The battle to control the nation's direct broadcast satellite spectrum has been raging for years, and the Federal Communications Commission's decision earlier this month to block EchoStar's play for DirecTV puts everything back up for grabs.
EchoStar has 30 days to make concessions, and must also get antitrust clearance from the Department of Justice, which is widely expected to reject the merger. Even Justice Department approval wouldn't stop the FCC from blocking the transfer of satellite licenses, which would effectively kill the deal.
EchoStar plans to file a new plan at the Justice Department before Oct. 28, followed by a similar filing at the FCC within the 30-day window.
"We're not specifying days, and it would be silly to do so," EchoStar spokesman Marc Lumpkin said.
The testiness at EchoStar is understandable. Not only is the government threatening to scrap its deal, but the action could help News Corp. chairman Rupert Murdoch -- who lost out to EchoStar CEO Charlie Ergen in an earlier bid for DirecTV -- take another shot at buying it.
Ergen and Murdoch go way back -- and not in a good way. They originally butted heads in 1997 after Murdoch agreed to buy part of EchoStar and turn it into ASkyB, an American version of his British satellite powerhouse BSkyB.
But the moguls couldn't get along or agree on control issues, so the deal soon died.
Then Murdoch agreed to sell ASkyB's assets to Primestar, another satellite company. That deal went sour by late 1998 (Primestar later sold out to DirecTV and became part of its customer base). Eventually, Murdoch sold ASkyB's assets in exchange for EchoStar stock, but Ergen kept control.
Dejected, Murdoch started courting DirecTV. But before he could get anything in writing, Ergen stole DirecTV out from under him.
Again, Murdoch wasn't happy.
But now, in an ironic twist, DirecTV could end up back in play with Murdoch in the wings. The only way Ergen may be able to salvage his EchoStar-DirecTV merger is to sacrifice enough combined spectrum so that a new competitor, such as Murdoch, could emerge.
Even so, that possibility is considered unlikely because Murdoch -- or any new competitor -- would have to start from scratch against an entrenched incumbent. Furthermore, the feds might be tempted to require that new competitor to go into underserved areas, making it even less attractive.
"It would be the kiss of death," said one Washington source close to Murdoch.
Then again, Murdoch could also do a side deal with Cablevision Systems' Chuck Dolan, who holds a number of direct broadcast satellite slots and has been looking to sell in an effort to raise cash for his troubled company.
Either way, the EchoStar-DirecTV union could be unsalvageable.
"The FCC didn't have to go this far," said Barry Brett, an antitrust lawyer at the New York City law firm of Jenkens, Gilchrist, Parker and Chapin. "The fact that they went public was really aggressive, and it was meant to get a message through to the parties."
The National Association of Broadcasters, which has fought with Ergen ever since he threatened local stations' ad revenue by importing distant broadcast signals into local markets, lobbied vigorously against the EchoStar-DirecTV deal and has already said it will keep the pressure on.
The National Association of Broadcasters won't accept any conditions other than Ergen walking away from the deal.
"That's the solution," NAB spokesman Dennis Wharton said.
News Corp.'s Fox TV network is not a member of the NAB, and News Corp. hasn't officially lobbied for or against the EchoStar-DirecTV merger.
Nonetheless, it looks as if the chilly relationship between Ergen and Murdoch could soon enter a new chapter. At least it's fun to watch.
