What Market are Dish Network, DirecTV In?

Are DirecTV and Dish Network competitors in the subscription video entertainment business, or contestants in the satellite TV business? The answer might actually matter.

Antitrust regulators always are forced to decide what a relevant market is when considering proposed mergers and acquisitions. Back in 2002, a proposed merger of DirecTV and Dish Network was blocked by the Federal Communications Commission and Department of Justice because of antitrust concerns. At the time, the relevant market was deemed to be “satellite-delivered video entertainment,” in essence.

Whether that still is the relevant market could become an issue if another merger of the two satellite companies is considered. The new issues are a dramatic drop in cable TV market share, a halt to satellite market share growth and entry of telcos into the business.

Then there is the clear sense that alternatives such as streaming delivery are about to start displacing all the traditional providers. As a rule, one might argue, it is a waste of time and money to spend too much effort adding regulatory burdens for declining businesses.

Some might argue that was basically what happened with the Telecommunications Act of 1996, the first major reset of U.S. communications law since 1934. The theory was that breaking down barriers to provision of voice services would spur innovation in the business.

One might argue the theory worked, enabling cable operators to seize huge chunks of the voice business. One might also argue the focus of innovation also shifted to the Internet, something unforeseen by regulators and lawmakers.

That’s the same sort of context that could become an issue in further consolidation in the satellite portion of the video entertainment business.

In other words, regulators would have to take another look at the relevant market parameters if

a DirecTV-DISH merger were to be proposed again.

What might have been viewed as an unwanted creation of a monopoly satellite video provider at one point in time might not make so much sense in a mature, perhaps saturated video enterainment business where the clear market leader is losing share, satellite share has stopped growing and powerful new competitors are taking customer share.

Also, there is the sense that the economic fortunes of the video entertainment business are changing, in any case, in ways that could threaten all providers of traditional subscription video entertainment services.