"For millions more in urban areas, a merger will create a single provider in the DBS (direct broadcast satellite) market," he said. "The market dominance and potential anti-competitive consequences of such a merged company raise important questions that this committee must address."
However, one rural lawmaker said he backed the deal because it would provide his constituents with more programming and high-speed Internet access at a competitive price.
"This merger is in the interests of my constituents," said Rep. Richard Boucher, a Democrat from rural western Virginia. He added there would be "no disadvantage to rural customers."
Colorado-based EchoStar, which operates the DISH satellite network, proposed buying Hughes Electronics and its DirecTV satellite service for $26.3 billion. This would create the No. 1 pay-television provider in the United States with some 16.7 million subscribers.
Another lawmaker, who said she represents a district that has rural and urban constituents, doubted the benefits of the deal. "I have significant concerns about this merger," said Rep. Tammy Baldwin, a Wisconsin Democrat.
A second hearing is due Tuesday before the House Energy and Commerce subcommittee on telecommunications and the Internet.
Significant concentration?
Some federal regulators have noted the deal would cut the number of competitors in the DBS market to two in urban areas and to one in rural areas.
Ergen admitted that "in general, choices will be reduced," but his company would only have 17 percent of the pay-television market after the deal, adding that this "hardly makes us a monopoly."
He argued that the deal would increase competition with cable operators and reduce inefficient use of spectrum to deliver service, while giving consumers more channels including more local stations and high-speed Internet service.
Late Monday, the two companies filed an application with the Federal Communications Commission seeking approval to transfer the requisite licenses to the proposed combined firm.
Antitrust enforcers will determine whether the deal would hurt competition and consumers while the FCC will examine whether it is in the public interest, a process that is expected to take months.
Robert Pitofsky, who in the Clinton administration headed the Federal Trade Commission, which in part reviews antitrust matters, warned the deal would violate antitrust laws.
Pitofsky now works for a law firm, Arnold and Porter, which represents a competitor of the two companies--rural satellite provider Pegasus Communications. Any transaction that "lessens competition in any market is not allowed," said Pitofsky. "This deal as proposed has very serious problems."
He did acknowledge that the deal would be evaluated in the broader context of the pay-television market.
One consumer watchdog said it could support the combination if the two companies agree to a consent decree that includes conditions on pricing, quality and service.
"We need more competition to cable," said Gene Kimmelman, co-director of the Washington office for Consumers Union.
EchoStar and DirecTV say they would commit to nationwide plans to ensure rural and urban customers pay the same amount.
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