EchoStar, DirecTV Make Final Plea

Top executives from EchoStar Communications Corp. and rival DirecTV made a final plea Tuesday to the Federal Communications Commission, trying to persuade commissioners not to block their proposed $15-billion satellite TV merger.

But they received a cool reception from government regulators, who remain highly skeptical about the deal, sources said.

EchoStar Chairman Charlie Ergen and DirecTV Chief Executive Eddy Harenstein met with FCC officials and talked about giving up enough satellite slots after the merger to allow for the creation of a new, rival nationwide satellite television provider, sources said.

The meetings were a follow-up to a letter the companies sent to the FCC on Monday, promising to discuss “major revisions” in a last-ditch effort to win approval for the deal.

A majority of FCC commissioners, including Chairman Michael K. Powell, have been poised to vote against the merger, and a staff recommendation found that the deal would not be in the public interest, sources said.

One of the biggest concerns of government regulators is that an EchoStar-DirecTV merger would combine the nation’s two major satellite television companies, eliminating competition in many rural markets that do not receive cable.

EchoStar and DirecTV, a unit of El Segundo-based Hughes Electronics Corp., also presented research to the FCC reemphasizing their assertion that cable TV rates would hold steady if the merger were approved. The companies have long said that their merger would help them to better compete against local cable operators by offering high-speed Internet access and local broadcast channels. Without the merger, they say, neither company has enough satellite slots to offer local channels in every U.S. market.

The study showed that cable TV prices rose by 11.3% between January 2000 and January 2002 in areas where satellite TV providers did not offer local service and 2.3% in areas with local service.

Gene Kimmelman, co-director of Consumers Union, said the figures suggest that the best chance of reining in cable rates is to permit the satellite merger, but to impose tough conditions, such as requiring that satellite TV companies offer all local broadcast channels.

Kimmelman also met Tuesday with FCC officials to discourage them from killing the deal and to consider EchoStar’s proposals.

“Consumers would be better off with a good consent decree [that imposed conditions on the deal] than by blowing the merger apart,” Kimmelman said.

But EchoStar has not detailed what it might be willing to offer. And in the past, EchoStar officials have resisted giving up any of its satellite signals, saying it needs all its slots to compete against cable.

New York-based Cablevision Systems has offered to take over some of the EchoStar-DirecTV slots and create a new nationwide satellite provider.

But there are questions about whether the company has the financial resources to become a viable rival to a combined EchoStar-DirecTV.

The Justice Department also is reviewing the deal to see whether it violates antitrust law.

Shares of Littleton, Colo.-based EchoStar closed Tuesday at $17.21, up 19 cents on Nasdaq. Hughes’ shares fell 20 cents to $8.72 on the New York Stock Exchange.