Deeper Dive—This time might be different for DirecTV-Dish Network

Almost 20 years ago, the FCC and the U.S. Justice Department blocked a proposed merger between DirecTV and Dish Network. A lot has changed since then.

According to the New York Post, private equity firm TPG Capital—which assumed a minority stake and operational control of DirecTV from AT&T earlier this year—is pushing a merger with Dish in hopes of cashing in on its investment. The reported merger talks are fulfilling the prophecy of Dish Chairman Charlie Ergen, who has repeatedly called it “inevitable” for the two satellite TV providers to combine.

Still, if U.S. governing bodies shut down a DirecTV-Dish merger once over antitrust concerns, what’s to stop them from doing it again? According to New Street Research’s Blair Levin, there are several factors that give the reported deal a slightly better than even chance of approval.

Two decades ago, the FCC and DOJ blocked a proposed merger of the U.S.’s two major direct broadcast satellite (DBS) firms on the basis of MVPD availability. In many markets at the time, satellite and cable or just satellite were the only options for consumers wanting a pay TV service, meaning a DBS merger would create an MVPD duopoly or monopoly in several pockets of the U.S.

Jump ahead to 2022 and there are now telco MVPDs like Verizon Fios, virtual MVPDs like Sling TV and DirecTV Stream, and a massive universe of direct-to-consumer streaming services like Netflix, Amazon Prime Video and Hulu.

“If the antitrust authorities agree, the government would likely deem that market significantly more competitive, with the merger unlikely to cause an anti-competitive effect,” wrote Levin in a research note, pointing out that the percentage of Americans who subscribe to SVOD services is now nearly as high as the percentage who subscribed to traditional pay TV at the time of the DOJ’s original complaint.

Levin also sees parallels in the DOJ’s approval of a 2008 merger between satellite radio providers Sirius and XM. At first the agency was concerned about consolidating too much power in satellite radio but then realized that the actual product market definition was in-car entertainment, putting both Sirius and XM in competition with terrestrial radio and MP3 players.

“That judgment represented a significant shift from the FCC’s decision in the 1990’s to create two licenses so to have competition between satellite radio providers, but the changes in technology justified the changes in thinking about the market,” wrote Levin. “So here, technology is changing the market from where it was when more Americans were using dial-up than broadband to access the internet.”

New Street Research also points toward factors like Congressional funds for expanding broadband access, changing regulatory views on streaming as a competitor to satellite TV, and recent approvals like T-Mobile-Sprint that reflect favorably toward a DirecTV-Dish merger gaining regulatory approval.

Still, Levin anticipates there could be pushback against a merger in areas of the country where broadband has yet to take hold and among consumers who find more value in DBS than in multiple streaming services. “In addition, critics will note that streaming services, for the most part, do not provide live sports or news programming, two services that many consumers view as essential,” he wrote.

New Street views other developments such as ongoing antitrust actions against deals like Amazon-MGM and the mid-term elections’ ability to shift the political landscape as possibly throwing a wrench in the plans. But as time goes on and market trends progress, the likelihood of approval increases.

“While we think there will initially be uncertainty about its fate, it is not unthinkable nor irrational to believe the deal can get done,” wrote Levin.