FCC: Hughes-EchoStar Needs Close Review

Satellite television provider EchoStar Communications Corp.'s proposed purchase of rival Hughes Electronics raises significant issues and will require close scrutiny by regulators, a Federal Communications Commission official said on Wednesday.

The agency will have to review the transfer of the licenses to determine whether it is in the public interest for the No. 1 and No. 2 U.S. satellite television operators to combine. Antitrust authorities will also examine the deal. 

"I think it clearly is one that we will have to take careful consideration of and raises significant issues," FCC Commissioner Kevin Martin, one of three Republicans on the five-member panel, told reporters during a press briefing. 

Because it involves the top two companies in a market, "I think the commission should take a careful look," he said, though he declined to elaborate on the significant issues stating he did not want to prejudge the proposed deal. 

Some analysts have said the two companies will face a tough challenge to win approval from antitrust enforcers and the FCC because of further concentration in the market, which could lead to higher prices in rural areas where there is less choice for pay television services. 

However, the companies could make concessions to alleviate any concerns, analysts have said. The merged company would have 16.7 million subscribers. 

Separately, Martin said the FCC may need a transition period for eliminating limits on how much spectrum mobile telephone companies can hold in a particular market, an issue expected before the FCC at its monthly open meeting next week. 

Agency staff members have proposed lifting the cap from 45 megahertz of spectrum an entity can hold in a single urban market to 55 megahertz and 18 months later eliminate it completely. However, the commissioners could alter that recommendation before they vote on the item. 

Combinations of wireless companies or transfers of licenses could then be evaluated on a case-by-case basis, Martin said. 

"I think we should be going toward looking at these things on a case-by-case basis," he said. "I think we need to be careful and probably have some kind of transition period, (which) might make sense so that we can put in place the kind of analysis we would be going through" to review transactions. 

The transition period could be shortened to as little as a year by the commissioners before it comes to a vote slated for next week, according to people familiar with the proposal. 

The mobile telephone industry's top lobbyist has been pushing the FCC to eliminate the cap immediately although Verizon Wireless, the biggest U.S. mobile telephone carrier, said it would not oppose a transition period as long as the cap was eventually eliminated. 

"The decision (to scrap the cap) would help wireless companies aggregate spectrum, particularly in large congested urban centers, and provide greater flexibility to companies contemplating transactions to fill holes in their national spectrum map," Legg Mason's said in a note co-authored by analysts Blair Levin and Sean Butson.