FCC Rejects EchoStar Hughes: Et tu, Powell?

Today, the Federal Communications Commission (FCC) voted unanimously, 4-0, to block the merger of satellite operators EchoStar and Hughes Electronics. The merger would have created the nation’s largest multichannel programming provider, pending the outcome of the AT&T Broadband-Comcast merger. CSE filed comments earlier this year to urge the FCC to approve the merger.

The following statement can be attributed to CSE Staff Economist Jason M. Thomas:

“Today’s decision shattered any hope that Michael Powell’s ascension to chairman of the FCC would lead to a more streamlined and sensible telecom policy. It also makes one feel naïve for believing that his FCC would deregulate broadband, strengthen the bundle of rights assigned to spectrum licenses, and expeditiously allow for necessary industry consolidation.

“This merger would have allowed the combined satellite firm to put duplicative TV spectrum to new uses and compete with its larger cable rivals’ less burdensome cost structure and huge edge in broadband deployment. Importantly, satellite could have shed its ‘also-ran’ image and allowed the technology to emerge as a driving force for innovation instead of simply an alternative platform for the services traditionally associated with cable companies.

“Today’s decision reasserted the Washington regulatory establishment’s primacy in economic affairs. The FCC discounted the value of Hughes’ shares with a regulatory premium: the value of the company as determined by the market minus the sum News Corp., Hughes only remaining suitor, is willing to pay.

“Corporations unwilling, or unable, to match the bid or potential synergies of a rival need only conjure up some plausible reasons why a merger would violate the indeterminate ‘public interest’ standard of Section 309 of the Communications Act.

“This may not be a bad system for D.C.-area residents who bill for their services by the hour, but is a horrible system for consumers as billions of dollars that would otherwise go toward productive use pays legal and lobbying bills. The success of this strategy will only lead to more of the same, which is unfortunate given the economy’s poor health and business investment drought.”