One bird: Sitting duck

Policy pushers tack wish lists to EchoStar/DirecTV merger

And the hits just keep on coming. As if EchoStar's Charlie Ergen didn't have enough headaches. Not only are Al Sharpton and others trying to squelch his company's acquisition of DirecTV (B&C, Jan. 21), but others are lined up to make sure that, if a deal emerges, there will be something in it for them. In fact, the merger of the country's two direct broadcast satellite providers has become a focal point for nearly every telecommunications-policy fight in Washington.

"This merger is a real easy target. It's like a piñata for competitors to whack at," says Precursor analyst Scott Cleland. "Everybody wants to smack it to see what goodies come out." Standing in line, stick in hand, are:

  • The cable industry, which sees a chance to kill program-access rules forcing them to share programming with DBS companies.
  • Broadcasters, fighting to tie the merger to disputes of DBS's carriage of local stations.
  • Backers of a plan to add terrestrial microwave competitors to EchoStar's spectrum, demanding Ergen drop his opposition.
  • Telephone companies, considering, sources say, tying the merger to dropping rules forcing them to carry competing Internet providers over their high-speed digital subscriber lines.

There's nothing new about outsiders' using government merger reviews as a backdoor way to battle over policy issues. About a year ago, consumer advocates turned the AOL-Time Warner merger review into a debate on access to cable companies' high-speed Internet platform. Open access also was a key issue in AT&T's Tele-Communications Inc. and MediaOne acquisitions.

Setting the EchoStar/DirecTV deal apart, say Washington analysts, is antitrust regulators' skeptical reaction, making it a bigger target for more lobbyists. "There is a substantial risk," says Blair Levin, policy analyst for Legg Mason, "regulators will say no."

Almost immediately after the merger was announced, FCC Chairman Michael Powell warned that the agency would be leery of placing all of the country's DBS orbital slots in the hands of one company; antitrust lawyers say there's little chance the Justice Department, reviewing the merger, will agree to turn a two-company industry into a monopoly.

The bet in Washington is Ergen must, and is willing to, strike policy deals to win support.

For now, EchoStar officials say they aren't worried that lobbyists will succeed in dumping a bushel of new obligations on the company or, worse, creating such crushing regulatory baggage that the deal falls apart. Their argument remains: DBS is not an industry by itself but part of a larger multichannel-TV industry dominated by cable. With no antitrust concerns, the merger will eliminate duplication in the DBS structure and free up spectrum for local and other channels not now carried.

Still, Ergen acknowledged his antitrust problem when he pulled out the piñata's first piece of candy the day the merger was announced. To win rare support from public advocates, he promised to cap the rates of high-cost rural customers that cable neglects.