EchoStar, DirecTV push benefits
of combined company

Copyright 2002 Warren Publishing, Inc.
WARREN'S CABLE REGULATION MONITOR...08/12/2002
From LexisNexis

From CED Broadband Direct, August 13, 2002

LAS VEGAS -- With the FCC decision on EchoStar's proposed purchase of Hughes Electronics and its DirecTV subsidiary expected by fall, the companies began a two-pronged attack at Satellite Bcstg. & Communications Assn. (SBCA) show in Las Vegas, portraying the combined company as the best means for DBS to reach 27 million to 30 million subscribers by 2005.

EchoStar Executive Vice President James DeFranco and DirecTV Customer Satisfaction Executive Vice President Robert Meyers laid out plans for the companies to fully integrate within three years of completing the sale and to offer bundled packages of video and broadband services to combat a similar strategy currently being used in the cable industry.

Citing the success of Cox Communications in packaging video with cable modem and telephone services, DeFranco conceded broadband was one of the areas that "we need to improve" to remain competitive with MSOs, which also have been rolling out digital programming. With Cox having gained 600,000 subscribers for its voice-over-cable package, DeFranco said the satellite industry needed to be positioned so all services were offered from a single receiver dish. "We need to package a video and a high-speed solution together so that we can offer a one-stop service," he said. DirecTV currently sells its video service separate from its DirecWay satellite-based Internet access service, which thus far has attracted 133,000 subscribers. EchoStar, after investments in WildBlue and StarBand failed to provide it with broadband service, has partnered with DSL providers and is weighing other options. "We have to respond to cable's bundling strategy across the board and the only way we can do that is by combining the companies and leveraging the assets," DeFranco said.

Combining the companies also would be key to expanding the offering of high-definition (HD) programming, the speakers said. EchoStar and DirecTV provide three and four HD channels, respectively, but integration of the companies could boost that to 12, DeFranco said. Noting that EchoStar subscribers who wanted to receive HD currently must deploy a second receiver dish, DeFranco said the combined companies probably could develop a dish that was capable of receiving signals from four different satellites. While HD is a "bandwidth hog" that requires a single transponder to transmit just two channels, the companies eventually will provide a "robust suite" of programming, Meyers said.

While DirecTV and EchoStar presented a case for combining the operations, some companies weren't convinced a deal would be in the best interests of the industry. The combined company would decrease competition, especially in rural markets where there are fewer options other than satellite for getting video and broadband services, said NRTC Senior Vice President Mark Brown, whose group competes with EchoStar in selling DirecTV service. NRTC has long opposed EchoStar's takeover of DirecTV and has said "competition is great for folks in rural areas" because historically it has driven "innovation" in products and services and provided lower prices, he said. "Without that competition there is no driving force for those innovations to happen" in rural regions," Brown said.