Ergen Once Opposed Cable-DBS Combos

11/03/2002 7:00 PM Eastern

It's a hard lesson of politics: What you said yesterday could haunt you tomorrow.

Four years ago, EchoStar Communications Corp. advocated adoption of a federal rule prohibiting the common ownership of cable and direct-broadcast satellite companies as a means of promoting competition in the pay TV market.

Earlier this year, the Federal Communications Commission declined to adopt the rule. And that likely turned out to be a good thing for EchoStar chairman and CEO Charlie Ergen, who hopes a DBS-spectrum deal with cable operator Cablevision Systems Corp. can salvage his $25.8 billion merger with DirecTV Inc. parent Hughes Electronics Corp.

In February 1998, the FCC initiated a cable/DBS cross-ownership rulemaking at a time when PrimeStar Inc. — the medium-power DBS carrier owned by several major cable MSOs — was seeking FCC approval to acquire a key satellite license from Rupert Murdoch's News Corp. and MCI Communications Corp.

"EchoStar supports, in principle, a cross-ownership restriction as between cable operators and DBS providers," EchoStar said in an April 6, 1998 filing with the FCC. "Plainly put, such a restriction would prevent cable operators from co-opting scarce DBS spectrum resources."

Last Monday, EchoStar officials met with Justice Department officials to go over a proposal that would shift vital DBS spectrum to Cablevision, which hopes to create a new national DBS competitor next year, sources said.

Cablevision is the nation's No. 7 cable operator and dominates the New York City area, with 2.9 million subscribers.

On Oct. 10, the FCC rejected the DBS merger as anti-competitive and monopolistic for millions of U.S. consumers. EchoStar hopes a deal with Cablevision can secure support from the Justice Department — and eventually the FCC.

The EchoStar-DirecTV merger has the qualified support of the Consumers Union and other similar organizations. When the FCC was considering the cable/DBS cross-ownership ban, the CU urged the agency not to adopt a sweeping prohibition, claiming cable/DBS alliances might make the pay TV market more competitive.

DirecTV took a similar position, recommending that the FCC review cable/DBS mergers on a case-by-case basis.

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