Audio Video News

Cable companies may be the accidental beneficiaries of the recently announced EchoStar-DirecTV deal, in which smaller direct broadcast satellite (DBS) service EchoStar won approval from General Motors to buy its subsidiary Hughes Electronics Corporation, operator of DirecTV.

The merger, which would create a single DBS service covering all of North America, faces many months of regulatory examination by the Federal Communications Commission, the Federal Trade Commission, the US Justice Department, and other agencies concerned about monopolistic developments. EchoStar CEO Charlie Ergen has promised that his company's approach to all such inquiries will be to insist that DBS is competition to cable rather than a "monopoly in the sky."

Whether the merger will ultimately be approved isn't clear, but the uncertainty of the coming months could give cable providers an advantage in the race to pull in new subscribers. DirecTV is already anticipating a possible decline in growth as a result of the delay, according to Hughes CEO Jack Shaw. "Hughes management has embarked on a new communications strategy to reassure current and potential subscribers that they won't face service disruptions or extra charges to replace equipment," reported Andy Pasztor and Sally Beatty in the November 20 edition of the Wall Street Journal.

Shaw told the reporters that his company is "going to have to work a lot harder to make sure consumers know there is no reason" not to sign on with DirecTV. Despite the publicity surrounding the possible merger of the two satellite services, DirecTV claims that its subscribership is up about 10% over last year's projections.

Should the Feds approve the deal, the newly merged company may spend as much as $2 billion to roll out a standardized set-top converter box. EchoStar and DirecTV have traditionally used different equipment, and a standard interface would prove more efficient in the long run. Together, the two services have approximately 16 million US subscribers.

Even so, more than two-thirds of American TV viewers still receive their signals via cable. Time Warner Cable, the second largest cable provider in the nation, plans an aggressive campaign to convert satellite subscribers to cable. Fifth-largest cable company Cox Communications, Inc. is doing likewise, with a "dish buyback" program in some of its markets. Industry analysts say the big opportunity for cable may happen during the changeover of DBS converter boxes, approximately 18 months from now, when consumer confusion will be at its height.