Cable Raises Concerns with DBS Deal

[Gregg Lengling]

A group of cable companies told the Federal Communications Commission this week that News Corp.'s proposed takeover of Hughes and DirecTV poses serious competition issues, including how News Corp. and its Fox unit could have an incentive to raise programming prices charged to rival pay-TV operators if they gain the satellite TV business.

The cable companies - Advance/Newhouse, Cable One, Cox and Insight - presented the FCC with research authored by Professor William Rogerson of Northwestern University on the News Corp./DirecTV deal. In their arguments, the cable companies said DirecTV's national footprint – not its share of the pay-TV marketplace – is a key concern, especially when it comes to access to Fox programming, including regional sports networks. Also at issue is the price paid for that content.

"The principal danger in this transaction is not that News Corp. will use its programming assets to benefit its distribution business," the companies said. "It is, instead, that DirecTV will be used as a weapon to obtain supra-competitive prices for Fox programming from all retail distributors that will ultimately be borne by consumers."

They added, "In this regard, DirecTV's 13 percent share is of far less significance than its presence in every local (multichannel) market."

The cable companies said while it may not be profitable for News Corp. to withdraw its programming from rival pay-TV operators after it gains control of DirecTV, "the revenue that News Corp. would lose from withdrawing programming from rival multichannel providers will be at least partially offset by the profits that News Corp. would earn from subscribers that switch to DirecTV," they said. "This will make the threat of withdrawing programming more credible and thus allow News Corp. to bargain for higher prices."