The two dominant satellite TV companies have failed to demonstrate how their proposed merger is in the public interest and have instead shown a disturbing tendency to contradict on core consumer protection issues, the National Rural Telecommunications Cooperative (NRTC) said.
In extensive comments filed today with the Federal Communications Commission (FCC), NRTC urged the agency to reject the proposed merger of EchoStar Communications and Hughes Electronics (DirecTV), citing severe implications for consumers.
NRTC, a leading advocate for rural consumers, responded specifically to a litany of inaccurate and contradictory claims made by the companies in recent months. The centerpiece of the NRTC document is a six-page "Flip-Flop Chart" that documents at least 22 occasions on which the companies made conflicting statements about material issues central to the merger. For example:
Local TV channels: In their February 25 filing to the FCC, and again in a March 6 news conference and Congressional hearing, the companies pledged to deliver local broadcast TV channels in all 210 designated market areas (DMAs) in the United States. But on March 7, EchoStar and allied groups filed a brief with the U.S. Supreme Court seeking to overturn the local carriage requirement and stating in a footnote that "the merged entity does not intend to carry all channels in every market" unless the law is upheld. The fact is, it is already technically and economically feasible to provide local stations in all 210 markets; they don't need the merger to do this.
Monopoly pricing power: EchoStar and DirecTV have promised a "national pricing plan" to allay concerns about their monopoly pricing power in areas without cable TV. Yet the companies have also openly acknowledged they need "flexibility" in pricing at the local level. And to be effective, a national pricing scheme would need to apply to every aspect of the service, including installation and equipment, to be effective. The companies have not proposed such a plan because it would be unworkable.
Availability of cable TV: EchoStar and DirecTV argue the merger will not create a monopoly for multi-channel TV service, based on the inaccurate claim that nearly 100% of television households have access to a cable TV option. But just two years ago, EchoStar acknowledged that "millions" of homes do not have access to cable. The New York Times, citing several independent, authoritative sources, has estimated the number of American homes not passed by cable at 25 million, and in August 2001, DirecTV itself estimated the number at 35 million.
Competition versus cable: EchoStar and DirecTV argue that they must merge in order to compete and even survive against the cable giants, but the evidence suggests otherwise. Since 1997, DBS subscribership has tripled while cable's penetration rate has dropped by 9%. And in statements to investors, a DirecTV executive said that if the merger were denied, his company, even without the merger, would continue to be "a very strong company with many new strategic options."
"The number and frequency of contradictory, inaccurate statements made by these companies on core issues is simply astonishing," said NRTC President and CEO Bob Phillips. "These statements were made at various times to various audiences, but regulators should not be fooled. The FCC should take this pattern of behavior into consideration when it decides whether this merger should be permitted. NRTC has pointed out repeatedly the numerous problems this merger poses for rural consumers including higher prices, less service, no choices and less innovation."
