After merging with News Corp., DirecTV Inc. has promised to carry every local TV station in the country by no later than 2008, funded by a $1 billion investment in new satellites designed to deny cable bragging rights as the lone pay-TV provider of local broadcasters anywhere in the U.S.
The companies broke the news in a filing last Monday with the Federal Communications Commission, which is expected to approve the merger later this year. The merger also needs Justice Department approval.
Cable concerns
Several cable companies are urging regulators to impose conditions on the deal. Also last week, two key senators asked the FCC and DOJ to impose several conditions, some directly related to cable's concerns.
The expanded local-TV promise would likely appease the National Association of Broadcasters, although the trade group has demanded that News Corp. and DirecTV serve all 210 markets by Jan. 1, 2006.
Last year, the NAB helped kill the proposed merger between EchoStar Communications Corp. and DirecTV parent Hughes Electronics Corp., a marriage that promised to serve all 210 markets within two years of merger approval, or late 2004.
"Our goal has always been the rollout of local-into-local as quickly as possible. Beyond that, we'll have to study the filing," said NAB spokesman Dennis Wharton.
News Corp., owner of 35 local TV stations, quit as an NAB member a few years ago.
DirecTV chairman and CEO Eddy Hartenstein, here last week to address a group of direct-broadcast satellite retailers, said meeting the NAB's timetable was possible if the business plan can be executed properly.
"We are looking to provide local channels through our platform in all 210 markets by no later than 2008. The goal is to get there by 2006, but there are a lot of hurdles to get there — technology, spectrum and all of that," Hartenstein told reporters after the speech.
DirecTV is the No. 1 DBS carrier, with more than 11 million subscribers. News Corp. has agreed to pay $6.6 billion for a controlling 34% stake in Hughes.
In the FCC filing, DirecTV said that if the merger closed by the end of this year, it might be able to add about 30 more HDTV channels in 2004 with both local and national content. But the addition of HD channels might force the company to slow its expansion into local TV markets, DirecTV added.
The leaders of the Senate Antitrust Subcommittee — Sens. Mike DeWine (R-Ohio) and Herb Kohl (D-Wis.) — argued in a letter to the DOJ and the FCC last Tuesday that a News-Hughes combination has the potential to drive retail cable and satellite prices higher, and to exclude new programmers from the pay TV distribution market.
"We believe this transaction should only be approved upon the adoption of certain conditions necessary to avoid the risk of injury to competition and competitors," the lawmakers said.
Add conditions
DeWine and Kohl said the merger should not be approved unless News Corp. and DirecTV keep the program-access promises already tendered and ensure that all of DirecTV's rivals to DirecTV gain access to all of the Fox broadcast network's sports programming, including the World Series.
The lawmakers said the DOJ and the FCC may find other conditions appropriate, such as ensuring that cable operators get the same contract terms for access to Fox TV stations as DirecTV.
They also recommended firm deadlines for DirecTV's expansion of local TV service and proposed barring News Corp. from acquiring majority control of Hughes for the next five years.
Some of the recommendations mirrored proposals made by Cox Communications Inc., Advance/Newhouse Communications, Cable One Inc. and Insight Communications Co. Inc., cable companies serving about 10 million subscribers.
