FCC gives go-ahead for DirecTV transfer to Liberty Media

A 2004 challenge on the grounds that DirecTV might make News Corp. too great a media power, was denied yesterday. As a result, ironically, News Corp. can now be a lesser power, surrendering DirecTV to Liberty Media.

Not long after News Corp. acquired a controlling interest in direct broadcast satellite provider DirecTV, chairman Rupert Murdoch changed his mind on the viability of the deal. For DBS to be a viable product against "triple-play" options from cable providers, Murdoch needed upstream Internet frequency, and found himself uncharacteristically outbid for it.

Way back in December 2006, Murdoch signaled he was definitely ready to part ways with DirecTV, confirming News Corp. would swap it out with Liberty Media, another major concern led by yet another media powerhouse, John Malone.

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But in one of the odder ironic twists, that deal could not be concluded until the US Federal Communications Commission had resolved the matter of a public challenge to its initial consent to the original May 2003 deal, where News Corp. purchased controlling interest in DirecTV from General Motors' Hughes Electronics division.

That challenge came in 2004 from the National Hispanic Media Coalition (NHMC), which raised objections to the FCC's consent on the grounds that it did not listen long and hard enough to public concerns that News Corp.'s control could extend the power of an existing media giant, and could subsequently enable the spread of indecent material through the airwaves.

According to the FCC's ruling yesterday, the 2004 NHMC complaint listed nine separate objections that, in the Coalition's words, "militate beyond a doubt against a finding that consent to the DirecTV acquisition is in the public interest, convenience and necessity."

Those nine complaints, however, coalesced to paint a single picture: one where a single broadcast entity beams out an homogenous picture of America to the entire continent, at whatever price it dictates, to the exclusion of minority-owned and operated programming. And in order to make that homogenous picture exciting, NHMC contended, News Corp. would make it titillating.

Yesterday, the FCC made clear it wasn't buying any part of that argument -- although it had almost four years to consider at least a small investment in it.

"With respect to the issue of indecency, NHMC fails to offer any argument or evidence showing a link between the particular transaction under examination and indecency," reads yesterday's decision. "Nor does NHMC explain why it did not or could not raise this issue earlier. Indecency was not raised by any commenter to this proceeding, either through formal comments or ex parte comments. NHMC's untimely claim of a link between the particular transaction under examination and indecency, without any supporting argument or evidence, is insufficient to warrant reconsideration of the decision approving the license transfers at issue."

With that business out of the way, it didn't take four more years for the FCC to decide what to do next: grant the swap of controlling interest from News Corp. to Liberty Media. But in so doing, the Commission validated an argument in favor of the separation of DirecTV from News Corp. that appears to directly contradict its stance in favor of letting the 2003 deal stand.

"The Applicants [Liberty and News Corp.] state that the transaction will benefit the public because it will...eliminate the vertical integration of News Corp. and DirecTV, and thus alleviate the Commission's concern, expressed in the News Corp.-Hughes proceeding, that the combination of News Corp.'s programming interests and its ownership of DirecTV, could increase News Corp.'s incentive and ability to threaten to withhold or actually withhold programming from competing multi-channel video programming distributors," reads the FCC's decision this morning.

The possibility that News Corp. would become powerful enough to withhold programming from multiple channels of distribution, was one of the concerns the NHMC raised in 2004, but which the FCC appeared to dismiss yesterday.

That fact did not get past Commissioner Michael Copps, who commented today that in 2003, "I said that the consolidation of so many media properties under News Corp.'s control could not be good for localism, diversity and competition. Nothing in the past four years has alleviated my concerns. To the contrary, the intervening years only confirm the devastating effect of media consolidation on the health of our democracy and the public interest.

"Nevertheless, while I have objected to many of the Commission's decisions that have brought us to this point, I must make decisions based on the facts as they exist today," Comm. Copps continued. "The question here is whether we should approve the transfer of assets from one giant media conglomerate to a marginally-less-giant media conglomerate. Once consummated, the transaction will result in a measure of de-consolidation and somewhat less vertical integration. That is the distinction between this transaction and the Hughes-News Corp. deal four years ago, and that is why I am concurring rather than dissenting in today's decision."

The deal is contingent upon Liberty's divestiture of some of its stake in Puerto Rican media interests, with which it has reportedly concurred. News Corp. celebrated the decision today by concluding a deal giving its leading Italian pay-TV provider, Sky Italia, exclusive coverage rights to the 2010 Winter Olympics in Vancouver and the 2012 Summer Olympics in London.

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