DirecTV-DishNetwork Spectrum Deal Fails. What Does that Mean for a Merger?

On the Aug. 4 edition of the radioshow I reported on a deal between the nation’s only two direct-broadcast satellite TV providers to cooperatively bid on wireless spectrum during the FCC’s auction. Now that deal is off , with the two companies pulling out of the auction, probably because the prices got too rich for their blood.

Getting some wireless spectrum would’ve given DirecTV and Dish a leg up in competing with the likes of Verizon and AT&T, which are doing their best to get into the cable-TV-over-broadband market by whatever means necessary. The spectrum would give the satellite companies an opportunity to get into high-speed data, which their satellite networks really aren’t well suited for. But as of Wedesday, Verizon was still in the auction, at #2.

But the news behind the news is that this Dish-DirecTV deal was seen as a sign of a potential merger between the two companies, worrying anyone concerned about competition in video services. The end of the spectrum deal doesn’t necessarily mean that a merger isn’t in the works. But last week Rupert Murdoch, whose News Corp. owns a controlling stake in DirecTV, told investors that no merger talks have happened… yet.

Satellite TV has been one of the biggest competitors to cable, which otherwise has a monopoly in most markets. Having a choice of two other providers beyond the local cable operator helps provide some control on prices, and some incentive for cable operators to keep service up–at least in theory. A Dish-DirecTV merger would cut down that competition by half.

I also wonder what effect such a merger would have on the public service channels carried by each provider. For instance, Dish Network carries the excellent Free Speech TV, but DirecTV does not. The FCC rules require that the satellite companies carry a slate of public service channels, but if they merge would they be permitted to dump some channels?

In essence, a satellite TV merger would mean a net loss in TV service diversity, with possible effects not just on pricing, but on the variety of channels available, like Free Speech TV. Industry hacks will argue that the entry of the telcos like AT&T in video services would make up for the loss. But Congress seems dead set against placing any real public service requirements on the telcos if their nationwide franchise makes it into law.

Further, if the national franchise happens and net neutrality doesn’t, then the likelihood of seeing another Free Speech TV goes way down. So does the possibility of a similar broadband-based public service video network, since the telcos will take the first opportunity to smack additional bandwidth fees on multimedia content providers, possibly pricing them out of existence.



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