Murdoch to consider pledge with Fox stations

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Under pressure from key senators, News Corp. chairman Rupert Murdoch said
he'd consider making extra concessions to the government to obtain permission to
gain control of DirecTV Inc.

He had already pledged not to charge cable MSOs more for News Corp.-owned
cable networks than he will DirecTV.

Wednesday, he agreed to consider making the same nondiscrimination pledge
about deals to carry News Corp.-owned Fox TV stations.

"That's a reasonable request, but I would want to study it," he said during a
Senate Antitrust Subcommittee hearing on the $6.6 billion deal. "I would have to
see how that would apply to competitors ABC, CBS and NBC in the broadcast-network business."

"It's a different world" than cable, he added.

Murdoch's professed willingness to consider those terms has been simply a
political way to parry lawmakers' aggressive questions, but it's unlikely to be
forgotten.

For one, Wisconsin Sen. Herb Kohl, the Antitrust Subcommittee's ranking
Democrat, has concluded that those terms are necessary after cable operators
convinced him that Fox would have the power to deny local cable operators both Fox
cable and broadcast channels by moving all News Corp. programming to DirecTV
unless they pay drastically higher prices.

"This combination of content holdings with worldwide distribution will create
a media powerhouse of virtually unmatched size and scope," Kohl said.

"The overriding fear," he added, "is that News Corp./DirecTV will take
advantage of their global distribution system and must-have programming to raise
prices and squeeze out competition."

Robert Miron, chairman of Advance/Newhouse Communications, said cable
companies would lose customers if they refused to pay higher prices for the
combination of Fox cable sports and news networks and local channels.

Without adding local stations to the anti-discrimination pledge, News Corp.
could use broadcast retransmission-consent contracts to bargain for higher prices
for all of Murdoch's programming, he said.

"We believe this transaction will give him added market power to bring higher
prices to consumers," Miron added.

Miron was speaking on behalf of several cable companies, including Cox Communications Inc., Cable
One Inc. and Insight Communications Co. Inc.

Murdoch scoffed at the notion of victimizing cable firms, which typically
control 80% of the pay TV customers in a market.

The companies Miron represents also own major broadcast stations,
market-dominating newspapers and cable systems, he said.

"We're not dealing with a bunch of virgins here," Murdoch said. Denying
programming to four-fifths of a market "would be totally self destructive," he added.

Kohl, seconded by Democrat Patrick Leahy of Vermont, said News Corp. must
agree to:

  • Make all of its cable and broadcast programming available to cable
    operators and EchoStar Communications Corp. on the same terms that DirecTV will get.
  • Shun "unreasonable" price increases in the cost of News Corp. programming.
  • Provide News Corp. programming rivals with equal access to DirecTV with regards
    to channel placement, tiering and pricing.
  • Set specific dates for rollout of local broadcast carriage and broadband
    access in specific markets.

Republican Mike DeWine of Ohio, the committee's chairman, didn't call for
specific conditions but did join with Kohl in asking the Federal Communications Commission and the Department of Justice to scrutinize the deal.

"This acquisition raises important vertical-competition issues worthy of
serious consideration," they wrote in letters Wednesday to FCC chairman Michael
Powell and DOJ antitrust chief R. Hewitt Pate.

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