ECHOSTAR ANNOUNCES PRICE INCREASES
LAS VEGAS -- EchoStar said it would raise monthly subscription prices 3% (about $1) starting in March on both America’s Top 50 basic service ($22.99) and premium offerings that range up to $72.99 for America’s Everything package. Under new federal must-carry law, EchoStar has increased number of local channels it carries to 250 in 36 markets. Channels have been added to satellites at 61.5 degrees W and 148 degrees W pending launch of spot beam birds later this year. Spot beam satellites are to be colocated at 110 degrees W. EchoStar Chmn. Charles Ergen said rate increase would have been twice as high if company hadn’t dropped ESPN Classic Jan. 1. He said Disney demanded 15% increase in licensing fee for sports network. EchoStar said Disney also sought raises for ABC Family in exchange for DBS merger support, but Ergen said company chose “not to pay hush money.” Disney denies charges. EchoStar also announced it had signed programming deal with Fox Sports regional channels.
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Meanwhile, flashes of temper heated already too-hot conference room as Satellite Bcstg. & Communications Assn. (SBCA)-sponsored panel here brought together CEOs of 3 largest DBS companies. Ergen and DirecTV Chmn.-CEO Eddy Hartenstein were upbeat about former’s proposed acquisition of latter and frequently used Wall St.-friendly terms such as “synergy.” “In terms of simple economics, the merger will double capacity and have a tremendous effect on cost savings,” said Ergen, who expected “more level playing field in programming.”
Pegasus Chmn. Mark Pagon and National Rural Telecom Co- op Pres. Robert Phillips were less exuberant. Pagon said he wasn’t necessarily opposed to EchoStar-DirecTV deal but wondered “whether it was a good thing for the industry and consumers. If you look at the record of the past decade, specifically the record of innovation in DBS, large resources are not necessary.” Phillips was less diplomatic: “The merger has problems and we can’t support it.” He said it might violate “laws that protect consumers.” With deal, 15- 20 million homes that had no access to cable “now will have one choice for multichannel TV.”
Companies have “as much as admitted this” by proposing “national pricing plan,” Phillips said. He doubted national pricing plan would be affordable where there wasn’t the protection of cable competition. “Duopolies don’t compete on price,” he said, referring to market that would be dominated by merged EchoStar-DirecTV and much smaller Pegasus. “In any industry of significant size, duopolies tend to compete on features sets,” Phillips said: “The dominant company provides price leadership and otherwise tries to stay out of trouble with the Department of Justice.”
Deal also affects emerging broadband Internet services for customers too remote to receive either cable modem or DSL. “Broadband for rural America is too important to leave to one company,” Phillips said. Another issue raised was delivery of local programming by satellite services. Pagon said: “This is something the industry should have embraced 3 to 4 years ago. Capacity exists to do that, and if the merger happens there is no excuse.” Hartenstein agreed market was “not ready for another 10 or more channels of national programming” and added capacity from deal should be directed toward local programming. He wasn’t specific what merged company would do.
Ergen said that as 2 networks currently existed, “there is no way to do local programming for rural customers. The capacity to do it exists, but [EchoStar and DirecTV] need a common standard. We now have a Beta-VHS situation.” While decision on technology hadn’t been made, he said, “when we do merge, the synergies will allow us to replace one system at our cost.” Having both companies using system with common standard, Ergen said, “will “double potential subscribers and we will be able to go to a lot more cities than we otherwise could. There never has been a merger with more compelling efficiencies.”