News Corp.'s p'gramming rivals allowed onto satcaster

WASHINGTON — The Federal Communications Commission plans to tie Rupert Murdoch’s hands — albeit loosely — when the agency greenlights a merger between News Corp. and DirecTV as expected later this month.

A source familiar with the final details of the review process said the $6.6 billion deal would be approved with at least one major condition: that News Corp.’s programming competitors maintain fair access to DirecTV.

The source would not elaborate about the details of such a condition. But in recent weeks the agency has been weighing several options designed to address concerns about handing Murdoch a 34% controlling interest in the nation’s largest satcaster. One option under consideration is the use of an outside arbitrator to settle disputes between the company and cablers during programming negotiations.

The merger requires the approval of the Justice Dept. and FCC, which are investigating potential antitrust and public interest concerns. FCC officials are hoping to wrap up work on the linkup by the end of the year and avoid allowing the issue to slip into January.

If approved, deal would mark the first time a programmer such as Fox has owned a U.S. distribution system, controlling the way in which content reaches viewers. Corporate rivals and consumer watchdogs complain the powerful combo, which would include the Fox television network, Fox News Channel, FX cable channel and 20th Century Fox studio, would give the new media giant too much leverage over programming and pricing, enabling it to gouge competitors or withhold such popular programming as pro football games or “The Simpsons.”

In congressional testimony and in several letters to the FCC, Murdoch and other News Corp. officials have promised to charge competing cablers and satcasters the same price it charges DirecTV for airing the company’s networks. But critics believe that the pledges don’t go far enough and want the merger to hinge on the new company’s commitment to maintain a level playing field.

Last week the deal cleared another major hurdle when Hughes Electronics, parent company of DirecTV, assured several government agencies it would and could address national security concerns about its foreign-based ownership. (Even though Murdoch is a naturalized U.S. citizen, News Corp. is an Australian company.)

The Dept. of Homeland Security, FBI and the Justice Dept. weighed in last week, worried the deal would place DirecTV’s five satellites under control of a company based outside the United States, effectively providing a ready means of spying on U.S. citizens and facilities.

“As the (FCC) is aware, the DOJ, FBI and DHS have taken the position that their ability to satisfy their obligations to (protect) the national security, to enforce the laws and to preserve the safety of the public could be significantly impaired by transactions in which foreign entities will own or operate a part of the U.S. communications system, or in which foreign-located facilities will be used to provide domestic communications services to U.S. customers,” read a letter filed at the FCC by the law enforcement agencies.

In response, Hughes promised to form an audit committee of the newly merged company composed entirely of U.S. citizens that would have exclusive jurisdiction over company policies related to U.S. national security issues. The new company would provide an annual report on these policies to the agencies.

The DHS, FBI and Justice Dept. reps wrote the FCC last week to accept Hughes’ proposal, but only if the agency makes it a condition of the merger.

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