News Corp. chairman Rupert Murdoch is sending a clear message to Washington regulators: Block the merger between EchoStar Communications Corp. and Hughes Electronics Corp., parent of DirecTV Inc.
Murdoch, who failed in his own bid to acquire Hughes, is apparently going all-out inside the Beltway to ensure that arch-rival Charlie Ergen, EchoStar's chairman and CEO, is denied his dream of becoming king of the direct-broadcast satellite industry.
In recent weeks, News Corp.'s Washington lobbyists have circulated a binder thick with analyses, reports, congressional letters, court filings and news articles intended to reinforce Murdoch's point that the EchoStar-Hughes deal is illegal under antitrust law no matter which standard is used.
Evidently, if Ergen is blocked from completing the deal, Murdoch would be in position to revive his effort to buy Hughes, though that scenario is not among the points raised in News Corp.'s attack on the pending merger.
EchoStar spokesman Marc Lumpkin criticized News Corp. for spreading "inaccuracies" about the merger in the documents and for failing to testify on Capitol Hill in December. On the Hill, News Corp. would have faced rebuttal from Ergen and DirecTV chairman and CEO Eddy Hartenstein.
"They obviously fear that, on its merits, the merger is the solution in providing consumers the benefits of more effective competition with cable companies, more TV programming choices, and more local TV market coverage via satellite, all at nationwide prices," Lumpkin said.
Both the Federal Communications Commission and the Justice Department need to approve the $25.8 billion merger. The first round of comments is due to the FCC on Feb. 4.
Murdoch's DBS deal dossier — titled "The Essential Guide to the EchoStar/DirecTV Deal" — runs more than 100 pages. It attempts to undercut EchoStar's claims that the merger is pro-competitive, and that any anti-competitive harms can be remedied through a consent decree with the Justice Department.
After combining with DirecTV, EchoStar would control at least 14.9 million subscribers. That's 90 percent of all DBS subscribers, but only about 17 percent of all pay TV subscribers, factoring in cable and other services.
EchoStar claims the merger is necessary to amass the capacity to provide local TV signals in 100 markets (up from about 40 today), provide a dozen high-definition TV channels and offer robust high-speed Internet access, especially in rural communities that cable and phone companies can't afford to serve.
These assets would position the company to compete directly with cable operator and cut into that industry's 78 percent share of the video market, as well as its lead position in the nascent high-speed Internet access market, EchoStar has argued.
According to News Corp., none of the purported benefits of the merger is valid.
As a result of the merger, News Corp. said, consumer choice would be reduced from three providers to two in markets served by cable and from two to one in markets not served by cable. News Corp. said 15 million U.S. households are not passed by cable plant.
News Corp. said that both EchoStar and DirecTV can offer local TV stations in every local market right now, and that EchoStar controls spectrum in other satellite bands that could also be used to deliver local TV signals.
"EchoStar and DirecTV each could provide significantly more local-into-local service, but have chosen not to," News Corp. said.
To protect rural consumers, EchoStar has proposed a national pricing plan, so consumers without a cable option would pay the same prices as consumers with access to cable.
News Corp. said a national pricing plan would require the Justice Department to police EchoStar's pricing on an ongoing basis, a role the Justice Department has never played.
Murdoch's company also said a national pricing plan would be an insufficient tool to protect consumers from a monopoly because it would not address other forms of discrimination, including customer service, programming availability and technological upgrades.