Small cable operators are demanding rejection of the merger of News Corp. and Hughes Electronics Corp. unless the newly formed company agrees to abide by certain competitive safeguards.
The merger would put Rupert Murdoch's News Corp. in control of 11 million-subscriber DirecTV Inc., creating a media force that small cable companies want restrained by the Federal Communications Commission and the Department of Justice.
In an FCC filing late Friday, the American Cable Association, small operators' lobbying arm, called for strict conditions on News Corp.'s ability to grant access to its 35 Fox TV stations on unfavorable terms to small MSOs.
In broadcast-retransmission negotiations, ACA members want the right to bargain as a group with News Corp., which would be akin to how ACA members currently bargain for access to News Corp.'s cable programming.
"News Corp. said it won't use retransmission consent against cable operators and their customers, and it also said retransmission-consent terms worked out well during the last round of negotiations," ACA president Matt Polka said in a prepared statement Monday.
"If that's the case, then News Corp. should have no problem agreeing to ACA's conditions, which merely preserve the status quo," he added. "However, if News Corp. refuses to accept these conditions, then it will be pretty obvious that it wants to use retransmission consent in a harmful way to consumers and cable operators."
The ACA's concerns about News Corp.'s leverage in retransmission consent tracked those of some larger other cable operators, including Cox Communications Inc., Advance/Newhouse Communications, Cable One Inc. and Insight Communications Co. Inc.
In testimony on Capitol Hill earlier in the year, Murdoch defended the merger as a tool to drive more competition between cable and direct-broadcast satellite. He volunteered to comply with FCC program-access rules that bar cable operators from withholding certain programming from competitors.
In other conditions, the ACA called on News Corp. to make its nonbroadcast programming available to small MSOs on the same terms offered to DirecTV and to promise to disclose the DirecTV conditions to the FCC and the National Cable Television Cooperative, small MSOs' buying agent.
In a final proposal, the ACA demand that in markets where DirecTV offers local TV signals, those signals should be offered to cable operators that can't get good-quality signals from the TV stations. The cable companies, however, would need the stations' permission.
"If Fox, News Corp. and DirecTV are as good as their word, as they say they are, then these entities should have no problem agreeing to ACA's conditions, which will prevent the public harm their merger will cause," Polka said.