D* and E* Joint Venture, Could it Work?

[Chris Freeland]

Since the merger appears to be dead and it appears locals in all 210 dma' s and cost competitive satellite broadband can not be accomplished by separate DBS companies, maby D* and E* should consider setting up a joint venture to share resources for locals and satellite broadband. By sharing resources the two providers can save much money on locals and broadband and at the same time could still be able to have locals in all 210 dma's to better compete with cable. At the same time this would still allow D* and E* to continue to offer their own individual packages in their own formats on their own satellites. Each company would contribute the same number of tp frequencies to the joint venture company. Each company would produce duel speak IRD's which if I am not mistaken many of the newer IRD's on the market now are capable of doing this now with a software upgrade. This plan is not perfect but it would provide some but not all of the benefits that a merged D* and E* would have provided, however it does preserve the competition between D* and E* and makes them a stronger competitor with cable in most or all markets.

[Mike123abc]

It probably would never work because of the 20+ million boxes in use that could not recieve the joint signals.

They also have no interest in providing all 210 DMAs. They only propose that to get interest in the merger, outside the merger they do not care about the bottom 110 DMAs. The bottom 110 DMAs represents only 12% of the population.

By being able to offer a market where the other one cannot is a big advantage they are not going to throw away.

The only thing they have ever shown interest in is maybe sharing the local PoP locations and backhauls to save money.

[Chris Freeland]

Originally posted by Mike123abc
It probably would never work because of the 20+ million boxes in use that could not recieve the joint signals.

They also have no interest in providing all 210 DMAs. They only propose that to get interest in the merger, outside the merger they do not care about the bottom 110 DMAs. The bottom 110 DMAs represents only 12% of the population.

By being able to offer a market where the other one cannot is a big advantage they are not going to throw away.

The only thing they have ever shown interest in is maybe sharing the local PoP locations and backhauls to save money.

All 20 million boxes would not need replaced. All DMA's that are currently carried by D* and or E* would remain in current format. Only some but not all current subs in single format DMA's would it require new hardware for locals and then at the subs own expense only if the sub wanted locals, however the providers would probably offer upgrade specials with commitments for those effected subs.

I think the cost savings of a joint venture would be enough to overcome any advantages one provider may have in these smaller markets. By doing a joint venture their would be enough cost savings to each provider to make it profitable to go into more markets then they could do separately.

[Mike123abc]

E* has all the capacity it wants to do all 210 DMAs. It still comes down to the "why bother" issue. If they can reach almost 90% of the population without any work, the last 10% costs too much to uplink. Even a merged ED* did not show a profit in LIL to all 210 DMAs except maybe after 2008 and they grew subscribers at wildly optimistic rates.

To do LIL you have to have a local presence to recieve the signals, equipment to encode, fiber to transmit to uplink location, and people there to run the place. Plus you have to have a deal with all the local stations. It is just not worth their time. They did not even propose doing all 210 DMAs in the merger until they saw they were losing support, so they put that in as a money losing proposal to show how the merger would benefit people.

Go to the FCC web site and read all their merger filings. Essentially below DMA 75 or so they can no longer make money with more than one of them in the market (i.e. they have to have exclusivity) and below 120 or so even exclusivity in the market no longer profits them. Why tie up a transponder with LIL to a market that will break even at best when you could use that transponder to sell national services that they can make money on.

LIL is only carried on DBS because it draws people in, they make their money by having more subscribers to the national feeds. They know from current/past experience that when they add LIL to a market they will get X% of new customers, and churn rate of current customers will be reduced by Y%. That is how they base their decisions. If X and Y are not big enough, they will not make any money, so they have no interest. Do not be confused by this issue, LIL is a marketing issue, not a technology issue.

[Karl Foster]

Wouldn't this type of joint venture violated anti-trust provisions about collusion? If they are to operate as two separate entities, this would seem in direct violation.

Just my $.02

[Chris Freeland]

Originally posted by Mike123abc
E* has all the capacity it wants to do all 210 DMAs. It still comes down to the "why bother" issue. If they can reach almost 90% of the population without any work, the last 10% costs too much to uplink. Even a merged ED* did not show a profit in LIL to all 210 DMAs except maybe after 2008 and they grew subscribers at wildly optimistic rates.

To do LIL you have to have a local presence to recieve the signals, equipment to encode, fiber to transmit to uplink location, and people there to run the place. Plus you have to have a deal with all the local stations. It is just not worth their time. They did not even propose doing all 210 DMAs in the merger until they saw they were losing support, so they put that in as a money losing proposal to show how the merger would benefit people.

Go to the FCC web site and read all their merger filings. Essentially below DMA 75 or so they can no longer make money with more than one of them in the market (i.e. they have to have exclusivity) and below 120 or so even exclusivity in the market no longer profits them. Why tie up a transponder with LIL to a market that will break even at best when you could use that transponder to sell national services that they can make money on.

LIL is only carried on DBS because it draws people in, they make their money by having more subscribers to the national feeds. They know from current/past experience that when they add LIL to a market they will get X% of new customers, and churn rate of current customers will be reduced by Y%. That is how they base their decisions. If X and Y are not big enough, they will not make any money, so they have no interest. Do not be confused by this issue, LIL is a marketing issue, not a technology issue.

I agree that E*could technically do all 210 DMA's by them selves, however it is not cost effective for them to do so. However, with a joint venture all those costs are cut in half because all the expenses can be shared, therefor they could be profitable in a larger number of DMA's.

[Chris Freeland]

Originally posted by karl_f
Wouldn't this type of joint venture violated anti-trust provisions about collusion? If they are to operate as two separate entities, this would seem in direct violation.

Just my $.02

No, competing company's do it all the time, United Motors is an example, UM is a joint venture between GM and Toyota in CA where they make the near identical Toyota Matrix and Pontiac Vibe. If D* and E* did a joint venture for all or some locals and possibly broadband, D* and E* would still be separate companies with their own packaging and pricing schemes even for the joint venture locals and broad band.

[Geronimo]

At one point a third party wanted to launch a massive satellite (or array) and have D and E act as resellers. Neither company was interested.

[Jacob S]

It would be great if they all used the same type of signal and then still compete and share the satellite space but they realize if they do that then other companies will also want in to compete. It would be like the program providers for c-band, used to be a whole bunch of them, but not anymore since everything is going dbs.