Daily Breeze

June 19, 2003

Murdoch calls merger a boon
DirecTV and News Corp. executives say marriage would bring innovation. Critics disagree.

By TOBY ECKERT
COPLEY NEWS SERVICE

WASHINGTON — The chief executives of El Segundo-based DirecTV and News Corp. squared off against a prominent consumer group and cable operators in a Senate hearing Wednesday that presented starkly different views of the companies’ proposed merger.

DirecTV Chief Executive Officer Eddy W. Hartenstein and News Corp. CEO Ru pert Murdoch said the $6.6 billion deal would be a boon to competition and innovation in the television market.

But representatives of Consumers Union and major cable companies argued it would create a media behemoth that would drive up prices for viewers.

Meanwhile, Murdoch won support from two U.S. senators for his $6.6 billion bid to purchase the DirecTV satellite broadcaster, helping clear the way for regulatory approval of the merger.

“The combination of News Corp. and DirecTV may result in significant benefits to viewers across the country by injecting additional competition in the multichannel video market,” Senate Judiciary Committee Chairman Orrin Hatch, a Utah Republican, said in a statement at an antitrust subcommittee hearing.

Senate Antitrust Subcommittee Chairman Mike DeWine, an Ohio Republican who convened Wednesday’s hearing, said Murdoch’s acquisition could force DirecTV’s rivals “to improve their product as well, to the benefit of all pay-TV customers.”

As federal regulators weigh the merits of News Corp.’s proposed acquisition of 34 percent of DirecTV’s parent company, El Segundo-based Hughes Electronics Corp., supporters and opponents of the deal also are trying to sway the opinions of influential lawmakers.

The merger would give News Corp. — which owns the Fox television network, 20th Century Fox movie studio, cable channels and other programming assets — a foothold in satellite television distribution.

Critics worry that with its own distribution assets, News Corp. will have tremendous leverage over the prices cable DIRECTV/C4
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DIRECTV: Consumer group opposes merger FROM PAGE C1 and satellite competitors pay for its programs, which, in turn, affects consumer bills.

“The combined company can maximize its earnings by inflating the prices it charges for its broad array of popular programming that all cable and satellite customers purchase,” said Gene Kimmelman, senior director for advocacy and public policy at Consumers Union, before the Senate Judiciary antitrust subcommittee.

Robert Miron, who represented several cable companies at the hearing, said cable providers “will be forced to concede” to News Corp. price demands or risk granting DirecTV exclusive rights to “very desirable programming.”

“So will EchoStar,” he said, referring to DirecTV’s prime satellite competitor.

To try to allay those concerns, DirecTV and News Corp. have asked the Federal Communications Commission to adopt several conditions on the merger, including preventing DirecTV from entering into exclusive programming arrangements with News Corp. or discriminating against other programmers.

“They make it clear that News Corp. and Hughes are committed to fair, open and non-discriminatory program access practices that go well beyond what the law requires. . .” Murdoch said.

But he declined to commit to a proposal by Sen. Herb Kohl, D-Wis., to limit any price increases for programming and to make all News Corp. programs available to DirecTV’s competitors on the “same terms” they are made available to DirecTV. He said he would have to study the proposal further.

Kohl, the top Democrat on the subcommittee, said, “I think it is essential that the regulators craft some reasonable restrictions on your ability to raise programming prices as a condition of approving this deal.”

Murdoch said News Corp. is interested in reaching the widest audience possible to maximize advertising and subscription profits and “we charge what the market will bear.”

“Rational business behavior will prevent News Corp. and DirecTV from engaging in anti-competitive behavior,” he told the subcommittee.

He and Hartenstein also touted new services they said would be offered by the combined companies, including more local programming, high-definition television and interactive services such as e-mail and online shopping.

“This is all about competition,” Hartenstein said. “That’s what a lot of folks are objecting about. They don’t like competition.”

Bloomberg News contributed to this article.