11-08-01, 07:47 AM
U.S. regulator outlines EchoStar-Hughes issues
(UPDATE: Adds details, News Corp. comments, closing stocks.)
By Jeremy Pelofsky
WASHINGTON, Nov 7 (Reuters) - EchoStar Communications Corp. (NasdaqNM:D ISH - news) will have to overcome at least three major hurdles to win approval for its proposed purchase of rival Hughes Electronics Corp. (NYSE:GMH - news) to become the biggest U.S. satellite television provider, a top regulator said on Wednesday.
The combination would likely reduce competition in some urban markets to two players from three, to one player from two in some rural markets and give the new company most of the direct broadcast satellite, or DBS, slots, said Kenneth Ferree, who will head the Federal Communications Commission's review.
EchoStar plans to combine its DISH network, the No. 2 digital broadcast satellite service, with Hughes No. 1 service DirecTV to create a carrier with 16.7 million subscribers if it can acquire the necessary regulatory approvals.
``On first blush, there are some real serious concentration issues here,'' Ferree told reporters during a news conference. ``We're talking about all of the prime DBS slots being held by the same entity. That is a concern.''
The companies have argued that they compete primarily with cable providers and less so against each other and therefore it will give consumers a cheaper alternative.
Additionally, EchoStar and DirecTV said they can combine their DBS spectrum to add more cities and local channels while more quickly rolling out advanced services like high-speed Internet services.
``EchoStar and DirecTV, they've said that they see some efficiencies in this proposed combination and maybe these efficiencies justify finding it will serve the public interest,'' Ferree said.
Ferree said he will meet on Thursday with officials from the companies to outline what information should be included in their application to be submitted to the FCC but he declined to elaborate on what the commission planned to seek.
The U.S. Justice Department is expected to examine whether the deal violates antitrust laws and harms competition while the FCC will examine whether the deal is in the public interest.
Ferree's comments echo those by FCC Chairman Michael Powell, who last week said the combination would result in ``significant concentration'' and established the team headed by Ferree to manage the agency's review.
EchoStar Chief Executive Charles Ergen said earlier on Wednesday the company will have a tough time but will ultimately convince regulators to approve the satellite television provider's proposed $25 billion combination with Hughes.
However, Ergen said antitrust and communications officials have historically examined satellite service in the context of the broader pay television market, which he said will work in his favor.
``Yes, we have a lot of work to do, obviously powerful, powerful enemies will line up against us and sometimes they won't be up front,'' Ergen told a small group of reporters.
He cited television broadcasters and cable operators as those who will likely seek to block or hobble the combination.
``My experience in working with those departments is that they are going to look at the facts and make decisions based on the facts and that's what gives us a high degree of confidence'' of winning approval, Ergen said, referring to the Justice Department and the FCC.
EchoStar and Hughes have argued that they expect prices to decline in a combined company and it will agree to have nationwide pricing to address concerns raised by consumer watchdogs that rural customers will end up paying more.
News Corp. (Australia:NCP.AX - news)(NYSE:NWS - news), which pulled out of the bidding for Hughes' DirecTV, said the control of the satellite pipeline by one operator could be detrimental, especially to content providers.
``The continual consolidation of the entertainment distribution business is something I think is beginning to spread some alarm among all (content) suppliers,'' said Rupert Murdoch, News Corp. chief executive.
``There will be potential competitors who will say how can you allow all the satellite spectrum over America to be in the hands of one company,'' he said.
Shares of EchoStar closed up 15 cents to $24.53 while shares of Hughes Electronics, which is owned by automaker General Motors (NYSE:GM - news) closed off a penny to $13.95.
(With additional reporting by Derek Caney in New York)
Article Courtesy Reuters
(UPDATE: Adds details, News Corp. comments, closing stocks.)
By Jeremy Pelofsky
WASHINGTON, Nov 7 (Reuters) - EchoStar Communications Corp. (NasdaqNM:D ISH - news) will have to overcome at least three major hurdles to win approval for its proposed purchase of rival Hughes Electronics Corp. (NYSE:GMH - news) to become the biggest U.S. satellite television provider, a top regulator said on Wednesday.
The combination would likely reduce competition in some urban markets to two players from three, to one player from two in some rural markets and give the new company most of the direct broadcast satellite, or DBS, slots, said Kenneth Ferree, who will head the Federal Communications Commission's review.
EchoStar plans to combine its DISH network, the No. 2 digital broadcast satellite service, with Hughes No. 1 service DirecTV to create a carrier with 16.7 million subscribers if it can acquire the necessary regulatory approvals.
``On first blush, there are some real serious concentration issues here,'' Ferree told reporters during a news conference. ``We're talking about all of the prime DBS slots being held by the same entity. That is a concern.''
The companies have argued that they compete primarily with cable providers and less so against each other and therefore it will give consumers a cheaper alternative.
Additionally, EchoStar and DirecTV said they can combine their DBS spectrum to add more cities and local channels while more quickly rolling out advanced services like high-speed Internet services.
``EchoStar and DirecTV, they've said that they see some efficiencies in this proposed combination and maybe these efficiencies justify finding it will serve the public interest,'' Ferree said.
Ferree said he will meet on Thursday with officials from the companies to outline what information should be included in their application to be submitted to the FCC but he declined to elaborate on what the commission planned to seek.
The U.S. Justice Department is expected to examine whether the deal violates antitrust laws and harms competition while the FCC will examine whether the deal is in the public interest.
Ferree's comments echo those by FCC Chairman Michael Powell, who last week said the combination would result in ``significant concentration'' and established the team headed by Ferree to manage the agency's review.
EchoStar Chief Executive Charles Ergen said earlier on Wednesday the company will have a tough time but will ultimately convince regulators to approve the satellite television provider's proposed $25 billion combination with Hughes.
However, Ergen said antitrust and communications officials have historically examined satellite service in the context of the broader pay television market, which he said will work in his favor.
``Yes, we have a lot of work to do, obviously powerful, powerful enemies will line up against us and sometimes they won't be up front,'' Ergen told a small group of reporters.
He cited television broadcasters and cable operators as those who will likely seek to block or hobble the combination.
``My experience in working with those departments is that they are going to look at the facts and make decisions based on the facts and that's what gives us a high degree of confidence'' of winning approval, Ergen said, referring to the Justice Department and the FCC.
EchoStar and Hughes have argued that they expect prices to decline in a combined company and it will agree to have nationwide pricing to address concerns raised by consumer watchdogs that rural customers will end up paying more.
News Corp. (Australia:NCP.AX - news)(NYSE:NWS - news), which pulled out of the bidding for Hughes' DirecTV, said the control of the satellite pipeline by one operator could be detrimental, especially to content providers.
``The continual consolidation of the entertainment distribution business is something I think is beginning to spread some alarm among all (content) suppliers,'' said Rupert Murdoch, News Corp. chief executive.
``There will be potential competitors who will say how can you allow all the satellite spectrum over America to be in the hands of one company,'' he said.
Shares of EchoStar closed up 15 cents to $24.53 while shares of Hughes Electronics, which is owned by automaker General Motors (NYSE:GM - news) closed off a penny to $13.95.
(With additional reporting by Derek Caney in New York)
Article Courtesy Reuters