FCC Moves Toward OK of DirecTV Deal

A majority of the Federal Communications Commission has conditionally voted for News Corp.’s acquisition of a controlling interest in No. 1 U.S. satellite TV service DirecTV, people familiar with the situation said Monday.

The three Republican commissioners on the five-person panel voted to let the $6.47-billion deal proceed with conditions to limit the media company from withholding key programming from cable and satellite operators, the sources said. The two Democrats on the panel have not yet cast their votes, the sources said.

If the Republicans do not change their votes, News Corp. would get the agency’s go-ahead to acquire a 34% stake in DirecTV’s parent, Hughes Electronics Corp. of El Segundo, giving the owner of the Fox broadcast network and 20th Century Fox movie studio control of a distribution pipeline it has long sought for its wide array of programming.

News Corp. also needs permission from Justice Department antitrust enforcers. That endorsement is expected without further restrictions after the FCC approval becomes final, sources have said.

“We remain confident that this transaction will be approved by year-end,” said DirecTV spokesman Bob Marsocci. An FCC spokeswoman and a News Corp. spokesman declined to comment.

The FCC approval would include several conditions, including a requirement that DirecTV offer local channels in 130 markets by the end of 2004, up from 100 by the end of this year.

The agency also plans to require that News Corp. have a neutral third party resolve prolonged programming disputes with cable operators. Either party would be allowed to appeal to the FCC if it was unhappy with the decision, a source has said.

Cable operators such as Comcast Corp. and cable programmers such as Fox that also own local TV stations typically negotiate terms under which the cable systems can carry local channels. A deal can include compensation or an agreement to carry additional channels. During negotiations, programmers sometimes pull one or more channels from cable systems, often forcing a deal.

Under the tentative FCC action, News Corp. would be barred from withholding its local Fox stations during the dispute resolution process. The FCC has been concerned that cable subscribers could be encouraged to switch to DirecTV to get the Fox channels that might have been pulled during a dispute.

Hughes shares fell 6 cents to $16.06 and News Corp. fell 29 cents to $33.53, both on the New York Stock Exchange.