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Regulators Approve News Corp.’s Takeover of DirecTV

BY Admin  December 22, 2003 at 12:00 PM EDT

The Republican-dominated FCC voted along party lines, 3-2, to allow News Corp. to acquire a controlling 34 percent in DirecTV’s parent company, Hughes Electronics Corp., a subsidiary of General Motors, for $6.6 billion.

Following the FCC’s approval, announced after the market closed Friday, the Justice Department said it would not challenge the takeover by News Corp., one of the largest media and entertainment companies in the world.

Headed by Rupert Murdoch, News Corp.’s diverse media holdings include the Fox Network, Fox News, Fox Sports, FX, along with other international properties.

“News Corporation has a history of taking significant risks and introducing new and innovative media services,” FCC Chairman Michael Powell said. “Enhanced competition will increase pressure to improve service and lower prices for both cable and satellite television subscribers.”

Michael Copps, one of the two Democrats on the commission, opposed the deal, calling it a “green light for the next great wave of media consolidation.”

“Where is the logic — where is the public interest benefit — of giving more and more media power to fewer and fewer players?” Copps said in a statement.

But, as part of the commission’s approval, the FCC imposed several unique conditions designed to curb News Corp.’s ability to discriminate against broadcast and cable competitors by either raising fees for access to certain programs, or favoring its Fox broadcasting network and its cable channels.

Additionally, the FCC mandated that News Corp., for the next six years, must accept arbitration of disputes with cable operators and other satellite providers over fees to carry local Fox stations and regional sports programming. The condition intends to preclude News Corp. from withholding popular Fox network programming from its competitors to lure viewers to subscribe to DirecTV.

News Corp. furthermore agreed not to take off either network programming or its regional sports networks while a dispute was being arbitrated.

Democratic Commissioner Jonathan Adelstein said he dissented because the FCC did not include a condition requiring DirecTV to provide local channels via satellite to all 210 television markets, especially those in rural areas where basic broadcast channels are unavailable.

“We hear a lot of talk about localism,” Adelstein said. “Here, we had the opportunity to do something about it. Instead, we let News Corp. gain all the benefits of this merger while asking them to do nothing in return for rural America, or anyone else for that matter.”

Under the deal proposed in April, News Corp. would acquire a controlling 34 percent stake in DirecTV’s parent company, Hughes Electronics, a subsidiary of General Motors Corp. With 11 million subscribers, DirecTV is the nation’s largest satellite television provider.

“‘Combining Hughes’ exceptional knowledge and history of satellite innovation with News Corporation’s and Fox’s creative talents and record of success in satellite television will result in a company with unmatched entertainment and technological offerings,” Murdoch said in a press statement.

Murdoch said he looked forward to transforming DirecTV into “such a compelling service for viewers that it becomes the logical first choice of all consumers looking for America’s best pay TV.”

Some advocacy groups opposed the acquisition, saying it would drive up the price of cable and satellite services and further reduce competition by reducing the number of media companies.

Consumers Union, publisher of Consumer Reports, warned the deal “not only has the potential to drive up consumers’ cable and satellite TV bills, it also could expand Murdoch’s ability to expand his influence over local media markets under the FCC’s new ownership rules.”

Gene Kimmelman, the group’s senior policy director, said in a press statement, “This merger illustrates everything that is wrong with the FCC’s new media ownership rules, which take a bulldozer to the pillars that support our democracy by destroying competition, checks and balances between media outlets, and diversity of views presented in the media.”

The group did offer some cautious praise of the FCC’s conditions, saying it would help limit News Corp.’s ability to “vastly overprice its programming,” but “it did not do enough to protect consumers from inflated cable and satellite prices.”

With its DirecTV purchase, News Corp. — which already owns several international satellite TV providers — will boast over 22 million subscribers in Italy, Britain and Australia. News Corp. estimates its Asia satellite broadcaster, Phoenix Television, reaches some 350 million viewers.