Release late Friday of the Federal Communication Commission's formal order
rejecting the merger between EchoStar Communications Corp. and DirecTV Inc. did
little to bolster the view that a deal with Cablevision Systems Corp. could
cause the FCC to eventually approve the merger.
In the 117-page report that hammered the direct-broadcast satellite merger as
massively anti-competitive, the FCC said Cablevision's proposed Rainbow 1 DBS
service would need to be a more established player in the market to be
considered a viable competitive check on a combined EchoStar-DirecTV.
'There are simply too many uncertainties associated with the launch of a new
satellite, operation of associated ground facilities, acquisition of
distribution agreements with local equipment retailers and installers and
deployment of a new DBS service to assume that Rainbow DBS could have a
significant competitive impact within the relevant two-year time frame,' the FCC
Sources indicated last week that EchoStar and Cablevision had opened a
dialogue on a plan that would give Cablevision effective control over an orbital
slot capable of serving all of the continental United States except for the
Pacific coast states and some of Nevada and Idaho.
EchoStar is hoping, sources said, to take the plan to an Oct. 28 meeting at
the Department of Justice and use it to persuade DOJ officials that the merger
with DirecTV should approved. EchoStar has 30 days to take a DOJ-approved merger
back to the FCC for reconsideration.
Judging by the FCC's order, Cablevision was viewed as an unlikely challenger
to EchoStar-DirecTV within the two-year period antitrust authorities are willing
to give a new entrant to offset competitive harms raised in a merger
'Even if Rainbow 1 DBS is successfully launched on schedule, it is highly
unlikely that the operator could roll out this new service and acquire a
significant customer base sufficient to offset the likely competitive harms of
the propose merger within two years,' the FCC said.
Cablevision expects to launch a satellite in March and to begin service by
the end of 2003.