FCC Poses Key News-Hughes Queries

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The Federal Communications Commission last Thursday released questions designed to seek additional merger information from News Corp. and Hughes Electronics Corp., as the agency promised when it suspended the informal 180-review clock on Oct. 10.

News Corp. has agreed to pay $6.6 billion for a controlling 34% stake in Hughes, which owns the 11 million subscriber DirecTV satellite TV service. Both Capitol Hill politicians and competitors have raised concerns about the anti-competitive effects of the deal.

The information sought by the FCC did not explicitly refer to issues raised by several cable companies concerning News Corp.'s ability and incentive to use the merger to raise retail rates for satellite and cable subscribers.

But sources noted that on closer examination, the FCC request clearly sought data that might show whether News Corp. could use DirecTV to extract higher programming fees from cable operators.

In the letter, the FCC asked for subscriber gains and losses per month for all U.S. ZIP codes where DirecTV had customers for the period January 1999 to December 2000.

It also asked for details regarding a Hughes promotion with The Walt Disney Co. from Jan. 1, 2000, to June 30, 2000.

If these two questions are viewed together, the FCC is looking at changes in DirecTV's subscribership during the period when Disney and Time Warner Cable were in the throes of a major retransmission-consent dispute.

The FCC's request could yield data showing that Disney's tactic of running promotions for DBS dishes as a weapon against Time Warner until the cable company finally agreed to a term sheet was successful at increasing DirecTV's penetration in Time Warner markets.

The data might lend support to arguments made by Cox Communications Inc. and other cable companies, which contend that News Corp. would withhold must-have broadcast stations from cable until the MSOs paid higher fees for its cable networks.

Cable companies that refused would lose the programming to DirecTV and possibly lose subscribers.

Sources said the FCC's third question — which asked to see News Corp.'s network affiliation agreements with 10 TV stations in various regions of the country — was related to the other data requests.

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