NEW DIRECTV DEAL RAISES OLD COMPETITION ISSUES, OFFICIALS SAY

It’s still too early to tell whether there will be vociferous opposition to either filing, Media Access Project Pres. Andrew Schwartzman said. The Senate Antitrust Subcommittee and the Consumers Union (CU) already have expressed their concerns about how the deal could decrease competition (CD April 11 p1).

One of the bigger issues involves media ownership, said Mark Cooper, dir.-research for the Consumer Federation of America. If the deal is approved, he said, News Corp. would own content, a satellite distribution platform and broadcast licenses all over the country that have must-carry rights. With only one cable distributor, a choice of 2 satellite distributors and only 8-10 broadcast licensees in most communities, that’s still a very small number, he said: “Why should anyone own 2? This is a completely unacceptable concentration of power over speech from a First Amendment point of view.”

The issue is interesting, said Coudert Bros. analyst Tim Logue, because it comes as the FCC, Congress and the White House are dealing with issues of media concentration. “There is a lot of concern about the fact that a handful of large companies have the power to determine what Americans see and hear,” Logue said. The acquisition would give News Corp. “unprecedented reach by having local television networks and control of a national platform,” he said. There are a number of subtle or unsubtle ways the company could favor its own content, he said, but the question would be how to hold the companies to their word.

Cooper said the other big issue was economics: “There is a question of the vertical leverage News Corp. will have because they own marquee programming.” Normally, both distributors and content owners have leverage in programming negotiations. Approval of the acquisition would create a situation where News Corp. would own its own distribution platform on top of existing broadcast licenses, increasing its bargaining power and driving the price up, Cooper said: “[Rupert] Murdoch has said that they will not price discriminate, but [EchoStar CEO Charles] Ergen said [in EchoStar/DirecTV talks] that EchoStar wouldn’t discriminate against rural areas and no one believed him. There’s no reason to trust Murdoch either.”

Vertical integration in this case does increase News Corp.’s advantage, said Stephen Blum of Tellus Venture Assoc. “You don’t really lose money in a transaction. [I]t’s money that goes from one pocket into another. News Corp. said they would offer [programming] to everyone for the same price, [but] if it’s high, so be it,” Blum said. TelAstra Pres. Roger Rusch said neither the FCC nor the govt. would be likely to deal with the situation at that level: “The government philosophy is that regulation should be as light as possible… It is always a matter of considering the public interest without disturbing free enterprise.” An industry official said because those concerns were more subjective than concrete, the deal would be hard to challenge at the FCC.

Beyond concerns about programming, Blum said he didn’t see any indications of a serious regulatory problem: “In my opinion, all the arguments about DirecTV are going to be over personal and self-interests… the extracurricular football played over these issues.” For example, Blum said, entities in contractual disputes with the company could try to hold up the acquisition until disputes were resolved. “In a lot of cases, they won’t have the [issues] that they had with EchoStar. That was a very clean sort of argument that you would have a monopoly,” he said. An NAB spokesman said broadcasters’ concern had been on expanding local-into-local service into all 210 markets as soon as possible: “If this merger accomplishes that, we would be supportive.”