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Murdoch clears DirecTV hurdle

Rupert Murdoch with his elder son Lachlan.
Rupert Murdoch with his elder son Lachlan.

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WASHINGTON (Reuters) -- Rupert Murdoch has cleared the final hurdles to fulfilling his long-sought dream of acquiring DirecTV satellite service, a pipeline into millions of American television sets.

The Federal Communications Commission and antitrust enforcers has approved the $6.78 billion plan by Murdoch's News Corp., home to movie studios and the Fox broadcast network, to gain control of the No. 1 U.S. satellite television provider, which has 12 million subscribers.

The FCC approval on Friday came with some conditions aimed at ensuring the television titan does not bludgeon cable and satellite rivals who want to offer News Corp programming. The agency also ordered the conglomerate to offer local channels in more markets.

"Cable and satellite customers will continue to have access to programming from a diverse source of media outlets," said FCC Chairman Michael Powell. "With these conditions, I believe the transaction serves the public interest."

The Republican-controlled agency cleared the deal by a vote of 3-2. The two Democrats on the panel dissented, citing fears of higher prices and concerns about DirecTV's plan to offer local channels in more markets.

The Justice Department's antitrust division also signed off on the deal without adding any additional conditions to the approval.

Murdoch has tried before to buy DirecTV, negotiating in 2001, but lost out to satellite rival EchoStar Communications Corp. When regulators blocked that deal last year, the Australian-born mogul won a second chance.

The complicated deal calls for News Corp., which runs the Fox broadcast network and 20th Century Fox movie studios among other properties, to buy a 34 percent controlling stake in DirecTV's parent, Hughes Electronics Corp.

Consumer groups had complained to the FCC and antitrust enforcers that the deal would lead to higher prices and fewer choices. That resonated at the agency where commissioners attached some restrictions but didn't address all concerns.

In protracted disputes over rival multichannel television providers carrying News Corp.'s Fox broadcast network, a neutral third-party will be empowered to resolve the fracases.

However, if either side is unhappy, they can appeal to the FCC. The arbitration requirement expires after six years.

Cable companies and programmers typically negotiate terms for carrying the local channels and deals can include some compensation or an agreement to carry additional cable channels. If no pact is reached, programmers sometimes pull channels from the cable system, often forcing a deal.

The FCC barred News Corp. from withholding its local Fox stations and regional sports channels during the dispute resolution process.

The majority of FCC commissioners were concerned that cable subscribers could be encouraged to switch to DirecTV to get the channels that may have been pulled during a dispute, like regional sports or the local Fox broadcast station.

Additional conditions include requiring the conglomerate to offer existing cable programming on nondiscriminatory terms and conditions to rivals, permit small cable providers to collectively bargain for programming and require DirecTV to offer local channels in 130 markets by end of 2004.

However, the conditions were not enough to satisfy all.

"News Corp. could be in a position to raise programming prices for consumers, harm competition in video programming and distribution markets nationwide, and decrease the diversity of media voices." said FCC Commissioner Jonathan Adelstein.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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