FCC blocks EchoStar-DirecTV merger

Susan Rush
From the October 10th edition of CED Broadband Direct

EchoStar Communications Corp. tried to cut the FCC off at the pass, but despite the company's best efforts regulators have rejected its proposed merger with Hughes Electronics Corp.

In a 4-0 vote, the commission has denied the proposed multi-billion dollar merger saying that the likelihood of the merger hurting competition "outweighs any merger-specific public interest benefits."

Earlier this week, following speculation that the FCC was about to rule against the merger, EchoStar and Hughes sent a letter to the commission asking for it to delay its decision until after the companies met with the Department of Justice. The letter also proposed major revisions to the deal.

The request obviously fell on deaf ears. In its decision, the FCC said a merger between the two satellite giants would decrease competition, create a potential for higher prices and lower service, and negatively impact future innovation.

In a prepared statement Commission Chairman Michael Powell said the merger "flies in the face of three decades of communications policy that has sought ways to eliminate the need for regulation by fostering greater competition." He said if the deal was approved, it would at best, "create a duopoly in areas served by cable and at worst a monopoly in areas not serviced by cable."

In October, Hughes' parent General Motors officially accepted EchoStar's $25.8 billion offer for the unit. The merger was designed to combine the No. 1 and No. 2 satellite providers -- both of which are offering high-speed Internet access via two-way satellite -- to create a powerhouse that could effectively compete with cable and increase broadband options for rural Americans, according to EchoStar. EchoStar submitted its merger application for review to the FCC in early December.

In March, the FCC halted its review and sought comment on the combined company's plan to launch a spot-beam satellite to enable the delivery of local channels in all 210 markets the combined company would serve. The FCC was seeking comment on how the local channels plan would affect competition. Regulators restarted the review clock on July 23.

The companies have the ability to refer the deal to the administrative law judge, but it is doubtful that will happen. EchoStar and Hughes had set a Jan. 21 drop-dead deadline to complete the deal, and pursuing anything for review will most likely take months. The DOJ has not yet issued a ruling on the merger, but all available information point to a rejection.