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Martin: Programming Holding Up Liberty-DirecTV Deal

Washington – Program access issues are holding up the Federal Communications Commission review of the $11 billion deal in which John Malone’s Liberty Media would claim News Corp.’s 38.5% ownership stake in DirecTV, FCC chairman Kevin Martin said Wednesday.

“It raises a few complicated issues, and we’re working hard on trying to address some of those issues,” Martin told reporters after testifying before a House subcommittee on digital television transition issues.

EchoStar, small cable operators and consumer groups have raised concerns about the Liberty-News Corp. transaction and about Malone’s return to the pay-TV distribution side of the business. Malone was the controversial head of Tele-Communications Inc., the largest U.S. cable company before it was sold to AT&T in the late 1990s.

Martin, who has been a vocal proponent of the a la carte sale of pay-TV channels, didn’t indicate that he wanted to condition the deal on some kind of commitment from Malone that DirecTV will beef up its per-channel offerings.

“There [are] some issues related to access to programming and how the commitments that have been made by News Corp. and DirecTV will be implicated, in terms of access to programming, now that DirecTV is now going to be not held jointly by News Corp. How some of those commitments are going to transfer, I think, are the issues,” Martin said.

The Justice Department, which the News-Liberty transaction under review, is apparently taking a close look at the competitive impact of Liberty’s relationship with a Puerto Rican cable company while holding a controlling interest in DirecTV. EchoStar has highlighted the Puerto Rico crossownership issue in FCC filings.

On other programming matters, EchoStar and cable overbuilder RCN have argued that DirecTV should be barred or limited from acquiring any additional exclusive rights to programming, such as the “NFL Sunday Ticket” package of out-of-market National Football League games.

Remembering Malone’s hardball ways at TCI, EchoStar claimed that “it is well-established that TCI and Liberty operated ruthlessly in acquiring and creating programming, and in its treatment of unaffiliated MVPDs [multichannel video-programming distributors] and programmers.”

EchoStar also charged that programmer Liberty and its sister companies have “determined that [the] additional ‘distribution muscle’ of DirecTV’s national platform is critical to its efforts to expand and enhance its programming assets.”

In its own FCC filings, Liberty dismissed the charges as baseless, claiming competitors were trying to use the FCC merger process to further their own commercial interests.

The net result of the Liberty-DirecTV transaction “is that Liberty will rejoin the ranks of vertically integrated major media conglomerates [including News Corp.] that can dictate the terms and conditions of programming — e.g. higher price and less choice — to MVPDs and consumers,” EchoStar claimed.

Liberty has ownership in programming services such as Discovery, Starz, QVC, Game Show Network and Hallmark Channel. It will also get News Corp.’s stakes in three regional sports channels as a result of its acquisition of Rupert Murdoch’s piece of DirecTV, a national distribution platform with 16 million subscribers.

The FCC imposed various conditions on News Corp. in 2003 in exchange for approving the media giant’s purchase of a stake in DirecTV. EchoStar has asked the agency to tweak those strictures so that they will be specifically tailored to Liberty taking News Corp.’s DirecTV stake.

For example, one of the 2003 conditions was that a distributor could take a dispute with a News Corp. regional sports network to arbitration. EchoStar argued that this arbitration right “should apply to any Liberty-affiliated RSN, including after-acquired or new RSNs.” Liberty’s attempt to “limit the condition to the three RSNs included in this transaction should be rejected,” EchoStar said in its filing.

Linda Moss contributed to this report.