 chance at it, let's take a 90% chance that we'll have a profitable customer. Because we have other places to deploy our capital where we think we have a 90% or 100% chance of getting a return. Probably one of the first things that I looked last year when I came back into the CEO role was really working with Steve and team to have the courage to go out there and get the right customers where I think there might have been a mentality here and maybe perhaps in other companies, where you're trying to show some number to Wall Street, but at the end of the day it hurts you long term financially. One of our rules is to think long term. So, we do that. There's been a lot more discipline in terms of what we do in the last year and I think that will pay dividends for us for years in the future. We still have some cleanup to do. It takes about two years to clean up. We're one year into a two-year process probably because you have people on two-year contracts. So, it takes a couple of years to clean that out. Our industry, there is a lot of people moving away from $19.99. It is misleading to a consumer because there's not really a good $19.99 package. And I think others have moved away from $19.99 and I think that's a positive for our industry. I think other people and other CFOs will start looking at it the way we look at it at some point, I think. And that will be a positive but the general trend is that the weight of programming contracts where you have a huge bundle of programming even in your most basic packages is a long term negative for the linear industry when they have an alternative for OTT, whether that be Netflix or Sling or Sony or AT&T in the future or whoever. The consumer is going to win, the consumer is going to have more choice and we're going to be right there on the side of the consumer trying to build a product that they'll buy that we can make a profit at.

That leads me to the second question which is, as you think about if Viacom goes dark tonight, you mentioned you have other content ready to go there. Should we think about this as a Suddenlink style where they had other content ready to be signed and once it was gone it was gone or a little bit more of things you've done in the past where things go dark for a little while but there's still negotiations to be had?

Our intent would be if they go dark they go dark. The only reason would be that we couldn't work together as companies. If we can't work together as companies on strategic things and building value between us and it gets into just a dollars and cents issue, then I'd rather spend my time with companies who are a bit more forward thinking than that and are willing to try and experiment with some stuff. Disney, when it came to the first big player to go to OTT, we've got a lot of loyalty there. That's a company who is thinking outside the box and trying some different things. Fox, who has led the charge on multi-stream with us, that team is now thinking of new ways to do things. That can be a very productive relationship because when you start having those kinds of strategic discussions you can start getting into things that aren't zero-sum games. You start thinking about things where both of you make money, incremental money, that you wouldn't have otherwise made. Just a negotiation with a company like Viacom, if it's just about dollars and cents it's totally a zero-sum negotiation. They want a penny more, we want to pay a penny less. If that is all we're going to do and we can't reach -- we're fine if that is what they want to do and we agree on the penny, but I'm a bit more interested in where would you go with your content and do we both make more money and how do we change the advertising model so we have a better second stream there that isn't obtrusive to customers. And we think we know how to do that. We have a lot of ideas. We don't have all the ideas but we have a lot of ideas on that.

Your next question comes from the line of Michael Morris of Guggenheim Securities. Your line is open.

Two topics, one just following up on the Viacom issue and the content question, would you consider, if you were to discontinue carriage of Viacom, if they were to pull the signal, would you consider helping subsidize perhaps a Netflix subscription, even maybe like a one-month free trial or something like that for your customers to help display to them that there is similar content available elsewhere? That is the first question. And then, second on Sling, can you share any insight on churn for that product? Maybe share with us how churn on Sling compares to churn for traditional DBS subscribers and whether you saw any increase in churn for Sling around the end of the football season. Thanks.

I will let Roger take the Sling question. But on the discounting, we've done a promotion with Netflix, so we're pretty aware of the power of Netflix and the content that is there., As an example, they have an awful lot of children and family programming that's pretty easy to access. In fact, if you're about two and a half you can pretty much navigate through the product. We've done some promotions and stuff with them in the past. It's interesting to see that Amazon has gone to a monthly fee now which fits more into our consumer's model. I think there are a lot of alternatives there for consumers.

The customer lifecycle for Sling is very different from satellite. A satellite subscriber, they come in, they sign a two-year contract so you fairly low churn during those two years and maybe a little bit higher when their contract ends. For Sling it really flips the model on its head because we can allow people to come in, in a free trial. So, the switch from free trial to pay, if you want to think about it as churn, is the highest churn that you'll have. And then the first month as a paid subscriber is the second highest and then the third month is the third highest and then it drops down. And then once customers have been with you six or seven months the churn rate is quite a bit lower overall. So, when we look at churn, we don't look at averages, we look at cohorts, to look at actually how those lifecycles are shifting. But in many ways it's the opposite -- until you get to customers who are long term. Long term customers with satellite tend to churn at a lower rate, long term customers on Sling tend to churn at a low rate.

There is very little cost to sample Sling. It's one of the things that we work with our content providers to make sure they understand, is that you will get somebody who can go on the Internet and churn in and out of your content. It probably affects somebody like HBO or Showtime the most where you want to watch Game of Thrones and you want to be on for three months and you watch HBO for three months, where at HBO and DISH you might be on all year. But with OTT, HBO Go or whatever their HBO Now, maybe the average person is on for three months or six months. It probably affects the premium guys more. We have to get better but there's ways to get better to make sure the customers pretty much come in and stay. Those are some of the things that we're learning. Those are some of the things that we're working with our content guys to help us with. But there's going to be more people coming in at low or no cost. And there's going to be higher short term during the first year of churn and then it is pretty stable. And I think Netflix, they had that same problem early on and they've gotten to a pretty steady state now. We're a long way from steady state, I think, at Sling, but.

The other thing we see is when customers come in for a free trial, even if they don't stay to, what we call, roll to pay, what we'll see is a pretty decent percentage of them will come back a few months later as a paid subscriber. To us, the more people we get to try the service the better because they either roll to pay which most of them do after the free trial or we find that a good percent come back a few months later as a paid subscriber. Michael, you also asked about at the end of the football season, we didn't see a noticeable change in and again, we didn't see a noticeable change in that. What you do see is, when there is a big event like the national football championship you things like that, you'll have lots of signups with people, again, who come in, who want to watch the game, use a free trial to do that and that's okay. You may see a lower percentage of them that become paid subscribers at the end of their free trial but, again, you still see -- that then becomes a pool that we can remarket to and we end up finding a good percent end up coming back as paid subs in the subsequent months.

And the whole experiment whether the trial period should be 7 days, 30 days, 14 days, 1 day, as we get a little better and a little more data on what the consumer experience is, we'll be able to better optimize how people sample.

Your next question comes from the line of Marci Ryvicker of Wells Fargo. Your line is open.

Two questions, the first, the new Sling package that has Fox, we've been asked if there was anything related to Disney and that maybe going up against the Disney cap in the original Sling package or Disney having some sort of say that another sports network can't be in the initial Sling package, if that is why Fox is separate. And then the second question is, Sony's PlayStation view is starting to sign contracts with the networks to incorporate live broadcast. Where are you with live broadcast with Sling?

Let me start with, as far as the multisport, we're talking to Disney. We would like to have Disney in the multisport product, multi-stream product. So far we haven't come to an agreement on that. One of the big things we're doing that we've learned is that when we did the single-stream product everybody came in under dynamic ad insertion was different standards, the way the content went to customers was different standards. For example, you couldn't pause some programs. Some programs you couldn't start over at the beginning. Sometimes you didn't have look-back rights. With multi-stream, everybody that is in multi-stream, we just made the strategic decision that we have to get a consistent product to our consumers. That's something that Disney is evaluating as to those standards and making sure they are comfortable with those. I'm optimistic that they'll decide to ultimately partner with us there because they've done such with Sony and many of the things we need to multi-stream they've already done before. If not, our customers, they can buy both the PSS and the MSS product and some customers do that, the single-stream and the multi-stream. They can buy both and they can get both. But it's more about some of the lessons we've learned and making sure that everybody works the same so that we have a much better service for our customer, it's consistent, it technically works better than the way we started with single-stream where there were no standards and we were breaking new ground. In hindsight, there's probably a lot of things I'd do differently there.

And also, Marci, you asked about the broadcast networks. In our multi-stream service we do have Fox in their owned and operated markets. In our single-stream service today we have ABC in the owned and operated markets as an add-on tier. And Univision we have in both services. I think that's a complex situation because the affiliates have to negotiate the rights from the national networks to be able to grant the streaming rights. And I think those relationships are just in the process of getting sorted out. And I think ABC made an announcement recently about how they are trying to do. I think all of them are trying to work through the issues. My expectation would be that those issues will get worked through and increasingly you will see locals as part of services like this including affiliates. But it's not something where you can wave a magic wand and do one deal with one company and all of a sudden have all the affiliates. It is one where it will take some time to work through.

[Operator Instructions]. Your next question comes from the line of Walter Piecyk of BTIG. Your line is open.

Charlie, Rich is obviously chomping at the bit to do a follow-up on Viacom, but before I yield my time over to him can you give us any sense of how large the down payment is going to be for the incentive auction? And this goes back to, I think, the cash question which you were about to answer a little bit more to Brett on that. When your deck came due you used cash. Obviously you generated some cash this quarter. The debt markets might be a little bit more favorable versus when you use your cash to pay down the debt. So, I just want to understand, in the week or so that's coming, if we see you guys hit the market with some debt, is this indicative of the size of the down payment you might be using for the auction? I know you talked about maybe not wanting to bid but preserving some flexibility if the price is right obviously has some value. So, if you could just address that. And then I'm sure Rich is going to fire him with some Viacom questions.

Walt, it's Tom. We can't give any indication of a down payment size that we would make because that would indicate something about our intent in the auction. So, unfortunately we can't answer that.

Can you answer at least on the financial size? Should we be shocked if you would take advantage of the debt markets the way they are today versus when you paid down your debt previously?

Good try. Love taking your questions, good try. We can't comment.

Okay. When you look at Viacom viewership, I'm curious, it's been seven years I think since you cut your last deal with them. Could you comment on how much viewership of Viacom's collected networks are down over that seven-year period? And, also, they say that 19% of total watch time on DISH occurs on Viacom channels. Is that factually accurate? And then just a question for Roger on Sling, ESPN is not in the multi-stream but Fox is. Is there a way for you to put both Disney into multi-stream and Fox into single-stream and keep the price point? Or does that price point ultimately have to go up?

Look, this isn't again unique to Viacom but in general programmers, viewership has gone down. You see the Nielsen ratings which aren't always completely accurate but they're close enough that they're good data points. Viacom, we don't have anything that would indicate that Viacom today would be anything like that number on our network.

Meaning the 19% is not an accurate reflection?

I would say that seven years ago Viacom was stronger on our network than they are today. And they still have valuable stuff. I'm not trying to -- I think they still have good content. But, in general, I would say that they suffered some from their product being more overly distributed than others. It's not product that you have to watch in general live and kids, some of their focus has been on kids and kids is a pretty, particularly with Netflix, diluted genre. The things that maybe haven't declined is NFL.

But if ratings are going down why are prices not going down?

I think what will happen is, is that ultimately the price -- ultimately what will happen, in my opinion, is what happened with the Los Angeles Dodgers, is somebody over-reaches and thinks that the Dodgers are worth whatever they said they are worth and people look at it and say -- no. Unless we own the Dodgers we can't pay that kind of money. You've seen Comcast drop YES Network. We carry it on Sling but we don't carry YES on DISH. It becomes a price you can't pay. And people will drop and once somebody drops, everybody -- then it's almost an possible negotiation for the next negotiation because somebody's got leverage on you. The world is changing a little bit to where distribution -- it's starting to be a fairer fight. But the industry hasn't worked through the balance between cost of content and viewership. There's going to be some food fights between any number of companies and content providers in the future, probably, would be my guess. You've seen it with YES, you're seeing it with the Dodgers, you see it with -- I think Comcast just rolled Spike up to a very high tier, low penetration. I think they rolled country music television up. You've seen Skinny Bundles by Verizon, that's where it's going. Ultimately it will reach its equilibrium and so forth. We're trying to provide different alternatives for content people to take advantage of those trends and not suffer from those trends. You can put your head in the sand or you can go out and say the world has changed, let's go change with the world, let's try to be innovative and that's what we're trying to do.

Rich, on your question about ESPN, let me just start with talking strategy about single-stream versus multi-stream. We think those products help us reach different target audiences. When we launched Sling TV, to me, the main thing we were doing was market segmentation which the pay-TV industry really had never done because the structure of the industry is such that everyone basically has the same channels at similar costs, so you end up with similar packages and similar pricing. So, first and foremost, I think what we do on Sling TV is segment the market and go after different segments. We did that with single-stream and we'll do that with multi-stream. What that mean is we won't put all the content that's in multi-stream into single-stream and just have the number of streams be the differentiator because you'd end up with packages that would cost too similar. To answer your question specifically, no, we couldn't put all of the Fox content into single-stream and maintain the price point that we had. And the same, vice versa, we couldn't put all the stream content into the multi-stream service and maintain our price point. You're just driving up the cost too much for those. Our strategy will remain to have a single-stream product and a multi-stream product and have them target different segments of the market.

But we're desirous of putting ESPN in multi-stream which will drive the price of multi-stream up. They are our first OTT partner so they get preferential treatment.

We would welcome ESPN and Disney into the multi-stream product.

[Operator Instructions] Our first media question comes from Alex Byers of POLITICO. Your line is open.

I wanted to ask a little bit about cable partners. The Charter deal looks like it is going to happen, though obviously we don't know for sure right now. But interested a little bit in your broader take on that issue. Reading some of [indiscernible] and then back to Comcast deal, as well, you almost get the sense that there's no room for cable mergers because no matter what, unless you had really small companies merging you would still have this increase for the potential of foreclosing against online video distributors, whether it was an MSN KPM thing or whether it was an inter-connection issue. I just see a lot of these issues potentially pertaining to future mergers and wanted to get your sense on if that was a good read in terms of what you [indiscernible].

This is Stan. I think you're generally right. Whenever you have large players coming together you're going to see the issues that cause us concern. Charter Time Warner, in many respects, quite frankly, any merger speak to me of -- and Charter particularly, when you think about it -- post-merger Charter would be the dominant broadband provider in many of our country's largest and most important geographic markets such as New York, LA, Dallas, just to name a few. What is troubling also, those guys control broadband access along with Comcast to the vast majority of American homes, when you're talking about speeds of 25 mgs or more which is the FCC's definition of high speed. It would be about 70% to 90% of the country. Those two companies together, they don't even have to act consciously together, they can just act parallel and everybody in the country effectively will suffer. Similarly, Charter said about two-thirds of the customers in their footprint won't have access to any competing broadband services of 25 mgs or more. So, if they decide to mess with OTT providers like Sling TV, our customers actually have no options to go somewhere else. Those three factors alone cause us great with concern. As we've publicly stated, we don't think the merger, for those reasons and others, serves the public interest. The amount of broadband consolidation is very troubling and puts serious harm on the OTT market, particularly our Sling services.

So, you see those issues being potential hang-ups in future mergers?

Yes. When you have two large players, as I said every merger is unique but when you have two large players coming together, I think it's hard to envision scenarios where you don't have similar concerns. The sad fact is, as we all know, behavioral conditions as part of merger approvals don't have a very good track record and they're very difficult to enforce. Ultimately it's the consumer who suffers.

Your next question comes from the line of Jimmy Schaeffler of The Carmel Group. Your line is open.

This is a question for Charlie and Tom. I'm interested in your forward thinking and your longer term thinking, your out of box thinking about licensed versus unlicensed spectrum and the pros and cons, the preferences, the strategies around that.

This is Charlie. I think both have a place in where I would see connectivity going. Unlicensed, there can maybe be more innovation. There's a lot of advantages to it. There are a lot of disadvantages because there's not a lot of rules around it and there's a lot of interference. Both will play a role. I think it's back to what Tom said. The spectrum, the wedding cake layers of spectrum, all work together. I would say it this way -- it's a transportation system. Just think about a transportation system, Jimmy and you're going from San Diego to Denver, you can drive, you can take a train, you can fly. And if you want to get here quick you are probably going to fly. If you want to go absolute cheapest way you are probably taking a bus. So, each part of the spectrum world is going to be part of the transportation system and it's going to include many different forms, some that needs low latency, some that needs high latency; and some that needs low power, some that needs high power; some that needs a phone call where you've just got to make it work versus some data that can afford to slow down; and some data, like healthcare, that can't afford to slow down or a car where you can't afford to have latency and you have to be 100%. It's all going to be different. When you put that system design together, you'll need a lot of building blocks. And probably no company in the United States really has everything they need for that, but we'll see.

Jimmy, the only other comment I would make, obviously there's been a lot of discussion around LTEU. That's a non-standard approach and then LAA is moving through standard. It is pretty well known that at the Wi-Fi level, certainly at 2.4, it's already getting pretty crowded and increasingly at the 5 gigahertz level. For a carrier that has a wired licensed anchor, by adding LTEU or LAA you're not only able to provide improved quality of service but you have visibility to the session when it goes from one network to the next where they don't have that today. So, it creates interesting opportunities for those that have licensed spectrum and the unlicensed bands as I said earlier, there's going to be very good uses for 3.5 and 28 and 38 and 60, but the use cases will vary. You can imagine at 60 gigahertz, having very short range movie downloads where you can do an HD movie in six or eight seconds to a device. That creates all new applications. The extension of that to the mobility layer is still a ways off.

And just one more quick question -- do you guys see yourselves ultimately getting closer and closer to the [indiscernible] of 3.5 million subscribers today?

You broke up a little bit. What was the question?

I'm doing that traveling from Arizona to LA that Charlie was talking about [indiscernible]

Jimmy, you are breaking up. I think the question was, do you see us playing in fixed wireless.

Yes.

We will continue to monitor it. We did some trials with Sprint a couple of years ago at the 2.5 band. There will be, I think, an increasing use case for fixed wireless in the higher millimeter wave bands. But, again, that's distance limited but at one- to two-mile radiuses, you could probably do something on a point-to-point basis that could provide pretty impressive speeds. And I'm sure you'll see more of that occurring. As I said, there is a lot of buzz in the industry right now about how to potentially deploy 28 to 39.

Your final question comes from the line of Scott Moritz of Bloomberg. Your line is open.

A Sling question, you guys were first out of the gate, you've got about half a million users. But there are other competitors coming on -- ATT, Verizon, Sony obviously, maybe the cable players. How confident are you, you can defend the Sling business? And do you have any exclusives or anything that helps you keep an advantage?

We've always expected that the OTT business is going to be a competitive business and ultimately we may have competitors that aren't traditional pay-TV companies in the market. In many ways they'll be lower carriers to entry. You don't have to go build a cable system, you don't have to launch satellites and therefore we'll probably end up with more competitors. The nature of this industry is that there is not a lot of exclusive content. The channels business, the vast majority of the channels in the U.S. are licensed on a non-exclusive basis. So, I don't think it's going to be exclusive content that's going to drive the differentiation. I think anyone who is going to succeed in OTT is going to have to be able to move very fast to be able to continue to innovate quickly and build their brand and grow their business and try to get scale that will bring them some other benefits in programming costs but also in the advertising side. As Charlie mentioned earlier, we think that the advertising model in OTT is in many ways superior to what it is in a traditional linear business because every ad can be targeted and we have lots more data that can be used for that targeting and therefore there's more value, both for our programming partners and for us in the advertising model.

You glossed right over the half a million subscribers. Did you want to clarify that in any way?

Another good try.

Thank you, all.

Thanks, everybody. We'll see you in three months.

This concludes today's conference call. You may now disconnect.