Government Seen Favoring Satellite TV Deal

Despite the prospect of a more consolidated satellite TV market, two antitrust experts who are usually at odds expect no challenge by the government to EchoStar Communications Corp.’s bid to merge with rival DirecTV.

Donald Russell, a Washington lawyer who once headed the Justice Department’s communications and finance division, said Friday that antitrust obstacles to a combination of the nation’s two biggest satellite TV firms aren’t insurmountable, as many skeptics have thought.

In a conference call with Wall Street investment analysts, Russell said antitrust authorities are likely to welcome a merger as a way to provide more competition to the cable TV operators, which control more than 70% of the subscription video market.

He said that although the government might impose some pricing restraints in rural areas, where satellite video operators face little cable competition, any deal between EchoStar and DirecTV could help lower prices as well as jump-start high-speed wireless Internet access offerings that both firms recently have begun marketing.

“It is likely that EchoStar and DirecTV would be a more vigorous competitor to cable . . . with much greater economies of scale [and] capacity to carry additional channels of programming,” Russell said.

Russell’s assessment was echoed by a leading consumer advocate.

“There would be significant antitrust concerns for me, of course,” said Gene Kimmelman, co-director of the Washington office of Consumers Union. “But since the Congress and the administration refuse to regulate . . . we are basically left at the point of having to resort to a Hail Mary” and allow the satellite TV industry to consolidate with the hope that greater competition will develop.

EchoStar, the nation’s No. 2 satellite TV provider with 5.6 million subscribers to its Dish Network, has not made a formal offer to General Motors Corp. for its DirecTV unit. But in a November Securities and Exchange Commission filing, the company indicated an interest in DirecTV, which beams video programming to 10 million customers across the nation.

A combination of the companies would create a video behemoth with a broader reach than the nation’s largest cable operator, AT&T; Broadband, which serves about 15.5 million subscribers.

That kind of consolidation would undoubtedly trigger an outcry from some watchdog groups as well as potential rivals, such as NorthPoint Technology Ltd. The Austin, Texas, company has been battling EchoStar and DirecTV to offer a new microwave TV service that would share the same airwaves used by the two satellite operators to beam video programming.

What’s more, President Bush’s nominees to head the Justice Department’s antitrust division and the Federal Trade Commission have not yet been confirmed by the Senate. Some experts say that makes it too early to predict Washington’s reaction to a merger of EchoStar and DirecTV.

“The climate is uncertain; I’m skeptical that anyone could predict the outcome,” said Ernest Gellhorn, an antitrust expert and law professor at George Mason University.