Pending Decision Could Create Monopoly in Satellite TV Service

Consumers Could Face Higher Prices, Poorer Service

Washington, DC – The nation’s oldest consumer organization is protesting the possibility that an upcoming decision by General Motors Corp. could create a monopoly in Direct Broadcast Satellite (DBS) service. 

The National Consumers League, representing American consumers on marketplace and workplace issues, today wrote Federal Trade Commission Chairman Timothy Muris and Assistant Attorney General for Antitrust Affairs Charles James urging them to keep a close eye on a transaction that could give one company monopoly power over millions of American consumers. 

“Monopoly power always leads to higher prices and poorer service for consumers,” said NCL President Linda F. Golodner.   “We are calling on the federal government to monitor this situation closely and defend the open, competitive marketplace for multi-channel television services.”     

Wednesday’s Wall Street Journal reported that the GM board may decide as early as this weekend whether to sell its subsidiary Hughes Electronics Corp., owner of DirecTV, the nation’s largest DBS provider, to EchoStar Communications Corp. 

Currently, 16 million US households are DBS consumers, many of them in rural areas.  DirecTV serves about 10 million households, and EchoStar serves about 6 million.  If EchoStar is permitted to merge with Hughes/DirecTV, US consumers will have only one provider for multi-channel satellite services.  Reduced competition could cause prices to soar and service quality to plummet.   While DirecTV currently works through an extensive network of rural service providers, EchoStar would have little reason to maintain such a network once complete market dominance was established.  Consumers in low-population regions of the country could be left stranded. 

  Also of considerable concern would be EchoStar’s ability to leverage monopoly power over the creators of programming.  Without competition in the marketplace, programmers would be at the whim of just one company in gaining access to DBS consumers. Those unwilling to pay the highest premiums to EchoStar would have no leverage and no alternatives. As a result, America’s 16 million DBS consumers could end up viewing the programming available to EchoStar at the cheapest price and be excluded from access to higher quality programs, including educational and public service shows that are often produced by under-funded public broadcasters.  The economic efficiencies that might flow from an EchoStar/DirecTV merger are also questionable. Echostar and DirectTV use different set-top boxes.  The conversion from one type of equipment to the other would disrupt service for consumers and cost many millions of dollars.

Noting reports that News Corp. is also interested in purchasing Hughes/DirecTV, NCL’s Golodner emphasized that the consumer group is not endorsing one competitor over another.  “However, we strongly believe that it would be in the best interests of American consumers -- particularly those in rural areas -- if there were at least two vibrant competitors in the market instead of just one with monopoly power,” she said.

The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to identify, protect, represent, and advance the economic and social interests of consumers and workers. NCL is a private, nonprofit membership organization. For more information, visit www.nclnet.org.   

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