News Corp. Takes Political Heat

Hill critics blast DBS deal but are unlikely to derail it

Rupert Murdoch's liberal critics couldn't conceal a sense of desperation last week as they grilled the media baron on his proposed acquisition of control of satellite-TV leader DirecTV.

Recognizing that his pledge not to discriminate against either competing pay-TV distributors or rival programmers is likely to ease regulators' concerns about his market power, Murdoch's opponents were left to spend much of their time arguing against his politics and the perceived right-wing bias of his Fox News Channel and other news operations.

"You are scaring the hell out of me," railed Rep. Maxine Waters (D.-Calif.) at the News Corp. chief during a May 8 House Judiciary Committee hearing on the deal. She predicted that, if the deal is approved by the FCC and the Justice Department, the conservative Murdoch would promote the Republican and Bush Administration lines. "Why should we support a transaction that could reduce diversity of opinion?"

Similar fears were voiced by Rep. Jerry Nadler (D-N.Y.), who charged that Murdoch has a long history of "using concentrated media power to distort the politics of the U.S. and other nations for your own commercial purposes." Specifically, he pointed to reports that Murdoch pulled BBC World Service from satellite transmissions in China at the request of authorities offended by the channel's critical coverage of the country's regime.

The committee's ranking Democrat, Michigan Rep. John Conyers, said after the hearing that he plans to examine whether Fox News Chairman Roger Ailes—whom Washington Post
reporter Bob Woodward has characterized as offering "political advice" to Bush advisers—gives News Corp. undue influence on the merger.

Still, Congress has no power over the deal beyond haranguing the FCC and the Justice Department, both of which must give their OK. For the regulators, such content concerns are off-limits.

One Democrat, New York Rep. Anthony Weiner, recognized that objections to perceived bias can't be parlayed into a realistic case against the deal, which calls for Murdoch to pay General Motors $6.6 billion for a one-third stake and voting control of DirecTV.

"Maybe Mr. Murdoch is not the dream owner of this thing," he said, predicting that he'll beam "reality dreck" on "2,000 stations." But "I'm not sure what the objections are."

But two key witnesses at the hearing did voice serious economic reservations.

Also playing off Fox's conspicuous role in the reality-TV craze, the president of a small Oregon cable system serving just 8,000 subscribers, predicted that News Corp. control over DirecTV would spell disaster for rural cable operators, who are most vulnerable to satellite-TV competition. "The reality will be like the Fox show Joe Millionaire: The merger has superficial appeal ... but, at the end, the ugly truth will emerge," said Uvision President Neal Schnog, who also is vice chair of the American Cable Association.

Small cable operators that have no programming networks of their own to boost their negotiating position will be left open to onerous terms from Fox to carry its channels, which include the broadcast network and cable's FX, Fox News Channel, a part of the National Geographic channel and the Speed network. Already, "25% of my programming costs go to back to [News Corp.]," he said, complaining that he can't say no to News Corp. fee hikes or demands to carry all its affiliated channels.

Consumers Union Director Gene Kimmelman said News Corp. has no other way to grow DirecTV besides hiking programming costs, because DBS's growth has slowed as cable operators have become more aggressive on price.

But Murdoch insisted that hiking prices is a crazy strategy that would lose him viewers. Denying DBS provider EchoStar Fox O&Os, for example, would cost him $400 million in annual ad revenue.

As for predictions that he will raise the cost of Fox News Channel to $2 per subscriber, he said cable systems and EchoStar would have sufficient power to reject his programming if his charges are too high.