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Satellite CEO duo takes its case to D.C.

Dec 10, 2001  •  Post A Comment

When the CEOs of EchoStar and DirecTV visited Washington last Wednesday to testify before Congress about the $26 billion merger of their companies, they had every reason to expect strong opposition.
The deal, after all, would form the largest television programming service in the country, usurping even cable front-runner AT&T.
And it would create a huge direct broadcast satellite monopoly, leaving many rural consumers with a single choice for TV service.
So it must have been a relief when just one lawmaker-Rep. Ed Markey, D-Mass.-expressed opposition to the union, and only in its current form, during back-to-back hearings spanning the entire day.
Several other congressmen raised concerns about the deal’s impact, particularly on rural constituents, but EchoStar Chairman Charlie Ergen and DirecTV head Eddy Hartenstein came prepared with carefully crafted promises.
“We would certainly consider a consent decree that would be long-term in nature, binding and [that] protects that part of America you’re so concerned about,” Mr. Ergen told Rep. Lee Terry, R-Neb., during a hearing before the House subcommittee on telecommunications and the Internet.
Such a consent decree would lock in uniform pricing for all customers, whether rural or urban.
The executives also pledged to reach as many markets as possible with local signals but sought relief from must-carry obligations so they can cherry-pick the popular local channels.
Most of the tough talk came not from lawmakers but from witnesses, including former Federal Trade Commission Chairman Robert Pitofsky, a Democrat, who testified before the House Judiciary Committee.
“The antitrust laws say that mergers that lessen competition in any market are illegal,” he said. “This deal, as proposed, has very serious problems.”
Discussing the increased efficiencies that the dish TV companies would cull from the merger, he said, “I suppose if Kmart and Wal-Mart merged, they could eliminate duplication, but I don’t think that’s a good idea.”
Rep. John Conyers, D-Mich., who raised plenty of his own concerns, questioned whether Mr. Pitofsky can be objective, since his law firm represents Pegasus, a small cable and satellite TV company opposed to the merger.
Mr. Pitofsky said he’s not a mouthpiece for the client.
Even Gene Kimmelman, co-director of the Washington office of the watchdog Consumers Union, backs the deal under certain conditions, such as the entrance of a new competitor to battle against a merged EchoStar-DirecTV.
The corporate marriage has a few congressional cheerleaders, the foremost being Rep. Rick Boucher, D-Va., a longtime friend of the satellite industry.
But most lawmakers, such as House Energy and Commerce Committee Chairman Rep. Billy Tauzin, R-La., said they’re reserving judgement until they know more about the impact on consumers and the marketplace.