FCC Approves Liberty Takeover of DirecTV

The Federal Communications Commission on Monday approved Liberty Media’s takeover of DirecTV, a deal that puts cable TV pioneer John Malone in control of 16.8 million customers after an eight-year hiatus from the pay-TV distribution side of the business in the United States.

The FCC’s action --

which was expected

but took more than a year to happen -- allows Malone’s Liberty Media to acquire News Corp.’s 38.4% interest in DirecTV in exchange for Liberty’s equity interest in News Corp. As part of the $11 billion deal, Liberty also picks up regional sports networks (RSNs) in Denver, Pittsburgh and Seattle and $550 million in cash.

The Justice Department is reviewing the transaction for consistency with federal anti-trust laws. But the nation's top law enforcement agency has not announced a decision. 

FCC approval was nearly unanimous as FCC Democrat Jonathan Adelstein issued a partial dissent to object that the FCC did not force DirecTV to provide local TV service in the 60 smallest markets in the country. 

“Scores of markets throughout the country have been ignored by DirecTV.  The [FCC] should not neglect these markets, relegating them to second-class video citizenship,” Adelstein said. 

DirecTV, which provides local TV service via satellite in 144 markets today,

has no plans to go beyond 150 markets.

The FCC’s decision will allow DirecTV to husband bandwidth in its fight with cable to offer the highest number of high-definition channels. 

The FCC's refusal to require DirecTV to sell local TV signals in all 210 markets was a lobbying defeat for the National Association of Broadcasters and affiliated local TV stations lobbying groups in Kansas, North Dakota and Texas. NAB, for example, insisted that DirecTV had promised in 2003 to serve all 210 markets by the end of 2008. 

The FCC adopted several conditions. In a press release, the agency said it would require: 

(*) “Liberty and DirecTV [to] abide by program access, program carriage, Regional Sports Network ("RSN") arbitration, retransmission consent arbitration conditions …” 

(*) “All of the attributable ownership interests connecting DirecTV-Puerto Rico and Liberty Cablevision of Puerto Rico, Ltd., which will be under common control as a result of the transaction, be severed within one year, at which point the companies must certify either that they have reduced the relevant interests to a non-attributable level or that they have filed any applications necessary to divest assets.” 

Justice Department officials were especially concerned about the deal's impact on pay-TV competition in Puerto Rico.