- The Washington Times - Wednesday, December 5, 2001

The House Judiciary Committee yesterday began investigating EchoStar Communications Corp.'s proposed acquisition of Hughes Electronic Systems, which would combine the two major players in the satellite television market.
EchoStar Chairman and Chief Executive Charles Ergen defended the $32 billion deal, which would combine the DishNetwork and Hughes' DirecTV services, arguing mainly that it would eliminate the operating inefficiencies that have slowed the advancement of high-definition television and prevented many satellite customers from receiving local channels.
But many members of the Judiciary Committee and testifying witnesses cautioned that the purchase would mean the creation of one satellite provider, stifling competition.
"The market dominance and potential anti-competitive consequences of such a merged company raise important questions that this committee must address," said House Judiciary Chairman F. James Sensenbrenner Jr., Wisconsin Republican.
Proponents of the deal argue that the creation of a single satellite provider would not be anti-competitive because satellite competes with cable operators. Currently, cable serves about 80 percent of what is called the multichannel video distribution market. DirecTV and the DishNetwork serve nearly everyone else.
"Competition in the multichannel video marketplace continues to expand but will only reach fruition if satellite TV is allowed to become a truly effective competitor to the dominant and entrenched cable companies," Mr. Ergen said.
Opponents testifying yesterday acknowledge potential benefits of the deal in urban areas, where cable and satellite coexist. But they warned of a monopoly in more rural communities, where satellite television is the only option.
"If this merger is approved, [consumers] choices in these areas go from two to one," said Bob Phillips, president and CEO of the National Rural Telecommunications Cooperative.
"We don't trade off and decrease competition in one area to improve it in another," said Robert Pitofsky, former chairman of the Federal Communications Commission and a Washington lawyer.
Consumers Union Co-director Gene Kimmelman, often an outspoken critic of mergers and consolidation, gave a mixed opinion.
"Consumers Union believes that this proposed merger poses significant antitrust problems and must be rejected, unless the problems are adequately addressed before the merger is completed," Mr. Kimmelman said. "Under certain circumstances, we also believe the merger could offer consumers some significant benefits, such as more local broadcast channels and better high-speed Internet options available via satellite."
The deal might provide stiffer competition and affect pricing for the cable industry, which has raised rates more than three times the rate of inflation in the last five years.
The Consumers Union wants requirements that would moderate pricing and service, plus the involvement of the FCC in encouraging competition. The Consumers Union also wants the agency to re-establish rate regulation for multichannel video providers like satellite and cable operators.

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