In October of 2002, the FCC ruled that the combination of Dish
(formerly Echostar Communications Corp.) and DirecTV (formerly owned by Hughes
Electronics, a subsidiary of GM) in the multichannel video program distribution
(“MVPD”) market would likely “harm consumers by: (1)
eliminating an existing viable competitor in every market; (2) creating the
potential for higher prices and lower service quality; and (3) negatively
impacting future innovation.” At the
time, most markets had three competitors – the two satellite providers and a
cable company (e.g. Comcast). At the
national level with 87.6 million MVPDs subscribers, the combined market share
of the satellite firms summed to about 20 percent. On a per market basis, the market shares were
much higher and therefore a hypothetical merger would have increased the market
power of both the satellite firm and its cable competitor. At a time, when annual MVPD price increases
were significantly outpacing inflation, the market needed more competition, not
less.
Today, Dish and DirecTV account for about a third of
the MVPD market. Today, the cable providers face increasing competition from
the “fringe” – media and technology firms going direct to consumer with
streamed content over the internet.
Today, an increasing number of households are cutting the cord and not
subscribing at all to an MVPD service.
So, would today be the right time for a merger between the 2 satellite
providers? Would a merger be approved by
regulators? Market analysts suggest that,
if the 2 firms combined, they would realize $2 billion in cost savings
annually. The synergies would help the
firms, with their own skinny bundles (DirecTV Now and Dish Sling), compete in
an increasingly crowded and fragmented market.
But, with Dish on the hook to buy Sprint’s assets to be a new entrant in
the wireless telecom market, today may not be the right time.
No comments:
Post a Comment