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Proposed DirecTV and DISH Network Merger
by: Gary Davis

It was in October 2001 that General Motors Hughes (Parent company of Direct TV) and EchoStar Communications Corp., trader of Dish Network agreed to a merger. The new company would have improved the services for satellite TV clients by adding many HDTV channels and local channels would then be available to all satellite TV viewers.

However, the US Department of Justice blocked the merger.
Why did they do that?

The merger would create a monopoly position

When merged the new company would serve all of the United States without any competition. As we all know, competition spurs progress and a merger would basically result in less progress. At the present time about 25 to 35 million homes do not have access to cable TV services. Those people have the choice between 2 satellite TV companies. The merger would reduce this to just 1 company, which clearly is a monopoly position that is not allowed. Even in areas with cable TV the merger would result in just 2 providers, of which each has a monopoly on its own technology. Further, EchoStar claimed that the merger was needed to be able to compete against the cable TV Giants. However, satellite TV was growing very fast while cable TV was loosing clients. Out of every 3 new cable/satellite TV clients, 2 would go for satellite TV.

EchoStars proposed self-regulation does not compensate for the basic monopoly issues

EchoStar and Hughes promised local TV programming to all 210 TV markets. However, the day after this promise, EchoStar asked the Supreme Court to overturn a law that required local carriage. They said they had no intention to carry all channels with the new company. At the time, local channels were available in just 41 markets while the 2 companies together already had the technology available to provide local programming in all 210 markets. A competitive market is more likely to speed up these services than a self regulated monopoly.
A proposed national pricing plan that would guarantee that prices would be the same in both rural and urban areas was also not accepted as prices could be set too high.

The merger would create a monopoly position for broadband internet services
In areas that are not served by DSL or cable, the only alternative to broadband internet services is via satellite. The merger would create a monopoly for broadband internet services in these areas.
Over all it seemed that without any other satellite TV providers a merger of the 2 companies was not possible. The public’s interest was just not served by a merger (or at least not enough).
Some markets just don’t have much competition because of their nature. Satellites are expensive to build, put into orbit and operate. The fact that there are 2 providers and not just 1 is a blessing for the public and everyone can make a choice. Of course we at believe that the choice is easy. Dish Network Satellite is our preferred choice.


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