The notion of Dish Network and DirecTV merging was once unthinkable. These two satellite dish competitors had the market for legacy cable access in rural areas sewn up between them. The rise of streaming, and improving internet access to the same places that would have gone with either Dish Network or DirecTV, however, changed the market for these providers. Now, the two are once again looking to consolidate and make perhaps a competitive presence better suited to the new market.
The latest report from the New York Post suggests that the two, who have been engaging in on-again-off-again talks for the last few years, are once again sitting down to the table to discuss combining their operations. Earlier attempts to build a unified operation have mainly been stymied by government operations. In the early 2000s, one such merger attempt was staged, A combined effort from the Justice Department and the Federal Communications Commission squashed that deal over antitrust concerns. Two years ago, the duo came back for a second round. The Justice Department once again came in with concerns about competition, this time urging the company to wait until 5G broadband access was more available in rural locations.
This time, however, there’s an unexpected driver in the merger talks. This round of talks is being spearheaded by TPG Capital, who purchased 30% of DirecTV from AT&T back last February. AT&T has been rapidly divesting assets in a bid to recover from losses and expand its streaming operations like HBO Max.
Perhaps sensing the acute interest at TPG Capital, Charlie Ergen—Dish Network’s head—is said to be dragging his feet on details. With a Justice Department increasingly interested in preventing mergers these days anyway, it may prove a moot point.
It’s not a moot point, however, for Lightshed Partners, who predicted that the merger would ultimately be completed this year. Essentially, Lightshed projects that the regulatory issues that were present back around the turn of the century—and to a lesser extent in 2018—are largely out of the picture. While some reports are suggesting that Justice wants to see Dish / DirecTV hold off until 5G hits the countryside, that may not really be that important.
Thankfully, for the first time in a long time, the digital divide that kept folks in lower population density areas from accessing quality high-speed internet is retracting. T-Mobile’s efforts have been particularly effective, and even Verizon and AT&T are branching out into home internet using wireless connections. Throw in Elon Musk’s Starlink system and rural accessibility is getting better and better. The allure of satellite systems may be fading.
Dish Network and DirecTV are going to have a hard time with this. Even merged, their primary advantage was that they were the provider of last resort. For years, if you wanted cable, and didn’t live downtown somewhere near a Comcast connection or the like, you were just out of luck. Some tried huge satellite dishes, and that worked for a while. Eventually, though, cable companies learned to encrypt their signals and that killed the market. Dish Network and DirecTV brought out mini-satellite dishes, complete with subscription programs and, in some cases, exclusives like NFL Sunday Ticket.
Thanks to internet-based competition, Dish Network and DirecTV may have to merge in order to survive. The portion of customers who have neither access to cable nor decent internet access is in decline and has been for years. Moreover, even when customers have access to legacy cable, they’re increasingly choosing services like Hulu Live TV or Sling TV (owned by Dish).
A combined Dish Network / DirecTV would allow the duo to stop splitting an ever-declining market between them, and instead, possess an ever-declining market as one whole. That may not be enough to save the two companies, but it will likely stave off a shutdown for some time.