Editorial: Anybody but EchoStar

Nov 5, 2001  •  Post A Comment

EchoStar’s $25.8 billion bid for direct broadcast satellite rival DirecTV probably won’t pass muster with federal regulators-and it shouldn’t.
Satellite legend Charlie Ergen, who built EchoStar dish by dish and whose number of subscribers would nearly triple from 6.4 million to 16.7 million if the deal goes through, says the combined company would control only 17 percent of the total multichannel video market-if cable is included. The reality is that a combined EchoStar-DirecTV would dish out programming to 91 percent of the satellite customers in the United States. That’s a level of ownership that puts the 35 percent broadcast ownership cap and 30 percent cable cap to shame.
And even if Federal Communications Commission Chairman Michael Powell, who has seemingly never met a regulation he didn’t want to dismantle, is disposed to blessing the merger, the Federal Trade Commission, the Justice Department and Senate Commerce Committee Chairman Ernest Hollings, D-S.C., may not go along.
Mr. Ergen’s argument is that a single giant satellite company that didn’t have to fight for dish customers would be better positioned to compete with local cable providers for multichannel subscribers. Never mind that the roughly 9 million customers whose homes are not passed by cable would no longer have a choice in signal providers. Even if regulations were put in place to protect rural customers from price gouging, the quality and cost of service would never be as attractive as it would be in a market with vigorous competitors-which EchoStar and DirecTV now are.
Other potential bidders for DirecTV include AOL Time Warner, Viacom, NBC or Disney. But the front-runner -and probably the only runner-is News Corp.
News Corp. head Rupert Murdoch, whose company already owns stations covering more of the country than any other broadcaster and is grabbing duopolies wherever it can, may not be the most-liked man in the media business. But he knows how to make satellite successful-his SkyTV systems have already transformed the television business in Europe.
And even though a Murdoch bid for DirecTV would represent an enormous leap in vertical integration for News Corp., it is preferable to the competition-killing horizontal integration that would come with EchoStar gobbling up its larger satellite rival.