FCC Rejects EchoStar-DirecTV Delay

1/24/2002 9:48 AM Eastern

EchoStar Communications Corp.'s merger with DirecTV Inc. won't be postponed
by regulators, as proposed by Pegasus Communications Corp., the Federal
Communications Commission said Thursday.

Pegasus asked the FCC to put off the review until EchoStar is more
forthcoming about its programming alliances.

Pegasus claimed that EchoStar stated in its Dec. 3 merger application that it
had no vertical-integration strategy with programmers, but it then announced an
agreement 11 days later in which Vivendi Universal S.A. would acquire 10 percent
of EchoStar for $1.5 billion.

Vivendi agreed to supply EchoStar with various programming services on a
nonexclusive basis. The Federal Trade Commission approved the EchoStar-Vivendi
transaction last week, and the deal closed Jan. 22.

In its decision rejecting postponement, the FCC said it could not determine
whether the EchoStar-Vivendi deal 'raises vertical-integration or
programming-discrimination concerns,' or whether the investment represents a
'substantial change' in the EchoStar-DirecTV merger application.

'We find no reason to delay the administrative process merely on the
suspicion that an application has failed to discuss or disclose issues that
changed circumstances have made potentially relevant,' the commission said in a
three-page ruling by W. Kenneth Ferree, chief of the Cable Services Bureau.

Ferree said that if the FCC decides that the Vivendi investment raises new
issues, it will ask EchoStar for additional information and possibly seek public
comment on EchoStar's new filing.

Initial comments on the merger are due at the FCC Feb. 4 and reply comments
Feb. 25.

Among other things, Pegasus resells DirecTV's service to 1.5 million
subscribers in 41 states under an exclusive marketing deal.

If the merger were approved, Pegasus would be in the position of competing
against its sole supplier.

On Dec. 4, Pegasus CEO Marshall Pagon said the EchoStar-DirecTV merger should
be quickly rejected as anti-competitive if the companies failed to ensure the
viability of Pegasus as a competitor.

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