EchoStar ready to rumble

Ergen, Hughes exec welcome open debate on merger

EchoStar and DirecTV have a message for opponents fighting their proposed merger: Bring it on.

Such was the mood on Tuesday as the satcasters began complying with a top-to-bottom records request from the Federal Communications Commission, which must clear the deal. In going about the task, company execs said they were not dissuaded by a growing chorus of opposition to the merger.

“We’re pleased to see the FCC review process of our pending merger moving forward,” EchoStar said in a statement. “The companies intend to cooperate in a timely and thorough fashion with FCC’s request. We’re confident that the commission will find that the merger serves the public interest.”

The FCC request for documents, including details of Vivendi Universal’s recent stake in EchoStar, is a part of the normal merger review process. What makes it high-profile is the intense attention being paid to the marriage by the TV biz, Capitol Hill solons and antitrust mavens. The deal also is being combed through by antitrust toppers at the U.S. Dept. of Justice.

Deadline for response

EchoStar and DirecTV have until Feb. 25 to respond to a batch of filings logged Monday with the FCC, many of them from critics, including the National Assn. of Broadcasters, the National Rural Telecommunications Cooperative, Paxson Communications, the Public Broadcasting Service, the Assn. of Public Television Stations and the Writers Guild of America.

Opponents say the EchoStar/DirecTV union would pose a monopoly, especially in rural areas where there is no access to cable. Programmers are likewise concerned about the gatekeeper factor.

EchoStar boss Charlie Ergen has argued throughout the merger proceedings that a combined Echostar-DirecTV should be viewed not as a monopoly in the DBS market, but rather as a more viable competitor to the firmly entrenched cable TV industry.

But critics of the deal balk at that line of reasoning, noting that no single cable company — not even the recently created AT&T-Comcast behemoth — commands a TV distribution network with the national reach of Echostar/DirecTV.

Fans weigh in, too

The satcasters were not without fans among Monday’s filings with the FCC. Vivendi Universal weighed in, as did Circuit City, several think tanks, several rural organizations, state legislatures and several governors.

“The merger will serve the public interest by increasing the diversity of programming available to the American public. Following the merger, EchoStar and DirecTV will eliminate the redundant programming carriage which will result in more efficient use of direct satellite broadcasting,” Vivendi U said in its FCC filing.

The Frog said its new programming deal with EchoStar — five new channels featuring U’s libraries –doesn’t mean other content providers will be shut out of the game. To the contrary, other programmers will benefit as well.

High on the FCC’s wish list to the would-be merger partners is a detailed description of Vivendi U’s recent pact for a stake in EchoStar. The French conglom last December agreed to pay $1.5 billion in cash for just over 10% in EchoStar equity (or about 5% of a combined EchoStar-DirecTV entity). Investment is part of a larger partnership to offer a range of Vivendi U’s TV programming and interactive content over the satcaster’s network.

Content giant to team with programming firm

Deal is of particular interest to regulators because it creates a close relationship between a content giant and a national programming distribution company. Before teaming with Vivendi U, Ergen had argued that EchoStar’s position as a pure-play distributor made it less threatening than an vertically integrated player like AOL Time Warner.

The Commission also asked for information on the combined company’s abilities to deliver broadband Internet access over its network — a major concern for groups that worry rural consumers will be left behind in the upgrade to high-speed Net access. In addition, the FCC sought a more comprehensive report of the satcasters’ plans for pricing, as well as an overview of their recent financial performance.

EchoStar’s Charlie Ergen said he is confident that the merger will ultimately be blessed by the appropriate parties in Washington. He said he welcomes the chance to sit down with opponents, and Hughes execs feel the same. “We welcome an open debate on the merits of our merger,” Hughes prexy-CEO Jack Shaw said.

In the coming weeks, the Senate is likely to hold a hearing on the merger. Late last month, Sen. Orrin Hatch (R-Utah), the GOP’s top man on the Senate Judiciary Committee, wrote a letter to Attorney General John Ashcroft saying he is concerned that the merger can’t pass antitrust muster.

EchoStar and DirecTV said they weren’t shaken by Monday’s FCC filings, nor by Hatch’s correspondence to Ashcroft.

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