Vive la competition

With his recent buying spree of American movie and television companies, Jean-Marie Messier has turned Vivendi from bit player to entertainment superstar. The sudden emergence of this French media powerhouse could have repercussions for American consumers far beyond the possibility of an all-Jerry Lewis channel.

They could be good repercussions. Although Vivendi’s acquisition last year of Universal Studios and its new $10.3 billion deal for the television and film units of USA Networks have drawn the most attention in the business world, it is the purchase of a major stake in the satellite television provider EchoStar that could have the greatest impact at home. It could, after years of unfulfilled promise, bring true competition to pay TV.

Specifically, it could bring competition, in both price and services, to cable TV. After a fast start a decade ago in luring subscribers away from cable, satellite has spent the last few years on a plateau, its only real growth coming from high-income households willing to pay for satellite’s extensive offerings and from rural areas – like much of Maine – that cable is unwilling to wire. It is telling that since Congress passed the Telecommunications Act of 1996, designed to increase competition, cable rates have soared nationally by an average of 35 percent.

Satellite’s hang-up has always been its lack of programming ownership. While several of the largest cable companies are parts of media conglomerates that include production facilities, satellite has had to buy its programming on the open market, with little bargaining power. The combination of EchoStar with Barry Diller’s USA Networks holdings (which include the highly popular Sci-Fi Channel and a piece of the acclaimed and lucrative “Law and Order” franchise), plus the Universal movie and TV catalog, gives satellite for the first time not just a delivery system but something of value to deliver.

It also gives satellite the potential to challenge cable in size. A proposed merger between EchoStar and DirecTV, the two largest American satellite companies, has been held up by EchoStar’s lack of financial backing. That no longer is an issue and the result could be a satellite giant – the nation’s largest subscription TV provider – with global reach and limitless resources. How much downward pressure this will place on the cost of pay TV remains to be seen, but EchoStar’s aggressive and effective marketing of 100 channels for $9 per month, a fraction of what cable charges, may be an indication.

Should the EchoStar/DirecTV merger fail on anti-trust grounds, the new spirit of international competition should survive. Another suitor for DirecTV is the Australian Rupert Murdoch, a businessman at least as aggressive as Mr. Messier and an even more ardent believer in the future of satellite. Mr. Murdoch dominates the satellite market in Europe and Asia, places where the downside of satellite in this country – the political and technological obstacles to carrying local stations and providing interactive services and high-speed Internet – has long been solved.

It has been nearly six years since Congress politely asked the American telecommunications industry to kindly get competitive. Progress has been spotty in some sectors, but nonexistent in television. Now it appears competition will come as a French import and, at nine bucks a months for 100 channels, who cares if one is devoted to continual showings of “The Nutty Professor”?