Senators 'concerned' about DBS merger

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Senators are skeptical that EchoStar Communications Corp.'s proposed $26
billion merger with Hughes Electronics Corp., parent company of DirecTV Inc.,
will pass antitrust muster, they told EchoStar CEO Charlie Ergen and DirecTV
chairman Eddy Hartenstein at a hearing Wednesday.

'It doesn't take a rocket scientist to be highly skeptical of a merger that
reduces competition in an industry and that creates a monopoly in rural
America,' said Sen. Herb Kohl (D-Wis.), chairman of the Senate Antitrust
Subcommittee.

Several senators pointed out that many rural areas are not passed by cable
and not reached by broadcast signals, making satellite TV rural consumers' only
choice.

EchoStar's proposed merger with DirecTV would reduce competition in some
rural markets from two providers of multichannel-TV programming -- DirecTV and
EchoStar -- to just one.

That fact alone violates the Clayton Act, antitrust law's guiding principal,
and it will make it hard for the Department of Justice to approve the merger,
said Sen. Mike DeWine (R-Ohio), the subcommittee's ranking member.

Kohl asked Ergen and Hartenstein if they would be willing to accept a
six-point checklist that was 'legally binding,' likely in the form of a consent
decree.

Kohl wants the new company to agree to deliver local programming in all 210
TV markets with a specified time frame; to comply with full local-TV-carriage
requirements; to agree to a national pricing scheme for all consumers; to unroll
a competitive broadband service; to offer high-definition and interactive
television; and to provide customers free-of-charge with any new equipment the
merger may require them to have.

Kohl also suggested that these requirements be 'overseen and enforced by a
special master,' much like the deal agreed to by America Online Inc. and Time
Warner Inc. when they merged.

Ergen and Hartenstein both gave Kohl unqualified yes answers on all six
points.

'It doesn't get any better than to condition the merger for something you
already do and you already are willing to continue because it makes good
business sense for you,' Ergen told reporters after the hearing.

'There's not anything in there that we wouldn't do as good business sense,
anyway. That's why we're so willing to agree to be bound by consent decree or by
whatever other mechanisms the FCC [Federal Communications Commission] or the
Department of Justice would assign,' Hartenstein said.

Even though a merged EchoStar-DirecTV plans to offer local TV signals in all
210 local TV markets, EchoStar this week plans to ask the U.S. Supreme Court to
review its challenge of a law that requires satellite TV companies to carry
every local TV station in every market they serve, Ergen said.

'We didn't abandon our principals for the merger,' he added. 'We believe the
principal of must-carry is a fundamental freedom-of-choice issue, and we're
willing to spend our dollars to fight for it.'

DirecTV has not yet decided whether it will join
EchoStar's appeal of the court fight, which went against the satellite-TV
industry in the Fourth Circuit Court of Appeals in Richmond, Va., in December.

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