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Summary of the sky wars
EchoStar Communication Corporation proclaimed its intention to seek the assets of Hughes Electronics Corporation on 28th October 2001. DirecTV and EchoStar are the two Direct Broadcast Satellite (DBS) companies which provide MVPD services to the consumers in the US. From 1997 to 2001, the two companies were dominant in the DBS market. The DirectTV had 10.9 subscribers while the EchoStar had 7.5 with the capacity of 500 channels and 400 channels respectively. They collectively were competing with Cable Company to increase efficiency but there were constraints of higher charges. Their merger would have an eliminating implication DBS services if they were allowed to proceed. Under MVPD they were providing the services of Cable, DBS, MMDS C-band, and SMAT. The percentage of national MVPD subscriber were: Cable 78%, DBS 18.3, MMDS 0.8, C-band 1.1, and SMATV 1.7 in June 2001.
Cable companies were providing local services while the DBS was providing national and their national pricing was depending on service offer and cable prices at the local level. Moreover, they had the ability to adjust prices at the local level. The merger would have sufficient market power for raising their prices if they had a narrow market. Now there came the question of raising their prices after the merger. If their prices are nationwide than the cable had the ability to provide competition by causing lower DBS prices. The proponents were of the view that DBS provider is to compete for more for attracting the Cable customers than each other’s customers.
As a result, their installation and equipment prices dropped to zero and EchoStar accepted that DirecTV is its competitor ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"k0gENGxv","properties":{"formattedCitation":"(Gilbert and Ratliff)","plainCitation":"(Gilbert and Ratliff)","noteIndex":0},"citationItems":[{"id":337,"uris":["http://zotero.org/users/local/orkqtrjP/items/J85VT324"],"uri":["http://zotero.org/users/local/orkqtrjP/items/J85VT324"],"itemData":{"id":337,"type":"article-journal","title":"Sky Wars: The Attempted Merger of EchoStar and DirecTV (2000)","source":"escholarship.org","abstract":"Author(s): Gilbert, Richard; Ratliff, James","URL":"https://escholarship.org/uc/item/38p01826","shortTitle":"Sky Wars","language":"en","author":[{"family":"Gilbert","given":"Richard"},{"family":"Ratliff","given":"James"}],"issued":{"date-parts":[["2007",9,1]]},"accessed":{"date-parts":[["2019",4,7]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Gilbert and Ratliff). The matter went to court where they found difficulties in providing evidence. The coordinated effect of the merger was that it created an environment which was beneficial to cable firms to collude. While the unilateral effect was that they had enough market power to manipulate the prices.
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ADDIN ZOTERO_BIBL {"uncited":[],"omitted":[],"custom":[]} CSL_BIBLIOGRAPHY Gilbert, Richard, and James Ratliff. Sky Wars: The Attempted Merger of EchoStar and DirecTV (2000). Sept. 2007. escholarship.org, https://escholarship.org/uc/item/38p01826.
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