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DirecTV questioning

Murdoch, News Corp. grilled on hill over bird buy

WASHINGTON — Even though most analysts believe Washington antitrust cops will ultimately approve News Corp.’s $6.6 billion deal with DirecTV, topper Rupert Murdoch has been put through the paces this week.

In recent days, senators, interest groups and rival EchoStar have expressed deep concerns about the merger to Congress, the Justice Dept. and the Federal Communications Commission.

Call for scrutiny

In a letter, two influential senators asked the Justice Dept. and the FCC on Wednesday to closely scrutinize News Corp.’s deal to acquire a controlling stake in satcasting giant DirecTV. “We believe that this merger raises very important competition and communications policy issues and should be scrutinized carefully by both of your agencies,” Sens. Mike DeWine (R-Ohio) and Herb Kohl (D-Wisc.) wrote assistant attorney general Hewitt Pate and FCC chairman Michael Powell.

The message came the same day Murdoch headed to Capitol Hill for another hearing and one day after EchoStar, the nation’s second-largest satcaster, asked the FCC to block the merger.

Vertical competition issues

DeWine and Kohl, the most senior members of the Senate’s antitrust subcommittee, argued that News Corp.’s 34% stake in DirecTV would create several vertical competition issues. They asked the agencies to examine the merger’s effects on distribution and programming markets and to consider whether it would trigger a spate of mergers and further consolidation as other media companies struggle to remain competitive.

The same questions were raised during a Senate Antitrust Subcommittee hearing Wednesday that focused on Murdoch’s extensive sports holdings and the power he would have to raise prices on cablers and DirecTV subscribers because of that leverage.

“I’m a Cincinnati Reds fan, and I also have DirecTV. I get the Reds on Fox Sports Network; my dad watches them on cable TV … Are you telling me we both should be nervous about this deal, that we’re going to be paying more?” DeWine asked.

Fee increases

Gene Kimmelman of the Consumers Union responded with an emphatic yes, explaining that Murdoch could start hiking prices for sports programming. If cablers refused to pay the higher rate, DirecTV would be the only distributor carrying it, giving him incredible leverage to drive prices up.

“There lies one of our serious concerns,” Kimmelman said.

But Murdoch brushed aside such arguments, pointing to the history of DirecTV’s increases — $4.04 in nine years — as evidence.

“I don’t know what they’re going on about,” Murdoch remarked, referring to cable companies’ track record of fee increases.

Rival EchoStar, however, is not convinced. Last year, EchoStar failed to win FCC and Justice Dept. approval of its attempt to buy DirecTV; News Corp. actively lobbied against the deal.

Working from the premise that turnabout is fair play, EchoStar’s argument against News Corp.’s acquisition of DirecTV should come as no surprise.

In a letter to the FCC, the company argued that the deal will force all TV providers, including DirecTV, to pay higher programming fees.

“In turn, DirecTV could absorb the higher fees into News Corp., while EchoStar and cable would pay a higher fee and be forced to pass that on to consumers,” EchoStar argued.

The company appealed to the agency’s sense of patriotism and concerns about giving an Australian company access to U.S. markets when the same trade opportunities don’t exist there. It also called for an investigation into charges of possible collusion and copyright infringement.

“News Corp. was blocked in 1997 from merging with Primestar, a satellite company, for colluding with cable companies,” the company argued. “News Corp. has every opportunity to do this again.”

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