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ACA Fights to Retain News Corp. Limits

5/02/2008 8:00 PM Eastern

A trade group for small cable operators had harsh words last Thursday for News Corp.'s effort to escape Federal Communications Commission competitive conditions imposed in late 2003, when the company acquired nearly 40% of DirecTV.

In a filing at the FCC, the American Cable Association accused News Corp. of “lack of candor and manipulation of [FCC] processes” because the media company didn't seek relief until after the FCC approved the transfer of its DirecTV stake to Liberty Media Corp. in February.

ACA called News Corp.'s timing “an obvious campaign to suppress scrutiny of an issue of decisional significance.” ACA's membership includes about 1,100 cable companies serving about 8 million subscribers in all 50 states.

News Corp. senior vice president of corporate affairs and communications Teri Everett did not immediately respond to a reporter's e-mail and phone call.

As News Corp. took effective control of DirecTV in early 2004, the FCC imposed several conditions sought by small cable companies based on concerns that News Corp.'s control of a major pay TV provider and nearly three dozen Fox owned-and-operated TV stations could be used as leverage to squeeze small cable providers.

The FCC insisted that until January 2010, News Corp. had to enter compulsory arbitration on the licensing of the regional sports networks it owns. News Corp. owns and operates 12 such networks and has a passive, minority interest in Comcast SportsNet Bay Area.

The FCC's RSN condition allowed any pay TV distributor to trigger arbitration.

The FCC also required News Corp. to enter arbitration with pay TV distributors to resolve disputes on the carriage of News Corp.-owned TV stations.

ACA told the FCC that the conditions brought “a measure of stability to Fox-affiliated retransmission consent and RSN renewals. This has benefited consumers by maintaining access to 'must have' programming and avoiding disruption of customer viewing patterns.”

Convincing the FCC to keep the merger conditions could assist small operators in the fall, when TV stations need to elect whether to seek mandatory carriage or negotiate for access. ACA also argued that the conditions were not a burden because News Corp.'s financial performance has been strong in recent years.

In March, News Corp. petitioned the FCC to remove both conditions 22 months early, stating the basis for them had been eliminated through the transfer of DirecTV to Liberty Media.

“In short, the justification for the RSN and [retransmission-consent] conditions has evaporated,” News Corp. said in its petition for relief.

ACA slammed News Corp. for not seeking relief while the DirecTV-Liberty transaction was pending before the FCC, which the agency approved on Feb. 25 following a 369-day deliberation.

“News Corp. has no legitimate argument for not disclosing earlier its plan to seek modification of the conditions,” the ACA said. “There is no question that potential modification of the conditions was an issue of decisional significance to the Liberty/DirecTV transaction.”

The ACA urged the FCC not to act on News Corp.'s request until after the agency had finished its rulemaking focused on the wholesale cable-programming market and retransmission-consent practices of local TV stations.

September