News Is Flexible On Liberty Point

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Rupert Murdoch's News Corp. is unwilling to let a program-access flap hinder its $6.6 billion deal to take control of DirecTV Inc. parent Hughes Electronics Corp., a News Corp. source said last week.

Some in the cable industry raised a fuss when News Corp. announced that if given the opportunity, it would bid to acquire Liberty Media Corp. programming that Liberty decided to sell exclusively to the highest satellite bidder.

Reserving the right to exclusive deals with Liberty struck one senior cable-industry lobbyist as possibly undercutting News Corp.'s overarching promise to share Liberty's programming with other pay TV distributors while that company remained a major investor in News Corp.

"If it becomes a problem, we will just get rid of that provision. There has been so much made of this," a News Corp. source said. "We are not going to let this be an issue. We'll just take if off the table."

When the deal was announced two weeks ago, News Corp., on its own motion, agreed to comply with FCC rules that bar exclusive carriage deals between cable operators and satellite-delivered programming networks owned by cable companies. Last year, the FCC extended the program-access rules for another five years.

News Corp. did make one small exception for Liberty, to avoid the possibility of EchoStar Communications Corp.'s Dish Network obtaining access to Liberty's DBS-exclusive programming by default.

"If Liberty ever decided to do a DBS-exclusive offering, we would want to bid for that against EchoStar, so that EchoStar did not automatically get it. That's what that was designed to do," a News Corp. source said.

Rob Kaimowitz, a DBS analyst with Bull Path Capital Management, indicated that News Corp. strategy in taking control of DirecTV was unrelated to denying cable access to programming.

"This is all about distribution of new programming," Kaimowitz said. "This isn't about DirecTV. DirecTV is a weapon to force people to pick up the Fox programming. DBS is a weapon against cable to continue to shove all the programming they can make down cable's throat."

Because it owns a cable system in Puerto Rico, Liberty is covered by the FCC's program-access rules, according to the agency's latest cable-competition report.

While Liberty is barred from withholding programming from DBS, it is not barred from signing exclusive deals with satellite providers, a fact that had some wondering why News Corp. even bothered to call attention to possible exclusivity with Liberty in the first place.

News Corp. was not saying when it would file a public-interest statement with the FCC other than as soon as possible. In the filing, News Corp. plans to ask the FCC to make its program-access commitment a merger-approval condition.

Conspicuously quiet in the wake of the merger news has been Charlie Ergen, chairman and CEO of EchoStar, who failed to combine his company with Hughes last year in the face of implacable regulatory opposition supported by Murdoch, the National Association of Broadcasters and various rural interests.

EchoStar has moved ahead with its local TV market strategy while adding dozens of international programming channels.

Ergen also hopes this is the year for his company to launch a high-speed data product that clicks with consumers.

EchoStar spokesman Marc Lumpkin said the company was not discussing the News Corp.-DirecTV deal with the media.

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