NRTC WITHHOLDS SUPPORT FOR ECHOSTAR-HUGHES MERGER
National Rural Telecom Co-op (NRTC) won’t support proposed EchoStar-Hughes DBS merger “the way it’s presently constructed,” but remains open to negotiations, Senior Vp Industry-Member Relations Andrew Brown told us Wed. NRTC, Pegasus and WSNet could play key roles in deciding outcome of antitrust review, industry officials and sources said. Pegasus hasn’t publicly announced its position. Rural companies appear ready to block deal unless EchoStar makes several unspecified concessions. Most analysts still believe companies face difficulty getting transaction approved. Merger is going to have “significant obstacles” and is “likely to be rejected” following Dept. of Justice review, Legg Mason analyst and former FCC staffer Blair Levin told us: “It is possible that the deal could ride a combination of anticable sentiment and lack of business opposition to garner approval, but we still believe the odds still favor government officials’ saying no.”
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Brown said NRTC was “very concerned” about merger because it would have major “business impact” on services members offer to rural subscribers. NRTC has 1.8 million subscribers to DBS services. Brown said officials were lobbying Hill leaders, mostly from rural states, to protect interests during antitrust review. Local-to-local, national pricing, future broadband deployment and details of merger are chief among concerns, he said.
WSNet is stepping up pressure on govt. with lobbying efforts because of plans to provide digital service for rural market. Company filed FCC application for landing rights in U.S. from 2 Canadian DBS orbital locations at 91 W and 82 W, it said Wed. It’s seeking to become rural alternative to EchoStar-DirecTV entity, industry source said. EchoStar and DirecTV are expected to file opposition to request, source close to WSNet told us: “This one is going to attract a lot of attention.” Company wants licenses for Earth station to transmit and receive signals from orbital slots and 1 million receive-only dishes. “In light of the impending mega-merger of EchoStar and DirecTV, these filings become critical in enabling WSNet to expand prepackaged digital video service offering it provides to wholesale customers,” CEO Jared Abbruzzese said. He said EchoStar-DirecTV merger “may offer the promise of much-needed competition,” but without “high- powered Canadian slots” it could have “disastrous and unintended consequence in rural America -- that being the creation of a giant, national video monopoly that could effectively drain revenues out of local subscription TV companies.”
Company also received backing from Senate Finance Committee Chmn. Baucus (D-Mont.), who called proposed merger “troubling” because 90% of DBS market would be controlled by EchoStar. In Nov. 19 letter to FCC Chmn. Powell released Wed., Baucus also said there was false perception that merger might benefit public by increasing competition with cable. “Policymakers and others continue to labor under the misperception that everyone in U.S. has a choice between cable and satellite service,” he said: “That isn’t so.” In Mont. there are 130,000 households without cable access and national number is 30 million, Baucus said: “Satellite is their sole option if they want to watch TV.” He said govt. should do more to encourage entry of more competitors into market. Commission should pay close attention to how EchoStar plans to “peg rates” of rural subscribers with urban rates.
Missouri Attorney Gen. Jeremiah Nixon said merger would have “profound effect” on DBS market and would result in “serious reduction in choices.” In letter to U.S. Attorney. Gen. John Ashcroft, Nixon called proposed acquisition “anticompetitive and detrimental to the welfare of consumers” in Mo. where 846,386 homes rely solely on DBS and could be left without future broadband service. Nixon said merger would “create an environment where prices will rise, services will fall and innovation will stagnate.”
Customers outside top 100 markets may be left without service, Sen. Burns said in Wed. letter to FCC Chmn. Powell. Burns also is planning hearings on proposed merger early next year, staffer said. Burns encouraged Commission to review proposed merger to “examine the actual costs” customers outside top 100 markets would have to pay and compare them with costs for customers within top 100 markets. He also was concerned that rural households wouldn’t be offered local- into-local service. “Many media markets below top 100 will be left out,” Burns said. He said EchoStar also would control access to programming: “The leverage that such an entity would have over small-and midsized cable companies or even other wholesale providers of video programming is troubling.”