The administration's you've-got-a-friend-in-the-White-House relationship with big business seems to have taken a detour with the torpedoing of a proposed merger of two satellite communications giants, EchoStar and the Hughes Corp.'s DirecTV.

Rural America is a loser in the deal that would have resulted in a satellite TV/Internet service with a potential of nearly 20 million customers. The merger was vigorously opposed by the Federal Communications Commission, the Justice Department, and attorneys general in a number of states, claiming it would create a monopoly that would compete unfairly with cable TV systems.

A monopoly? And how would that differ from the cable TV industry, which has a monopolistic grip in virtually every city in the country because nobody's going to come in and spend the millions required to build a competing system. As a result of federal deregulation, cable TV rates over the past five years have gone up nearly 50 percent, many times the rate of inflation during the period.

“This merger could have been structured in a way that actually helped consumers, by making satellite TV a legitimate competitor to cable TV,” said Gene Kimmelman, senior director of public policy and advocacy for the Consumers Union…. The combination of EchoStar and DirecTV would have freed up enough spectrum for the merged company to offer local channels across the country.”

Ironically, regulators opposing the merger used rural America as an excuse for not approving it, lamenting that it would create a “rural monopoly” for TV/broadband Internet signals. This, as opposed to the cable TV industry which now controls 83 percent of the for-pay television signals in the U.S.?

In another case of odd bedfellows, the merger was also opposed by the National Rural Electric Cooperative Association and the National Rural Telecommunications Cooperative, both of which had a vested interest since their member organizations rake in big bucks by re-selling DirecTV service to their customers.

From the earliest days of satellite TV, the industry has been a friend to the American farmer — providing programming as good as or better than the city cable companies, at comparable or lower cost.

Combined, EchoStar and DirecTV could have given rural subscribers every local channel in the country, no matter how small the market, plus Internet service.

Waiting in the wings to try and snap up DirecTV is, among others, Australian billionaire Rupert Murdoch, who can hardly be described as particularly concerned about rural America.

The merger would have brought “a new era of telecommunications and opportunity… to residents of rural America,” said Rep. Rick Boucher, D-Va., who had supported the proposal. “It held absolutely no disadvantages. In the absence of this merger, many rural areas around the nation, particularly in the smaller television markets, may never receive (local TV signals) service.” Further, he says, for these areas high-speed Internet service “is unaffordable.”

Chalk up a win for the powerful cable lobby, and a loss for consumers everywhere — especially those in rural America.


e-mail: hbrandon@primediabusiness.com.