he stakes in the battle for the nation's televisions are gargantuan — subscription TV generates revenue of $60 billion a year. So the players need to be gargantuan as well, some industry executives argue.

Thus the big are getting bigger in order to prepare for a clash of the titans. The two big satellite television companies, EchoStar Communications (news/quote) and DirecTV, are trying to consolidate to create a single company with nearly 17 million subscribers. At the same time, the Comcast Corporation (news/quote) has agreed to buy the cable television unit of AT&T (news/quote), a move that would make it the largest cable company with more than 22 million subscribers.

The two new companies that would emerge, AT&T Comcast and EchoStar, would control 40 percent of the television households in the United States.

Nervously watching on the sidelines of battle between big cable and big satellite are the 1,200 smaller independent cable operators that serve 12 million homes, about 17 percent of cable subscribers.

The independent operators, many in small rural markets, say the talk about convergence and national competition neglects a fundamental fact: competition is local. They fear that federal regulators are missing the trees for the forest.

"What we fear is policy makers are going to take their eye off the ball because they are going to be focused on these high- profile media mergers and not the smaller markets," said Matthew Polka, president of the American Cable Association, an organization of independent cable operators that opposes the EchoStar and DirecTV merger.

The chief executive of EchoStar, Charles Ergen, has been trying to paint the competitive landscape as one of convergence — the convergence of cable and satellite markets, the convergence of television and Internet, and a convergence of fractured local markets into one national market. But state officials agree that television, like politics, is local. Attorneys general from several states have joined the debate, discussing how to block the EchoStar and DirecTV merger.

Small cable companies cast themselves as mom-and-pop stores that come under siege when Wal-Mart (news/quote) rolls into town with lower prices and better distribution networks. In this case, the Wal-Marts are DirecTV and EchoStar, which distribute pizza-size satellite dishes that can receive hundreds of channels.

But unlike the retail industry, the telecommunications realm is closely regulated. The Justice Department and the Federal Communications Commission are also weighing the merits of the satellite deal.

The satellite companies say size will make them more competitive and allow them to build the infrastructure for high-speed Internet access and interactive television, all of which require extensive initial investment. They also say that rural customers will benefit from competition in urban areas through a nationwide pricing plan.

But small cable operators say the cost-effectiveness that makes satellite operators better able to compete with the likes of AT&T Comcast and AOL Time Warner (news/quote)'s cable operation will undermine small cable companies.

Despite the local nature of competition, satellite operators can leverage their national reach and size in ways local cable operators say they cannot. EchoStar, for example, offers one promotional package of 100 channels for $9 a month to new customers, compared with its regular rate of $30.99.

"They are competing at a price below the cost," said Ben Hooks, chief executive of the Buford Media Group, a cable company with 7,000 subscribers that is based in Tyler, Tex. "How can they do that? Tell me what is going on."

Mr. Hooks said his programming fees alone, without taking into account the costs of the infrastructure, exceed $9 a month. "If you are going to advantage satellite operators to the point where it wipes out competition, what has it accomplished?" he said.

In all of this, customers do not seem to be suffering, at least not yet. The quality and variety of satellite television has forced cable operators to scramble to upgrade their systems by installing digital networks. Customers are getting more channels, more diverse programming and more choices. Satellite operators have also put pressure on the cable rates in the markets where they compete.

But rural cable operators say the long-term consequences of consolidation will create a landscape where smaller players will be squeezed out and viewers will be left with fewer choices.

Many are already feeling the pinch as satellite television has eaten into cable subscriber bases.

Small operators are confronted with a choice of losing subscribers or upgrading their equipment. But they say small and sparse subscriber bases in the rural areas make it hard to recuperate the upfront costs of upgrading. A rural operator may get only 30 or so households for each mile, compared with 150 or more households in an urban area.

In addition, small cable operators say they are feeling the brunt of the sharp increases in programming costs. The cost of the ESPN channel, for example, has nearly doubled in five years, to nearly $2 a subscriber, making it one of the most expensive basic channels.

In addition, most national television channels are controlled by a handful of companies — AOL Time Warner, Walt Disney, Viacom (news/quote), General Electric (news/quote), Vivendi Universal (news/quote) and the News Corporation (news/quote) — many of which have financial ties to pay-TV companies.

The largest cable and satellite companies also have enough clout to get discounts from programmers. Smaller operators say they cannot get the same discounts, and as a result, they pay as much as 40 percent more for programming.

Cable rates have jumped an average of 35 percent since 1996, so some of the costs have been passed on to the customers. But the cable companies say they have also had to absorb the higher fees, which has eroded profit margins.

The Comcast-AT&T merger will only make it worse, the rural operators contend. Small rural cable companies rarely compete head-on with the large companies because they are in different geographical areas.

But the economics of the industry can be affected by the actions of the industry leader. Comcast executives say their programming costs will go down after the merger since they can take advantage of AT&T's better rates. Small cable companies say in turn, their fees will be increased to make up the difference.

The squeeze of increasing programming costs and an eroding subscriber base is getting to be too much for some operators. Many rural operators have sold out in the last several years. Independent Brokerage, a Denver company that focuses on selling rural cable companies, has seen the number of clients trying to sell their cable systems double this year compared with last year.

"We've had more listings of rural cable systems than we have ever had," Cindy Lyle, a partner at Independent Brokerage, said.

"They are losing subscribers monthly," Ms. Lyle said. "They have come to a crossroads. They either need to upgrade and become digital to compete. They can stay and run the company. Or they can sell."

A cable system in Arkansas lost 100 of its 1,200 subscribers in one month. That prompted the owner to sell the business a year ago.

One trend may be for rural cable operators and satellite broadcasters to join forces. A weakness of satellite broadcasting is its lack of local channels. Limited satellite spectrum means that currently EchoStar and DirecTV broadcast local channels in about 40 of the 210 defined television markets nationwide, covering about 60 percent of the nation's population.

But local programming is important in winning subscribers, executives say, particularly in rural areas. Some businesses are creating hybrid systems of satellite television and local cable. Cable Direct, in Sikeston, Mo., has purchased rural systems over the last year and offered a combination of a satellite dish complemented with local channels.

"This is the wave of the future," Ms. Lyle said. "If you can't beat them, join them."