NCTC Weighs In on Liberty-DirecTV

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News Corp. shouldn’t be allowed to “escape” its obligation to abide by binding arbitration for its regional sports networks after it divests its ownership in DirecTV, the National Cable Television Cooperative told federal regulators.

The NCTC told the Federal Communications Commission it should continue to enforce certain restraints -- including submitting to arbitration for some programming disputes -- it imposed on News Corp. back in 2003 in approving its acquisition of a major stake in DirecTV.

The NCTC made its remarks in a nine-page filing Friday on Liberty Media’s proposed $11 billion purchase of News Corp’s 39% stake in DirecTV. Comments to the FCC on the pending acquisition were due by Friday.

The NCTC -- a buying co-op for small and midsized cable companies -- is in the midst of an arbitration proceeding with News Corp.’s Fox Cable Networks over how much its members will have to pay to carry seven FSN services.

The NCTC said in its FCC filing, “It would be patently unfair and contrary to the public interest for the commission’s approval of the News Corp./Liberty transactions to have the effect of terminating or otherwise interrupting any arbitration proceeding commenced under the News Corp./DirecTV order.”

As one of the conditions of News Corp. buying its stake in DirecTV, distributors can submit carriage disputes regarding News Corp.-affiliated sports networks and its TV stations to arbitration. Those conditions also said small cable companies can designate a bargaining agent to negotiate with News Corp. on their behalf.

According to the NCTC, those conditions should “continue to apply for their entire scheduled term, at minimum, to those networks or stations that are the subject of an arbitration proceeding at the time the News Corp./Liberty transactions close.”

Under the conditions set in 2003 by the FCC on News Corp., the company can’t withhold its cable networks from distributors at least until October 2007, and arbitration can be used to settle carriage disputes regarding regional sports channels and TV stations until January 2010.

Fox Cable couldn’t be reached for comment Monday.

The NCTC is in arbitration on behalf of 30 of its members regarding carriage deals for FSN Florida, FSN North, FSN Northwest, FSN Ohio, SportsSouth, FSN South and FSN Southwest.

The co-op filed for arbitration in January after nearly two years of trying to negotiate a master carriage deal with Fox for its regional sports channels.

As part of the Liberty-DirecTV deal, Liberty will also get News Corp.’s interests in three regional sports channels: FSN Rocky Mountain, FSN Pittsburgh and FSN Northwest.

In their application for ownership transfer, News Corp. and Liberty said those three sports networks will continue to be bound by the conditions set when News Corp. acquired its DirecTV stake.

But that acknowledgement “begs the question of whether the commission’s approval of the News Corp./Liberty transaction will permit News Corp. to escape the application of the News Corp./DirecTV order conditions to its other affiliated programming services,” the NCTC said in its filing Friday.

The pending arbitration proceeding only involves one of the regional sports channels, FSN Northwest, “that News Corp. and Liberty have conceded will remain subject to the News Corp./DirecTV order conditions,” the NCTC pointed out.

The NCTC also expressed concern that News Corp. will use its DirecTV divestiture “as the basis of evading the application of the other programming-related conditions imposed” by the FCC regarding nonsports News Corp.-affiliated cable networks, such as FX and National Geographic Channel.

The NCTC in its filing said that “there is the potential risk that DirecTV and News Corp.-owned programming services entered into, or will enter into, ‘sweetheart’ deals that serve as part of the actual consideration for the transactions between News Corp. and Liberty.”

To guard against that, the NCTC asked that the FCC “rule that the News Corp./DirecTV order conditions will apply to News Corp.-affiliated programming that entered into or modified its affiliation agreement with DirecTV during the period beginning four months prior to the announcement of News Corp.’s acquisition of DirecTV and ending four months after the closing” of the transaction.

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