IP: EchoStar Takes to Capitol Hill To Defend DirecTV Purchase

[David Farber <dave () farber net>]

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> Subject: [OpenDTV] News: EchoStar Takes to Capitol Hill To Defend DirecTV 
> Purchase
> Date: Tue, 4 Dec 2001 08:58:17 -0400
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> December 4, 2001
> Tech Center
>
> EchoStar Takes to Capitol Hill To Defend DirecTV Purchase
>
> By YOCHI J. DREAZEN
> Staff Reporter of THE WALL STREET JOURNAL
>
>
> WASHINGTON -- Facing mounting skepticism that their $26 billion deal will 
> be approved by regulators, EchoStar Communications Corp. and DirecTV 
> Tuesday will begin a flurry of congressional hearings and filings that 
> could help make or break the merger.
>
> The two companies need to do more, though, than simply convince already 
> skittish lawmakers and regulators to bless a deal that would create a 
> satellite-television company whose size would rival that of the biggest 
> cable companies. They also need to stave off counterattacks from opponents 
> such as Pegasus Communications Corp., a Bala Cynwyd, Pa., company that 
> markets DirecTV services in many rural states, and the National 
> Association of Broadcasters trade group.
>
> Pegasus already has won an important ally to its side. Several weeks ago, 
> EchoStar officials contacted former Federal Trade Commission Chairman 
> Robert Pitofsky, who they hoped would become a public advocate of the 
> deal, and asked him to listen to a preview of its legal strategy, 
> according to people close to the discussions. Mr. Pitofsky considered, but 
> then rejected the offer. His law firm now represents Pegasus and he is 
> expected to urge lawmakers to reject the merger during a hearing Tuesday 
> morning before the House Judiciary Committee.
>
> EchoStar and DirecTV are trying to counter such critics with their own 
> heavy hitters. DirecTV parent General Motors Corp. has hired former Reagan 
> Chief of Staff Ken Duberstein and former Clinton Deputy Chief of Staff 
> Steve Ricchetti to press their message here. EchoStar, meanwhile, has 
> turned to Jack Fields, the former head of the House Telecommunications 
> Subcommittee, and Greg Rohde, who ran the National Telecommunications and 
> Information Administration during the Clinton administration.
>
> The company also has hired Robert Willig, an antitrust expert at Princeton 
> University, in Princeton, N.J., and the economic consulting firm of Nobel 
> Prize winner Joseph Stiglitz.
>
> One wild card in the fight is Rupert Murdoch's News Corp., which spent 
> nearly 18 months pursuing DirecTV, only to lose out at the last minute to 
> EchoStar. News Corp. is lobbying regulators and lawmakers to reject the 
> deal because it would create a company that would wield undue influence 
> over the programming market, but a News Corp. spokesman said the effort 
> "is no more aggressive than any other issue we're concerned about.
>
> "We lost the deal and it's time for us to move on," the spokesman said. 
> "It's a battle we fought for 18 months, but now we're focused on running 
> our businesses as best as we can and letting events in Washington play out 
> themselves."
>
> The jockeying comes at a pivotal moment, as the merger faces a lengthy 
> review by the Justice Department and Federal Communications Commission, as 
> well as a series of potentially hostile congressional hearings.
>
> Critics, including many antitrust experts, have attacked the deal as 
> essentially eliminating any competition in the satellite-television market 
> in the U.S. and leaving many rural customers, who aren't wired for cable, 
> with only one choice for multichannel television. Several powerful 
> lawmakers, including Sen. Ernest Hollings (D., S.C.), the head of the 
> Senate Commerce Committee, already have said they oppose the deal.
>
> Still, EchoStar and DirecTV say they have no intention of throwing in the 
> towel. In a white paper circulated on Capitol Hill and in a filing to the 
> FCC last night, the companies argue that the deal would allow the merged 
> entity to carry more channels and quickly deploy high-speed Internet 
> services to underserved rural areas while providing more effective 
> competition to cable.
>
> "The proposed merger may provide the only opportunity for rural consumers 
> to have an affordable high-speed Internet access option in the foreseeable 
> future," the companies say in their letter to lawmakers. Absent the 
> merger, the companies warn, "cable threatens to extend its market 
> dominance of the video market to the high-speed Internet access market as 
> well."
>
> In the two documents, the companies also insist that the 
> satellite-television industry is part of a broad multichannel-video market 
> that includes the cable industry, and shouldn't be seen as a stand-alone 
> market. It is a crucial point: EchoStar officials have conceded that the 
> deal will certainly be rejected if regulators conclude that satellite 
> television is its own market.
>
> In the meantime, both sides are gearing up for Tuesday's hearings before a 
> pair of House panels. Pegasus Chief Executive Marshall Pagon says the 
> entire experience has offered a quick education in the ways of Washington; 
> in recent days, several of his lobbyists and lawyers have told him that 
> they have left meetings with regulators or lawmakers, only to run into 
> representatives of EchoStar and DirecTV. "This is incredibly intense for 
> everyone," he said.
>
> Write to Yochi J. Dreazen at yochi.dreazen () wsj com

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