Weak quarter renews talk of Dish merger

By David Milstead, Rocky Mountain News (Contact)

Published September 1, 2008 at 9:05 p.m.

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David Balto

Bill Leone

Bill Wycoff

Ray Gifford

Phil Weiser

A poor second quarter for Douglas County-based Dish Network has prompted new speculation that the satellite TV provider is contemplating a deal with rival DirecTV.

Federal regulators blocked a merger between the nation's only two large satellite-TV companies in 2002 on the grounds it would severely erode competition. Now, though, the environment may be more receptive to a merger given the recent approval of a Sirius-XM deal, which combined the only two players in the satellite-radio industry. Executives at Douglas County-based Liberty Media, which controls DirecTV, pooh-poohed the possibility of a merger, and Dish executives declined to comment.

But Rocky Mountain News reporter David Milstead asked several antitrust specialists whether they thought the two companies could win approval to get together if they eventually decide to move in that direction.

Rocky: If Sirius and XM can merge, why can't Dish Network and DirecTV?

David Balto, antitrust attorney and senior fellow at the Center for American progress: There are two key differences. First, for over 25 percent of the country there is no cable available. Thus Dish and DirecTV are the only alternatives. Second, technology is rapidly changing for audio entertainment and there are currently many more options than satellite radio - such as iPods and HD radio.

Bill Leone, a Denver-based attorney with Faegre & Benson in Denver: I would expect the Department of Justice and the Federal Communications Commission to view the Dish-DirectTV competition issues differently than the Sirius-XM issues. The DOJ and FCC see only two competitors for subscription television for millions of rural households where cable is unavailable. And in many regions the only real competition to an incumbent cable provider is the two satellite companies. By eliminating one of them, you reduce competition even in areas served by cable.

Bill Wycoff, partner with Thorp Reed & Armstrong in Pittsburgh: In the case of the satellite radio providers, both of them had shown consecutive quarters of financial losses and seemed unlikely to improve their financial strength and results. Regulators saw that if radio was going to have a viable competitor in satellite radio, they needed a provider that had some financial strength. This stands in contrast to the financial conditions of the satellite TV providers.

Rocky: Will the January 2009 change in presidential administrations make a big difference in the answer?

Ray Gifford, a Denver-based attorney with Kamlet Shepherd & Reichert: Who heads the antitrust division and the FCC will certainly play a big role in the feasibility of the merger. The current head of the antitrust division really believes in the dynamism of these markets, and thus is more inclined to see these mergers as part of "creative destruction" of the digital age rather than some merger toward permanent, entrenched monopoly. An antitrust division head inclined to more static analysis would be inclined to use a narrower market definition and to not tolerate mergers of "two into one."

Phil Weiser, professor at the University of Colorado Law School: Probably not. The Bush DOJ and FCC brought the original case against Dish when they proposed a merger several years ago, and John McCain, a self-described acolyte of Teddy Roosevelt, is likely to be more committed to antitrust enforcement than Bush was. As for Obama, he has argued that antitrust enforcers have been too passive in the wake of consolidation in the media sector.

• September 1, 2008

  10:59 p.m.

  Suggest removal

  sparhawk writes:

  To David Balto:
  There are some logical problems with your argument:
  * You say that there are competing options to satellite radio "such as iPods" -- but if you count pre-recorded music devices like iPods then you must count pre-recorded video devices (like the Sony PSP, or portable DVD players).
  * And while you are considering pre-recorded music devices, since satellite radio is also available in home-based non-portable devices, you would also need to include home-based DVD players or VCRs -- ways to view pre-recorded TV devices as "competing options" to satellite TV.
  * Excluding pre-recorded "competing options" from satellite TV but not from satellite radio makes no sense.
  * You mention HD Radio as a competitor to satellite radio, but a little bit of research (http://www.hdradio.com/find_an_hd_dig...) shows that in most cases the HD Radio stations are only available in the bigger markets.
  I would be willing to bet that HD Radio competes with satellite radio in roughly the same areas that cable TV competes with satellite TV. The rural areas have little access to cable and have little access to HD radio.

  Granted, I am not a lawyer, but it seems there are large holes in your argument. There are other perfectly legitimate reasons to disallow this merger, but not the ones you mentioned.

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