USATODAY.com - Ergen makes pitch for satellite TV deal
Posted NaN/NaN/NaN NaN:NaN PM Updated 10/27/2002 7:59 PM
Ergen makes pitch for satellite TV dealBy David Lieberman, USA TODAY
NEW YORK  EchoStar CEO Charlie Ergen will make the sales pitch of his career Monday.
In a meeting with the Justice Department, he must convince skeptical antitrust lawyers that a deal he cut to boost Cablevision Systems' satellite aspirations will give consumers more competition, not less, if the department approves his $21 billion merger with DirecTV's parent.
This is his last, best chance to save the controversial merger between EchoStar, known for its Dish Network service, and Hughes Electronics, which owns DirecTV. Justice has yet to rule on the plan to combine the two dominant satellite companies, with 19 million customers.
The Federal Communications Commission rejected the deal this month, with Chairman Michael Powell saying that it would "replace a vibrant competitive market with a regulated monopoly."
The regulators warned that a merger would leave most consumers with only two choices — EchoStar and cable — while rural communities that don't get cable would have only one option. With regards to Cablevision, they said that it was "highly unlikely" it could grow into a meaningful satellite competitor in less than two years.
But the FCC gave the companies until mid-November to amend their proposal. And proponents of a merger plan to pressure the agency to reconsider based on the changes.
"Given the potential advantages to consumers, this proposal deserves a thorough review by the agencies," says Ken Johnson, spokesman for the House Energy and Commerce Committee, which oversees the FCC and was briefed on the changes late last week.
People familiar with the new plan say that it's designed to convince regulators that Cablevision, which has yet to launch its first satellite, can become a formidable competitor beginning in 2003.
Cablevision plans to use the latest available technology to offer more than 320 standard definition channels in all 50 states, 40 high-definition channels, and local stations in 143 markets. Consumers would use a 13-inch dish vs. today's conventional 18-inch dishes.
To make that possible, Ergen and Cablevision propose — if the DirecTV deal is approved — to do the following:
Ergen will let Cablevision's new satellite use spectrum that EchoStar now controls at an orbital location that covers the East and Midwest. In addition, Cablevision will buy, for backup purposes, EchoStar's existing satellite there. Prices are still under negotiation.
Cablevision will lease additional spectrum on two satellites EchoStar controls that cover the West, including Hawaii and Alaska.
EchoStar will make it easier for Cablevision to offer local channels by sharing transmission facilities. In addition, EchoStar will not enforce exclusivity deals it has with programmers, retailers and installation services.
And financially strapped Cablevision will promise to sell some of its assets to help pay for its satellite service. It has already spent about $300 million on it. The company is shopping some of its cable channels, including Bravo, which NBC might buy for about $1.2 billion.
The EchoStar-Cablevision deal came together on Oct. 14, after the FCC decision, when Cablevision's father-and-son team of Chuck and Jim Dolan visited Ergen in Denver.