Feds OK purchase of DirecTV

WASHINGTON -- Federal regulators on Friday approved News Corp.'s takeover of DirecTV, the nation's largest satellite television provider, but imposed certain conditions on the $6.6 billion deal.

The Federal Communications Commission said News Corp. must agree to arbitration to solve disputes with companies that carry its broadcast and cable channels, such as cable companies and other satellite providers. And News Corp. must treat all stations equally, not tilt in favor of its Fox broadcasting network and cable stations such as FX.

The Republican-dominated FCC split along party lines, 3-2, to approve the deal.

News Corp. also owns the Fox News Channel, headed by former GOP political operative Roger Ailes.

"This merger with strict conditions ultimately benefits the American public," FCC Chairman Michael Powell said. "News Corporation has a history of taking significant risks and introducing new and innovative media services. Enhanced competition will increase pressure to improve service and lower prices for both cable and satellite television subscribers."

But one of the two Democrats on the commission, Michael Copps, said the deal would reduce competition, not enhance it.

"Where is the logic -- where is the public interest benefit -- of giving more and more media power to fewer and fewer players?" Copps said.

Democratic commissioner Jonathan Adelstein said he dissented because the deal does not require DirecTV to provide local channels to every television market, meaning some rural areas will be out of luck. Other areas may get the local channels not via the satellite but through alternative means such as an antenna on their dishes or a digital tuner, Adelstein said.

"They want to do it on the cheap and not do it right, and the FCC is going to roll over and let them do it that way," Adelstein said in an interview. "If they don't put it on the satellite, some people are not going to get it."

Under the deal announced in April, News Corp. would acquire 34 percent of DirecTV parent Hughes Electronics, a subsidiary of General Motors Corp. The deal would give News Corp. the largest block of shares in Hughes and controlling interest in DirecTV, which has more than 11 million subscribers.

The deal was opposed by some consumer groups, who said that it would further reduce competition by shrinking the number of media companies, and would drive up the price of cable and satellite services.

"Given Rupert Murdoch's Fox Corporation's already bloated holdings in over-the-air TV and cable programming, the FCC should have rejected this deal," said Jeff Chester, executive director of the Center for Digital Democracy, a media watchdog group. "At the very least, they should have imposed stringent safeguards that would have ensured unfettered opportunities for new and competing programmers on DirecTV."

In May 2002, a dispute over how much Time Warner should pay for the Walt Disney Co.'s cable channels led to Disney's ABC network being removed from Time Warner cable systems in New York and six other cities. In January, some 400,000 Cox Communications customers in the Washington, D.C., area, Cleveland, Dallas and Houston lost the Fox network for a week in a dispute over whether the cable company should also carry two Fox cable channels.

The FCC last year rejected a proposed merger between DirecTV and its chief competitor, EchoStar Communications Corp., ruling it would unfairly limit consumer choices.