hmmm
hehe...
hehe...
FCC KILLS Echostar & DirecTV Merger... The Next Steps for Both Companies
Today the Federal Communications Commission here in DC voted UNANIMOUSLY against the proposed merger of Echostar and DirecTV. Sure, they have 30 days to file an amended proposal, but with a unanimous decision, swaying enough members to gain approval is highly unlikely... To quote a terrible movie "The dishes are done, maaaaan!"
So where do we go from here? Seems to me that before the merger talk, DirecTV was having serious financial difficulties and looking for a buyer. My guess is they were putting all their eggs into one basket, and now they have to start searching again for ways to stay afloat financially. It would be quite amusing if DirecTV was forced to file bankruptcy and Echostar bought up their auctioned off assets... merger still "happens" but in an entirely different way.
What about Dish Network? Seems like Charlie anchored every answer to customer questions to the merger. Now that it won't go through, does he have alternate plans for getting more broadcast cities? How about additional channels? Where is he going to get capacity?
It should be an interesting Charlie Chat next week, and I guess that all we'll get is the blame game, and down the road we'll get a rate hike because they'll suddenly need more funds to do what the merger would have done for free...
So where do we go from here? Seems to me that before the merger talk, DirecTV was having serious financial difficulties and looking for a buyer. My guess is they were putting all their eggs into one basket, and now they have to start searching again for ways to stay afloat financially. It would be quite amusing if DirecTV was forced to file bankruptcy and Echostar bought up their auctioned off assets... merger still "happens" but in an entirely different way.
What about Dish Network? Seems like Charlie anchored every answer to customer questions to the merger. Now that it won't go through, does he have alternate plans for getting more broadcast cities? How about additional channels? Where is he going to get capacity?
It should be an interesting Charlie Chat next week, and I guess that all we'll get is the blame game, and down the road we'll get a rate hike because they'll suddenly need more funds to do what the merger would have done for free...
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I see a last minute reversal. Look Charlie agrees to nationwide pricing, wholesaling of programming to indenpendents including the NRTC group, nationide LIL, one platform shared with comnpetitors, selling off of non core assets, and whatever else it will take to get the deal approved.
Although those non cores have little value, to anyone but a non merged E.
If the deal dies LIL for all those rurals areas is permanetely dead. Now the NAB loves that, less competition for viewers in rural areas.
Charlie if this all falls thru will be the ultimate competitor. I see most of the countries LIL going up fairly fast. Now this could be thru those non core slots with new spotbeam birds, or off band carriage like philadephia. E could probably reach 90% LIL carriage in a 12 to 18 months. The remaing 10% will not get carriage and those areas will want to go after all involved parties. The merger rejection sets the stage for the regulators to get a better deal
This will put real pressure on D. They have been stalled forever in merger waiting. Lacking the financing from GM, who will still want to sell them and as such not invest boatloads of money.
Look for GM to try to sell off D quick to minimize these problems. Of course Rupert carries his own baggage regulation wise. I will go out on a limb and wonder aloud if Cablevision will somehow try to buy D?
After all they are talking of setting up a satellite business. Cablevision with the non core slots is a looser.
But speaking of non core E still could put up 100% of LIL. Use 148 for mirrored core and spotbeam LIL with a 500 dish and spotbeam bird at 166.
Spotbeam bird at 61.5 with smaller eastern LIL and core as is wiith perhaps one more spot beam at core.
Some eastern citys might need a second dish but the entire country would be up.
This is a EXCITING time for DBS.
The REAL WINNER if the deal dies? The dealers, they were going to get screwed in the merger, with falling profit margins and no where else to go.
Although those non cores have little value, to anyone but a non merged E.
If the deal dies LIL for all those rurals areas is permanetely dead. Now the NAB loves that, less competition for viewers in rural areas.
Charlie if this all falls thru will be the ultimate competitor. I see most of the countries LIL going up fairly fast. Now this could be thru those non core slots with new spotbeam birds, or off band carriage like philadephia. E could probably reach 90% LIL carriage in a 12 to 18 months. The remaing 10% will not get carriage and those areas will want to go after all involved parties. The merger rejection sets the stage for the regulators to get a better deal
This will put real pressure on D. They have been stalled forever in merger waiting. Lacking the financing from GM, who will still want to sell them and as such not invest boatloads of money.
Look for GM to try to sell off D quick to minimize these problems. Of course Rupert carries his own baggage regulation wise. I will go out on a limb and wonder aloud if Cablevision will somehow try to buy D?
After all they are talking of setting up a satellite business. Cablevision with the non core slots is a looser.
But speaking of non core E still could put up 100% of LIL. Use 148 for mirrored core and spotbeam LIL with a 500 dish and spotbeam bird at 166.
Spotbeam bird at 61.5 with smaller eastern LIL and core as is wiith perhaps one more spot beam at core.
Some eastern citys might need a second dish but the entire country would be up.
This is a EXCITING time for DBS.
The REAL WINNER if the deal dies? The dealers, they were going to get screwed in the merger, with falling profit margins and no where else to go.
Oh. My God. Even though I was expecting this, this is huge. I'm really guessing Charlie is going to start selling organs to get this thing approved. . .
No just creae a competitor or two....
Well any way that Echostar gets bought by another company (ie New Corp)? I've heard all the stories about DirecTV, but I'd assume that Echostar would be for sale also (even though all publicly traded companies are technically always for sale). Who knows, DirecTV and Echostar could be in totally different hands by this time next year... :shrug:
FCC to block Hughes-EchoStar
Agency staff opposes merger of satellite TV providers, calls it not in the public interest.
October 10, 2002: 1:06 PM EDT
NEW YORK (CNN/Money) - Federal regulators rejected the proposed $18 billion merger of satellite-TV operators EchoStar Communications and Hughes Electronics that would have created the largest pay-TV service.
Federal Communications Commission Chairman Michael Powell said at a press conference Thursday that he would move to block the merger between EchoStar, the No. 2 satellite provider and Hughes, the No. 1 provider, because the commission cannot find that it is in the public interest.
Opponents of the deal said it would create a monopoly in many areas, especially in rural places with no access to cable television.
"Those Americans would be left with only one choice for their subscription video service, now and in the foreseeable future," Powell said.
On Monday, lawyers for EchoStar (DISH: down $0.29 to $16.72, Research, Estimates) and Hughes (GMH: down $0.25 to $8.15, Research, Estimates), the General Motors subsidiary that operates the DirecTV satellite service, asked the FCC to delay judgment on their proposed merger because they are revising the pact to address concerns about competition. EchoStar operates the DISH network.
DirecTV is considering selling frequencies and satellite slots as a way to meet the antitrust concerns, the Associated Press reported Thursday, citing statements by its CEO, Eddy Hartenstein.
The alterations come after a series of published reports that the agency planned to block the deal.
Though EchoStar is the nation's No. 2 satellite TV provider, it has posted solid growth in the last year that has put it in position to acquire its larger rival, Hughes. In August, Littleton, Colo.-based EchoStar reported a profit of $37 million, or 8 cents a share, reversing a loss of $6 million, or a penny a share, a year earlier and ahead of Wall Street's average forecasts.
In July, Hughes reported higher second-quarter cash flow and sales, but said subscriber growth was slower than expected.
Wall Street analysts expected the company to post a profit of 6 cents a share in the second quarter, according to research firm First Call.
Agency staff opposes merger of satellite TV providers, calls it not in the public interest.
October 10, 2002: 1:06 PM EDT
NEW YORK (CNN/Money) - Federal regulators rejected the proposed $18 billion merger of satellite-TV operators EchoStar Communications and Hughes Electronics that would have created the largest pay-TV service.
Federal Communications Commission Chairman Michael Powell said at a press conference Thursday that he would move to block the merger between EchoStar, the No. 2 satellite provider and Hughes, the No. 1 provider, because the commission cannot find that it is in the public interest.
Opponents of the deal said it would create a monopoly in many areas, especially in rural places with no access to cable television.
"Those Americans would be left with only one choice for their subscription video service, now and in the foreseeable future," Powell said.
On Monday, lawyers for EchoStar (DISH: down $0.29 to $16.72, Research, Estimates) and Hughes (GMH: down $0.25 to $8.15, Research, Estimates), the General Motors subsidiary that operates the DirecTV satellite service, asked the FCC to delay judgment on their proposed merger because they are revising the pact to address concerns about competition. EchoStar operates the DISH network.
DirecTV is considering selling frequencies and satellite slots as a way to meet the antitrust concerns, the Associated Press reported Thursday, citing statements by its CEO, Eddy Hartenstein.
The alterations come after a series of published reports that the agency planned to block the deal.
Though EchoStar is the nation's No. 2 satellite TV provider, it has posted solid growth in the last year that has put it in position to acquire its larger rival, Hughes. In August, Littleton, Colo.-based EchoStar reported a profit of $37 million, or 8 cents a share, reversing a loss of $6 million, or a penny a share, a year earlier and ahead of Wall Street's average forecasts.
In July, Hughes reported higher second-quarter cash flow and sales, but said subscriber growth was slower than expected.
Wall Street analysts expected the company to post a profit of 6 cents a share in the second quarter, according to research firm First Call.
FOR IMMEDIATE RELEASE NEWS MEDIA CONTACTS:
October 10, 2002 Michelle Russo 202-418-2358
David Fiske 202-418-0513
FCC DECLINES TO APPROVE ECHOSTAR-DIRECTV MERGER
Today, the Federal Communications Commission ("FCC") declined to approve the transfer of licenses from EchoStar Communications Corporation and Hughes Electronics Corporation, a subsidiary of General Motors Corporation, to a new entity. The FCC said that the companies have not demonstrated that approval of the transaction will serve the public interest, convenience, and necessity.
In an Order designating the application for a full evidentiary hearing before an Administrative Law Judge, the FCC ruled that the likelihood of the merger harming competition in the multichannel video program distribution ("MVPD") market outweighs any merger-specific public interest benefits. The FCC found that such a loss of competition within the MVPD market is likely to harm consumers by: (1) eliminating an existing viable competitor in every market; (2) creating the potential for higher prices and lower service quality; and (3) negatively impacting future innovation.
The FCC said the combination of EchoStar and DirecTV would eliminate existing facilities-based intramodal competition and replace it with a proposed "national pricing" plan, which would have to be enforced by regulatory authorities. The FCC said the effect would be to replace facilities-based competition with regulation, which is not consistent with either the Communications Act or with long-standing policy, both of which aim at replacing regulation with free market competition.
In addition, the FCC said the record does not support a conclusion that the combined spectrum resources of EchoStar and Hughes/DirecTV are necessary for deployment of viable satellite-delivered broadband services. Furthermore, the FCC found that the proposed merger is inconsistent with well-established pro-competitive spectrum policies and the elimination of an alternative MVPD provider in every market in the country may disserve the FCC's policy of viewpoint diversity.
The FCC provided Applicants 30 days to file an amended application to ameliorate the FCC's anti-competitive concerns and to file a petition to delay the hearing. A summary of the FCC's analysis is attached.
Action by the Commission, October 9, 2002, by Hearing Designation Order (FCC 02-284). Chairman Powell, Commissioners Abernathy and Copps issuing separate statements, Commissioner Martin approving in part, concurring in part, dissenting in part and issuing a statement.
Media Bureau Staff Contacts: Barbara Esbin, Marcia Glauberman at 202-418-7200.
FCC DECLINES TO APPROVE ECHOSTAR-DIRECTV MERGER
SUMMARY OF FCC'S ANALYSIS
RELEASED: OCTOBER 10, 2002
GENERAL BACKGROUND
The proposed transaction involves the split-off of Hughes Electronics from General Motors Corporation, followed by the merger of the Hughes and EchoStar companies. The proposed merged entity, "New EchoStar," would have a new ownership structure and would continue to provide DBS subscription television service under the DirecTV brand name. If approved, the proposed merger would combine operations of the two major direct broadcast satellite ("DBS") providers in the United States - EchoStar and DirecTV, a wholly-owned subsidiary of Hughes - into a single entity. In addition to acquiring the significant DBS operations of EchoStar and DirecTV, New EchoStar would acquire other significant satellite operations of Hughes, including Hughes Network Services, Inc., a leading facilities-based provider of very small aperture terminal network systems, and PanAmSat Corporation, a leading global facilities-based provider of geostationary-satellite orbit FSS.
SUMMARY OF KEY POINTS IN FCC'S DECISION
The companies have not demonstrated that approval of the transaction will serve the public interest, convenience and necessity.
The FCC ordered the application to be designated for hearing before an Administrative Law Judge.
In almost all areas reached by cable, the number of competitors would drop from three to two. In almost all other areas, the proposed transaction would create an effective monopoly.
Courts applying the antitrust laws have not looked kindly on mergers to duopoly, especially in markets characterized by high barriers to entry, because those mergers often result in less competition, higher prices, less innovation, and fewer consumer benefits.
The promised benefits are not supported by the data supplied; are not merger-specific; or are achievable through other means.
Direct Broadcast Satellite service is a successful model of intramodal, facilities-based competition, which is a communications policy goal and FCC priority.
The proposed "national pricing" plan is at best unlikely to be effective to protect consumers and at worst could exacerbate likely competitive harms of the merger.
These are not failing firms. Both DirecTV and EchoStar continue to enjoy growth rates that many companies would envy, while the growth rates for cable are essentially flat.
PUBLIC INTEREST ANALYSIS
The FCC's public interest analysis requires a broad consideration of federal communications policy - a policy shaped by Congress and deeply rooted in a preference for competitive processes and outcomes. The FCC's public interest standard includes an evaluation of the effect of the proposed transaction on competition, consistency with its spectrum policies, and in the case of MVPD services, a consideration of the impact on program and viewpoint diversity.
HARMFUL EFFECTS ON COMPETITION
With regard to competition, the record irrefutably demonstrates that the proposed transaction would have the following effects:
• Eliminate a current viable competitor from every market in the country, whether those markets are currently served by cable systems or are markets in which no cable systems exist. Nearly every American household would effectively face either a duopoly or a monopoly.
• Such a loss of competition within the MVPD market is likely to harm consumers by: (1) eliminating an existing viable competitor in every market; (2) creating the potential for higher prices and lower service quality; and (3) negatively impacting future innovation.
• Combine two DBS providers that are currently fairly evenly balanced in terms of the assets necessary for effective competition in the MVPD market. Each has, over a number of years, at great expense, acquired the necessary spectrum and licenses; developed and deployed the necessary equipment (satellites, earth stations, and consumer premises equipment); developed the necessary resources for marketing and consumer support; and acquired a substantial base of consumers.
• Each company holds licenses for approximately half the total orbital slots available for the provision of DBS service to the entire continental United States-licenses they seek in this proceeding to transfer to a single new entity. Accordingly, the barrier to entry for any entity seeking to compete in the market for satellite provision of MVPD service would be enormous.
REPLACING COMPETITION WITH REGULATION
• The combination of EchoStar and DirecTV would eliminate the viable facilities-based intramodal competition that characterizes the DBS service today, and replace it with the proposed "national pricing" plan, which must be enforced by regulatory authorities. In other words, the effect would be to replace facilities-based competition with regulation.
• The proffered national pricing plan is unlikely to cure the anticompetitive effects of the merger in areas unserved by any other MVPD provider, and may in fact exacerbate harmful competitive effects.
• Replacing facilities-based competition with regulatory oversight is not consistent with either the Communications Act or with contemporary regulatory policy and goals, all of which aim at replacing, wherever possible, regulatory safeguards with free market competition, and particularly with facilities-based competition.
ANALYSIS OF PROPOSED BENEFITS
The FCC determined that the majority of the companies' promised benefits appear to be inadequately supported by the data supplied; are not merger-specific; or are achievable through other means. In analyzing the proposed benefits of the transaction, the FCC reached the following conclusions.
Nationwide "local into local" service
• Separately, the companies could serve the top 100 markets, representing nearly 85 percent of the U.S. population.
• With the resulting high degree of concentration in all MVPD markets, the economic incentives to carry local broadcasts into local markets will be decreased, rather than increased.
Competition to Cable
• DBS companies are witnessing 20 percent annual growth; cable growth is flat.
• In rural areas, there is no cable, so competition would decrease, not increase.
• Regulation should not replace existing competition.
• The proposed transaction would produce a more capable but less effective competitor.
Broadband Market Competition
• Competition to cable modem and DSL products from satellite providers would be a significant advance, but the claimed efficiency benefit here is weaker than in the MVPD market.
• There is no spectral efficiency gain because each broadband customer uses additional spectrum, regardless of the number of providers.
• The companies have failed to substantiate that their claimed broadband benefit was likely to occur or that the merger was necessary to achieve it.
SPECTRUM POLICY AND DIVERSITY
• The claims of improved spectrum efficiency have some validity in that the elimination of duplicative programming carriage will permit more efficient use of scarce spectrum resources.
• However, the record does not support further claims that this efficiency would result in public interest benefits cognizable under the FCC's merger review standard.
• Placing all of the available full-CONUS DBS spectrum licenses in the hands of one entity is inconsistent with the FCC's well-established pro-competitive spectrum policies.
• Elimination of an alternative MVPD provider in every market in the country, without any cognizable evidence of offsetting enhancement of viewpoint diversity, may disserve the FCC's policy of viewpoint diversity.
ADMINISTRATIVE LAW JUDGE HEARING
Section 309(e) of the Communications Act provides that if the FCC "for any reason" is unable to make a finding under Section 309(a) that the public interest would be served by the granting of a license transfer application, then "it shall formally designate the application for hearing on the ground or reasons then obtaining."
Pursuant to Sections 309(e) and 409(a) of the Act, the FCC designated the EchoStar-DirecTV merger application for hearing. The FCC is directing the Administrative Law Judge ("ALJ") to conduct an evidentiary hearing and to provide the FCC with an initial decision, taking into consideration the conclusions made in the Order along with any additional evidence developed at the hearing.
The item identifies specific issues to be addressed at hearing, and directs that Applicants will have the burden of proof both with respect to the introduction of any new evidence they may proffer and with respect to all of the issues. Pursuant to Section 1.276 of the Commission's rules, any party that disagrees with the ALJ's recommendation will have the opportunity to appeal it to the Commission, which will review the matter de novo. The item directs the ALJ, based on the guidance and findings made in the item, along with any additional evidence developed at the hearing, to determine whether the transfer of control to New EchoStar of the licenses and authorizations controlled by GM/Hughes and DirecTV and EchoStar is likely to cause any anticompetitive or other public interest harms, and to determine what, if any, public benefits would likely accrue from this transaction.
As a matter of process, the FCC provided the Applicants 30 days to file an amended application to ameliorate the FCC's concerns and to file a petition with the FCC seeking to delay the hearing.
SATELLITE APPLICATION
In this proceeding, the FCC also considered the joint application submitted by EchoStar and Hughes requesting authority to launch and operate NEW ECHOSTAR 1, a direct broadcast satellite that would be located at the 110° W.L. orbital location. EchoStar and Hughes propose, subject to and contingent upon grant of the Satellite Application, to launch and operate a spot beam satellite with other existing and planned satellites at the 110° W.L. orbital location on frequencies currently authorized to EchoStar and DirecTV. The Applicants claim that grant of the proposed Satellite Application would ultimately allow New EchoStar to offer local broadcast channels in all 210 television markets, or Designated Market Areas ("DMAs").
In addition to the specific issues the FCC designated for hearing, it also directed that the review of Applicants' proposed Satellite Application be undertaken within the context of the hearing proceeding.
TIMELINE OF FCC REVIEW OF PROPOSED ECHOSTAR-DIRECTV MERGER
December 21, 2001: FCC review begins. FCC issues Public Notice seeking comment on merger application. 180-day clock starts.
February 4, 2002: Public comments due to FCC.
FCC issues Discovery request.
February 25, 2002: Reply comments due to FCC.
March 7, 2002: FCC Merger Review clock stopped pending Applicants' substantial compliance with Discovery Request (Day 77).
April 19, 2002: New EchoStar 1 Satellite Application placed on Public Notice.
May 20, 2002: Petitions to Deny/Dismiss Satellite Application due.
May 30, 2002: Opposition to Petitions and Reply Comments due.
June 4, 2002: Replies to Petitions due.
July 23, 2002: Merger review clock re-started; Applicants found to have substantially complied with Discovery Request.
October 10, 2002: FCC declines to approve proposed transaction (Day 157).
For more information on the FCC's review, see www.fcc.gov/transactions or fcc.gov/mb
-FCC-
October 10, 2002 Michelle Russo 202-418-2358
David Fiske 202-418-0513
FCC DECLINES TO APPROVE ECHOSTAR-DIRECTV MERGER
Today, the Federal Communications Commission ("FCC") declined to approve the transfer of licenses from EchoStar Communications Corporation and Hughes Electronics Corporation, a subsidiary of General Motors Corporation, to a new entity. The FCC said that the companies have not demonstrated that approval of the transaction will serve the public interest, convenience, and necessity.
In an Order designating the application for a full evidentiary hearing before an Administrative Law Judge, the FCC ruled that the likelihood of the merger harming competition in the multichannel video program distribution ("MVPD") market outweighs any merger-specific public interest benefits. The FCC found that such a loss of competition within the MVPD market is likely to harm consumers by: (1) eliminating an existing viable competitor in every market; (2) creating the potential for higher prices and lower service quality; and (3) negatively impacting future innovation.
The FCC said the combination of EchoStar and DirecTV would eliminate existing facilities-based intramodal competition and replace it with a proposed "national pricing" plan, which would have to be enforced by regulatory authorities. The FCC said the effect would be to replace facilities-based competition with regulation, which is not consistent with either the Communications Act or with long-standing policy, both of which aim at replacing regulation with free market competition.
In addition, the FCC said the record does not support a conclusion that the combined spectrum resources of EchoStar and Hughes/DirecTV are necessary for deployment of viable satellite-delivered broadband services. Furthermore, the FCC found that the proposed merger is inconsistent with well-established pro-competitive spectrum policies and the elimination of an alternative MVPD provider in every market in the country may disserve the FCC's policy of viewpoint diversity.
The FCC provided Applicants 30 days to file an amended application to ameliorate the FCC's anti-competitive concerns and to file a petition to delay the hearing. A summary of the FCC's analysis is attached.
Action by the Commission, October 9, 2002, by Hearing Designation Order (FCC 02-284). Chairman Powell, Commissioners Abernathy and Copps issuing separate statements, Commissioner Martin approving in part, concurring in part, dissenting in part and issuing a statement.
Media Bureau Staff Contacts: Barbara Esbin, Marcia Glauberman at 202-418-7200.
FCC DECLINES TO APPROVE ECHOSTAR-DIRECTV MERGER
SUMMARY OF FCC'S ANALYSIS
RELEASED: OCTOBER 10, 2002
GENERAL BACKGROUND
The proposed transaction involves the split-off of Hughes Electronics from General Motors Corporation, followed by the merger of the Hughes and EchoStar companies. The proposed merged entity, "New EchoStar," would have a new ownership structure and would continue to provide DBS subscription television service under the DirecTV brand name. If approved, the proposed merger would combine operations of the two major direct broadcast satellite ("DBS") providers in the United States - EchoStar and DirecTV, a wholly-owned subsidiary of Hughes - into a single entity. In addition to acquiring the significant DBS operations of EchoStar and DirecTV, New EchoStar would acquire other significant satellite operations of Hughes, including Hughes Network Services, Inc., a leading facilities-based provider of very small aperture terminal network systems, and PanAmSat Corporation, a leading global facilities-based provider of geostationary-satellite orbit FSS.
SUMMARY OF KEY POINTS IN FCC'S DECISION
The companies have not demonstrated that approval of the transaction will serve the public interest, convenience and necessity.
The FCC ordered the application to be designated for hearing before an Administrative Law Judge.
In almost all areas reached by cable, the number of competitors would drop from three to two. In almost all other areas, the proposed transaction would create an effective monopoly.
Courts applying the antitrust laws have not looked kindly on mergers to duopoly, especially in markets characterized by high barriers to entry, because those mergers often result in less competition, higher prices, less innovation, and fewer consumer benefits.
The promised benefits are not supported by the data supplied; are not merger-specific; or are achievable through other means.
Direct Broadcast Satellite service is a successful model of intramodal, facilities-based competition, which is a communications policy goal and FCC priority.
The proposed "national pricing" plan is at best unlikely to be effective to protect consumers and at worst could exacerbate likely competitive harms of the merger.
These are not failing firms. Both DirecTV and EchoStar continue to enjoy growth rates that many companies would envy, while the growth rates for cable are essentially flat.
PUBLIC INTEREST ANALYSIS
The FCC's public interest analysis requires a broad consideration of federal communications policy - a policy shaped by Congress and deeply rooted in a preference for competitive processes and outcomes. The FCC's public interest standard includes an evaluation of the effect of the proposed transaction on competition, consistency with its spectrum policies, and in the case of MVPD services, a consideration of the impact on program and viewpoint diversity.
HARMFUL EFFECTS ON COMPETITION
With regard to competition, the record irrefutably demonstrates that the proposed transaction would have the following effects:
• Eliminate a current viable competitor from every market in the country, whether those markets are currently served by cable systems or are markets in which no cable systems exist. Nearly every American household would effectively face either a duopoly or a monopoly.
• Such a loss of competition within the MVPD market is likely to harm consumers by: (1) eliminating an existing viable competitor in every market; (2) creating the potential for higher prices and lower service quality; and (3) negatively impacting future innovation.
• Combine two DBS providers that are currently fairly evenly balanced in terms of the assets necessary for effective competition in the MVPD market. Each has, over a number of years, at great expense, acquired the necessary spectrum and licenses; developed and deployed the necessary equipment (satellites, earth stations, and consumer premises equipment); developed the necessary resources for marketing and consumer support; and acquired a substantial base of consumers.
• Each company holds licenses for approximately half the total orbital slots available for the provision of DBS service to the entire continental United States-licenses they seek in this proceeding to transfer to a single new entity. Accordingly, the barrier to entry for any entity seeking to compete in the market for satellite provision of MVPD service would be enormous.
REPLACING COMPETITION WITH REGULATION
• The combination of EchoStar and DirecTV would eliminate the viable facilities-based intramodal competition that characterizes the DBS service today, and replace it with the proposed "national pricing" plan, which must be enforced by regulatory authorities. In other words, the effect would be to replace facilities-based competition with regulation.
• The proffered national pricing plan is unlikely to cure the anticompetitive effects of the merger in areas unserved by any other MVPD provider, and may in fact exacerbate harmful competitive effects.
• Replacing facilities-based competition with regulatory oversight is not consistent with either the Communications Act or with contemporary regulatory policy and goals, all of which aim at replacing, wherever possible, regulatory safeguards with free market competition, and particularly with facilities-based competition.
ANALYSIS OF PROPOSED BENEFITS
The FCC determined that the majority of the companies' promised benefits appear to be inadequately supported by the data supplied; are not merger-specific; or are achievable through other means. In analyzing the proposed benefits of the transaction, the FCC reached the following conclusions.
Nationwide "local into local" service
• Separately, the companies could serve the top 100 markets, representing nearly 85 percent of the U.S. population.
• With the resulting high degree of concentration in all MVPD markets, the economic incentives to carry local broadcasts into local markets will be decreased, rather than increased.
Competition to Cable
• DBS companies are witnessing 20 percent annual growth; cable growth is flat.
• In rural areas, there is no cable, so competition would decrease, not increase.
• Regulation should not replace existing competition.
• The proposed transaction would produce a more capable but less effective competitor.
Broadband Market Competition
• Competition to cable modem and DSL products from satellite providers would be a significant advance, but the claimed efficiency benefit here is weaker than in the MVPD market.
• There is no spectral efficiency gain because each broadband customer uses additional spectrum, regardless of the number of providers.
• The companies have failed to substantiate that their claimed broadband benefit was likely to occur or that the merger was necessary to achieve it.
SPECTRUM POLICY AND DIVERSITY
• The claims of improved spectrum efficiency have some validity in that the elimination of duplicative programming carriage will permit more efficient use of scarce spectrum resources.
• However, the record does not support further claims that this efficiency would result in public interest benefits cognizable under the FCC's merger review standard.
• Placing all of the available full-CONUS DBS spectrum licenses in the hands of one entity is inconsistent with the FCC's well-established pro-competitive spectrum policies.
• Elimination of an alternative MVPD provider in every market in the country, without any cognizable evidence of offsetting enhancement of viewpoint diversity, may disserve the FCC's policy of viewpoint diversity.
ADMINISTRATIVE LAW JUDGE HEARING
Section 309(e) of the Communications Act provides that if the FCC "for any reason" is unable to make a finding under Section 309(a) that the public interest would be served by the granting of a license transfer application, then "it shall formally designate the application for hearing on the ground or reasons then obtaining."
Pursuant to Sections 309(e) and 409(a) of the Act, the FCC designated the EchoStar-DirecTV merger application for hearing. The FCC is directing the Administrative Law Judge ("ALJ") to conduct an evidentiary hearing and to provide the FCC with an initial decision, taking into consideration the conclusions made in the Order along with any additional evidence developed at the hearing.
The item identifies specific issues to be addressed at hearing, and directs that Applicants will have the burden of proof both with respect to the introduction of any new evidence they may proffer and with respect to all of the issues. Pursuant to Section 1.276 of the Commission's rules, any party that disagrees with the ALJ's recommendation will have the opportunity to appeal it to the Commission, which will review the matter de novo. The item directs the ALJ, based on the guidance and findings made in the item, along with any additional evidence developed at the hearing, to determine whether the transfer of control to New EchoStar of the licenses and authorizations controlled by GM/Hughes and DirecTV and EchoStar is likely to cause any anticompetitive or other public interest harms, and to determine what, if any, public benefits would likely accrue from this transaction.
As a matter of process, the FCC provided the Applicants 30 days to file an amended application to ameliorate the FCC's concerns and to file a petition with the FCC seeking to delay the hearing.
SATELLITE APPLICATION
In this proceeding, the FCC also considered the joint application submitted by EchoStar and Hughes requesting authority to launch and operate NEW ECHOSTAR 1, a direct broadcast satellite that would be located at the 110° W.L. orbital location. EchoStar and Hughes propose, subject to and contingent upon grant of the Satellite Application, to launch and operate a spot beam satellite with other existing and planned satellites at the 110° W.L. orbital location on frequencies currently authorized to EchoStar and DirecTV. The Applicants claim that grant of the proposed Satellite Application would ultimately allow New EchoStar to offer local broadcast channels in all 210 television markets, or Designated Market Areas ("DMAs").
In addition to the specific issues the FCC designated for hearing, it also directed that the review of Applicants' proposed Satellite Application be undertaken within the context of the hearing proceeding.
TIMELINE OF FCC REVIEW OF PROPOSED ECHOSTAR-DIRECTV MERGER
December 21, 2001: FCC review begins. FCC issues Public Notice seeking comment on merger application. 180-day clock starts.
February 4, 2002: Public comments due to FCC.
FCC issues Discovery request.
February 25, 2002: Reply comments due to FCC.
March 7, 2002: FCC Merger Review clock stopped pending Applicants' substantial compliance with Discovery Request (Day 77).
April 19, 2002: New EchoStar 1 Satellite Application placed on Public Notice.
May 20, 2002: Petitions to Deny/Dismiss Satellite Application due.
May 30, 2002: Opposition to Petitions and Reply Comments due.
June 4, 2002: Replies to Petitions due.
July 23, 2002: Merger review clock re-started; Applicants found to have substantially complied with Discovery Request.
October 10, 2002: FCC declines to approve proposed transaction (Day 157).
For more information on the FCC's review, see www.fcc.gov/transactions or fcc.gov/mb
-FCC-
After Charlie pays the $600M and the $2.7B for PanAmSat, Echostar will no longer be profitable. Hughes will be debt free and a cash cow. This merger had no chance from day 1.Originally posted by Bob Haller
I see a last minute reversal. Look Charlie agrees to nationwide pricing, wholesaling of programming to indenpendents including the NRTC group, nationide LIL, one platform shared with comnpetitors, selling off of non core assets, and whatever else it will take to get the deal approved.
Although those non cores have little value, to anyone but a non merged E.
If the deal dies LIL for all those rurals areas is permanetely dead. Now the NAB loves that, less competition for viewers in rural areas.
Charlie if this all falls thru will be the ultimate competitor. I see most of the countries LIL going up fairly fast. Now this could be thru those non core slots with new spotbeam birds, or off band carriage like philadephia. E could probably reach 90% LIL carriage in a 12 to 18 months. The remaing 10% will not get carriage and those areas will want to go after all involved parties. The merger rejection sets the stage for the regulators to get a better deal
This will put real pressure on D. They have been stalled forever in merger waiting. Lacking the financing from GM, who will still want to sell them and as such not invest boatloads of money.
Look for GM to try to sell off D quick to minimize these problems. Of course Rupert carries his own baggage regulation wise. I will go out on a limb and wonder aloud if Cablevision will somehow try to buy D?
After all they are talking of setting up a satellite business. Cablevision with the non core slots is a looser.
But speaking of non core E still could put up 100% of LIL. Use 148 for mirrored core and spotbeam LIL with a 500 dish and spotbeam bird at 166.
Spotbeam bird at 61.5 with smaller eastern LIL and core as is wiith perhaps one more spot beam at core.
Some eastern citys might need a second dish but the entire country would be up.
This is a EXCITING time for DBS.
The REAL WINNER if the deal dies? The dealers, they were going to get screwed in the merger, with falling profit margins and no where else to go.
G
Charlie won't pay Hughes a dime, just watch and see. He will wiggle his way out of this one.
DBS Merger Fight Not Over Yet
Source: SkyReport
Sure, the Federal Communications Commission decided on Thursday to block the proposed merger between EchoStar and DirecTV. But both merger opponents and proponents, opportunists and the regulators themselves said they know the battle over the multi-billion-dollar deal isn't finished.
At issue is a 30-day period the Commission gave the companies to come up with revisions for their merger proposal. While saying they were disappointed with the decision, the companies involved issued a joint statement saying they will continue to "work aggressively within the context of this FCC process to achieve approval of the merger."
FCC Commissioner Kevin Martin talked about the 30 days the companies have to amend their application to include major revisions, which could include divestiture of orbital locations. "This idea is interesting, but the applicants have made no such proposal," Martin said.
"If the applicants were to request such a structural remedy, it could merit further review as to its technical and economic feasibility. Failing to fully explore such options could be a missed opportunity to bring more competitive choices to consumers," Martin said.
Charles Dolan, CEO of Cablevision, which wants to take control of the 61.5-degree DBS orbital location it shares with EchoStar, said the FCC decision "provides an opportunity for a restructured plan that will expand competition among facilities-based providers. The divestiture of spectrum we have proposed is a reasonable structural remedy that will not only answer concerns about reduced competition, but also will result in more satellite viewers receiving local programming from multiple sources in markets nationwide."
Source: SkyReport
Sure, the Federal Communications Commission decided on Thursday to block the proposed merger between EchoStar and DirecTV. But both merger opponents and proponents, opportunists and the regulators themselves said they know the battle over the multi-billion-dollar deal isn't finished.
At issue is a 30-day period the Commission gave the companies to come up with revisions for their merger proposal. While saying they were disappointed with the decision, the companies involved issued a joint statement saying they will continue to "work aggressively within the context of this FCC process to achieve approval of the merger."
FCC Commissioner Kevin Martin talked about the 30 days the companies have to amend their application to include major revisions, which could include divestiture of orbital locations. "This idea is interesting, but the applicants have made no such proposal," Martin said.
"If the applicants were to request such a structural remedy, it could merit further review as to its technical and economic feasibility. Failing to fully explore such options could be a missed opportunity to bring more competitive choices to consumers," Martin said.
Charles Dolan, CEO of Cablevision, which wants to take control of the 61.5-degree DBS orbital location it shares with EchoStar, said the FCC decision "provides an opportunity for a restructured plan that will expand competition among facilities-based providers. The divestiture of spectrum we have proposed is a reasonable structural remedy that will not only answer concerns about reduced competition, but also will result in more satellite viewers receiving local programming from multiple sources in markets nationwide."
The full story
FCC grounds satellite TV deal
EchoStar, Hughes to pursue merger despite opposition
Friday, October 11, 2002 Posted: 9:58 AM EDT (1358 GMT)
LITTLETON, Colorado (AP) -- EchoStar Communications Corp. may soon face another disappointment in its scuttled bid to merge with Hughes Electronics Corp. -- a breakup fee that could top a half-billion dollars.
The Federal Communications Commission voted 4-0 Thursday to reject the $18.8 billion deal to combine the nation's two largest satellite TV companies. Commissioners said it would create a virtual monopoly for the millions of Americans without access to cable television.
Both companies said they would amend their proposal in the next 30 days and keep working for approval. They also are negotiating with the Justice Department, which is scrutinizing whether the deal violates antitrust laws.
But at a conference in New York this week, EchoStar chief executive officer Charlie Ergen skirted questions of whether Hughes had done everything it could to complete the transaction -- a key factor in whether EchoStar will have to pay Hughes a breakup fee of as much as $600 million if the deal disintegrates before Jan. 21.
EchoStar also may have to buy Hughes' majority stake in PanAmSat, the largest U.S. satellite operator, if both sides walk away.
The FCC vote marked the first time the commission had blocked a major media merger since 1967.
"Everyone is going to put forth best efforts to get this deal and all the companies want to see this merger approved. We're still moving in that direction," Hughes spokesman Richard Dore said.
Negative effects on consumers "staggering"
Kenneth Ferree, chief of the FCC's media bureau, said the commission remains open to revisions, but the agency staff's analysis found that the deal's negative effects on consumers were "staggering."
"It's clear there is no easy or quick fix with this," he said. "They have quite a hill to climb at this point."
EchoStar, based in Littleton, Colorado, runs Dish Network, while El Segundo, California-based Hughes operates DirecTV. Together they serve about 18 million subscribers and would be the largest pay-television service, although that would be overtaken if a merger of cable TV giants AT&T and Comcast is approved.
EchoStar and Hughes argued the merger is needed to provide competition to cable TV. The commission wasn't persuaded by that claim.
"EchoStar and DirecTV not only compete but compete vigorously, not only with cable but with each other," FCC chairman Michael Powell said.
He also said the merger would give Americans without cable access only one choice for subscription video service.
In promoting their plan, the companies offered uniform pricing nationwide to ease fears that its dominant market position would be used to gouge consumers where no alternative was available.
"Confounded" by FCC logic
Gene Kimmelman, president of Consumers Union, said he was "confounded by the FCC's logic" that satellite TV was competing with cable, considering cable rates have gone up 45 percent since Congress deregulated the industry in 1996.
"My question for the FCC is, 'What are you doing to hold down cable rates? What are you doing to bring in competition that will challenge cable monopolies?' And it appears their answer today is 'We don't care to lift a finger,"' Kimmelman said.
EchoStar was to buy Hughes for about $26 billion in stock, but the value of the deal has since fallen to $18.8 billion. It was unclear if DirecTV, which has been weakened by a year in limbo, could still fetch that price.
If EchoStar and Hughes are unable to work out terms acceptable to the FCC, analysts say Hughes would find another suitor, with Rupert Murdoch's News Corp. the most likely.
News Corp. did not comment Thursday. Hughes' parent company, General Motors, has a shortfall in its pension fund that it is seeking to patch by selling Hughes. News Corp. spent more than a year negotiating a possible merger with Hughes before the EchoStar deal was announced.
FCC grounds satellite TV deal
EchoStar, Hughes to pursue merger despite opposition
Friday, October 11, 2002 Posted: 9:58 AM EDT (1358 GMT)
LITTLETON, Colorado (AP) -- EchoStar Communications Corp. may soon face another disappointment in its scuttled bid to merge with Hughes Electronics Corp. -- a breakup fee that could top a half-billion dollars.
The Federal Communications Commission voted 4-0 Thursday to reject the $18.8 billion deal to combine the nation's two largest satellite TV companies. Commissioners said it would create a virtual monopoly for the millions of Americans without access to cable television.
Both companies said they would amend their proposal in the next 30 days and keep working for approval. They also are negotiating with the Justice Department, which is scrutinizing whether the deal violates antitrust laws.
But at a conference in New York this week, EchoStar chief executive officer Charlie Ergen skirted questions of whether Hughes had done everything it could to complete the transaction -- a key factor in whether EchoStar will have to pay Hughes a breakup fee of as much as $600 million if the deal disintegrates before Jan. 21.
EchoStar also may have to buy Hughes' majority stake in PanAmSat, the largest U.S. satellite operator, if both sides walk away.
The FCC vote marked the first time the commission had blocked a major media merger since 1967.
"Everyone is going to put forth best efforts to get this deal and all the companies want to see this merger approved. We're still moving in that direction," Hughes spokesman Richard Dore said.
Negative effects on consumers "staggering"
Kenneth Ferree, chief of the FCC's media bureau, said the commission remains open to revisions, but the agency staff's analysis found that the deal's negative effects on consumers were "staggering."
"It's clear there is no easy or quick fix with this," he said. "They have quite a hill to climb at this point."
EchoStar, based in Littleton, Colorado, runs Dish Network, while El Segundo, California-based Hughes operates DirecTV. Together they serve about 18 million subscribers and would be the largest pay-television service, although that would be overtaken if a merger of cable TV giants AT&T and Comcast is approved.
EchoStar and Hughes argued the merger is needed to provide competition to cable TV. The commission wasn't persuaded by that claim.
"EchoStar and DirecTV not only compete but compete vigorously, not only with cable but with each other," FCC chairman Michael Powell said.
He also said the merger would give Americans without cable access only one choice for subscription video service.
In promoting their plan, the companies offered uniform pricing nationwide to ease fears that its dominant market position would be used to gouge consumers where no alternative was available.
"Confounded" by FCC logic
Gene Kimmelman, president of Consumers Union, said he was "confounded by the FCC's logic" that satellite TV was competing with cable, considering cable rates have gone up 45 percent since Congress deregulated the industry in 1996.
"My question for the FCC is, 'What are you doing to hold down cable rates? What are you doing to bring in competition that will challenge cable monopolies?' And it appears their answer today is 'We don't care to lift a finger,"' Kimmelman said.
EchoStar was to buy Hughes for about $26 billion in stock, but the value of the deal has since fallen to $18.8 billion. It was unclear if DirecTV, which has been weakened by a year in limbo, could still fetch that price.
If EchoStar and Hughes are unable to work out terms acceptable to the FCC, analysts say Hughes would find another suitor, with Rupert Murdoch's News Corp. the most likely.
News Corp. did not comment Thursday. Hughes' parent company, General Motors, has a shortfall in its pension fund that it is seeking to patch by selling Hughes. News Corp. spent more than a year negotiating a possible merger with Hughes before the EchoStar deal was announced.
I`ve always wondered where folks draw unusual conclusions from and your statement makes me think about this even more.Originally posted by Swampthing
<snip>So where do we go from here? Seems to me that before the merger talk, DirecTV was having serious financial difficulties and looking for a buyer. My guess is they were putting all their eggs into one basket, and now they have to start searching again for ways to stay afloat financially. It would be quite amusing if DirecTV was forced to file bankruptcy and Echostar bought up their auctioned off assets... merger still "happens" but in an entirely different way <snip>
I guess Ergen has simply charmed his way into the peoples hearts, although I would guess that many dealers do not look at it that way.
If you take a good look, it is Echostar who will tend to get burned from this non-merger, possibly to the tune of 600B. Also, in financial terms, I believe it is safe to say that DirecTV is much stronger financially, as well as subscriber wise, than Dish.
Now factor in that Rupert M. will probably buy DTV, at a better price than imagined, and that spells MAJOR headaches for Ergen.
Also, let`s not forget that cable, yes the dreaded cable, has made MAJOR leaps and bounds around the country and satellite in fast becoming the second choice for a lot of people.
Although I doubt either entity will file bankruptcy, it is easy to see that Echostar would be much more likely to than DTV.
Well, lets look at it this way...
For the most part, 99% of the "mainstream" channels are carried both by Dish Network and DirecTV. However, as has been pointed out by many people, both Dish and DirecTV do not carry the full slate of premium channels--most notably in Cinemax.
For PVRs, both Dish and DirecTV have an edge over cable. Both systems offer intergrated STB/PVR units. Nothing similar is readily available to subscribers. In fact, Dish and DirecTV's units are a double-edged swords: They do not include a encoder unit because they are recording the satellite bitstream, but this also prevents them from recording OTA signal.
Now, look at the niche programming. If you want sports programming, DirecTV has the edge with contracts with major sports to carry out of market games (Dish only has NHL Center Ice), and has the YES contract. Dish, on the otherhand, is the only provider that has the superstation pack plus carries International programming on the side satellites.
Now, look what has happened to cable. If DBS wasn't a major threat, why would they air commercials that are anti-DBS (and contains half-truths)? With the competition, cable has been forced to upgrade their infrastructure. However, cable's debt-to-equity ratio is higher than DBS's.
The only achilles heal in DBS is Internet. While it can provide high-speed connectivity from extremely remote locations, it has extreme latency problems that cannot be overcome in design. Both DSL and cable broadband have an advantage over DBS.
For the most part, 99% of the "mainstream" channels are carried both by Dish Network and DirecTV. However, as has been pointed out by many people, both Dish and DirecTV do not carry the full slate of premium channels--most notably in Cinemax.
For PVRs, both Dish and DirecTV have an edge over cable. Both systems offer intergrated STB/PVR units. Nothing similar is readily available to subscribers. In fact, Dish and DirecTV's units are a double-edged swords: They do not include a encoder unit because they are recording the satellite bitstream, but this also prevents them from recording OTA signal.
Now, look at the niche programming. If you want sports programming, DirecTV has the edge with contracts with major sports to carry out of market games (Dish only has NHL Center Ice), and has the YES contract. Dish, on the otherhand, is the only provider that has the superstation pack plus carries International programming on the side satellites.
Now, look what has happened to cable. If DBS wasn't a major threat, why would they air commercials that are anti-DBS (and contains half-truths)? With the competition, cable has been forced to upgrade their infrastructure. However, cable's debt-to-equity ratio is higher than DBS's.
The only achilles heal in DBS is Internet. While it can provide high-speed connectivity from extremely remote locations, it has extreme latency problems that cannot be overcome in design. Both DSL and cable broadband have an advantage over DBS.
The problem is that DirecTV will be lucky to see any of that 600 million before their creditors come knocking on the door... which will once again put them in a bad place.
I'm fairly confident that Echostar will tie up any payments for YEARS through legal maneuvers and DirecTV will probably never see a dime. Think about it... which company has the best financial resources right now to hire the best legal representation?
This "agreement" reminds me of those lawsuit where someone wins some outrageous financial judgement such as 20 million dollars. The amounts end up getting appealled over and over again, ends up getting reduced in court, and eventually the plaintiff hardly gets any money at all. I think you're dreaming if you believe Charlie Ergen is actually going to walk into DirecTV with a 600 million dollar check in hand without putting up one helluva fight first...
I'm fairly confident that Echostar will tie up any payments for YEARS through legal maneuvers and DirecTV will probably never see a dime. Think about it... which company has the best financial resources right now to hire the best legal representation?
This "agreement" reminds me of those lawsuit where someone wins some outrageous financial judgement such as 20 million dollars. The amounts end up getting appealled over and over again, ends up getting reduced in court, and eventually the plaintiff hardly gets any money at all. I think you're dreaming if you believe Charlie Ergen is actually going to walk into DirecTV with a 600 million dollar check in hand without putting up one helluva fight first...
Whoa, where do you come up with that? I think GM can afford to fight for 600 million dollars. The GM board will want the money and there is nothing that a small satellite company can do about it. I don't think Echostar can afford not to pay them the 600 million. GM didn't do this deal because they think satellite tv is a good thing, they did this because of the money Echostar paid them for their company. They aren't going to let 600 million get away from them. GM went with Echostar over News Corp because their bid was higher, not because they are in financial trouble. GM has huge profits and DirecTV is still worth billions of dollars.Think about it... which company has the best financial resources right now to hire the best legal representation?
Echostar has built up a lot of cash over the last year. They have about 4.3 billion in cash and short term securities. They have the money to pay GM the 3.3 billion they owe them now. Afterwards they will have about a billion in cash, and PanAmSat will have about 700 million in it.
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