DirecTV-News Corp. Deal Nears

Federal regulators appear to have few objections to the proposed buyout of the satellite broadcaster by News Corporation—which makes for a completely different scenario than last year's aborted acquisition of DirecTV by rival Echostar.

During the first week of December, officials in the antitrust division of the US Justice Department and at the Federal Communications Commission (FCC) indicated that they would approve the deal. On December 5, Justice Department attorneys announced that they had no objections to the merger, provided that it cleared the FCC—and that News Corp. would continue to provide its programming to cable providers and other satellite services.

On December 3, FCC officials likewise gave the $6.6 billion deal a tentative approval, with the provision that DirecTV deliver local broadcasts to its subscribers. The FCC also would like to see an arbitration system in place to negotiate any disputes between News Corp.'s Fox Television unit and cable TV providers. Announced in April, the deal would give News Corp. a 34% stake in DirecTV's parent company Hughes Electronics, a subsidiary of General Motors Corp. With the largest block of Hughes shares, News Corp. would have controlling interest of DirecTV.

Some critics, including consumer advocates and cable companies, have expressed concern that Fox programming, including Major League Baseball and National Football League games, could disappear from cable offerings should the combined entity make a move to get more people to sign up with DirecTV. News Corp. Chairman Rupert Murdoch has promised that this wouldn't happen, and has said repeatedly that the deal would give consumers more choice, more local stations, and better high-speed Internet access.

In a separate deal, DirecTV has agreed to use programming guide technology from Gemstar-TV Guide International in interactive program guides used by the satellite service and makers of its set-top box receivers. Beginning in January 2004, DirecTV will begin offering its subscribers the TV Guide Channel on its "Total Choice" package. The TV Guide Channel combines original programming, informative television guidance, and special features such as interviews with directors, producers, and actors and other behind-the-scenes programming. Under the new agreement, Gemstar-TV Guide will be paid by DirecTV rather than from the satellite service's set-top box suppliers.

The deal also further cements the growing alliance of News Corp. and DirecTV. News Corp. owns 43% of Gemstar-TV Guide. DirecTV has more than 11 million subscribers.