As Satellite News went to press, no announcement had been made regarding the fate of Rainbow DBS, the business unit of Cablevision that offers direct-to-home (DTH) satellite television services under the Voom brand name. A deadline of March 31 had been set for Cablevision and its Chairman, Charles Dolan, to come to terms on selling the Voom assets not included in the deal Cablevision has with EchoStar Communications Corp. (SN, March 14). A phone call to Cablevision April 1 was not returned.
However, the passing of that deadline could be tied to a recent petition submitted by Voom HD LLC, the company formed by Dolan to keep the Voom brand alive, and a group known as the Association of Consumers to Preserve and Promote DBS Competition, headed by Jerome Sandler, to the Federal Communications Commission (FCC) to block the deal Cablevision has with EchoStar. Cablevision agreed to sell Voom’s lone in-orbit asset, Rainbow-1, and certain ground assets to EchoStar for $200 million earlier this year (SN, Jan. 24). If Voom HD LLC’s petition is granted, it could open another door for Dolan to acquire the Voom business, as well as the satellite that would otherwise be sold to EchoStar.
In the 53-page petition, dated March 28, Voom HD LLC and the association called on the FCC to deny an application that would grant, “among other things, the authority to operate a Direct Broadcast Satellite (DBS) space station on 11 channels at the 61.5 degrees West Longitude orbital location.” The petition argued that the proposed sale, which included the Rainbow-1 satellite and certain Rainbow DBS ground assets, “would conflict with the FCC’s well-established policy of fostering competition and new entry among DBS service providers.” The petition further argued that granting regulatory approval of the sale “would directly conflict with the FCC’s specific finding that it would disserve the public interest for EchoStar to acquire any additional DBS capacity at 61.5 degrees West Longitude.”
The petition argued that granting EchoStar, operator of the Dish Network DTH service, a license to operate at 61.5 degrees West would hurt competition in the television industry. The application noted that if the FCC granted EchoStar the DBS license it needs to operate Rainbow-1, it would give EchoStar “effective control of more than 30 of the 32 transponders available” at that orbital slot and would effectively take Voom out of the market, leaving the approximately 40,000 Voom subscribers without service and reducing the companies competing in the DTH market to two. “The proposed transaction thus indisputably conflicts with the agency’s stated policy of promoting competition in the DBS marketplace,” the petition stated.
The petition goes on to cite FCC ruling that stated the agency’s “public interest goals would be furthered by prohibiting the two leading DBS operators from bidding on the licenses for the two remaining transponders at that orbital location” in its Auction 52 Order in October 2004. “To better ensure that a competitive marketplace could develop, the FCC further restricted EchoStar and DirecTV from acquiring, owning or controlling these licenses within four years of the auction,” the petition added.
Voom and the association continue in the petition to note that “Just four months removed from the issuance of that order, EchoStar seeks the FCC’s permission to acquire 11 transponder authorizations at the very same orbital location the Commission found in [the Auction 52] proceeding to be uniquely situation to enhance competition.
“We are perplexed that a member of the board would file an objection at this time after the Cablevision board of directors had already voted to approve the deal,” EchoStar spokesman Steve Caulk told Satellite News. “Nonetheless, we will continue in our efforts to complete the deal.” Caulk declined to comment on the merits of Dolan’s petition.
“I think that Dolan himself is in good faith attempting to save [Voom],” Eileen McGowan, product manager of FCCFilings.com, told Satellite News. “I think that this is not supposed to be a delay tactic. I think he generally is trying to preserve this service and the fight we have seen played out in the press already has shown that he really is trying to make this thing go and genuinely believes it can and should survive.”
A Bidding War Looming?
In addition to voicing objections to EchoStar gaining access to the licenses necessary to operate the Rainbow-1 satellite, the petition also offered a glimpse as to what Dolan is willing to pay to acquire Voom from Cablevision.
According to the petition, “Voom HD is in the process of obtaining financial commitments from its controlling investors in the amount of $400 million in cash and credit and it stands ready, willing and able to compete for the purchase of Rainbow DBS.”
That amount is twice the amount of the deal Cablevision currently has in place with EchoStar for Rainbow-1 and certain other ground assets. But whether Dolan will be able to price EchoStar out of the market if the FCC petition fails remains one of many unanswered questions currently surrounding Voom.
McGowan said a bidding war for the Voom assets that Cablevision agreed to sell to EchoStar cold be looming. “It would be in EchoStar’s best interest to get [Rainbow’s DBS license] but I am not sure whether that plus the Rainbow-1 satellite is worth” $400 million.
Adding to the confusion (or perhaps a bit of clarity) was an announcement that Wealth TV launched an HD channel on Voom last week, suggesting that maybe Dolan and Cablevision reached an agreement to allow Dolan to acquire Voom after all.
But at least one Wall Street analyst was not optimistic of Voom’s survival. In a March 31 equity research report, Vintage Research LLC analyst William Kidd wrote, “we believe the FCC will not support Dolan’s position, which should effectively end Voom.”
–Gregory Twachtman (Steve Caulk, EchoStar, 303/723-2010; Eileen McGowan, FCCFilings.com, 301/347-3431; William Kidd, Vintage Research, 646/472-5228)
