Cablevision's DBS Hopes Still Alive

11/29/2002 8:04 AM Eastern

EchoStar Communications Corp. said its new merger proposal with DirecTV Inc. parent Hughes Electronics Corp. is a far broader antitrust remedy than the one rejected by the Department of Justice in late October.

In a new plan submitted Thanksgiving eve, EchoStar told the Federal Communications Commission it is prepared to divest assets and execute national and local resale programming agreements with Cablevision Systems Corp. in order to obtain merger approval from the agency.

"This remedy is significantly broader than the proposal presented . to the Department of Justice" in October, EchoStar and Hughes said in the joint FCC filing.

On Oct. 10, the FCC effectively rejected the merger, which it considered anticompetitive, by assigning it to an administrative law judge.

Under the remedy plan, Cablevision is central to EchoStar's hope of acquiring Hughes. But EchoStar needs quick action from the FCC because Hughes can walk away from the deal Jan. 6, at which time EchoStar is reportedly on the hook to Hughes for a $600 million breakup fee.

That deadline is also likely to arrive before the courts have dealt with the antitrust suit the DOJ filed Oct. 31 in federal court to block the direct-broadcast satellite merger.

In March, Cablevision is planning to launch a DBS bird to provide local TV signals and an array of high-definition-TV programming services.

To bolster Cablevision's entry, EchoStar is effectively agreeing to allow Cablevision, though transactions and assignments, to take control of the 148 degrees west longitude and 61.5 west longitude orbital locations, which together can serve all 50 states. But EchoStar would retain control of the three orbital slots that provide the most efficient DBS service.

EchoStar is also guaranteeing to sell one satellite and lease two others to Cablevision. And the plan calls for sharing terrestrial facilities to reduce Cablevision's cost to provide local TV signals via satellite.

In a broad marketing agreement, both EchoStar and Cablevision would be able to resell each other's "full product line," distributed from six orbital positions.

EchoStar is also promising to give Cablevision a shot at EchoStar subscribers that need new set-top boxes, and it is vowing to discuss ways to give Cablevision "open access" to retail distributors.

With these assets and guarantees, Cablevision's DBS service would be up and running quickly and represent a "more robust service that either EchoStar and DirecTV today," the DBS firms said.

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