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Seeking to strengthen their case before antitrust regulators, EchoStar Communications Corp. and DirecTV Inc. said Tuesday they have devised a way to offer full service to every market in the country, which would mean all cable subscribers would have at least one other option for pay television. The two satellite television companies had previously said they would have enough spectrum post-merger to provide only the 100 largest markets with full service, which means consumers get all local and premium channels. But, after examining each other’s technical abilities, the companies concluded that they could reach all 210 local markets — an increase of 42 million households — if they added a new satellite and moved others around. “Without this merger many Americans will never see local channels on satellite and have no choice of local television providers,” EchoStar chief executive officer Charles Ergen said. Yankee Group analyst Michael Goodman said the announcement could improve prospects for the deal winning approval from the Department of Justice and the Federal Communications Commission. “If it works, this is the first actual tangible benefit to consumers of the deal,” Goodman said. “And it has everything to do with influencing the regulators by saying here is the benefit to consumers.” But opponents of the merger argued that both companies could implement the same plan absent a merger. “DirecTV and EchoStar don’t need to merge to provide national local coverage,” said Matthew M. Polka, president of the American Cable Association, a Pittsburgh-based organization that represents small cable companies. “It’s a red herring; each could do it on their own because they are both multibillion-dollar companies.” Currently, DirecTV, owned by General Motors Corp.’s Hughes Electronics Corp., offers local television coverage to 41 markets while EchoStar offers it to 37. Ergen estimates the cost of the new satellite and technical changes to the ground network at about $300 million. Ergen unveiled the plan as part of a media blitz to tout the benefits of the $26 billion deal. At a briefing for reporters, Ergen said the merger would provide the economies of scale needed to quickly deploy high-density television and rural broadband service. It also would permit EchoStar to lower prices enough to be competitive with cable monopolies that serve urban centers and thus enjoy a high density of customers per square mile. John Stone, an analyst with New York investment bank Ladenburg, Thalmann & Co., said rural consumers would benefit from new services. “Most rural cable companies don’t have the financial resources to develop new broadband and HDTV technology,” Stone said. “And investors are not going to give them the finances because they know small rural cable companies can’t compete with the big satellite television firms.” Yet others have questioned why EchoStar and DirecTV could not develop these products and at the same time be competitive with cable without merging. “Combining the companies will save money, but it won’t mean they will be able to provide broadband and HDTV services faster to rural America,” Goodman said. Ergen also responded to an early November report by Roger J. Rusch of TelAstra Inc., a Palos Verdes, Calif.-based consulting firm, which said either satellite television company could already provide nationwide local television coverage on their own with a new technology. Ergen said Rusch’s one satellite approach posed interesting ideas but would not be economically feasible. Instead the strategy of working with existing satellites and a new one would make nationwide local coverage a reality within months. Copyright (c)2002 TDD, LLC. All rights reserved.

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