Grilled Murdoch Drops HD Hints

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For the first time, News Corp. chairman Rupert Murdoch dropped a few hints about his plans for local HDTV if he can take control of DirecTV Inc.

Murdoch said last Thursday that technology is not far away from allowing direct-broadcast satellite carriers to retransmit local TV stations in high-definition format.

"Eventually, the technology is coming for that, maybe in three or four years," Murdoch told reporters after testifying before the Senate Commerce Committee on News Corp.'s proposed merger with DirecTV parent Hughes Electronics Corp.

In his testimony, Murdoch told the committee that if he can operate DirecTV, he would attempt to offer local TV signals in all 210 markets, if technically and economically feasible. DirecTV expects to serve the top 100 by the end of the year.

No HD retrans vow

"It will take time, but we will do that," he said, after noting DirecTV would need to launch two more satellites.

But, in House testimony May 8 — and in an earlier Federal Communications Commission filing — Murdoch and News Corp. did not commit to retransmission of local stations in HDTV, if that's the format selected by the local station.

EchoStar Communications Corp. has repeatedly told the FCC that an HDTV-carriage mandate would consume so much bandwidth that the satellite carrier would have to abandon local TV markets. Offering local-TV signals has allowed the DBS firms to improve their competitive position against cable operators.

The FCC has yet to decide whether direct-broadcast satellite operators have to carry local stations in HDTV. The agency is expected to rule later this year, when it will also resolve a host of other related digital-television issues.

Murdoch hinted to reporters that there might be a way around the capacity problem. "I think HDTV is basically going to be done by networks. We won't need to repeat each HDTV 200 times," he said.

National feed?

That comment suggested that during primetime — when HDTV is expected to see its most-intensive use — a national network feed would replace the local signal, evidently cutting affiliates out from crucial advertising time during the key evening hours.

News Corp. spokesman Andrew Butcher said he was unfamiliar with all the details but nevertheless promised that under News Corp. ownership, Hughes would strongly support HDTV.

"It's a great way to differentiate ourselves," Butcher said.

Murdoch needs approval from the Justice Department and the Federal Communications Commission to complete the $6.6 billion deal to acquire 34% of Hughes and gain de facto control. Murdoch intends to be chairman of Hughes, with Chase Carey as president and CEO.

During the two-and-one-half-hour hearing — which seesawed between the DBS merger and the FCC's June 2 broadcast-ownership rulemaking — Murdoch insisted that News Corp. would have neither the incentive nor the ability to use DirecTV in an anti-competitive manner. Instead, he plans to inject more competition into the pay-TV market to expand consumer choice.

"With these consumer benefits, DirecTV will become a more formidable competitor to cable and thus enhance the competitive landscape of the entire multichannel industry," Murdoch said.

But Gene Kimmelman, senior director of advocacy and public policy for the Consumers Union, called News Corp. a "programming juggernaut" that, when combined with the DirecTV asset, would drive up monthly bills for both satellite and cable consumers.

Murdoch explained that he could not manipulate the market at once to benefit News Corp. and undercut Hughes. That's mainly because News Corp. would be not a majority shareholder in Hughes, and because the Hughes board of directors and audit committee would be supervised by the outside directors, he said.

"I am surprised at Mr. Kimmelman's ignorance at how things work, although I didn't mean to be insulting to him," Murdoch snapped.

Murdoch also testified that DBS-delivered high-speed data services would not be an immediate benefit of the merger. Because the current costs of installing two-way equipment in a DBS home are eight times those of cable, Hughes under Murdoch would need to examine other options.

Lott: don't hedge

"We are investigating two or three technologies to go provide broadband that we have via the electricity grid and the utility companies," Murdoch said.

Murdoch has agreed to abide by program-access rules enforced by the FCC to the extent those rules continue to apply to vertically integrated cable companies. But Murdoch repeated that he won't volunteer to do so on a unilateral basis.

Sen. Trent Lott (R-Miss) urged Murdoch not to place conditions on his program-access promise.

"I think this is the place where you ought to get in real trouble. If you limit program access, eventually we are going to intervene if there is not some fairness there," Lott said. "You invented the 'fair and balanced' term. Let's make sure it applies to program access, too."

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