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."

Comments

Right result, wrong reason

[coltrane679]

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.

And the stocks went up.

[Animats]

Amusingly, when Justice Department opposition to the merger was announced, both stocks went up. That indicates what investors think of the deal.

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.

Missing information

[ctr2sprt]

I didn't see it in the two articles, but... the merger was proposed, and voted down, once already. This new one has a provision which gives some cable company (Cablevision?) rights to use parts of the combined company's satellites. Cablevision, or whatever company it is, is not currently in the satellite TV game. Apparently the owner of the company is planning to sell some assets (like the channel AMC) to fund investment. The idea here is that Hughes et al. were offering a potential competitor even after the merger is done. This is described in detail in an op-ed piece in the Wall Street Journal. Apparently the FCC's concerns with the new proposal are that Cablevision might not have the financial backing to last in the satellite TV business. The WSJ cynically observes that they are trying to learn the lesson they got from the telco deregulation nightmare, where the Baby Bells just outspent their smaller challengers and snapped up the remains when they went bankrupt. But the FCC is also running the danger of preventing mergers of financially-insecure companies, with the possible result that they'll all go bust.

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.

Re:What?

[SacredNaCl]

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.

Half the country may never get locals via sat

[Slashdolt]

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.