After weeks of soothing Washington decision-makers in private, media baron Rupert Murdoch this week pitches them publicly to win support for his $6.6 billion bid to acquire controlling interest in DirecTV.
Whether asking the U.S. government to waive prohibitions on owning TV stations and a newspaper in the same town or circumventing restrictions on foreign ownership of broadcast licenses, the Australian-born head of News Corp. has never been shy about seeking, and usually winning, regulatory favors.
This time, special treatment doesn't appear necessary, but he isn't taking any chances. For good reason, this acquisition makes a lot of people in Washington nervous. It would be the first marriage of a U.S. pay-TV distributor and a major broadcast network, a combination that many say would give Murdoch unprecedented leverage to favor his own programming channels and TV stations over competitors or boost the price that rival distributors pay for his channels.
Murdoch is scheduled to appear before the House Judiciary Committee May 8 to explain the bid and assure lawmakers that he will treat rivals the same as his own properties. The deal will also be examined during a Senate Commerce Committee hearing on the state of the multichannel industry Tuesday. The Senate Antitrust Subcommittee is also expected to hold a hearing on the deal.
Congress has no official role in approving the deal, but Capitol Hill jawboning can be a strong influence on regulators. Rulings by the FCC and antitrust regulators expected by year end.
Recognizing that the deal would cause jitters, News Corp. offered a concession when it announced last month, and Murdoch and Rich Wagoner, chief executive of DirecTV owner GM, immediately made rounds in Washington to make face-to-face appeals to policymakers.
News Corp. has already given regulators a two-page pledge to follow cable program-access rules, and more details will follow when a formal application is filed with the FCC. The company also is expected to play up consumer benefits of the merger, including demonstrations of interactive services introduced on its U.K. BSkyB DBS service.
Regulators have acknowledged that concerns over program discrimination will be the primary focus of their reviews. "We'll be looking at content-related issues," FCC Chairman Michael Powell told reporters last week. He called Murdoch's preemptive concession a "helpful step."
Sen. Conrad Burns (R-Mont.), chairman of the Senate Communications Subcommittee, said he is "opti- mistic" about Murdoch's offer but wants to assess the impact of the deal on rural communities, particularly DirecTV's carriage of stations in those areas, before reaching a decision.
Murdoch will face plenty of skeptics on Capitol Hill. Among them, Rep. John Conyers (D-Mich.), the Judiciary Committee's ranking member. Commenting on prospects for a Murdoch/DirecTV union 18 months ago, he wondered aloud whether News Corp. could resist the temptation to favor its Fox programming.
If the DirecTV deal is approved, additional mergers between networks and major cable operators or EchoStar are sure to follow. Consequently, they will use as a template for future deals the program-access rules and anti-discrimination requirements Murdoch will be required to follow.
Before News Corp. formally announced the deal and unveiled its program-access promises, Consumers Union was vowing to fight the deal. "Consumers Union fears that a News Corp. purchase of DirecTV is likely to lead to higher prices for both satellite TV and cable TV," complained Gene Kimmelman, the group's Washington policy chief. Rather than cutting the price of DirecTV to compete with EchoStar and cable operators, Kimmelman predicted, News Corp. will increase programming costs to both cable and DBS provider.
News Corp. is currently lobbying the FCC to increase the 35% cap on a TV-station-group owner's household reach so that its Fox Television Stations can buy more stations. Murdoch has drawn the ire of consumer groups for building a vertically integrated media empire combining both programming production and distribution platforms. They also oppose his often successful attempts to escape rules barring crossownership of TV stations and local newspapers and restricting foreign ownership of broadcast licenses.