Henderson project stalled by satellite TV merger

Thursday, Jan. 10, 2002 | 10:59 a.m.

Henderson officials are no further along today than they were six months ago in learning whether Hughes Network Systems will build its Spaceway broadband satellite system in Southern Nevada.

And, based on remarks made by key corporate leaders in Las Vegas for the International Consumer Electronics Show this week, executives with Hughes' parent company have bigger issues to resolve before Spaceway can achieve front-burner status.

In late June, Mike Cook, vice president and general manager of Hughes, a subsidiary of Hughes Electronics, was extolling the virtues of Henderson as a possible site for the $1.4 billion Spaceway project, a new satellite system that would allow users to communicate with their computers directly to a satellite without having to go through a retransmission service or hub station.

Cook said Henderson's terrain, dry climate and access to fiber-optic cables made the city a prime candidate for the system and its approximately 75 $41,000-a-year jobs. Early on, Henderson was one of four cities in the running to be Spaceway's home; in June, the field was narrowed to Henderson and Phoenix.

But in late October, Hughes' focus was dramatically altered.

EchoStar Communications Corp., of Littleton, Colo., owner of the nation's No. 2 home satellite television service Dish Network, announced it would buy Hughes, which owns the No. 1 home satellite company, DirecTV.

The $28 billion deal set off fireworks in the satellite television industry because the acquisition would give EchoStar a customer base of about 17 million subscribers and virtually no competition.

Since that announcement, corporate executives, industry analysts, regulators and lawmakers have debated the merits of the proposed acquisition against the antitrust concerns. The debate played on center stage of a CES panel discussion on the satellite TV industry Wednesday with some of the heavy hitters of the industry trading barbs on the deal.

About 200 people -- many of them company employees wearing the logo shirts of Dish Network, DirecTV and Pegasus Communications Corp., DirecTV's largest independent distributor -- overflowed the hall to hear Charles Ergen, chairman and chief executive officer of EchoStar, Eddy Hartenstein, chairman and chief executive officer of DirecTV and Mark Pagon, chairman, president and chief executive officer of Pegasus, discuss the pros and cons of the deal.

Pagon, who opposes the acquisition as anticompetitive, has a customer base of primarily rural customers with no access to cable television that could be hurt if the lack of competition results in higher rates.

A coalition of Western House members also wrote a letter to the Federal Communications Commission and the Justice Department urging the deal to be turned down as anticompetitive. Rep. Jim Gibbons, R-Nev., was among the lawmakers who signed the letter to Attorney General John Ashcroft and FCC Chairman Michael Powell.

In addition to debating the acquisition, Ergen, Hartenstein and Pagon discussed peripheral issues, including an ongoing feud between EchoStar and the Walt Disney Co., which has gone to court to force the satellite company to continue airing its ABC Family Channel.

EchoStar has said Disney tried to raise its licensing fee for ABC Family Channel and Disney threatened to oppose the acquisition.

"We're not going to pay hush money," Ergen said during the panel.

Disney conducted a telephone conference with reporters Wednesday denying the charges.

With the acquisition and the legal brawling a priority, Spaceway has dropped off the radar screen.

After the panel discussion, Ergen and Hartenstein referred reporters to others for information on the status of Spaceway.

"It's not my baby," Ergen said. "You'll need to talk to Eddy."

Hartenstein deferred to a corporate spokesman. Hughes' Cook could not be reached for comment.

"That's about the same thing they've been giving us," said Bob Cooper, Henderson's economic development manager. "The ball's in the court of the FCC and the Justice Department at this point."

Cooper said he isn't troubled by the fact Spaceway is in an apparent holding pattern. He figures once the acquisition issues are resolved, attention will be refocused on whether Henderson or Phoenix will get the project.

"We have to remember that this (Spaceway) is just one of hundreds of issues that Hughes and EchoStar have to consider," Cooper said.

Cooper said he isn't bothered by the fact Gibbons has signed onto the lawmaker letter opposing the deal. He said he recognizes Gibbons has to consider the needs of his constituents and not just the individual municipalities. In fact, he said, if the deal fails to materialize, he expects Hughes would continue as it has and resurrect the original Spaceway plans.

He also acknowledged if Hughes does become a part of EchoStar Phoenix might gain an edge in the location decision, since the company already has other high-tech facilities in Arizona's capital city. But Cooper is confident the decision would be based on each city's attributes and Henderson brings favorable topographic features and a low tax rate to the table.

Still, if the decision were left to Ergen, Henderson could be on the losing end.

"We considered Hendersonville for one of our facilities," Ergen said after the panel Wednesday, mispronouncing the city's name. "We ended up choosing Phoenix instead."