Friday, July 25, 2008

Will Sirius/XM Merger Enable Direct TV and Dish to Merge?

So is what is good for the goose also good for the gander? Now that the FCC has approved the Sirius XM merger, will that create a precedent to allow Direct TV to merge with Dish? In the case of satellite radio, their economic survival seemed threatened when faced with the pressures of competing against a large marketplace, from broadcast radio stations, iPods, and now internet radio; competition, it could be argued, remains very much in the marketplace. Merging allowed them to remain competitive.

For satellite cable today, a merger of Dish and Direct TV also has economic consequences. But merging of cable operations is not foreign to the FCC. As cable companies like Time Warner and Comcast have grown in size, it is at the expense of the small and mid size operators. The FCC has continually approved those cable acquisitions. As a result both Time Warner and Comcast cover a majority of the country's cable footprint.

New competition, from the telcos, Verizon and AT&T, has also emerged, to have added a new level of competition in the marketplace. And it appears that this competitive threat has had more impact on cable operators today. Where satellite has pushed their superiority in HD, the telcos are coming in with a message of more variety, faster speeds, and better service.

Satellite has had a disadvantage, operating one way plants while cable and telco can employ two way technology. Direct has come up with their version of VOD to offer a two way, on demand experience. Voom tried to join the hunt and compete as a third satellite provider, pushing original HD channels, but ended up selling its satellite to Dish, instead. For customers that are not easily reached by cable lines, satellite may be their only choice. Without competition, the customer may be hurt. Unless it is proven that in each case, telco or cable can reach that same customer with a competitive product. Else, the loss of a satellite provider would create a detriment.

Lastly, one could argue that given the market, a very limited competitive market already exists. The consumer, looking for TV, can choose only one telco that serves their market, or one cable operator that serves their market, or two satellite providers. But like radio, the other choice is free TV. While not as many choices, free TV does provide an alternative to pay TV, It may not be as many choices, but you get what you pay for. Should Direct TV and Dish be allowed to merge? I say yes. The real fight is between technologies, not within them; cable vs telco vs satellite vs free TV. And as technological changes emerge, internet TV, obtained wirelessly may become even more mainstream as another competitive choice. Let the market rule.