DirecTV Program Exclusivity Curbs Sought at FCC
Some cable and satellite rivals want program access restrictions put on DirecTV in its deal to shift control to Liberty Media (CD Dec 26 p1), they said in comments to the FCC on the $11 billion asset swap. The American Cable Assn. (ACA), the National Cable TV Cooperative (NCTC), RCN and EchoStar want curbs on anticompetitive behavior, especially in exclusive deals for sports. A history of more than a decade of cooperation between Liberty Chmn. John Malone and News Corp. Chmn. Rupert Murdoch, “undercuts their claim that transitioning DirecTV from one partner (News Corp.) to the other (Liberty Media) ends this relationship in any real matter,” said EchoStar, perhaps the harshest of commenters to file by late Fri. with the Commission.
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DirecTV rival EchoStar filed 42 pages of analysis on the Liberty acquisition, arguing that unless the FCC imposes specific conditions, Liberty/DirecTV will become too powerful in multichannel video. Created to avoid FCC monopoly rules, Liberty lost significant market power after cutting its ties to TCI, EchoStar said. By rewriting conditions that News Corp. accepted when acquiring DirecTV, DirecTV/Liberty is avoiding a commitment against vertical integration, EchoStar said. The Commission should “scrutinize closely any proposed conditions to ensure there are not loopholes” that Liberty can “exploit” with its “rediscovered market power,” said EchoStar, noting that conditions imposed on News Corp./DirecTV don’t translate well to an acquisition by Liberty. But those conditions that do fit should apply until News Corp. and Liberty “demonstrate conclusively that this transaction eliminates the ties” that link News Corp. and Liberty, EchoStar said. If Liberty is to acquire DirecTV, it should have to divest its Puerto Rican properties, EchoStar said.
Liberty’s proposal to accept conditions that the FCC previously put on DirecTV is a good first step toward ensuring the DBS company won’t cut pay-TV rivals out of “must-have” content, said the ACA, RCN and others. The ACA called the Liberty plan a “notable concession.” RCN said it’s “pleased to note that applicants have implicitly conceded that the transaction does not in any way lessen the need for imposition of the same program access conditions.” More remedies are needed, filings said. At stake is whether the FCC should put broader conditions on transfer of the 38.5% of DirecTV to Liberty from News Corp. than were attached to News Corp.’s 2004 purchase of the stake. The 2004 limits bar News Corp. from withholding carriage of certain regional sports networks (RSNs). The companies involved in the deal said they will follow those conditions at the 3 RSNs being transferred from News to Liberty, but said no further conditions are needed (CD Jan 30 p14) since Liberty has far fewer video investments than News Corp. Pay- TV rivals disagree and say Liberty shouldn’t be able to withhold other popular content.
RCN said the Commission should weigh extending program access rules to sports deals other than RSNs. To justify more controls, ECN cited DirecTV’s recent agreement to carry Major League Baseball’s Extra Innings out-of-market game package. “It is also important to preclude the combined entity from entering exclusive carriage agreements with other networks for ‘must-have’ programming that is essential for competition but is not duplicable,” RCN said: “It can only be expected that the aggressive history of Liberty in using programming as a competitive tool will only exacerbate this trend.”
The FCC should ban exclusive deals with the 12 RSNs that News Corp. plans to keep after transferring 3 to Liberty, because such networks “will continue to be operated using substantial amounts of shared programming and facilities,” NCTC said: “Such commonality of operations and identity between and among the RSNs transferred to Liberty and remaining with News Corp. warrants the application of the same conditions to all these networks.” ACA wants the program exclusivity ban extended to Discovery Networks, so that Liberty’s large stake in the programmer doesn’t cause it to strike exclusive carriage deals with DirecTV. The FCC should keep the retransmission consent limits that the agency placed on DirecTV in 2004, which helped small cable operators get better carriage deals with Fox TV stations, ACA said.
The NAB wants the FCC to ensure DirecTV still offers local-into-local in all its 210 markets before 2009, as it said it would when News Corp. bought DirecTV from Hughes. DirecTV cited conditions “imposed” on it by the FCC but NAB noted that DirecTV/News Corp. “offered” the local-into-local condition. N.D. Broadcasters said it believes DirecTV wants to invest in HD programming and not in local-into-local outside large markets.