FCC Approves News Corp. DirecTV Buy
(December 15, 2004)--The FCC has approved News Corp.'s purchase of DirecTV. It granted a conditioned approval of the transfer of licenses held by Hughes, which owns DirecTV, to News Corp. In approving this transaction, the FCC imposed several conditions to ensure that such a merger does not threaten the public interest.
By acquiring DirecTV, News Corp. will no longer be solely a supplier of video programming to multichannel video programming distributors (MVPDs) such as cable and satellite TV, but also will be a major MVPD competitor to its programming customers in every area of the country.
The FCC concluded that the transaction is likely to give News Corp. a greater incentive and ability to increase programming prices paid by MVPDs by temporarily withholding or threatening to withhold O&O broadcast TV stations and its RSN programming, both of which are critical to the offerings of MVPDs that compete directly with DirecTV. The FCC said News Corp.’s ability to act anti-competitively to raise its competitors’ programming costs would likely lead to higher prices for consumers and thereby harm the public interest.
At the same time, the FCC determined that the transaction is likely to generate several public interest benefits, including the introduction of new services such as interactive television from DirecTV. The FCC said that consumers should benefit from stronger competition in the MVPD market. It also determined that consumers will benefit, and the FCC’s goals of promoting localism and competition will be furthered, by the company increasing the number of markets that can receive local broadcast channels from their satellite TV provider.
The Commission said that in order for the purchase to remain legal, DirecTV must offer local service packages in an additional 30 designated market areas ("DMAs") beyond what had been previously funded, projected or planned. DirecTV plans to launch its DirecTV-7S satellite in the first quarter of 2004, which it anticipates will allow it to expand from 64 to 100 local markets. News Corp. is required to offer its existing and future cable programming services on a non-exclusive basis and non-discriminatory terms and conditions, for as long as the FCC’s program access rules are in effect. An aggrieved MVPD may file a program access complaint as specified in the FCC rules for any alleged violation of the program access conditions.
The commitments News Corp. has made regarding nondiscriminatory MVPD access to cable programming is extended to any broadcast television station that News Corp. owns and operates, or on whose behalf it negotiates retransmission consent. In addition, the good faith and exclusivity requirements of the 1999 Satellite Home Viewer
Improvement Act, due to sunset at the end of 2005, are extended for as long as the FCC’s program access rules are in effect.
News Corp/DirecTV must enter commercial arbitration for disputes over retransmission consent of its broadcast stations and carriage of its Regional Sports Networks (RSNs).
This condition applies to any RSN that News Corp. manages or in which it owns or holds a controlling interest; and retransmission consent agreements for any broadcast station in which News Corp. owns or holds an attributable interest, or independently-owned Fox network affiliates for which it negotiates retransmission consent. The aggrieved MVPD will be allowed to continue carriage of the broadcast signals or RSN pending resolution.
For disputes regarding "first time" requests for carriage, i.e. the MVPD has never carried the programming before, the MVPD can elect arbitration. However, News Corp. is not required to allow carriage of the programming during the negotiations or arbitration period. This condition expires six years after the release of the final Order.
An MVPD meeting the FCC’s definition of "small cable company" may appoint an agent to bargain collectively on its behalf and that of other small MVPDs in negotiating for carriage of regional sports networks and retransmission consent for broadcast stations with News Corp. News Corp. may not refuse to negotiate with such an entity.
The designated collective bargaining entity will have all the rights and responsibilities granted by all of today’s conditions. When dealing with small MVPDs with fewer than 5,000 total subscribers, News Corp. must either elect "must-carry" status or negotiate retransmission consent for its owned and operated stations without any requirements for cash compensation or carriage of programming other than the broadcast signal.
Federal Communications Commission