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The Federal Communications Commission has voted unanimously against EchoStar Communication Corp.’s $16.9 billion acquisition of DirecTV, FCC Chairman Michael Powell said at a news conference Thursday. The matter now goes before an administrative law judge for a hearing on whether the direct broadcast satellite license transfers should be permanently blocked. That process could take months to complete. Powell said the direct broadcast satellite segment is growing 2.5 times faster than cable and it is forcing cable to expand its channel offerings. He also said that both EchoStar and DirecTV, which is owned by General Motor’s Hughes subsidiary, have the ability within a few years to offer local channels in up to 85 percent of local markets without a merger. The ability to bring local channels to all markets was a major rationale raised by the companies in favor of the deal. The companies also argued they would be more effective competitors to local cable monopolies post-merger. “The very premises on which the proposed merger rests are without foundation,” Powell said before turning over the press conference to Ken Ferres, director of the FCC’s media bureau. Ferres said the law does not permit the commissioners to reject the license transfers outright without first sending it to an administrative law judge. “This is akin to the Department of Justice filing suit,” he said. The commission concluded the merger would result in “immediate and substantial” consumer harm through higher prices and lower service quality, Ferres said. The commission said it has confidential estimates that the losses to consumers from the merger would be quite large. “Consumer welfare losses from this transaction were staggering,” he said. Ferres said the FCC did not consider cable company Cablevision’s proposed DBS plan viable because it could not enter the market quickly enough to offset the merger’s detrimental effects to consumers. The decision does not mean the deal is dead. Ferres said the companies could withdraw their application during the 30 days it takes to bring the matter up before an administrative law judge. The companies then could refile an amended deal for new consideration. The Department of Justice’s antitrust division still must decide if the deal violates the antitrust laws. That decision is not expected until the end of October or early November. The companies have said they are working on a package of major concessions for the Justice Department. Ferres’ comments suggest the companies, if they persuade the antitrust division, could refile the amended deal for new consideration by the FCC. Copyright �2002 TDD, LLC. All rights reserved.

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