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Murdoch Promises Lawmakers the Sky

Media giant News Corp.'s imminent control of DirecTV could bring viewers a wealth of high-tech media riches; or, the merger could end up like a bad reality program, witnesses told the House Judiciary Committee.

News Corp. boss Rupert Murdoch told the lawmakers May 8 that the winner in the merger will be the American media consumer with better prices, more local programming, longstanding commitment to diversity and advanced high-tech services like HDTV, interactive TV and e-commerce.

But critics fear the new company will use its newfound distribution power to favor its own programming at the expense of competitors', and will use its programming arsenal to boost DirecTV at the expense of rival multichannel providers.

Neal Schnog, president of Uvision (a small Oregon cable company) and vice-chairman of the American Cable Association, said News Corp.'s control over the distribution of its channels-including tactics such as bundling channels and gag orders on financial terms-could allow the media behemoth to quash cable competitors and direct viewers to its new DirecTV DBS acquisition.

Schnog likened the viewing public to the hoodwinked competitors in the Fox offering "Joe Millionaire," where the ugly truth about is eventually revealed.

And he wasn't impressed by News Corp.'s promise, in its FCC application, to abide by conditions to play fair.

"The federal government should not let this fox in the DirecTV henhouse," he said. "Competition in smaller markets and rural areas will remain easy prey. If the federal government accepts these meager constraints, consumers throughout America will be the ones outfoxed."

The deal would give News Corp. 34 percent of DirecTV parent Hughes Electronics. Murdoch told the lawmakers the deal would bring more local-into-local programming, despite the hurdles of cash and technology.

"One of the first enhancements DirecTV subscribers will enjoy is more local television stations," Murdoch said, although he stopped short of promising local channels in every market.

Most committee members of both parties praised Murdoch for his innovation and competitive spirit, taking on entrenched industries and rivals such as CNN. And Murdoch noted that News Corp. is only the sixth largest media enterprise in America, earning only 2.8 percent of the revenue in that vast market.

Former Federal Trade Commission Director of Competition Kevin Arquit joined several lawmakers in gushing over Murdoch and dismissing fears of anticompetitive practices, suggesting News Corp.'s past behavior foretold a future friendly to consumers.

"If anything, News Corp.'s history of being a maverick, shaking up business segments it enters, suggests that competition may be increased," he said. "Whatever industry participants or others may think of such market behavior, or whether it causes political delight or dismay, antitrust policy looks favorably on maverick firms, because they engage in the unexpected. Uncertainty spurs competition."

Murdoch assured the panel his ways would continue.

"Innovation and consumer purpose is part of our company's DNA," he said. "We have a long and successful history of defying conventional wisdom and challenging market leaders whether they be the big-three broadcast networks, the previously dominant cable-news channel or the entrenched sports establishment."

The committee took no action on the merger, which requires FCC approval.