Dish Network in the News

EchoStar and Hughes File for Merger

NEW YORK (Reuters) - 12/03/01 - EchoStar Communications Corp. officially brought its $26.1 billion acquisition of rival Hughes Electronics Corp. before the U.S. Federal Communications Commission (news - web sites) for approval Monday, starting what many believe will be a prolonged regulatory review process.

EchoStar, together with Hughes and Hughes parent company General Motors Corp., filed with the FCC (news - web sites) Monday evening to transfer certain broadcast licenses held by the three firms to a new entity being created through the merger.

The FCC now has up to 10 months to review the proposed transaction, which aims to combine EchoStar's Dish network with Hughes' DirecTV operation and create the dominant U.S. provider of satellite TV with more than 16.7 million subscribers.

The filing comes just one day before EchoStar Chief Executive Charlie Ergen and DirecTV CEO Eddy Hartenstein are scheduled to testify before two congressional committees on competition in the pay-television industry.

The proposed transaction has already drawn a wary eye from antitrust experts and regulators, who worry the combination will leave most of the prime direct broadcast satellite slots in the hands of one operator while reducing competitition in rural markets.

But EchoStar and Hughes argue the merger will create an even stronger and more viable alternative to U.S. cable companies who, even after the merger, will still control some 80 percent of the U.S. pay television market.

"Although not itself a proof that cable prices constrain DBS prices, further evidence is provided by the fact that the cable industry itself views DBS as a significant competitor,'' said Robert Willig, an economics and public affairs professor at Princeton University and former Deputy Assistant Attorney General for Economics in the Department of Justice (news - web sites)'s Antitrust Division, in a document supporting the companies' application.

"Cable companies have also stated that their pricing decisions and advertising strategies are influenced by competition from DBS providers,'' he said.

EchoStar and Hughes also intend to argue that combination will "free up'' overlapping spectrum between the two firms, thereby allowing the new entity to offer additional local broadcast channels and an even stronger array of services, according to the filing.

The companies also intend to argue that rural customers, whose only pay TV option is often either the Dish network or DirecTV, would be adequately served by a nationwide pricing policy for video services.