EchoStar, DirecTV have room to wiggle

Mar 11, 2002  •  Post A Comment

EchoStar CEO Charlie Ergen and DirecTV CEO Eddy Hartenstein have been making lots of promises lately to convince government regulators to approve the planned merger of their companies.
But upon closer inspection, their sweeping pledges have lots of wiggle room. Take for example their promise of nationwide pricing of their satellite programming, intended to ensure that all subscribers pay the same rates.
Under tough questioning from a Senate panel last week, Mr. Ergen said he envisions some pricing flexibility to respond to cable companies that try to undercut his prices.
“Well, now you’re getting off of the pledge and promise very quickly,” snapped Sen. Herb Kohl, D-Wis., chairman of the Senate antitrust subcommittee, who’s increasingly skeptical about the deal.
Why Ergen’s in court
There’s also the commitment to carry every local station in every market if the merger is approved.
Despite the pronouncement, EchoStar last week asked the U.S. Supreme Court to hear its challenge of the law requiring satellite providers to carry all or no local signals in a market. The law is designed to guard against the cherry picking of TV stations by satellite companies.
Mr. Ergen said striking the law is a matter of principle because it requires him to carry duplicative stations. “Hopefully we’re going to win, because it’s a freedom of choice issue, right? But we’re still going to put up all the channels with the merger,” Mr. Ergen said.
Meanwhile, the CEOs originally said they would only have capacity to offer local stations in 100 markets. But as criticism grew, Mr. Ergen and Mr. Hartenstein suddenly doubled their capacity.
“If the antitrust authorities find it appropriate to permit this merger, they need to tightly wrap all these promises into a consent decree,” said Sen. Kohl, whose concerns were echoed by other lawmakers.
The CEOs welcomed the idea. “This merger will not reduce our incentive to compete but will enhance our ability to compete,” Mr. Ergen told the panel.
States might fight
Missouri and about 30 other states are exploring whether to file suit in state or federal courts to block the deal, said Missouri Attorney General Jay Nixon.
“On the surface it is about as illegal as a merger gets to be,” said former Federal Trade Commission Chairman Robert Pitofsky, a Democrat, who warned that combining the two direct broadcast satellite providers may hurt consumers and send the wrong signal to other media giants.