Scrutiny of DirecTV Deal Reported

From Reuters

News Corp.'s proposed purchase of satellite provider DirecTV probably needs changes to ensure that it cannot gain an unfair advantage over cable rivals, two officials familiar with the matter said Thursday.

Federal Communications Commission Chairman Michael K. Powell is concerned that News Corp. could entice cable subscribers to DirecTV by withholding popular programming such as broadcast or regional sports channels from cable providers during contract disputes, the two officials said.

Without conditions on the DirecTV purchase, Powell is worried News Corp. could encourage customers to get those channels by abandoning the cable provider and subscribing to DirecTV, with 12 million customers the biggest U.S. satellite television provider.

Cable operators and programmers typically negotiate terms for carrying channels, and deals usually include some form of compensation or agreement to carry additional channels. If the two sides cannot reach a pact, programmers sometimes pull their channels from the cable system, often forcing a deal.

One idea that could satisfy Powell would be to require News Corp. to enter arbitration with a cable provider if a dispute could be resolved by the two parties, the sources said. The agency is still weighing whether the arbitration would be binding, or if a side was unhappy with the decision, there could be an appeal to the FCC. USA Today first reported the arbitration concept.

Powell would have to persuade at least two of the four other commissioners to impose conditions on the deal.

FCC spokeswoman Michelle Russo and News Corp. spokesman Andrew Butcher declined to comment.

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