EchoStar, Hughes Talk Blockbuster on Broadband

Hughes Electronics (GMH - Cramer's Take - Stockpickr) and EchoStar Communications (DISH - Cramer's Take - Stockpickr) have launched a new tactic for getting approval of their proposed merger, plus getting approval for a new satellite.

In a plan unveiled to Wall Street Tuesday, the two home satellite service providers said they would be able to offer local broadcast TV channels to every household in the U.S. should their deal go through, compared with the 61% of Americans who can get local stations via satellite through the companies' current, separate operations.

Furthermore, the companies said they would be able to offer "economical" high-speed Internet access via satellite if they merged, but hinted that they might not be able to offer it at all if their plans were nixed by the Federal Communications Commission or the Justice Department, which are reviewing the deal. Nobody can make a business out of broadband Internet access via satellite, EchoStar CEO Charlie Ergen told reporters Tuesday morning, adding that for the companies to continue their current broadband-via-satellite services, they have to see an economic light at the end of the tunnel. "Absent the merger, we don't," Ergen said, and thus "broadband via satellite will be a long time coming, if ever."

EchoStar and Hughes both rallied Tuesday, EchoStar gaining $1.13, or 5%, to $23.83 and Hughes rising 23 cents to $13.61.

The companies' plan for total TV coverage, which Hughes and EchoStar termed "technically and commercially feasible," is part of their ongoing effort to counter criticism of their deal on antitrust grounds, because the transaction would eliminate competition in the home satellite service market.

Hughes and EchoStar argue that their deal would foster competition rather than eliminate it, because it would strengthen the satellite industry's ability to compete with cable television. In an argument bolstered by Tuesday's announcement, the companies also say the deal would improve the services they would be able to offer in rural markets. Plus, they say, uniform nationwide pricing would give customers in rural areas -- where satellite doesn't face competition from a local cable provider -- protection against price gouging.

"This merger is about more choice, not less," Ergen said.

In addition to merger approval, the new plan would also require FCC approval for a new satellite in addition to the 15 the companies already control between them.