US: Murdoch's News Corp is cleared to acquire DirecTV

Media mogul Rupert Murdoch on Friday cleared the final hurdles to fulfilling his long-sought dream of acquiring DirecTV satellite service, a coveted pipeline into millions of American television sets

Taipei Times
Sunday, December 21, 2003

Media mogul Rupert Murdoch on Friday cleared the final hurdles to fulfilling his long-sought dream of acquiring DirecTV satellite service, a coveted pipeline into millions of American television sets.

The Federal Communications Commission (FCC) and antitrust enforcers approved the US$6.78 billion plan by Murdoch's News Corp, home to movie studios and the Fox broadcast network, to gain control of the No. 1 US satellite television provider, with its 12 million subscribers.

The FCC voted 3-2 to approve the deal with conditions aimed at ensuring the television titan does not bludgeon cable and satellite rivals who also want to offer their customers News Corp's popular network and cable programming.

"Cable and satellite customers will continue to have access to programming from a diverse source of media outlets," said FCC Chairman Michael Powell. "With these conditions, I believe the transaction serves the public interest."

Powell was joined by Republican Commissioners Kathleen Abernathy and Kevin Martin voting for the deal. The two Democrats on the panel dissented, citing fears of higher prices for consumers and concerns about limits on DirecTV's plan to offer local channels in more markets, among other issues.

The Justice Department's antitrust division on Friday also signed off on the transaction without adding any additional conditions to the approval.

The complicated deal calls for News Corp, which runs the Fox broadcast network and 20th Century Fox movie studios among other properties, to buy a 34 percent controlling stake in DirecTV's parent, Hughes Electronics Corp.

News Corp chairman Murdoch tried to buy DirecTV before, negotiating in 2001 but lost out to satellite rival EchoStar Communications Corp. When regulators blocked that deal last year, the Australian-born mogul won a second chance.

"We want to make [DirecTV] such a compelling service for viewers that it becomes the logical first choice of all consumers looking for America's best pay TV," said Murdoch and Chase Carey, who will become the chief executive of Hughes.

The companies plan to close the deal in the next few days, the executives said in a joint statement.

The approval came despite complaints by consumer groups that the deal would lead to higher prices and fewer choices. That resonated to some extent at the agency where commissioners attached some restrictions but didn't satisfy all.

In protracted disputes with rival multichannel television providers over carrying News Corp's Fox broadcast network, a neutral third-party will be empowered to resolve the fracases.

However, if either side is unhappy, they can appeal to the FCC. The arbitration requirement expires after six years.

Cable companies and programmers typically negotiate terms for carrying the local channels and deals can include some compensation or an agreement to carry additional cable channels. If no pact is reached, programmers sometimes pull channels from the cable system, often forcing a deal.

The FCC barred News Corp from withholding its local Fox stations and regional sports channels during the dispute resolution process.

The majority of FCC commissioners were concerned that cable subscribers could be encouraged to switch to DirecTV to get the channels that may have been pulled during a dispute, like regional sports or the local Fox broadcast station.

Additional conditions include requiring the conglomerate to offer new and existing cable programming on nondiscriminatory terms and conditions to rivals and permit small cable providers to collectively bargain for programming. DirecTV will also have to offer local channels in 130 markets by end of next year.

However, the conditions were not enough to satisfy all.

"News Corp could be in a position to raise programming prices for consumers, harm competition in video programming and distribution markets nationwide, and decrease the diversity of media voices," said FCC Commissioner Jonathan Adelstein.

Adelstein was perturbed that DirecTV will not offer all consumers local channels through the satellite system, noting that all rural consumers will not receive those channels because the company will use an antenna.

"For those who live in outlying rural areas, tough luck," he said. Adelstein, who at one point was considering voting for the deal, also complained that the arbitration requirement went away after six years.