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DOJ Blocks Satellite TV Merger
EyesWideOpen writes "The Justice Department filed a lawsuit to block a merger between EchoStar Communications and Hughes Electronics that would have created the nation's largest pay-television service, stating that 'This merger would give EchoStar control of the skies for the provision of video programming by satellite, leaving customers to suffer from the resulting reduction of competition'. The FCC had already voted unanimously to oppose the merger because it would create a monopoly that would have 'adverse' effects for consumers."
I skimmed through the article, but I'm quite curious about some aspects of it.
It is fair to say that the concerns that led to the passage of US merger laws, and the goals that the laws aim to achieve, are not unique to the United States.
All countries that have adopted merger statutes will recognize them: putting limits on large concentrations of economic power, protecting small businesses, preserving competition, protecting jobs, encouraging economic efficiency, and protecting consumers against anticompetitive price increases. The explosion of new merger laws in recent years suggests that the issues may be close to universal.
Department of Physics and Atmospheric Science, Dalhousie University, Halifax, N.S., Canada, B3H 3J5
What I expected was some sort of bull that there is competition from cable companies. When regulators allowed cable co's to raise their rates everywhere they argued that they have satellite competition. They have SOME competition from satellite and vicea versa. There are many building codes that prevent people from getting even small satellite dishes not to mention obstructed views
Opposing this merger on antitrust grounds is a no-brainer. It would mean the entire US would have but one satellite provider, which would be a total monopoly in those areas not served by cable. (Actually, there are ways for US residents to get Canadian satellite service from ExpressVu, like http://www.global-cm.net/).
However, this sudden affection from the Bush administration for strictly enforcing antitrust law is obvious horseshit. Dish won a bidding war for Direct by outbidding Rupert Murdoch's Fox conglomerate. Murdock, a renowned political conservative (he of Fox News, and the NY Post, among other things) figured (correctly, as it turns out) that the politicans his lobbyists bought over the years--primarily Republicans--could be counted upon to do his bidding. And so they have.
Monopolies are the opposite version of socialism -- economic power concentrated in private v. public hands.
Western Europe has been quite socialist for many years and they seem pretty happy, really.
Last time I checked, we capitalists had PLENTY of corruption and incompetce. Heard of Enron? WorldCom? Tyco? Even Martha Stewart!
It means you won't be facing a monopoly in the sky just like the one you've currently got on the ground. I think the companies involved will muddle on through to providing the services you desire without merging into a mega-corp.
Supposed the two dish companies had merged? How popular would it have been for them to have immediately jacked the prices up? But, you say, they could have done it anyway, because people would have had no choice? Well, there IS still air channels. Or, radical idea here! Quit watching TV! Ahh...now I see the problem. The State made sure to preserve the people's Bread and Circuses. If people stopped watching TV, they might start reading or something hazardous.
But slightly more seriously, to take it to an illustrative extreme, the satellite networks join, and jack prices way up. How long can they keep that up? A demonstrated low level of profitable service has apparently been illustrated at the current level. If they exceed this, the pressure just keeps increasing for someone to come in from underneath and displace them as cheap as they currently are operating. It might take 2 or three years, but it will happen. Oh wait. No it won't. Too much government red tape to get through. :-P
Meanwhile, the two existing companies can collude a little bit, and stay just good enough, and lobby just enough to keep screwing you more than unfettered competition would.
What the hell, if they did abuse their market, maybe it would be a good thing. The next dish network to displace them might use 6" dishes, or roll out broadband cable/internet or something. The existing companies are not as likely to do that; they are happy where they are, making money.
Most mergers don't do much for the shareholders. In fact, most M&A activity is counterproductive. You'd think otherwise, but, in fact, making the company formed by a merger work properly is hard.
There are some other interesting tidbits in the piece, like that the potential satellite competitor is interested in offering some 40 HDTV channels. The WSJ is unabashedly free-market, so they support the revised merger, apparently with the opinion that neither company can combat cable companies independently.
Honestly the only way Sattelite TV was to be a threat to Cable television and end their monopoly reign over people is to merge Echostar and Dtv. With Echostar and Dtv merged into 1 company, they could offer all the locals to all markets, but with the merger being block local channels can only be offered to some markets instead of all of them.
Cable Co's feared a merged Echostar/Dtv, as they wouldn't have a monopoly anymore and Sattelite TV was a real threat with all local market channels being offered but they have nothing to fear now.
Almost universally I've been against big company mergers that decrease competition. This wasn't one of them.
I'm extremely disappointed with the FCC's decision in this matter, one that I feel was probably influenced by back door dealing at the behest of the current cable conglomerates.
This was a deal that made sense for consumers, and made good business sense for the companies involved. It's also unfortunate that consumers are being denied Canadian competition in this market as well. (Maybe...but I doubt it, a NAFTA challenge will correct that last item.)
I had a friend that a few years ago bought a house on the edge of what in 10 years will be suburbia, but it isn't yet. They are still getting things like water treatment, gas service, and the like wired up. Every year for 10 years the cable company here has promised to connect this community. Every year for 5 years the phone company has said "we're going to roll out DSL in your area soon". Every year the federal government gives them a ton of money in subsidies to 'wire up rural areas'. Nothing happens.
Echostar has done more for rural communities in terms of offering service than cable ever has. At least they provide a choice. This deal would of allowed them to combine resources, have the bandwidth to offer additional services (and local channels) to just about every area of the US. It would of lowered the cost bar for the service as well. This is a slap in the face to every American living in rural communities and in communities that cable will never be available in.
Freedom is merely privilege extended unless enjoyed by one and all.
The 1 merger I actually WANTED. The killer part is that by combining they could have eliminated redundant channels on the sats and added local channels. I was looking forward to getting my local channels on Dish because Directv already has them. When the Cable CO wanted more bandwidth it strung up new cable. How much does that cost? Dish or direct? How much does it cost to lauch a rocket?
Why is GM so interested in selling off hughes? It seems like a profitable business venture that is only getting better. Anyone who has ever had DTV certainly prefers it over the local cable monopoly. I was concerned with what the echostar merger would do to the Directv with TiVo receiver or now called "Directv DVR"
The cable movie networks (showtime, movie channel, hbo, cinemax, etc) don't have commericals (except for themselves and sometimes each other). The other networks (usa, nick, history, etc) do, but then again you don't pay very much for them. For one nonimal fee you get 20 or more cable channels, and your cable company pays very little to provide them (just for the equipment mostly). So the only way USA et all pay their bills is to sell time, just like the 'big three'. OTOH YOU are paying for the movie networks directly. Just because it's cable don't mean it's paid for.
Can I see some proof or support to this? I'm interested to where this claim is coming from.
In land mass, it's probably more than half, but in population, it's only about 15%.
If you read the FCC's decision (available from www.fcc.gov), they repeatedly mention that without the merger the two companies can still provide local into local service for 100 of the roughly 200 DMA's in the country. Had the merger been accepted, it would have been all 200.
I really don't see how satellite can possibly COMPETE EFFECTIVELY against cable, when they're only provide local-into-local service for the larger metropolitan areas, which may even have multiple cable companies also competing!
The DOJ could easily make sure that the New Echostar keeps its promise of uniform pricing, and make no mistake, They're not making a whole lot of money from us people in Farm Country (as I am), so it wouldn't make sense for them to create "uniformly high pricing", unless they wanted to just roll over and die.
The FCC generally makes decisions that are friendly to broadcasters. Look at their decisions against satellite over the last few years. They (and Congress) regard satellite companies as essentially wanting to steal television from Over The Air broadcasters.
I quit watching the major networks (ABC/NBC/CBS/FOX) about 3 years ago, when I couldn't get a decent signal over-the-air. I get UPN and WB via satellite superstations, and I watch those quite a bit. Broacasters should have been fighting tooth and nail for this, but instead they generally opposed it, probably out of habit. I might actually start watching network TV again, if I could get it on sat.
I'm very angry at Rural TV, and other "rural" groups that opposed this merger. As a rural person in a DMA that will likely never get locals via satellite, I am very angry at these people that are supposedly representing me. They don't speak on my behalf.