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Can direct broadcast satellite services make good on their promises? Representatives of EchoStar and Hughes Electronics Corporation (owner of DirecTV) have promised federal lawmakers that if their merger is approved, they will roll out broadband digital services, retransmit local television signals, and generally saturate the nation with satellite television—all within three years.

In hearings in Washington the last week of February, the companies committed to delivering a wide range of services to all parts of the country by late 2004. The promises are intended to allay fears that a single DBS service would offer rural subscribers no choice in TV providers, and would have no incentive to control subscription rates. EchoStar chairman Charlie Ergen insisted last week that if the merger is approved, the improved operating efficiency could cut Internet access rates in half for rural residents. Should the deal not win approval, the two would-be partners say they may have to cut back on the development of broadband services.

Ergen's spin on his company's proposed purchase of its larger rival is that it would create not a "monopoly in the sky," but a serious competitor for the nation's cable systems, each of which is a local monopoly. The merger is opposed by national broadcasting lobbies, in particular the National Association of Broadcasters, and by a loose alliance of rural organizations.

Lawmakers have raised serious questions about whether the merger might violate federal anti-trust law, despite recent rulings that overturned ownership caps on terrestrial broadcasters. Promises made by EchoStar and Hughes executives have been interpreted by several observers as "pre-emptive concessions" intended to win support from key congressmen. Merger advocates face senators next week, and still have to persuade commissioners at the FCC and regulators at the US Justice Department that the move is legal and in the best interests of US consumers.

At the end of February, while hearings in Washington continued, EchoStar surprised analysts with a report of big gains in subscribers and revenue. Up to 400,000 households signed onto the service in the quarter and revenue rose 43% to $1.15 billion from $805.4 million for the same period a year ago. Net income for the quarter was $88.1 million. The Littleton, CO–based company reduced its fourth-quarter net loss to $42.9 million, as opposed to $184.2 million for the same period a year earlier. EchoStar's subscribership now totals approximately 6.8 million. Ergen predicts that his company's revenue will grow by 25% in 2002, with a 17% increase in subscribers.