FEDS REJECT SATELLITE MERGER FINALLY

The federal government thrust a stake into the heart of the proposed merger between EchoStar and Hughes Network Systems' DirecTV satellite service last week when the Department of Justice — along with 23 states, the District of Columbia and Puerto Rico — filed an antitrust lawsuit.

The FCC unanimously rejected the deal in early October, and both agencies said a merged satellite provider would reduce competition in areas not served by cable.

The only surprise was how long the final deathblow took, said Scott Cleland, CEO of The Precursor Group. “It was way over the line,” he said. “An easy, clear antitrust violation.”

EchoStar Chairman and CEO Charles Ergen isn't conceding, however, claiming the merger is still the best chance to stop rising cable prices and bring enhanced services to rural America. “EchoStar will continue to explore all possible means to be allowed to compete against the cable giants,” he said in a prepared statement.

EchoStar's last-minute bid to assuage federal concerns by offering spectrum to start-up competitor Cablevision Systems was rejected by the DOJ because it was unlikely to become a sufficient replacement for competition between Hughes and EchoStar.

Cleland similarly rejected the thought that satellite providers must merge to combat cable. “It's ridiculous,” Cleland said. “They're very competitive today. They're eating cable's lunch.”

The lawsuit also could throw DirecTV back into play for a possible bid by John Malone's Liberty Media Group or Rupert Murdoch's News Corp., both of which have been said to be interested in getting into the U.S. satellite space.