A key consumer benefit of the merger between EchoStar Communications Corp.
and Hughes Electronics Corp., parent of DirecTV Inc., received a high level of
skepticism from a Senate subcommittee chairman.
If their $25.8 billion merger is approved, the direct-broadcast satellite
firms pledged to offer a national pricing plan so that subscribers without
access to cable pay the same rates as subscribers in the country's most
But Sen. Herb Kohl (D-Wis.), chairman of the Antitrust, Competition and
Business Rights Subcommittee, expressed considerable doubt that the plan was
operationally sound in the face of cable price cuts.
'I would submit to you that there needs to be an awful lot of discussion
prior to an approval of this merger on that particular point,' Kohl said.
Kohl -- before whose panel EchoStar chairman and CEO Charlie Ergen appeared
Wednesday -- suggested that the national pricing plan could trap
EchoStar-DirecTV if cable operators in one or several markets decided to cut
Knowing that EchoStar-DirecTV would be required to offer uniform rates
nationally, cable operators could use rate cuts to drive the DBS firm from a
market because EchoStar-DirecTV could not afford to drop its rates to those
levels throughout the country, he added.
The pricing plan, Ergen responded, was far from perfect, but he said the
Department of Justice or the Federal Communications Commission might provide
flexibility to allow his company to meet cable discounts and promotions.
Ergen did not volunteer the point that the DOJ has sued companies that
lowered prices to eliminate competition and raised their rates