Deathstar rises again

Satellite merger: Echostar's proposed takeover of DirecTV could squeeze cable companies.

November 03, 2001

AUSTRALIAN media magnate Rupert Murdoch once talked about launching a U.S. home satellite service that would be a lethal competitor to cable television. He nicknamed it Deathstar.

A killer satellite service would come closer to reality under the proposed merger of the nation's two satellite television providers. It was announced recently that Mr. Murdoch abandoned his plan to acquire DirecTV, the nation's No. 1 home satellite provider.

If federal regulators approve Echostar's $26 billion plan to acquire DirecTV, it would result in a monopoly serving more than 17 million subscribers. In theory, new competitors might emerge. In reality, however, the high costs of launching satellites would make that unlikely.

Is satellite monopoly a bad thing? Federal regulators must figure that out in light of rapidly changing technology.

Satellite is merely a distribution mechanism, just as cable is. In terms of content, satellite is not very different from cable, except that it can provide up to 500 channels. In the end, though, subscribers receive only those channels they pay for.

A satellite television monopoly would surely be a more formidable competitor to cable companies, which in the past have increased their rates with abandon.

However, both satellite and cable face a potential new competitor that might upset the rules of the market place once again. An upstart company is testing technology that would allow wireless "cable" transmission.

Both Echostar's Dish Network and DirecTV oppose the new rival. Dropping that opposition is one price federal regulators should extract from the would-be satellite monopoly.

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