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Fox, AT&T in carriage marriage

Two pact for digital TV

NEW YORK — AT&T and Fox are hoping Thursday’s 10-year carriage deal sends a loud and clear message to Washington: Forget any plans to regulate digital transmission.

The agreement comes on the heels of a similar pact inked by AT&T and NBC three months ago, and gives Fox Network’s 22 owned TV stations guaranteed carriage on AT&T’s cable systems representing at least 10 million subscribers.

In a deal announced by Chase Carey, co-chief operating officer of News Corp. and the Fox Entertainment Group, and Leo Hindery, president and CEO of broadband and Internet services for AT&T, the 22 stations will also get slots on AT&T’s cable systems for all of the digital signals the stations create between now and 2009.

“The private sector is perfectly capable of accommodating the expansion of digital services so that cable TV subscribers will be able to get any new channels coming from the broadcasters,” says one source close to the negotiations. “Cable systems could suffer tremendous disruption if the government forced them to carry all of the future digital signals before cable operators could comfortably make room for them.”

What’s happening?

None of the Big Four broadcast networks has spelled out specific plans for the kind of services it might conjure up to fill the digital spectrum that technology has ushered in.

Those plans will depend on what the TV audience gravitates toward. If the cost of a high-definition TV set, which now ranges between $5,000 and $25,000, starts coming down, the additional digital bandwidth could get swallowed up by HDTV transmission of “Touched By an Angel,” “The X-Files,” “The NBC Sunday Night Movie” and “Monday Night Football.” If viewers fall in love with HDTV, the prospect of a whole new group of digital broadcast services — like channels devoted to local news, local sports and local programming — could fall by the wayside.

The AT&T deal with Fox follows an agreement struck last month between the two companies in which AT&T’s cable systems secured extended contracts — at reasonable rate increases — for all of the regional sports networks controlled by Fox.

Cable networks spend more money each month in license fees to regional sports networks than to any other cable channel, so AT&T got big benefits from the deal. In exchange, AT&T agreed to buy Fox’s newest cable channel, Health Network, for at least two-thirds of the company’s 10 million subs.

Troubleshooting

The business arrangements being worked out by AT&T and Fox, says one source, are expected to result in a willingness by AT&T to continuing renewing such Fox-owned cable channels as Fox Family, FX, Fox News Channel and FXM: Movies from Fox.

But a spokeswoman for AT&T stresses that an AT&T cable system won’t start taking the digital signals of a Fox O&O in that market until the rebuild has dramatically enlarged the system’s channel capacity. AT&T will not drop a cable network to accommodate the digital signal of an owned TV station, the spokeswoman said.