News Corp.’s Rejection of EchoStar Deal Questioned

Two Colorado senators have asked for an investigation into whether News Corp.’s refusal to agree to a $100-million settlement with EchoStar Communications Corp. last week was driven by an attempt to get viewers to switch to News Corp.’s DirecTV Group Inc. from EchoStar’s Dish Network satellite TV service.

Sens. Wayne Allard and Ken Salazar, in a Sept. 1 letter to the Senate Judiciary Committee, said News Corp.’s exclusion of its wholly owned Fox television affiliates from the settlement raised questions about whether it had engaged “in behavior that would threaten the viability of the satellite TV market.”

On Aug. 28, EchoStar, the second-largest satellite TV service in the U.S. after DirecTV, settled a nine-year legal fight with affiliates of the ABC, NBC and CBS television networks over the transmission to their markets of TV programs aired by broadcasters in other cities.

Only News Corp.’s Fox affiliates did not agree to the settlement. Fox withdrew from negotiations last week. Litigation with about 25 Fox owned and operated stations continues, EchoStar spokeswoman Kathie Gonzalez said.

EchoStar has been providing programming from broadcasters in faraway markets to subscribers who can’t get high-quality reception of local stations. The TV networks and affiliates charged that many of those customers were ineligible for distant service. At issue is the loss of advertising revenue by stations when local viewers watch programs from distant broadcasters.

The settlement is contingent on confirmation by a U.S. District Court judge in Florida, Gonzalez said last week. She declined to comment on the senators’ letter.

News Corp.’s refusal “threatens to interfere with the court’s ability to accept” the settlement and as a result threatens the television signals for rural customers who “depend on distant network channels for critical news and emergency information,” Allard and Salazar said in their letter.

EchoStar, based in Englewood, Colo., had 12.5 million customers at the end of the second quarter. DirecTV reported 15.5 million customers.