**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | MB Docket No. 03-124         |
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| General Motors Corporation and   | ) |                              |
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| Hughes Electronics Corporation,  | * |                              |
| Transferors                      |   |                              |
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| And                              | * |                              |
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| The News Corporation Limited,    | * |                              |
| Transferee,                      | * |                              |
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| For Authority to Transfer        | * |                              |
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+----------------------------------+---+------------------------------+

**MEMORANDUM OPINION AND ORDER**

**Adopted: December 19, 2003 Released: January 14, 2004**

By the Commission: Chairman Powell, Commissioners Abernathy and Martin
issuing separate statements; Commissioners Copps and Adelstein
dissenting and issuing separate statements.

**TABLE OF CONTENTS**

[Para. No.]{.underline}

I. INTRODUCTION 1

II\. DESCRIPTION OF THE PARTIES 6

> A. The News Corporation Limited 6
>
> B. General Motors Corporation and Hughes Electronics Corporation 8
>
> C. The Proposed Transaction 9

III\. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK 15

IV\. COMPLIANCE WITH COMMUNICATIONS ACT AND COMMISSION RULES

AND POLICIES 18

> A. Licensing Qualifications 18
>
> B. Foreign Ownership 27
>
> C. National Security, Law Enforcement, Foreign Policy and Trade Policy
> Concerns 35

V. INTRODUCTION TO THE VIDEO PROGRMAMING AND MVPD MARKETS 39

> A. Background 39
>
> B. Applicable Regulatory Framework 41
>
> 1\. Program Access Requirements 41
>
> 2\. Program Carriage Rules 45
>
> 3\. Must-Carry and Retransmission Consent 46
>
> C. Relevant Markets 49
>
> 1\. Product Markets 51
>
> a\. MVPD Services 52
>
> b\. Video Programming 54
>
> 2\. Relevant Geographic Markets 62
>
> a\. MVPD Services 62
>
> b\. Video Programming 63

VI\. ANALYSIS OF POTENTIAL HARMS IN THE RELEVANT MARKETS 68

> A. Introduction 68
>
> B. Potential Horizontal Harms 72
>
> C. Potential Vertical Harms 76
>
> 1\. Background 76
>
> 2\. Role of Corporate Governance 89
>
> 3\. Discrimination Against Unaffiliated Programming 101
>
> \(i\) Positions of the Parties 101
>
> \(ii\) Discussion and Condition 107
>
> 4\. Discrimination Against Unaffiliated MVPDs 109
>
> a\. Access to National and Non-Sports Regional Cable
>
> Programming Networks 109
>
> \(i\) Position of Parties 109
>
> \(ii\) Discussion and Conditions 124
>
> b\. Access to Regional Sports Cable Programming Networks 133
>
> \(i\) Background 133
>
> \(ii\) Positions of the Parties 135
>
> \(iii\) Discussion 147
>
> \(iv\) Conditions 163
>
> c\. Access to Broadcast Television Station Signals 180
>
> \(i\) Background 180
>
> \(ii\) Positions of the Parties 182
>
> \(iii\) Discussion 201
>
> \(iv\) Conditions 212
>
> d\. Access to Programming-Related Technologies 227
>
> \(i\) Electronic Program Guides/Interactive Program Guides 227
>
> \(ii\) Interactive Television 242
>
> \(iii\) Conditional Access Technology and Set-top Boxes. 247
>
> e\. Access to Fixed Satellite Services 251

VII\. OTHER POTENTIAL PUBLIC INTEREST HARMS 259

A. Impact of the Transaction on Diversity 259

> 1\. Background 259
>
> 2\. Program Diversity 260
>
> 3\. Viewpoint Diversity 262
>
> B. Effect on Network-Affiliate Relationships ("Bypass" Issue) 274
>
> C. Collusion with Cable MSOs 276
>
> D. Exclusive Arrangements with Unaffiliated Programmers 289
>
> E. Applicants' Conduct in Foreign Jurisdictions 294
>
> F. Competitive Harms in Latin America and Impact on U.S. Consumers and
> Programmers 301
>
> G. DirecTV and Fox Network Service in Alaska and Hawaii 304
>
> H. Exclusion of Non-Network Affiliated Broadcasters from the Benefits
> of Local-Into
>
> Local Carriage 307
>
> I. Lack of Final Media Ownership Rules 310
>
> J. Protection of General Motors Class GMH Stockholders 313

VIII\. ANALYSIS OF POTENTIAL PUBLIC INTEREST BENEFITS 315

> A. Analytical Framework 316
>
> B. Claimed Benefits 319
>
> 1\. Improvements in DirecTV's Service Offerings Resulting from News
>
> Corp's Innovative Management 320
>
> 2\. Increased Offering of Local-into-Local, HDTV, and Broadband
> Services 329
>
> 3\. Increased Operating Efficiencies 335
>
> 4\. Economies of Scope and Scale 339
>
> 5\. Improved Customer Satisfaction and Reduced Churn 345
>
> 6\. Improved Capital Structure 349
>
> 7\. Reduction in Double Marginalization 351
>
> 8\. Increased Program and Employment Diversity 352

IX\. BALANCING POTENTIAL PUBLIC INTEREST HARMS AND BENEFITS 358

X. CONCLUSION 371

XI\. ORDERING CLAUSES 372

APPENDICES

Appendix A -- List of Commenters

Appendix B -- Modifications to Rules for Arbitration Involving Regional
Sports Networks

Appendix C -- Modifications to Rules for Arbitration Involving
Retransmission Consent

Appendix D -- Technical Appendix

Appendix E -- Hughes Electronics Corporation -- Amended and Restated
By-Laws

Appendix F -- Conditions

Appendix G -- Licenses and Authorizations to Be Transferred

# introduction

1.  In this Order, we consider the application ("Application")[^1] of
    General Motors Corporation ("GM"), Hughes Electronics Corporation
    ("Hughes"), and the News Corporation Limited ("News Corp.")
    (collectively, the "Applicants") for consent to transfer control of
    various Commission licenses and authorizations, including direct
    broadcast satellite ("DBS")[^2] and fixed satellite space station,
    earth station, and terrestrial wireless authorizations held by
    Hughes and its wholly- or majority-owned subsidiaries to News Corp.
    The proposed transaction involves the split-off of Hughes from GM,
    wherein Hughes will become a separate and independent company,
    followed by a series of transactions through which News Corp.,
    through its majority-held subsidiary, Fox Entertainment Group
    ("FEG"), will acquire a 34% interest in Hughes. The remaining 66%
    interest in Hughes will be held by three GM employee benefit trusts
    (managed by an independent trustee), which combined will hold an
    approximately 20% interest in Hughes, and by the general public,
    which will hold an approximately 46% interest in Hughes.

2.  If approved, the proposed transaction will result in News Corp.
    holding the single largest block of shares in Hughes, thus providing
    News Corp. with a *de facto* controlling interest over Hughes and
    its subsidiaries, including DirecTV Holdings, LLC ("DirecTV"), a
    wholly-owned subsidiary of Hughes, which provides DBS service in the
    United States, as well as Hughes Network Systems, Inc. ("HNS"), a
    facilities-based provider of very small aperture terminal ("VSAT")
    network systems, and PanAmSat Corporation ("PanAmSat"), a global
    facilities-based provider of geostationary-satellite orbit fixed
    satellite services ("FSS"). As described in the Application, if the
    proposed transaction is consummated, K. Rupert Murdoch, chairman and
    chief executive officer ("CEO") of News Corp., will become chairman
    of Hughes, and Chase Carey, News Corp.'s former co-chief operating
    officer, will become president and chief executive officer of
    Hughes. Hughes' board of directors will consist of 11 directors, six
    of whom will be independent directors.

3.  Among News Corp.'s video programming assets are 35 owned and
    operated ("O&O") full-power television broadcast stations, a
    television broadcast network, ten national cable programming
    networks, and 22 regional cable programming networks. With 11.4
    million subscribers -- 13% of all multichannel video programming
    distribution ("MVPD") households -- DirecTV is second only to
    Comcast Corporation in its share of the MVPD market. With its
    national footprint, DirecTV competes with every single MVPD in the
    country, in markets of all sizes.

4.  Currently, News Corp. supplies programming to DirecTV and other
    MVPDs, and DirecTV is a buyer of programming content from News Corp.
    and other programming suppliers. By combining News Corp.'s
    programming assets with DirecTV's national distribution platform,
    the proposed transaction creates a vertically integrated
    content/distribution platform. It thereby changes the nature of News
    Corp.'s relationship with all other MVPDs from that of solely a
    programming supplier to that of both a supplier of crucial inputs
    and a direct competitor in the end user MVPD market. As discussed
    more fully below, our analysis of the principal allegations of
    competitive harm in the record demonstrates that this vertical
    integration has the potential to increase the incentive and ability
    of News Corp. to engage in temporary foreclosure bargaining
    strategies during carriage negotiations with competing MVPDs for two
    types of "must have" video programming products -- broadcast
    television station signals and regional cable programming sports
    networks \-- in order to secure higher prices for its
    programming.[^3] Although News Corp., like other broadcast networks,
    engages or attempts to engage in this sort of behavior today,
    ownership of a competing MVPD platform with a national footprint
    means that News Corp. stands to gain from any subscriber losses the
    affected MVPD suffers during the period of foreclosure when those
    subscribers move over to its competing MVPD platform to access the
    desired programming.[^4] The ability to gain revenues via its
    ownership interest in DirecTV thereby helps offset any temporary
    losses that News Corp. would suffer from withdrawal of its
    programming from the competing MPVD in terms of lost advertising
    and/or affiliate fee revenues. This off-setting revenue gain makes
    use of the strategy more tolerable to News Corp post-transaction
    than it was pre-transaction and thereby increases the likelihood and
    frequency of its use. This lowering of the costs of foreclosure to
    News Corp. from present levels fundamentally and substantially
    alters the bargaining dynamic between the program supplier and the
    competing programming distributor to the benefit of the former at
    the expense of the latter and its subscribers. To the extent that
    News Corp. succeeds in using temporary foreclosure strategies to
    extract supra-competitive prices for its programming, these
    transaction-specific higher programming costs are likely to be
    passed through as higher MVPD prices, which in turn would harm
    consumers.

5.  Applicants have alleged, and we have found, various public interest
    benefits from the transaction, including more potent competition to
    cable, increased innovation and consumer benefits in terms of
    programming and services, and increased penetration of
    local-into-local broadcasting service. Our license conditions
    described below are designed to lessen the impact of the public
    interest harms outlined above, while preserving the benefits of the
    transaction for the public. Based on the record before us, we find
    that on balance and as conditioned, the subject license transfer
    approvals will serve the public interest. We therefore grant the
    Application with the conditions specified below.

# DESCRIPTION OF THE PARTIES

## The News Corporation Limited

6.  News Corp. is a corporation formed under the laws of South Australia
    with securities that are publicly traded on both the New York Stock
    Exchange and the Australian Stock Exchange.[^5] News Corp. is a
    diversified international media and entertainment company with
    operations in a number of industry segments, including: filmed
    entertainment, television, cable network programming, magazines and
    inserts, news papers, and book publishing.[^6] Shareholders holding
    a greater than 10% interest in News Corp. are K. Rupert Murdoch, a
    U.S. citizen and chief executive of News Corp., who directly and
    indirectly controls an approximately 16% equity and 30% voting
    interest in News Corp.,[^7] and Liberty Media Corporation
    ("Liberty"), a Delaware corporation, which holds preferred limited
    voting ordinary shares representing approximately 17.6% of the
    shares of News Corp. but with no voting rights except in limited
    instances.[^8] Liberty holds interests in domestic and international
    video programming, interactive technology services, and
    communications businesses in the United States, Europe, Latin
    America, and Asia.[^9] Among its holdings are majority ownership
    interests in Starz Encore Group LLC (100%) and Liberty Satellite and
    Technology, Inc. (87%), and minority interests in a number of other
    companies.[^10] Liberty also holds a controlling interest in
    Astrolink International LLC, and the largest plurality interest in
    Wildblue Communications, Inc., both Commission licensees authorized
    to construct, launch and operate satellites using frequencies in the
    Ka-band.[^11]

7.  News Corp. holds its U.S. programming interests through its Fox
    Entertainment Group, Inc. subsidiary, a Delaware corporation, in
    which News Corp. currently holds an approximately 80.6% ownership
    and 97% voting interest.[^12] The remaining 19.4% equity is publicly
    traded on the New York Stock Exchange.[^13] The Fox Entertainment
    Group, Inc. is principally engaged in the development, production
    and distribution of television broadcasting and cable network
    programming.[^14] Its programming interests include Fox Broadcasting
    Company, Fox Television Stations, Twentieth Century Fox Film,
    Twentieth Century Fox Television, Fox News Channel, and Fox Cable
    Networks.[^15] News Corp. indirectly holds interests in a number of
    direct-to-home ("DTH") subscription services, all of which operate
    outside the United States, including a 35% indirect interest in
    British Sky Broadcasting ("BSkyB"), which operates in the United
    Kingdom and Ireland.[^16] In addition, News Corp. holds an
    approximately 42.9% interest in Gemstar-TV Guide International, Inc.
    ("Gemstar"), which, among other things, produces an electronic
    program guide for on-screen navigation of program offerings.[^17]
    News Corp. also holds an approximately 79% equity interest in NDS
    Group plc ("NDS"), a supplier of conditional access systems that
    provide secure solutions for pay television systems.[^18]

## General Motors Corporation and Hughes Electronics Corporation

8.  Hughes, a Delaware corporation, is a wholly owned subsidiary of GM,
    also a Delaware corporation.[^19] Hughes holds a number of
    Commission licenses and authorizations directly or through its
    wholly- or majority-owned subsidiaries.[^20] Hughes' wholly-owned
    subsidiaries include both DirecTV, the parent company of DirecTV
    Enterprises, LLC, and United States Satellite Broadcasting Company,
    Inc., both Commission DBS licensees.[^21] DirecTV currently provides
    service to U.S. consumers from seven DBS satellites using 32
    channels at 101º W.L. orbital location, three channels at 110º W.L.
    orbital location, and 11 channels at 119º W.L. orbital
    location.[^22] In the United States, DirecTV, together with certain
    independent distributors, have approximately 11.9 million DBS
    subscribers.[^23] HNS also is a wholly-owned subsidiary of Hughes
    and holds a number of authorizations for transmit/receive earth
    stations and VSAT networks for use of frequencies in the C- and
    Ku-bands, as well as authorizations for the construction, launch and
    operation of the Ka-band SPACEWAY Satellite System.[^24] Hughes also
    indirectly holds an approximately 81% economic and voting interest
    in PanAmSat, a publicly traded Delaware corporation and the
    corporate parent of PanAmSat Licensee Corp., a Commission licensee
    that holds authorizations to operate fixed satellite service systems
    using the C- and Ku-bands, as well as authorizations for numerous
    earth stations which are licensed to transmit and receive
    frequencies in the C- and Ku-bands.[^25]

## The Proposed Transaction

9.  The transaction will be accomplished in two parts. GM will split off
    Hughes and divest its interest in Hughes such that Hughes will
    become a separate and independent company. As a result of these and
    several related transactions, News Corp. will own a 34% interest in
    Hughes, and will become the largest single holder of Hughes stock.
    Three GM employee benefit trusts managed by an independent trustee
    will own a combined approximately 20% interest in Hughes, and the
    remaining 46% interest in Hughes will be held by the general
    public.[^26]

10. *The Split-Off of Hughes*.[^27] Hughes is currently part of GM. GM
    has issued a tracking stock, GM Class H common stock ("GMH shares")
    to investors who wish to "invest" in Hughes. The GMH shares are held
    by the public and are traded on the New York Stock Exchange
    ("NYSE"). The total number of GMH shares issued and outstanding as
    of the date of the Application represented an approximate 80.1%
    indirect economic interest in the financial performance of Hughes,
    the largest block of which is held by three GM employee benefit
    trusts.[^28] GM itself owns all of the common stock of Hughes, holds
    all of Hughes' voting power, and retains the remaining approximately
    19.9% economic interest in Hughes.[^29] As one of the first steps of
    the proposed transaction after the payment by Hughes to GM of a
    \$275 million dividend, GM will distribute to the holders of GMH
    shares new shares of Hughes common stock in exchange for the
    outstanding GMH shares -- on a share-for-share basis.[^30] GM's
    19.9% interest in Hughes will be represented by Hughes Class B
    common stock.[^31]

11. *The Stock Purchase.*[^32] Simultaneous with the Hughes split-off,
    News Corp. will purchase GM's approximately 19.9% interest in Hughes
    for \$14 per share[^33] payable in cash, or, at News Corp. election,
    up to 20% of the total amount may be paid to GM in News Corp.
    preferred limited voting ordinary American Depository Receipts
    ("ADRs").[^34]

12. *The Merger*.[^35] News Corp. will form a new subsidiary specially
    created to merge with Hughes ("merger subsidiary"). Immediately
    following the split-off and stock purchase described above, the
    merger subsidiary will merge with and into Hughes, with Hughes being
    the surviving corporation.[^36] In connection with the merger, News
    Corp. will acquire from the former GMH shareholders an additional
    14.1% of Hughes for \$14 per share payable at News Corp.'s election
    in the form of News Corp. preferred ADRs, cash, or a combination of
    preferred ADRs and cash.[^37] As a result of the merger, each former
    GMH shareholder will receive for each of their Hughes shares owned,
    consideration of which approximately 82.4% will consist of equity in
    Hughes and 17.6% will consist of News Corp. preferred ADRs and/or
    cash.[^38] Automatically upon consummation of the merger, the Hughes
    Class B common stock acquired by News Corp. from GM will be
    converted on a share-for-share basis into Hughes common stock with
    no class. The consequence of these transactions is that after the
    merger, News Corp. will hold 34% of Hughes common stock and the
    former GMH shareholders will hold 66% of Hughes common stock.[^39]
    Immediately following the merger, the shares of Hughes acquired by
    News Corp. will be transferred to FEG or a wholly-owned subsidiary
    of FEG for a combination of a promissory note and stock in FEG. The
    acquisition of this stock will increase News Corp.'s ownership
    interest in FEG, currently 80.6%, to approximately 82%.[^40]

13. *The Resulting Ownership and Management Structure.*[^41] As a result
    of the proposed transactions, Hughes will become an independent
    company incorporated in the United States with a single class of
    publicly traded common stock. News Corp., through its FEG
    subsidiary, will control the single largest block of shares in
    Hughes with a 34% interest. The remaining 66% interest in Hughes
    will be held by the former owners of GMH shares. Of this public
    shareholding, trusts established under various GM employee benefit
    plans will hold, in the aggregate, an approximately 20%
    interest.[^42] The United States Trust Company of New York ("US
    Trust") serves as the independent trustee of each of those trusts
    with respect to such shares, and is therefore expected to initially
    hold, in the aggregate, approximately 20% of the voting power of
    Hughes common stock. Subject to its fiduciary duties as trustee, US
    Trust will have sole discretion in exercising those voting rights.
    The remaining shares will be widely held by the public. Hughes will
    continue to own indirectly approximately 81% of the shares of
    PanAmSat. After the transaction, GM will no longer hold any shares
    of Hughes common stock.[^43]

14. The Applicants state that, after the closing of the transaction,
    Hughes' board of directors will consist of 11 members, of which six
    will be independent.[^44] The parties have agreed upon an initial
    slate of directors, all of whom are U.S. citizens and include K.
    Rupert Murdoch as chairman of the board and Chase Carey as CEO.[^45]
    The board will have an Audit Committee comprised entirely of
    independent directors. Among its other functions, the Audit
    Committee will review and approve all related-party transactions in
    such amounts and related to such matters as the Audit Committee
    determines. Accordingly, because News Corp. and its programming
    vendor subsidiaries would be considered related parties, any
    transaction they might enter into with Hughes or DirecTV may be
    subject to review and approval by the Audit Committee.[^46] No
    single shareholder will have a *de jure* controlling interest in the
    company either through a majority interest in voting stock or
    majority representation on the board. Because News Corp. will
    indirectly control a 34% interest in Hughes and its former employee
    will be CEO, News Corp., for purposes of the Communications Act,
    will exercise *de facto* control over Hughes.

# standard of review and public interest framework

15. The Commission must determine whether the Applicants have
    demonstrated that the proposed transfer of control of licenses from
    GM to News Corp. will serve the public interest, convenience, and
    necessity.[^47] The public interest standard involves a balancing of
    potential public interest harms of the proposed transaction and the
    potential public interest benefits.[^48] The Applicants bear the
    burden of proving, by a preponderance of the evidence, that the
    proposed transaction, on balance, serves the public interest.[^49]

16. Our public interest evaluation under Section 310(d) necessarily
    encompasses the "broad aims of the Communications Act,"[^50] which
    includes, among other things, preserving and enhancing competition
    in relevant markets, ensuring that a diversity of voices is made
    available to the public, and accelerating private sector deployment
    of advanced services.[^51] To apply our public interest test, then,
    we must determine whether the transaction violates our rules, or
    would otherwise frustrate implementation or enforcement of the
    Communications Act and federal communication policy. That policy is
    shaped by Congress and deeply rooted in a preference for competitive
    processes and outcomes.[^52]

17. Our determination of the competitive effects of the proposed
    transaction under the public interest standard is not limited by
    traditional antitrust principles.[^53] The Commission and the
    Department of Justice ("DOJ") each have independent authority to
    examine communications transactions involving mergers and
    acquisitions, but the standards governing the Commission's review
    differ from those of DOJ.[^54] The review conducted by DOJ is
    pursuant to Section 7 of the Clayton Act, which prohibits
    transactions that are likely to substantially lessen competition in
    any line of commerce.[^55] The Commission, on the other hand, is
    charged with determining whether the transaction serves the broader
    public interest.[^56]

#  compliance with communications act and commission rules and policies

## Licensing Qualifications

18. *Background*. As a threshold matter, we must determine whether the
    Applicants meet the requisite qualifications under the Act and our
    rules.[^57] Among the factors the Commission considers in its public
    interest review is whether the applicant for a license has the
    requisite "citizenship, character, financial, technical, and other
    qualifications."[^58] No issues have been raised in this case that
    would require us to re-evaluate the basic qualifications of Hughes,
    the transferor, and we thus find that Hughes is a qualified
    transferor. As to the qualifications of the transferee, Section
    310(d) requires that the Commission consider the qualifications of
    the proposed transferee as if the transferee were applying for the
    license directly under Section 308 of the Act.[^59] Therefore, our
    review of the transferee, News Corp., includes examination of
    whether News Corp. has the requisite "citizenship, character, and
    financial, technical, and other qualifications" that we require of
    all applicants for a Commission license.[^60]

19. *Position of Parties*. EchoStar is the only party that challenges
    News Corp.'s qualifications to be a Commission licensee on the basis
    of character. EchoStar's assertions relate to a pending criminal
    investigation, as well as pending civil litigation cases, filed
    against NDS Group, plc. ("NDS"), a company that is 79% owned by News
    Corp.[^61] EchoStar asserts that NDS is reportedly the subject of a
    criminal investigation by the U.S. Attorney General's office for,
    among other things, the willful violation of criminal statutes
    outlawing the circumvention of disabling of encryption technology
    (*i.e*., hacking).[^62] This investigation, according to EchoStar,
    may possibly lead to criminal indictments resulting in a felony
    conviction that could implicate the Commission's character policy as
    to News Corp.'s qualifications.[^63]

20. EchoStar also claims that NDS is the defendant in civil law suits
    brought by EchoStar, Canal+ (Vivendi Universal), DirecTV, and
    EchoStar and NagraStar L.L.C. ("NagraStar").[^64] According to
    EchoStar, these lawsuits involve allegations of, *inter alia*,
    willful hacking of the security functions of a number of MVPD
    platforms; unfair competition in the provision of mass media-related
    services; corporate sabotage and satellite signal piracy; violations
    of the California unfair competition statute, the Digital Millennium
    Copyright Act ("DMCA"), and the Communications Act of 1934; breach
    of contract, fraud, breach of warranty and misappropriation of trade
    secrets.[^65]

21. EchoStar argues that the pending federal criminal investigation and
    civil litigation cases involve matters that should be of paramount
    concern to the Commission.[^66] In addition, EchoStar maintains that
    a possible finding that NDS has engaged in such alleged activities
    would be highly relevant to the application of the Commission's
    character policy to News Corp.'s qualifications.[^67] Thus, EchoStar
    submits that the Commission should put the current proceeding on
    hold while it undertakes its own investigation of these factual
    allegations[^68] or at least await the outcome of the criminal
    investigation.[^69] EchoStar surmises that, in the alternative,
    should the U.S. Attorney General's investigation result in a felony
    conviction, the Commission would be faced with an extremely
    burdensome license revocation proceeding.[^70] Finally, EchoStar
    asserts that News Corp. failed to report the criminal investigation
    of NDS's activities on its FCC Form 312 Application in this
    proceeding even though these facts are directly relevant to the
    Commission's analysis of its qualifications.[^71]

22. In response, the Applicants point out that EchoStar took the
    opposite position on the relevance of pending such proceedings just
    last year when its own qualifications were challenged in connection
    with its plan to merge with Hughes, based on its alleged failure to
    engage in collective bargaining and other labor law concerns.[^72]
    The Applicants point out that in that case, the Commission held that
    any "unadjudicated non-FCC violations" as to EchoStar "should be
    resolved by the governmental agency with proper jurisdiction."[^73]

23. *Discussion*. The Commission has long held that character
    qualifications of an applicant or licensee are relevant to the
    Commission's public interest analysis and that an applicant's or
    licensee's willingness to violate other laws, and in particular to
    commit felonies, also bears on our confidence that an applicant or
    licensee will conform to FCC rules and policies. To this end, the
    Commission has determined that, in deciding character issues, it
    will consider certain forms of adjudicated, non-FCC related
    misconduct that includes: (1) felony convictions; (2) fraudulent
    misrepresentations to governmental units; and (3) violations of
    antitrust or other laws protecting competition.[^74] The Commission
    has also stated that it will consider non-FCC related misconduct of
    the licensee's or applicant's parent or related subsidiary where
    there is a sufficient nexus between the licensee or applicant and
    the parent corporation or a related subsidiary.[^75] Further, the
    Commission has used its character policy in the broadcast area as
    guidance in resolving similar questions in transfer of common
    carrier authorizations and other license transfer proceedings.[^76]

24. We do not agree with EchoStar that the alleged pending federal
    criminal investigation and civil cases against NDS warrant
    disqualification of News Corp. on the basis of character.
    Unadjudicated non-FCC violations should be resolved by a court with
    proper jurisdiction and should not be pre-judged by our
    processes.[^77] Because the investigation and civil cases cited by
    EchoStar are pending matters, they are irrelevant to News Corp's
    character qualifications under the Commission's long-held position
    that there "must be an ultimate adjudication before an appropriate
    trier of fact, either by a government agency or court, before we
    will consider the activity in our character determinations."[^78]

25. We also do not agree with EchoStar that we should hold this
    proceeding in abeyance in order to undertake a separate
    investigation into the matters alleged, or await the outcome of the
    criminal investigation by the Attorney General's Office.[^79] The
    cases cited by EchoStar do not persuade us otherwise.[^80] Both of
    the cases cited by EchoStar involve previous findings by an
    appropriate trier of fact of misconduct on behalf of the applicant's
    or licensee's parent.[^81] In those cases, the Commission was
    justified in its decision to delay resolution of the related license
    applications to allow consideration of the adjudicated misconduct in
    its license review process. The instant case involves allegations
    concerning a pending criminal investigation and various pending
    civil lawsuits, none of which have been finally adjudicated. As we
    do not typically give consideration to pending matters not involving
    FCC-related misconduct in reaching character determinations, it
    would be inappropriate to rely on these pending matters as a basis
    for delaying resolution of the instant Application.[^82] Indeed,
    holding this proceeding in abeyance on the grounds advocated by
    EchoStar would only create uncertainty, delay, and expense that
    would disserve the public interest.

26. Finally, EchoStar's assertion that News Corp. failed to report the
    criminal investigation of NDS's activities on FCC Form 312 lacks
    merit. The Commission's rules do not impose upon applicants a
    requirement to report *pending* criminal investigations,[^83] nor
    does the application filed in this proceeding, FCC Form 312, require
    specific disclosure of *pending* criminal matters *prior* to
    conviction.[^84] The pending matters referred to in question 39 of
    FCC Form 312 relate to cases where there has been a conviction (as
    may be listed in response to question 37) or adjudication of guilt
    (as may be listed in response to question 38) of the party to the
    application or of a party directly or indirectly controlling the
    applicant.[^85]

## Foreign Ownership

27. *Background*. Generally, foreign ownership interests in Title III
    licensees are governed by Section 310(a) and (b) of the Act.[^86]
    The policies and rules implementing these foreign ownership
    provisions with respect to satellite services are largely
    articulated in the *DISCO II Order*, and support the Commission's
    policy objectives of promoting competition in the U.S. market and
    achieving a more competitive global satellite market.[^87] The
    *DISCO II Order* and a companion decision, the *Foreign
    Participation Order,*[^88] are the initial Commission decisions
    implementing market opening commitments made by the United States in
    the World Trade Organization ("WTO") Agreement on Basic
    Telecommunications Services ("WTO Basic Telecom Agreement"),[^89]
    and remain central to the Commission's overall foreign ownership
    policy today.

28. In the *DISCO II Order*, the Commission implemented a number of
    measures to foster competition among multiple satellite service
    providers, including adoption of a rebuttable presumption that entry
    by WTO Member satellite systems will promote competition in the
    United States.[^90] The Commission, however, explicitly did not
    apply this open entry presumption to satellites providing DBS,
    Direct-to-Home ("DTH"), and Digital Audio Radio Services ("DARS"),
    as these services were not covered by commitments made as part of
    the WTO Basic Telecom Agreement (*i.e.*, "non-WTO covered
    services").[^91] The Commission determined that for all requests to
    provide non-WTO covered services to the United States using non-U.S.
    licensed satellites, an evaluation was required to determine whether
    effective competitive opportunities ("ECO") for U.S. satellite
    systems were available in the country in which the foreign satellite
    was licensed ("ECO-Sat test").[^92]

29. *Position of Parties*. EchoStar contends that the Commission should
    determine if Australia provides effective competitive opportunities
    to U.S. companies to provide the same service News Corp. would be
    authorized to provide in the United States.[^93] EchoStar maintains
    that the underlying rationale for applying the *DISCO II* ECO-Sat
    test to the provision of non-WTO covered services, *i.e*., "to
    encourage open markets for these services and to avoid
    anti-competitive conduct in the U.S. market," holds whether the
    foreign company is attempting to gain entry to the U.S. market
    through a foreign licensed satellite or through acquisition.[^94]
    Accordingly, EchoStar argues the Commission should apply the ECO-Sat
    test in this case.[^95]

30. The Applicants respond that the ECO-Sat test is wholly irrelevant to
    this proceeding. They assert that the ECO-Sat test applies only to
    parties "requesting authority to operate with a non-U.S. licensed
    space station to serve the United States."[^96] Thus, by its terms,
    Applicants claim the ECO-Sat test does not apply to foreign
    investments in U.S. licensed DBS providers. They submit that this
    position is confirmed in the recent *SES-DTH Order.*[^97] Further,
    the Applicants contend that application of the ECO-Sat test to U.S.
    licensed systems would not make any sense as a matter of policy,
    especially in view of the Commission's *2002 DBS Report and
    Order*,[^98] which found that there was "no public policy
    justification for imposing foreign ownership restrictions on DBS
    providers," in part because such restrictions would prevent DBS from
    achieving a "more equal regulatory basis with cable," which is not
    subject to any foreign ownership restrictions.[^99] Alternatively,
    the Applicants argue that even if the ECO-Sat test did apply, the
    Commission should find that there is no foreign ownership issue in
    this proceeding because News Corp.'s "home market" is the United
    States.[^100]

31. *Discussion*. Because of the foreign ownership interests presented
    in this case,[^101] we first consider the applicability of Section
    310(a) and (b) of the Act.[^102] We find that neither provision
    applies to the proposed transaction. No foreign government or its
    representative would hold any of the subject licenses. Thus, our
    review does not fall under Section 310(a) of the Act, which
    prohibits "any foreign government or the representative thereof"
    from holding a license.[^103] Further, the Application before us
    involves the transfer of control of earth station licenses, space
    station licenses for provision of FSS and DBS service, and wireless
    licenses, all of which are held, and are to be transferred, on a
    non-common carrier basis.[^104] Thus, we find that the proposed
    transaction does not involve a "broadcast or common carrier or
    aeronautical en route or aeronautical fixed radio station license,"
    and the statutory provisions of Section 310(b) of the Act do not
    apply.[^105]

32. However, in the *2002 DBS Report and Order,* the Commission stated
    that although it would not impose additional foreign ownership rules
    on providers of DBS subscription services beyond those already
    required by Section 310(a) and (b) of the Act,[^106] in deciding
    questions of access to the U.S. market for provision of DBS service
    through use of non-U.S. licensed satellites, the Commission
    concluded that it would apply the requirements set forth in the
    *DISCO II Order.*[^107] As stated earlier, the *DISCO II Order*
    requires that the Commission apply the ECO-Sat test to all requests
    to access the U.S. market for the provision of non-WTO covered
    services (*i.e*., DTH, DBS and DARS) using non-U.S. licensed
    satellites.[^108] Thus, we note that if News Corp. were seeking to
    operate a foreign-licensed satellite to provide DBS service in the
    United States, we would not permit it to do so until we conducted an
    ECO-Sat analysis.[^109] The proposed transaction, however, does not
    involve a request to use non-U.S. licensed satellites but rather a
    request to acquire U.S. licensed satellites to deliver DBS service
    to the U.S. market. As such, the instant transaction does not fall
    within the analytic framework adopted by the Commission in the
    *DISCO II Order* and, thus, application of the ECO-Sat test is not
    required in this case.[^110]

33. Regardless of the applicability of Section 310(a) and (b) of the Act
    or the ECO-Sat test, the Commission maintains a responsibility
    pursuant to Section 310(d) to examine and make a finding as to
    whether a specific transfer or assignment involving Title III
    licenses will serve the public interest, convenience, and
    necessity.[^111] Thus, consistent with our responsibilities under
    Section 310(d), where appropriate, our review considers whether
    public interest harms are likely to result from foreign investment
    in Title III licensees.[^112] Therefore, in this case, we consider
    whether foreign investment in a U.S. licensee is likely to distort
    competition in any relevant U.S. market. We also consider whether
    such foreign investment will further competition in the U.S. market
    and whether efficiencies and other public interest benefits are
    likely to result. If we find any harms resulting from foreign
    investment, these harms will be taken into consideration in the
    overall balancing of the potential public interest harms and
    benefits of the proposed transaction.[^113]

34. EchoStar argues that before granting the instant Application, the
    Commission should be satisfied that Australia provides effective
    competitive opportunities to U.S. companies to provide the same
    services News Corp. would be authorized to provide in the United
    States.[^114] We are not persuaded by EchoStar's arguments that
    there is a need in this case for the Commission to take steps to
    ensure that U.S. companies can compete effectively in
    Australia.[^115] The nature of our inquiry here focuses on whether
    the provision of Title III services by a U.S. licensee (with a
    controlling interest held by a foreign incorporated entity) would
    harm competition in the U.S. market. EchoStar's argument, at best,
    advances the position that U.S. licensees could be at a competitive
    disadvantage in the Australian market due to Australia's statutory
    and regulatory foreign ownership limitations on subscription
    television.[^116] EchoStar does not provide any evidence or
    arguments to show how Australia's requirements could cause
    competitive distortions or competitive harm in the U.S. market. For
    example, EchoStar does not argue or show how News Corp.'s investment
    could limit competitive choices for U.S. consumers; nor does
    EchoStar argue or show how the acquisition of a controlling interest
    in a U.S. licensee by News Corp. could result in increased
    concentration in the global market, and thereby cause competitive
    harm in the U.S. market. No evidence was provided, for example, that
    DirecTV, because of its relationship with News Corp., could provide
    DBS services to the U.S. market that a U.S.-owned operator could not
    provide. Based on our review of the record, we find that the
    proposed acquisition of Hughes by News Corp. is not likely to create
    competitive distortions in the U.S. market based upon News Corp.'s
    incorporation or activities in Australia.[^117]

## National Security, Law Enforcement, Foreign Policy and Trade Policy Concerns

35. As part of our public interest analysis, our review takes into
    consideration concerns relating to national security, law
    enforcement, foreign policy and trade policy that may present public
    interest harm, including any such issues raised by the Executive
    Branch.[^118] If the Executive Branch raises national security, law
    enforcement, foreign policy or trade policy concerns, we accord
    deference to its expertise on such matters.[^119] On November 25,
    2003, the DOJ, and the Federal Bureau of Investigation ("FBI"), with
    the concurrence of the Department of Homeland Security ("DHS")
    (collectively referred to as the "Executive Agencies"), filed a
    "Petition to Adopt Conditions to Authorizations and Licenses"
    ("Petition to Adopt Conditions"),[^120] along with attachments in
    this proceeding.[^121]

36. Specifically, in the Petition to Adopt Conditions, the Executive
    Agencies state that their ability to satisfy their obligations to
    protect the national security, to enforce the laws, and to preserve
    the safety of the public could be significantly impaired by
    transactions in which foreign entities will own or operate a part of
    the U.S. communications system, or in which foreign-located
    facilities will be used to provide domestic communications services
    to U.S. customers.[^122] The Executive Agencies note, that News
    Corp., the foreign entity acquiring control of Hughes (through its
    controlling interest in FEG), is organized under the laws of
    Australia.[^123]

37. According to the Executive Agencies, after discussions with the
    Applicants, the Executive Agencies concluded that the commitments
    set forth in the Hughes By-law Amendment, the Proposed Resolutions,
    and the Letter Agreement were adequate to ensure that the Executive
    Agencies and other entities with responsibility for enforcing the
    law, protecting the national security and preserving public safety
    can proceed in a legal, secure and confidential manner to satisfy
    these responsibilities.[^124] Accordingly, DOJ and FBI, with the
    concurrence of DHS, advised the Commission that they have no
    objections to the grant of the Applicants' transfer of control
    applications, provided that the Commission condition the grant of
    the transfer of control applications on (i) GM causing Hughes to
    adopt, and Hughes adopting, prior to the closing of the subject
    transaction, the Hughes By-law Amendment; (ii) the adoption by the
    Board of Directors of News Corp. of the Proposed Resolutions;
    and (iii) compliance by Hughes and News Corp., respectively, with
    the commitments set forth in the Hughes By-laws Amendment, the
    Proposed Resolutions, and the Letter Agreement.[^125]

38. In assessing the public interest, we consider the record and accord
    the appropriate level of deference to Executive Branch expertise on
    national security and law enforcement issues.[^126] As the
    Commission stated in the *Foreign Participation Order*, foreign
    participation in the U.S. telecommunications market may implicate
    significant national security or law enforcement issues uniquely
    within the expertise of the Executive Branch.[^127] In the context
    of this particular proceeding, we consider these concerns
    independent of our own separate analysis. Therefore, in accordance
    with the request of the Executive Agencies, in the absence of any
    objection from the Applicants, and given the discussion above, we
    condition our grant of the Applications on compliance with the
    following conditions: (i) GM causing Hughes to adopt, and Hughes
    adopting, prior to the closing of the subject transaction, the
    Hughes By-law Amendment; (ii) the adoption by the Board of Directors
    of News Corp. of the Proposed Resolutions; and (iii) compliance by
    Hughes and News Corp., respectively, with the commitments set forth
    in the Hughes By-laws Amendment, the Proposed Resolutions, and the
    Letter Agreement.[^128]

# INTRODUCTION TO THE video progrmaming and mvpd MARKETS

## Background

39. The proposed transaction involves the acquisition by News Corp., a
    major owner of both broadcast and cable video programming content
    and programming-related technologies, of a 34% interest in Hughes
    Electronics, owner of DirecTV, a DBS provider that is the second
    largest MVPD in the United States and the largest MVPD that has a
    national service footprint. News Corp. presently has no MVPD assets
    in the United States; its' primary domestic business is the
    provision of video programming to MVPDs in every area of the
    country. Similarly, Hughes currently does not participate in the
    video programming market as a programming supplier;[^129] rather,
    its DirecTV subsidiary functions purchaser and distributor of
    multichannel video programming to subscribing customers.[^130] By
    acquiring DirecTV, News Corp. immediately transforms itself from a
    supplier of video programming MVPDs to a vertically integrated MVPD
    competitor. News Corp. thus becomes a vertically integrated supplier
    of broadcast and cable video programming to all of its' MVPD
    competitors in every region of the country.

40. Applicants have alleged that a combination of economic forces,
    existing regulatory constraints and their own program access and
    program carriage commitments will suffice to protect competition and
    consumers against potential competitive harms arising from the
    transaction.[^131] Commenters and opponents argue, among other
    things, that News Corp.'s acquisition of a controlling interest in
    the second largest MVPD will increase the incentive and ability of
    News Corp. to seek and obtain supra-competitive prices for its video
    programming services through retransmission consent negotiations for
    its local broadcast television station signals and in affiliate
    agreement negotiations for its regional sports cable networks. This,
    they contend, will increase rival MVPD costs, who will in turn seek
    to recover these increased costs through end-user rate increases, a
    result not foreclosed by either the program access or retransmission
    consent rules, or the Applicants' offered additional
    commitments.[^132] Before assessing these claims, we first provide
    some background on relevant Commission rules concerning the
    distribution of video programming, including our program access
    rules, program carriage rules, and the must-carry/retransmission
    consent requirements, and on economic theory concerning horizontal
    and vertical transactions. We then define the relevant upstream and
    downstream markets and consider whether the transaction is likely to
    have adverse competitive effects in those markets.

## Applicable Regulatory Framework 

### Program Access Requirements

41. The program access provisions, contained in Section 628 of the
    Communications Act, were adopted as part of the Cable Television
    Consumer Protection and Competition Act of 1992.[^133] At the time,
    Congress was concerned that most cable operators enjoyed a monopoly
    in program distribution at the local level.[^134] Congress found
    that vertically integrated program suppliers had the incentive and
    ability to favor their affiliated cable operators over nonaffiliated
    cable operators and programming distributors using other
    technologies.[^135] Section 628 is intended to foster the
    development of competition to traditional cable systems by governing
    the access of competing MVPDs to cable programming services. DBS was
    among the technologies that Congress intended to foster through the
    program access provisions.[^136] As a general matter, the program
    access rules prohibit a cable operator, a satellite cable
    programming vendor[^137] in which a cable operator has an
    attributable interest, or a satellite broadcast programming vendor
    from engaging in "unfair methods of competition or unfair or
    deceptive acts or practices, the purpose or effect of which is to
    hinder significantly or to prevent any MVPD from providing satellite
    cable programming or satellite broadcast programming to subscribers
    of consumers."[^138] Thus, Congress in 1992 acknowledged that access
    to satellite cable programming was critical to ensure competition
    and diversity in the satellite programming and MVPD markets by
    prohibiting permanent foreclosure of satellite cable programming and
    requiring non-discrimination in its provision by vertically
    integrated cable operators and satellite cable programming vendors.
    As required in the statute, the Commission, in 2002, examined the
    developments and changes in the MVPD marketplace in the ten years
    since the enactment of the program access statute.[^139] The
    Commission concluded that the competitive landscape had changed for
    the better since 1992, but that vertically integrated programmers
    continued to have the incentive and ability to favor affiliated
    cable operators over other MVPDs.[^140]

42. The program access rules specifically prohibit cable operators, a
    satellite cable programming vendor in which a cable operator has an
    attributable interest, or a satellite cable programming vendor from:

-   Engaging in unfair acts or practices which hinder significantly or
    prohibit an MVPD from providing satellite cable programming to
    subscribers or consumers.[^141]

-   Discriminating in the prices, terms and conditions of sale or
    delivery of satellite cable programming.[^142]

-   Entering into exclusive contracts with cable operators unless the
    Commission finds the exclusivity to be in the public interest.[^143]

43. Aggrieved entities can file a complaint with the Commission.[^144]
    Remedies for violations of the rules may include the imposition of
    damages and the establishment of reasonable prices, terms and
    conditions for the sale of programming.[^145] Broadcast programming
    is not subject to the program access rules.

44. The Commission's 2002 examination of whether the exclusivity
    prohibition should sunset placed substantial weight on whether, in
    the absence of the exclusivity prohibition, vertically integrated
    programmers would currently have the incentive and ability to favor
    their affiliated cable operators over nonaffiliated cable operators
    and program distributors using other technologies and, if they
    would, whether such behavior would result in a failure to protect
    and preserve competition and diversity in the distribution of video
    programming.[^146] Commission held that access to all vertically
    integrated satellite cable programming continues to be necessary in
    order for competitive MVPDs to remain viable in the
    marketplace.[^147] The Commission further found that an MVPD's
    ability to provide service that is competitive with an incumbent
    cable operator is significantly harmed if denied access to "must
    have" vertically integrated programming for which there are no good
    substitutes, such as regional news and sports networks.[^148] The
    Commission also found that vertically integrated programmers retain
    the incentive to favor their affiliated cable operators over
    competing MVPDs.[^149] In that regard, the Commission found that
    cable operators continue to dominate the MVPD marketplace and that
    horizontal consolidation and clustering combined with affiliation
    with regional programming, have contributed to cable's overall
    market dominance.[^150] In addition, the Commission determined that
    an economic basis for denial of access to vertically integrated
    programming to competitive MVPDs continues, and that such denial
    would harm such competitors' ability to compete for
    subscribers.[^151] The prohibition on exclusive contracts for
    satellite-delivered cable or satellite-delivered broadcast
    programming was therefore extended for five years, until October 5,
    2007.[^152]

### Program Carriage Rules

45. Our rules implementing section 616 of the 1992 Cable Act[^153]
    prohibit all MVPDs from: (1) demanding a financial interest in any
    program service as a condition of carriage of the service on its
    system; (2) coercing any video programming vendor to provide
    exclusive rights as a condition of carriage; and (3) unreasonably
    restraining the ability a video programming vendor to compete fairly
    by discriminating on the basis of affiliation or non-affiliation of
    vendors in the selection, terms or conditions of carriage.[^154] The
    program carriage rules also specify complaint procedures and
    remedies for violations of these requirements. Complaints may be
    brought by aggrieved video programmers or MVPDs.[^155]

### Must-Carry and Retransmission Consent

46. In adopting the mandatory carriage provisions of the 1992 Cable Act,
    Congress recognized the importance of local television broadcast
    stations as providers of free local news and public affairs
    programming.[^156] Congress found that cable service was rapidly
    penetrating television households, and increasingly was competing
    with free over-the-air television for advertising dollars.[^157]
    Congress recognized that television broadcast stations rely on
    advertising dollars to provide free over-the-air local service, and
    that competition from cable television posed a threat to the
    economic viability of television broadcast stations, and mandated
    cable carriage to ensure the continued economic viability of free
    local broadcast television.[^158]

47. Pursuant to these rules, commercial television broadcast station
    signals are carried by their local MVPDs pursuant to either
    mandatory carriage or retransmission consent.[^159] For cable
    systems, a broadcast station is entitled to mandatory carriage
    (*i.e.* "must-carry") on all cable systems within their local
    markets.[^160] Where a television broadcast station has elected
    must-carry, the cable operator is not required to compensate the
    broadcaster.[^161] Alternatively, the station and the cable operator
    can negotiate the terms of carriage through retransmission consent
    negotiations.[^162] The must-carry obligations of DBS operators
    differ slightly from those of cable operators. In markets where a
    DBS operator carries any station to subscribers within the station's
    local market *(i.e.,* "local-into-local" carriage), pursuant to the
    Statutory Copyright license all broadcast stations in the market
    have a right to mandatory carriage by that DBS operator (*i.e.* the
    "carry-one, carry-all" requirement).[^163] Broadcasters also have
    the option of negotiating terms of retransmission with the DBS
    operator. Under the Act and the Commission's rules, television
    stations are prohibited from entering into exclusive retransmission
    agreements, and must negotiate in good faith with MVPDs.[^164] By
    statute, the exclusivity and good faith negotiation requirements are
    effective "until January 1 2006."[^165]

48. By the time Congress enacted the must-carry/retransmission consent
    provisions of the Satellite Home Viewer Improvement Act of 1999
    ("SHVIA"), Congress had recognized the importance of local
    television broadcast signals not only as providers of a valuable
    public service, but as "must-have programming" critical to a DBS
    offering. By permitting DBS operators to carry local television
    broadcast signals, Congress sought to place DBS operators on a level
    playing field with their cable counterparts so that they could
    compete more effectively with cable operators.[^166] To ensure that
    broadcasters negotiated fairly with these relatively new entrants
    into the MVPD market, Congress enacted the good faith negotiation
    requirement and prohibition exclusive retransmission consent
    agreements. Congress explicitly stated that good faith negotiation
    did not equate to a requirement that broadcasters grant
    retransmission consent on the same terms and conditions to all
    MVPDs.[^167]

## Relevant Markets 

49. DirecTV is one of two full-CONUS DBS providers and the second
    largest MVPD in the U.S, providing service in all 50 states.[^168]
    It offers more than 825 channels of sports, news, movies, and family
    programming, including local broadcast channels in 64 television
    markets, high definition and foreign-language programming to nearly
    12 million customers.[^169] News Corp. is a global media corporation
    owning a wide variety of video programming products from cable and
    broadcast networks to broadcast television stations which they sell
    to MVPDs across the country. Included in its suite of video
    programming products are the Fox broadcast network, one of the four
    major national broadcast networks, 35 owned and operated (O&O)
    full-power local television broadcast stations, including two
    stations in three of the top five and five of the top ten markets,
    10 nationally distributed cable networks, 12 owned and managed
    regional cable networks,[^170] and 171 independently owned local
    television stations that are affiliated with the Fox Network.[^171]
    News Corp.'s cable programming assets include the Fox News Channel,
    Speedvision, FX, Fox Movie Channel, and the National Geographic
    Channel. News Corp. controls a wide array of regional and national
    sports programming channels, as well as valuable program production
    assets.[^172] News Corps' broadcast stations carry UPN and Fox
    programming, which includes the World Series and other Major League
    Baseball post-season games, the 16 National Football Conference
    ("NFC") teams of the National Football League ("NFL"), and popular
    shows like "The Simpsons," "American Idol" and "Joe
    Millionaire."[^173] In addition, News Corp. controls the national
    broadcast rights to National Association of Stock Car Auto Racing
    ("NASCAR") races and several major packages of college basketball
    and football games nationwide.[^174]

50. In evaluating the potential competitive effects of the transaction,
    it is necessary to first define the product and geographic
    markets.[^175] A relevant market is defined as a product or group of
    products and a geographic area in which the product or products are
    produced or sold such that a hypothetical profit-maximizing
    monopolist would impose at least a 'small but significant and
    nontransitory' increase in price, assuming the terms of sale of all
    other products are held constant.[^176]

### Product Markets

51. In analyzing vertical issues in MVPD transactions, as the Applicants
    note, the Commission has generally examined two separate but related
    product markets: (1) the acquisition of programming ("the
    programming market"); and (2) the distribution of programming to
    consumers ("the distribution market").[^177] We agree that the
    Applicants are significant participants in both of these product
    markets, and therefore analyze them in detail in this section.

#### MVPD Services

52. *Positions of the Parties.* The Applicants begin by observing that
    the Commission has previously found that DBS operators compete in a
    market composed of all MPVD providers,[^178] and that although the
    Commission has considered at times that a more narrowly drawn market
    may be appropriate, it has continued to use the MPVD product market
    for its competition analysis in recent cases. Accordingly,
    Applicants propose that the MVPD market is the relevant product
    market for purposes of analyzing the issues presented by this
    transaction.[^179] Intelsat agrees, asserting that the Commission
    and antitrust authorities have traditionally defined markets in a
    technology-neutral manner,[^180] and urging the Commission to
    recognize the interchangeability of space and terrestrial
    transmission facilities when defining the appropriate product market
    in its analysis of the Application.[^181] NRTC, on the other hand,
    contends that the decision of whether to consider cable systems with
    low channel capacities in the same product market as DBS should be
    determined by an administrative law judge at hearing.[^182] CFA
    asserts that DBS and cable occupy "somewhat different product
    spaces" due to the lack of local channels on DBS in many markets,
    the unavailability of DBS in urban areas because of line of sight
    problems, and cost.[^183] CFA asserts that this is best evidenced by
    the fact that competition from DBS has not constrained cable
    prices.[^184] CFA does not urge the Commission to define the product
    market differently, but seeks to emphasize the lack of constraint on
    cable prices as part of its broader claim that the transaction will
    raise prices of DBS and cable.[^185]

53. *Discussion.* In the *EchoStar-DirecTV HDO,* the Commission
    determined that the relevant product market that includes services
    offered by DBS providers was no broader than the entire MVPD market,
    but may well be narrower.[^186] For the purpose of analyzing the
    competitive effects of the transaction before us we may again safely
    presume that the relevant downstream product market is no broader
    than the MVPD market. As we have noted, and our analysis below
    demonstrates, by purchasing Hughes and its DirecTV unit, News Corp.
    becomes a vertically integrated competitor to all of its MVPD
    programming purchasers in every MVPD market. To the degree that the
    transaction increases News Corp.'s incentive and ability to act
    anticompetitively, it does so with respect to all of its MVPD
    customer/competitors.

#### Video Programming

54. *Background.* Companies that own cable or broadcast programming
    networks both produce their own programming and acquire programming
    produced by others. Companies that own cable networks package and
    sell this programming as a network or networks to MVPD providers for
    distribution to consumers.[^187] Companies that own broadcast
    networks distribute their programming through owned or affiliated
    television broadcast stations. Television broadcast stations
    affiliated with broadcast networks combine network programming with
    their own locally originated programming and/or programming secured
    from other sources to provide over-the-air service.[^188] They
    redistribute such programming via cable or DBS pursuant to an
    election of mandatory carriage or a retransmission consent
    agreement.[^189] MVPDs combine cable programming networks or
    broadcast television signals with transport on their cable,
    satellite, or wireless distribution networks to provide delivered
    multichannel video services to subscribers.[^190]

55. Participants in the market for video programming consist of entities
    of various sizes, from unaffiliated packagers that own one
    programming network to large corporations with multiple 24-hour
    networks.[^191] Cable programming networks sell programming to MVPDs
    that range in size from small "mom and pop" cable systems offering
    tens of channels of programming to fewer than a hundred subscribers,
    to large vertically integrated cable companies offering hundreds of
    channels of programming to tens of millions of subscribers in dozens
    of states. Owners of cable programming networks are compensated in
    part through license fees that are based on the number of
    subscribers served by the MVPD. These license fees are negotiated
    based on "rate cards"[^192] that specify a top fee, but substantial
    discounts are negotiated based on the number of MVPD subscribers and
    on other factors, such as placement of the network on a particular
    programming tier.[^193] Most cable programming networks and MVPDs
    also derive revenue by selling advertising time during the
    programming.[^194]

56. Commercial local broadcast television stations elect to be carried
    on MVPDs pursuant to must-carry status or retransmission consent on
    a schedule that tracks the three-year statutory
    must-carry/retransmission consent election timeframe.[^195] The
    broadcast stations most likely to elect must carry are those that
    are not affiliated with one of the four major networks and those in
    smaller markets.[^196] Those stations that elect retransmission
    consent negotiate the terms of carriage with MVPDs. Owners of local
    television broadcast stations that elect retransmission consent are
    generally compensated by one or more of the following: (1)
    retransmission consent fees; (2) cable advertising availabilities;
    and/or (3) where the station owner also owns cable programming
    networks, it may grant retransmission consent rights in exchange for
    carriage of its cable programming networks by the MVPD.[^197] At
    least one study finds that historically, most broadcasters have
    opted for (or settled for) in-kind compensation from cable operators
    in exchange for retransmission consent---the right to program a
    channel on the cable system or some cable advertising
    availabilities.[^198] Because they are generally retransmitted in
    their entirety, broadcast television station signals already contain
    advertising sold by the station owner, the network with which the
    station is affiliated (if any), or other program suppliers.[^199]

57. Some cable programming networks offer programming of broad interest
    and depend on a large, nationwide audience for profitability; others
    also seek large nationwide audiences but offer content that is more
    focused in subject; yet others still seek nationwide distribution,
    but offer narrowly tailored programming, focusing on a "niche within
    a niche."[^200] Some cable programming networks do not seek a
    national audience but are regional or even local in scope, including
    RSNs and local or regional news networks. Some cable programming
    networks likely can survive with distribution to a few million
    subscribers within a certain region, while others may need
    nationwide distribution in order to remain viable.[^201]

58. *Positions of the Parties.* Applicants describe the video
    programming market as national or international in geographic scope,
    although they do not offer a product market definition.[^202]
    EchoStar complains that Applicants "postulate a single product
    market encompassing all programming" but offer no economic evidence
    to support this view.[^203] Commenters identify and discuss various
    segments of the video programming market, including broadcast
    network programming and RSN programming. Several commenters contend
    that News Corp. has market power in some or all segments of the
    video programming market.[^204]

59. *Discussion.* The record in this proceeding makes clear that the
    video programming networks offered to MVPDs differ significantly in
    their characteristics, focus and subject matter. Thus, for example,
    there are over-the-air broadcast stations, national cable networks,
    including news, entertainment and hobby networks, as well as various
    regional networks, including, in particular, regional sports
    networks. The record further makes clear that these various networks
    are not viewed as perfect substitutes by either MVPDs or their
    subscribers.[^205] Accordingly, we find that the market(s) that
    include video programming networks are classic differentiated
    product markets.[^206] As discussed in greater detail below, the
    record further indicates that at least a certain proportion of MVPD
    subscribers view certain types of programming as so critical or
    desirable that they are willing to change MVPD providers in order to
    gain or retain access to that programming.[^207]

60. Nothing in the record suggests a need for us to define rigorously
    all the possible relevant product markets for video programming
    networks; the primary alleged harm involves a unilateral vertical
    restraint, and there is sufficient data in the record for us to
    analyze the potential profitability of News Corp.\'s engaging in
    such temporary foreclosure with respect to certain of its video
    programming products. For purposes of this analysis, we will
    separate the video programming products offered by News Corp. into
    three broad categories: (1) national and non-sports regional cable
    programming networks;[^208] (2) regional sports cable
    networks;[^209] and (3) local broadcast television
    programming.[^210]

61. *Other Relevant Product Markets.* News Corp. also owns substantial
    interests in firms selling programming-related technologies. As with
    the video programming products, there is no need to engage in a
    rigorous market definition in order to analyze the potential
    anticompetitive effects of the transaction. Rather, we will separate
    these products into three programming-related technologies product
    categories: (1) electronic and interactive program guides; (2)
    interactive television programming and associated technologies;
    and (3) conditional access technologies. We address issues arising
    from News Corp.'s acquisition of an interest in PanAmSat in Section
    VI.C.4.e., *infra.*

### Relevant Geographic Markets

#### MVPD Services

62. Applicants assert that the Commission has consistently found that
    the geographic scope of the multichannel video programming
    distribution market is local or regional.[^211] Cablevision and
    EchoStar assert that the proper geographic market is local.[^212] In
    the past, we have concluded that the relevant geographic market for
    MVPD services is local[^213] because consumers make decisions based
    on the MVPD choices available to them at their residences and are
    unlikely to change residences to avoid a small but significant
    increase in the price of MVPD service. In order to simplify the
    analysis, we have aggregated consumers that face the same choice in
    MVPD products into a larger, more manageable relevant geographic
    market. We find it appropriate to continue this approach here.
    Because the major MVPD competitors in many cases are the local cable
    company and the two DBS providers, we find that the franchise area
    of the local cable company can be used as the relevant geographic
    market for purposes of this analysis.

#### Video Programming

63. Applicants assert that the geographic scope of the video programming
    market is national and possibly international. The Applicants do not
    divide the video programming market into different types of video
    programming, and therefore do not provide geographic definitions for
    different types of programming. EchoStar critiques Applicants'
    failure to identify or analyze various segments of the video
    programming market.[^214] Although they do not provide detailed
    descriptions of how the geographic markets for each programming
    segment should be defined for purposes of our analysis, MVPD
    commenters identify at least two segments of the video programming
    market that have a geographic scope narrower than the "national or
    international" scope of the programming market described by
    Applicants. MVPDs contend that access to one or both of these
    segments is critical to their ability to compete within the
    geographic areas where such programming is popular: broadcast
    network programming delivered by free over-the-air television
    stations (within a Nielsen Designated Market Area ("DMA")); and RSN
    programming (within the region where the sporting events featured on
    the RSN take place).[^215]

64. Because video programming is a non-rival good[^216] that can be
    distributed large distances at relatively little cost, the relevant
    geographic market potentially could be the national or international
    in scope. As a practical matter, however, demand for particular
    types of programming varies from region to region. Moreover, owners
    of programming have the right to decide in which areas to license
    the programming for distribution, and they generally limit
    distribution to smaller areas where the demand for programming is
    greatest. Given this, we find it reasonable to approximate the
    relevant geographic market for video programming by looking to the
    area in which the program owner is licensing the programming.

65. Applying this approach, we conclude that in the case of broadcast
    television programming, it is reasonable to use DMAs to define the
    relevant geographic market for each individual broadcast station.
    Contracts between broadcast stations and the providers of
    programming, as well as FCC regulations and broadcasting technology,
    limit the extent to which broadcast station signals can be
    distributed outside of the assigned market area.[^217] DMAs are
    widely used to represent these areas, so we will use them as
    reasonable approximations.

66. With respect to national cable programming networks the relevant
    geographic market is at least national in scope. These networks are
    generally licensed to MVPDs nationwide, and in some cases they are
    licensed internationally. The widespread demand that is evidenced
    for such programming and the corresponding widespread distribution
    suggests that the relevant geographic market is at least national in
    scope. In contrast, with respect to RSNs, we conclude, as we did in
    the Comcast-AT&T merger, that the relevant geographic market for
    RSNs is regional.[^218] In general, contracts between sports teams
    and RSNs limit the distribution of the content to a specific
    \"distribution footprint,\" usually the area in which there is
    significant demand for the specific teams whose games are being
    transmitted.[^219] MVPD subscribers outside the footprint thus are
    unable to view many of the sporting events that are among the most
    popular programming offered by RSNs. We thus find it reasonable to
    define the relevant geographic market as the \"distribution
    footprint\" established by the owner of the programming.

67. Finally, we find that the geographic market for programming-related
    technologies is at least national in scope, and possibly
    international. These technologies are composed of software and
    hardware components which have high value and low transportation
    costs and can be easily delivered and are delivered to many
    widespread locations in the U.S. and the world.

# Analysis of Potential Harms In The Relevant Markets

## Introduction 

68. In this section, we consider the potential harms of the proposed
    transaction in the relevant product markets that include video
    programming and MVPD services. In particular, we consider whether,
    as a result of the transaction, the post-transaction entity will
    have an increased incentive and ability to engage in anticompetitive
    foreclosure strategies with respect to national and non-sports
    regional cable programming networks, regional sports cable
    programming networks, broadcast television station signals,
    programming-related technologies, including electronic and
    interactive programming guides and fixed satellite services. Where
    we find that the proposed transaction is likely to result in
    anticompetitive harms, we also analyze and explain our decision to
    impose conditions that are narrowly targeted to address those harms.

69. Transactions involving the acquisition of a full or partial interest
    in another company may give rise to concerns regarding "horizontal"
    concentration and/or "vertical" integration, depending on the lines
    of business engaged in by the two firms. A transaction is said to be
    horizontal when the firms in the transaction sell products that are
    in the same relevant markets and are therefore viewed as reasonable
    substitutes by purchasers of the products. Horizontal transactions
    are of antitrust concern because they eliminate competition between
    the firms and increase concentration in the relevant markets.[^220]
    The reduction in overall competition in the relevant markets may
    lead to substantial increases in prices paid by purchasers of
    products in the markets.

70. Vertical transactions raise slightly different competitive concerns.
    At the outset, it is important to note that antitrust law and
    economic analysis have viewed vertical transactions more favorably
    in part because vertical mergers, standing alone, do not increase
    concentration in either the upstream or downstream markets.[^221] In
    addition, vertical mergers may generate significant efficiencies.
    For example, a vertical transaction may produce a more efficient
    organization form, which can reduce transaction costs, limit
    free-riding by internalizing incentives, and take advantage of
    technological economies.[^222] Where both the upstream and
    downstream firms possess enough market power to set prices above
    marginal costs, a vertical transaction also may reduce prices
    through the elimination of this "double marginalization." The
    reduction occurs because the integrated firm, in determining the
    costs of producing the downstream product and consequently the final
    price charged to consumers, will consider the real economic cost of
    the input rather than the higher price (including the upstream
    profit margin) previously charged by the unintegrated upstream
    firm.[^223]

71. Nevertheless, as discussed in greater detail below, vertical
    transactions also have the potential for anticompetitive effects. In
    particular, a vertically integrated firm that competes both in an
    upstream input market and a downstream output market, such as
    post-transaction News Corp., may have the incentive and ability
    to: (1) discriminate against particular rivals in either the
    upstream or downstream markets (*e.g.,* by foreclosing rivals from
    inputs or customers); or (2) raise the costs to rivals generally in
    either of the markets. We first address potential horizontal harms
    and then analyze, with respect to each affected product and
    geographic market, potential vertical harms arising from the
    proposed transaction.

## Potential Horizontal Harms

72. *Positions of the Parties*. Applicants explain that the satellite
    assets of Hughes and its subsidiaries in the United States
    complement the non-U.S. satellite interests of News Corp.,
    completing News Corp.'s global network for the distribution of
    programming without creating any domestic overlap of satellite
    assets or MVPD participation.[^224] In contrast with the failed
    EchoStar-DirecTV merger, this transaction, Applicants aver, does not
    involve the affiliation of two domestic MVPD systems.[^225]
    Similarly, they allege that there is no effect on potential
    competition because News Corp. has no plans for independently
    entering the domestic distribution market.[^226] Following the
    transaction, DirecTV will continue to face competition from cable
    operators in most local markets, as well as continued competition
    from EchoStar in every local market.[^227]

73. Nor does the proposed transaction create horizontal overlap in
    programming, according to the Applicants, because DirecTV does not
    produce or own any programming (beyond Hughes' 5% passive equity
    interest in the Hallmark Channel), and has no plans to expand its
    programming interests.[^228] For its part, News Corp. will continue
    to face competition in regional, national, and international
    programming markets from the same array of well-established and
    well-funded companies with which it currently competes.[^229]

74. Cablevision disagrees, claiming that the combination presents
    horizontal concentration issues because it adds to News Corp.'s
    existing means of distributing Fox content---television broadcast
    stations. Cablevision asserts that by giving News Corp. a new outlet
    for its content in addition to the broadcast station outlets it
    already controls, the transaction will provide News Corp. with
    greater opportunities to leverage the power of its broad range of
    media assets.[^230] Cablevision asserts that, for example, in the
    New York DMA, where it competes with DirecTV, post-transaction News
    Corp. will have three platforms to distribute its content---two
    broadcast licenses, and a DBS platform.[^231] Cablevision states
    that if Fox denies retransmission consent for its broadcast stations
    to Cablevision, it will still have two different
    platforms---over-the-air and DBS---for reaping a return on this
    "must have" programming, while Cablevision will lack any means of
    providing this content to its subscribers.[^232]

75. *Discussion.* We agree with the Applicants that the instant
    transaction does not present horizontal concentration issues. The
    Commission has previously held that broadcast television is not
    sufficiently substitutable with the services provided by MVPDs to
    constrain attempted MVPD price increases, and hence, is not in the
    same relevant product market.[^233] The concern Cablevision
    raises---access to Fox network programming delivered via television
    broadcast stations for Cablevision's MVPD product---demonstrates
    that broadcast signals are an input used to produce a downstream
    product---MVPD service. We view access to News Corp.'s broadcast
    signals not as a horizontal concentration issue, but as a vertical
    integration issue, and we address it as part of our potential
    vertical harms discussion below. We therefore conclude that, because
    the Applicants do not offer the same products or services, the
    transaction does not present horizontal combination issues.[^234]

## Potential Vertical Harms

### Background

76. *Background.* In this section, we consider the potential vertical
    harms of the proposed transaction. In particular, we consider
    whether, as a result of the transaction, Applicants will have an
    increased incentive and ability to engage in anticompetitive
    foreclosure strategies with respect to national and non-sports
    regional cable programming networks, regional sports cable
    programming networks, broadcast television station signals,
    programming-related technologies, including electronic and
    interactive programming guides and fixed satellite services.

77. Applicants present a series of economic and legal arguments in
    support of their overall claim that the proposed transaction poses
    no competitive harms in the affected markets. In general, they
    contend that: (1) economic forces are sufficient to ensure that the
    proposed transaction will have no anticompetitive effect in any
    relevant market; (2) neither News Corp. nor Hughes has sufficient
    power in any relevant market that would give it the ability or
    incentive to pursue a vertical foreclosure strategy; and (3) even if
    this were not true, structural corporate governance checks and
    regulatory constraints, including their proposed program access
    conditions, would safeguard against such conduct.[^235] Most
    commenters and opponents of the transaction argue that News Corp.
    will use its control of DirecTV to disadvantage its MVPD rivals and
    harm consumers.[^236] Commenters and opponents of the transaction
    assert that the transaction poses a significant likelihood that News
    Corp. will use its control of Hughes and DirecTV to disadvantage its
    MVPD competitors and ultimately harm consumers in several relevant
    product markets.[^237] In particular, several opponents of the
    transaction contend that consumer demand for local broadcast
    television station signals and regional sports network programming
    is so strong as to make profitable a strategy of temporary vertical
    foreclosure in order to drive up prices for those programming
    packages.[^238]

78. With respect to vertical foreclosure, which is the main harm alleged
    in the record, a vertically integrated firm, as the result of a
    transaction, may have the incentive and ability (or an increased
    incentive and ability) to foreclose downstream competitors from
    important inputs.[^239] That is, where a firm that has market power
    in an input market acquires a firm in the downstream output market,
    the acquisition may increase the incentive and ability of the
    integrated firm to raise rivals\' costs either by foreclosing supply
    of the input it sells downstream competitors or by raising the price
    at which it sells the input to competitors.[^240] By doing so, the
    integrated firm may be able to increase its profits by raising
    prices in the downstream market, or increasing its market share in
    that market, or both.

79. The economic literature suggests that an integrated firm will engage
    in *permanent foreclosure* only if the present discounted value of
    the increased profits it earns in the downstream market as the
    result of foreclosure exceeds the present discounted value of the
    losses it incurs from reduced sales of the input in the upstream
    market.[^241] If an integrated firm calculates that permanent
    foreclosure would be unprofitable, it nevertheless might find it
    profitable to engage in *temporary* *foreclosure* in certain
    markets. In markets exhibiting consumer inertia,[^242] among other
    things, temporary foreclosure may be profitable even where permanent
    foreclosure is not, because, during the period of foreclosure,
    downstream customers may switch to the integrated firm\'s downstream
    product and, due to inertia, then not immediately switch back to the
    competitor\'s product once the foreclosure has ended. Consumers
    choosing an MVPD are subject to inertia and partial lock-in,
    because, among other things, there are switching costs associated
    with changing providers and some MVPDs, including DirecTV generally
    require one-year contracts.[^243] Thus, temporary foreclosure may
    generate profits that continue for a longer period than the period
    of upstream losses caused by the reduction in demand for the input.

80. There is an additional reason why temporary foreclosure may be
    profitable. Specifically, by temporarily foreclosing supply of the
    input to a downstream competitor or by threatening to engage in
    temporary foreclosure, the integrated firm may improve its
    bargaining position so as to be able to extract a higher input price
    from the downstream competitor than it could have negotiated if it
    were a non-integrated input supplier. In order for an integrated
    firm successfully to employ temporary foreclosure or the threat of
    temporary foreclosure as a strategy to increase its bargaining
    position, the foreclosure strategy must be credible. This means that
    competitors must believe that temporary foreclosure is profitable
    (whether or not it actually is)[^244] in order to extract a higher
    input price. For example, if the vertically integrated firm, by
    temporarily withholding an input from a competitor, can cause the
    competitor to lose sufficient revenue or suffer other competitive
    harms, the competitor might agree to pay a higher price for the
    input, which could lead to higher prices for the output, thus
    injuring consumers. Even if the vertically integrated firm suffered
    a loss in profits from engaging in a specific instance of temporary
    foreclosure, it might nevertheless find it to be a profitable
    strategy over the longer run. Specifically, if by temporarily
    foreclosing certain competitors, the vertically integrated firm may
    signal to other downstream competitors its willingness to foreclose,
    which may cause other downstream competitors to agree to a higher
    price without the vertically integrated firm\'s having to actually
    engage in repeated foreclosures.[^245] Temporary foreclosure may
    result in a widespread increase in the input price and thus upstream
    profits in the longer-run. In addition, if the increase in the input
    price affects the marginal cost of producing the downstream product,
    prices in the downstream market will rise as well.

81. The underlying purpose of temporary foreclosure generally is to
    extract a higher price for the integrated firm\'s upstream input and
    thus raise its downstream rivals\' costs. It is recognized that this
    raising rivals\' costs strategy may take two forms. First, an
    integrated firm, if it can, will generally seek to discriminate in
    the price it charges downstream rivals for its upstream input.
    Specifically, it will have an incentive to charge a higher input
    price to its downstream competitors than it charges itself or
    non-competing firms in ancillary markets.[^246] In many cases,
    however, either legal or regulatory constraints or market forces
    will limit the ability of the integrated firm to engage in price
    discrimination.

82. Where the downstream affiliate is wholly owned, the integrated firm
    can always raise the internal transfer price of an input so that it
    equals the price charged to downstream competitors. Under these
    conditions, however, the increase in the internal transfer price is
    not particularly meaningful, since the integrated firm in making
    business decisions will consider the real economic cost of the input
    and not its nominal transfer price.[^247] Thus, in the case of a
    wholly owned downstream affiliate, it may be difficult to detect if
    price discrimination is occurring and anti-discrimination rules may
    not function effectively.

83. Where, as in this case, the upstream input supplier holds only a
    *partial ownership interest* in the downstream firm, matters become
    even more complicated. The Applicants note that corporate law
    generally requires that the transfer price not be set in a manner
    that disadvantages the other shareholders of the downstream
    firm.[^248] As our discussion of corporate governance in the
    following section demonstrates, the protections afforded by
    corporate law are neither absolute nor omniscient. Even when
    corporate law effectively limits the ability of the upstream firm to
    enter into arrangements that disadvantage the minority shareholders
    of the downstream firm, it is equally true that the upstream firm
    can circumvent this problem if it can effectively compensate the
    downstream firm and its shareholders for any increase in the
    transfer price of the input. This compensation is frequently
    referred to as a \"side-payment.\"[^249] As a result, the upstream
    firm will likely be willing to incur any transaction costs
    associated with arranging such side-payments if the expected
    revenues from the uniform input price increase exceed the expected
    transaction costs of arranging the requisite side payments. If the
    transaction costs associated with designing the compensation scheme
    exceed the expected revenues from the uniform price increase, then
    again, it will not find it profitable to attempt such a strategy.

84. The above discussion confirms that the program access rules (and
    other non-discrimination safeguards) serve several useful functions
    with respect to the video programming subject to the vertically
    integrated firm's control. First, the program access rules prohibit
    permanent foreclosure with respect to all satellite cable
    programming. Second, they can prevent overt discrimination in the
    prices the integrated firm charges for such inputs. Finally, they
    can also prevent uniform increases in satellite cable programming
    input prices where the downstream affiliate is partially owned and
    where the cost of compensating the affiliate exceeds the expected
    profits resulting from the price increase. Because, under the
    proposed transaction, News Corp. will acquire only a partial
    ownership interest in DirecTV, we believe that our program access
    rules and the Applicants\' proposed program access commitments can
    help prevent permanent foreclosure, discriminatory input price
    increases and, in some cases, non-discriminatory uniform input price
    increases with respect to satellite cable programming of general
    interest. Conversely, the above discussion suggests that these
    safeguards will not prevent an upstream firm that partially owns the
    downstream affiliate from uniformly raising the price of its input
    to both its downstream affiliate and downstream competitors when it
    has both the economic incentive and ability to do so. Thus, the
    partially integrated firm may be able to execute a *uniform* input
    price increase without running afoul of corporate law and despite
    such non-discrimination safeguards especially if it is able to
    profitably arrange a mechanism for side-payments to occur. It would
    certainly be able to execute such a uniform price increase for video
    programming inputs not subject to such safeguards and for which it
    has significant market power, and may even risk shareholder
    litigation to do so.

85. *Roadmap and Summary of Decision.* At the outset, we note that local
    MVPD markets already are highly concentrated.[^250] Changes in
    vertical relationships between a major input and output supplier in
    such a market can therefore have significant competitive effects.
    Because Applicants have asserted corporate governance and related
    securities laws as a global defense against all potential forms of
    vertical foreclosure, we address this matter at the outset of our
    analysis. Next, our discussion will address each relevant product
    market in turn and, with respect to each, the defenses raised by
    Applicants. For each relevant type of video programming and
    programming-related technologies, we will examine whether: (1) the
    Applicants possess market power and, if so, (2) whether the
    transaction increases the Applicants' incentive and ability to gain
    from withholding a given input, either permanently or temporarily,
    which could lead to increases in end user prices.[^251] For markets
    in which we find that Applicants lack market power, we conclude that
    no potential public interest harms will arise with respect to that
    market. For markets in which the Applicants have market power, we
    will analyze whether the transaction increases Applicants' incentive
    and ability to withhold a given input. Based on our review and
    analysis of the record, we do not agree with Applicants that the
    proposed transaction will result in no public interest harms in any
    of these areas absent appropriate conditions.

86. Our review of the record, using the approach described above,
    demonstrates that, with respect to national and non-sports regional
    cable programming, the program access rules, together with the
    Applicants' program access-like commitments should adequately
    protect against permanent foreclosure and overt price
    discrimination. Further, there is no evidence in the record that
    significant numbers of customers will shift MVPDs if such
    programming is temporarily withdrawn from their current MVPD. This
    suggests that temporary foreclosure will not significantly increase
    downstream profits of DirecTV or that this increase in profits will
    exceed the sum of the loss in revenues in the upstream market plus
    the transaction costs associated with arranging compensation for
    DirecTV\'s other shareholders. As a result, we find it unlikely that
    News Corp. will have an incentive to temporarily withhold such
    programming in an effort to secure a uniform increase in the price
    of its general interest cable programming.

87. In contrast, we find substantial evidence in the record that a
    temporary withdrawal of regional sports programming networks and
    local broadcast television station signals would cause a significant
    number of customers to shift from their current MVPD, which is
    subject to the foreclosure, to DirecTV. In addition, there is
    significant evidence in the record that the per-subscriber profits
    generated by each additional DirecTV subscriber are sufficiently
    large that the increased downstream revenues resulting from
    temporary foreclosure are likely to exceed the costs of foreclosure
    in many local markets. Accordingly, we find that, as a result of the
    transaction, the increased profits accruing to DirecTV and News
    Corp. as a result of the temporary withdrawal of regional sports
    programming and broadcast signals will give News Corp. an increased
    incentive to adopt a strategy of temporary foreclosure in order to
    uniformly raise the price of its broadcast television and regional
    sports programming and/or obtain other carriage concessions. News
    Corp.'s post-transaction ability to act anti-competitively to
    increase its competitors' programming costs is greater than it would
    otherwise be due to News Corp.'s post-transaction ability to off-set
    temporary revenue losses arising from foreclosure with increased
    profits accruing to DirecTV as subscribers drop the affected MVPD
    and subscribe to News Corp's affiliated MVPD. This increased ability
    and incentive to seek and obtain higher programming rates through
    unilateral temporary foreclosure would likely lead to higher prices
    to MVPD consumers than would otherwise occur and thereby harm the
    public interest. To avoid public interest harms that would result
    from such conduct, we impose several conditions to maintain the
    balance of bargaining power between News Corp. and other MVPDs at
    roughly pre-transaction levels.

88. In this section, we first address Applicants' claims with respect to
    the role of corporate governance and associated legal requirements
    in protecting against anticompetitive harms. We next examine,
    sequentially, concerns raised in the record with respect to the
    potential for Applicants to discriminate against or foreclose access
    to unaffiliated programming on the DirecTV platform and their
    potential for discrimination against or foreclosure of unaffiliated
    rivals in the video programming and MPVD markets, as appropriate,
    with respect to access to Applicants': (a) national and non-sports
    regional cable programming networks; (b) regional sports cable
    programming networks; (c) local broadcast television stations
    signals; (d) programming-related technologies; and (e) fixed
    satellite services.

### Role of Corporate Governance

89. *Background.* Applicants allege that corporate governance and
    related legal requirements will protect against all forms of
    vertical foreclosure alleged in the record and will guard against
    harmful self-dealing within the vertically integrated entity.[^252]
    With respect to the latter, and in order to avoid a charge that they
    might engage in discriminatory conduct against other MVPDs, News
    Corp. and Hughes have hypothesized that News Corp. could employ a
    strategy of raising its programming prices to DirecTV which would
    then set a benchmark that other MVPDs would have to accept or lose
    the right to carry News Corp. programming.[^253] To counter this
    hypothesis the Applicants state that, among other things, they
    intend to use the Audit Committee to review related‑party contracts,
    and that the Audit Committee, in its sole discretion, will ensure
    that such contracts are on an arms' length basis.[^254]

90. All publicly-traded corporations are required to have an audit
    committee comprised of at least three independent directors.[^255]
    The proposed Hughes Amended and Restated By-Laws that will come into
    effect upon consummation of the transaction confirm that the Audit
    Committee will ". . . have the sole authority to consider and pass
    upon any Related Party Transaction. . ."[^256]

91. *Positions of the Parties.* Some commenters question the
    effectiveness of the Applicants' proposal. CDD suggests that the
    so-called independent directors will, in fact, not be independent,
    pointing out that the initial nominations for such directors include
    persons that have longstanding relationships with Mr. Murdoch or
    News Corp.[^257] JCC contends that the Applicants purported reliance
    on the Sarbanes-Oxley Act[^258] as providing a level of protection
    is misplaced. They allege that there is nothing in Sarbanes-Oxley
    that would prevent a controlling stockholder from exerting undue
    influence over the company that it controls.[^259] They further
    suggest that the Audit Committee will not have the necessary
    expertise to be able to understand fully complicated programming
    contracts to ensure that the prices are the same as an arms' length
    transaction. JCC also suggest that News Corp. has offered no
    indication as to how the Audit Committee will function or when
    related-party contracts will be subject to review.[^260] They
    conclude that, as a practical matter, independent directors are
    likely to be dominated and defer to the controlling stockholder and
    that to resist the controlling stockholder could result in a loss of
    a board seat.[^261]

92. Applicants respond that the GM stockholders would not affirmatively
    vote to approve the transaction if the commenters' allegations were
    true. Applicants argue that the claimed vagueness of the By-Laws is
    actually a strength, as the Audit Committee will have the
    flexibility to respond to changing conditions and areas of concern
    that could not have been predicted when the By-Laws were
    adopted.[^262] Responding to allegations that the Audit Committee
    lacks the expertise to properly review related-party contracts, the
    Applicants assert that the Audit Committee can retain experts,
    counsel and consultants to assist it with its task.[^263] They
    further note that, as a public company, Hughes will be subject to
    extensive disclosure obligations under federal securities laws,
    including disclosure requirements relating to related-party
    contracts.[^264] Finally, they contend that Hughes' non‑controlling
    shareholders will be able to bring derivative shareholder suits
    against the company if self-dealing is suspected; that covenants
    contained in certain of Hughes' debt agreements require that a
    related-party transaction be on an arms' length basis; and that
    certain transactions, in addition, require an independent fairness
    opinion from an outside financial advisor.[^265]

93. *Discussion.* Applicants contend that, because the Audit Committee
    will have the sole power to pass upon related-party contracts, any
    attempt by News Corp. or its programming subsidiaries to compel
    Hughes to accept anything other than an entirely fair contract for
    the carriage of Fox programming would be unsuccessful. This in turn
    would result in the protection of both the non-controlling
    shareholders of Hughes and, ultimately, protecting Hughes' consumers
    from higher prices.[^266] The NYSE Rules state that an audit
    committee must consist of at least three directors each of whom must
    be "independent."[^267] As set forth in the NYSE Rules, an audit
    committee's responsibility is to select and oversee the company's
    outside auditors.[^268] In the case of Hughes, however, the Audit
    Committee will be asked to undertake the additional function of
    passing on related-party contracts. Neither the NYSE Rules nor
    Hughes' proposed By-Laws state the qualifications necessary for an
    Audit Committee member to fulfill that function. Although there is
    no requirement that the member have any special expertise or even
    knowledge of programming contracts, the Applicants claim that this
    does not matter as the Audit Committee will be allowed to hire
    experts in order to assist it. We remain concerned, however, that,
    if the Audit Committee members do not have a good understanding of
    complicated programming contracts, they might not be aware when
    issues arise that require an expert's attention.[^269]

94. Both the Applicants and the JCC have provided affidavits from law
    professors explaining Delaware law and how the Audit Committee will
    or will not function as an independent reviewer of related-party
    contracts.[^270] The experts disagree about three main issues.[^271]
    The first concerns the effect of judicial review of related-party
    transactions. The JCC expert asserts that "'independent' director
    review and approval of transactions between a controlling
    shareholder and a firm. . . cannot suffice to give a clean bill of
    health to transactions that are by their very nature tainted with
    conflict of interest."[^272] The Applicants' expert responds that,
    at the very least, independent director review and approval of a
    related-party transaction can shift the burden of proof from the
    company to the stockholder challenging the transaction to establish
    unfairness. While we agree with the Applicants that the effect of
    compliance with section 144 of the Delaware General Corporation Law
    will be to shift the burden of proof to the complaining shareholder,
    we do not find that argument responsive. Independent director
    approval is, in no sense, determinative of the issue as a
    complaining stockholder would still be able to file a lawsuit and
    allege the transaction is unfair to the company. The Applicants
    further attempt to counter the JCC argument is dealt with below.

95. The second issue concerns the effectiveness and value of stockholder
    derivative litigation as a check on self-dealing transactions.
    Shareholder derivative litigation is brought on behalf of a company
    by a non-controlling shareholder. The Applicants allege that, for
    various reasons, related-party transactions would be easy to detect,
    and suspect transactions would be prosecuted by a "vibrant"
    plaintiffs' bar.[^273] JCC argue that, if the plaintiffs' bar is so
    vibrant, "it is hard to see why such frauds and violations still
    occur."[^274] We agree with the JCC on this issue. Not all
    violations will be detected, even by an alert plaintiffs' bar.
    Moreover, litigation may not be brought for a variety of reasons
    that have nothing to do with the merits of the case. In the final
    analysis, this Commission, not the private bar, is the guardian of
    the public interest in these matters.

96. The final and most contentious disagreement concerns the extent to
    which and independent director is actually "independent." The
    Applicants contend that Delaware corporate law, the federal
    securities laws, the NYSE Rules, and other federal statutes will
    ensure that independent directors will be effective in reviewing the
    fairness of related-party contracts to Hughes and to all of its
    shareholders and thus, ultimately, to the public. We disagree. As we
    have already discussed, the Delaware Law provides a safe harbor for
    companies entering into related-party contracts.[^275] Further,
    although federal securities laws provide that material contracts
    must be disclosed, they do not bar such contracts from being entered
    into in the first place.[^276] On the Applicants' own admission, the
    Sarbanes-Oxley Act does not operate "to protect consumers from
    alleged controlling shareholder self-dealing."[^277] Finally, the
    NYSE Rules set forth the requirements of an audit committee and
    define who is eligible to be a member of the committee. As we have
    already discussed, the requirements set forth in the NYSE Rules
    consist of matters relating to the company's outside auditors, they
    do not consist of requirements concerning related‑party contract
    review.

97. The NYSE Rules also provide a definition of an independent
    director.[^278] JCC argue that, while Delaware law, the
    Sarbanes-Oxley Act and the NYSE Rules set forth requirements that
    are designed to ensure that independent directors are independent
    from the firm's management in transactions involving the company and
    its management, such provisions do not deal with the situation
    presented by the instant transaction, namely, the independent
    directors' independence from the company's controlling
    shareholder.[^279] Applicants argue that News Corp. is not a
    controlling shareholder, with the consequence that News Corp. cannot
    influence the choice and election of the independent
    directors.[^280] Applicants attempt to distinguish between Delaware
    law, which they assert presumes that shareholders owning less than a
    majority of a company's shares do not control a company, and
    Commission precedent.[^281] Applicants state that the presumption
    could be overcome only "if it were supported by specific facts of
    record that overcome the Delaware law presumption against
    non-majority stockholder control."[^282] We believe that there is
    sufficient evidence in the record to overcome the presumption.
    Indeed, Applicants implicitly concede, by having filed the
    Application presently before us, that News Corp. will be considered
    to have *de facto* control of Hughes under Commission
    precedent.[^283] Accordingly, we find that News Corp.'s influence is
    likely to be such that an independent director will be cautious
    before taking any step that could cause offense to News Corp. for
    fear that he or she might be ousted.

98. Even assuming that News Corp. will not "control" Hughes in a legal
    sense, it is beyond doubt that it will have enormous influence over
    Hughes. The Hughes board of directors will consist of 11
    individuals; five appointed by the Applicants and six independent
    directors.[^284] Applicants and the JCC discuss at length whether
    News Corp. will have the power to replace or dismiss an independent
    director that displeases it.[^285] In order to do so, News Corp.
    would need to muster a majority of votes in support of an
    appropriate resolution. News Corp. will have only 34% of the votes,
    so, on the face of it, News Corp. would need other shareholders to
    cast their votes in favor of the resolution. We do not think that it
    is far-fetched to suggest that a sufficient number of shareholders
    might follow the lead of the largest single stockholder and vote the
    way that News Corp. voted.

99. Even if our concern about News Corp.'s influence on the board of
    directors is overstated, it is unlikely that related-party contracts
    will get the necessary scrutiny to unearth wrongful self-dealing. As
    a prominent corporate law treatise states, "\[t\]he nominations for
    outside directors are controlled by the nomination committee of
    existing directors, which may in turn be controlled . . . by outside
    directors who were selected by and acceptable to the insiders.
    Nomination of a person by the official committee virtually insures
    his election by the shareholders. The persons nominated are in fact
    often friends of the chief executive or other insiders..."[^286] The
    treatise further points out that frequently independent directors
    are the corporation's bankers or lawyers and have a direct financial
    interest in their relationship with the corporation. Such
    relationships are often "controlled by the chief executive and other
    insiders."[^287] Along these lines, CDD claims that several of the
    so-called independent directors have long-standing relationships
    with either Mr. Murdoch or News Corp.[^288]

100. We therefore conclude that, notwithstanding the best intentions of
     the Applicants in assigning the task of related-party contract
     review to the Audit Committee, a significant risk remains that
     unfair self-dealing transactions may occur and go uncorrected. We
     also observe that the principal purpose of an audit committee is to
     protect shareholders from inappropriate management conduct \-- its
     function is not to protect consumers. Thus, even if the Audit
     Committee performed its task perfectly, which, as we have noted, we
     do not think likely, consumers would not be protected from
     artificially inflated prices that are "entirely fair" to DirecTV
     and its shareholders but are not necessarily so to its
     customers.[^289] We therefore discount the likelihood that
     corporate governance, corporate law or securities laws in general
     may be relied upon to adequately protect MVPD and video programming
     competitors from potential anti-competitive vertical foreclosure
     behavior on the part of Applicants.

### Discrimination Against Unaffiliated Programming

##### Positions of the Parties

101. Applicants acknowledge that competitive concerns could arise if a
     transaction were to create an entity with sufficient market power
     in the distribution of programming that it would have the incentive
     and ability to foreclose access to its distribution network by
     refusing to buy programming that viewers' desire from unaffiliated
     programmers.[^290] Applicants assert, however, that DirecTV's
     post-transaction ability and incentive to engage in such conduct is
     significantly constrained by DirecTV's small share of the MVPD
     market. Applicants assert that DirecTV's share of the national MVPD
     market---13%---is too low for the transaction to result in harm to
     unaffiliated cable networks,[^291] and they note that, in every
     local market, DirecTV competes against a "dominant" cable operator,
     as well as EchoStar.[^292] Applicants maintain that the primary
     purchasers of video programming are cable operators, including
     Comcast, which alone controls 29% of the MVPD market.[^293]
     Applicants claim that it would be economically irrational for
     DirecTV to refuse to carry attractive unaffiliated programming in
     favor of programming produced by its new affiliate, News Corp. They
     claim that it is DirecTV's primary economic incentive to increase
     subscribership by distributing the widest possible variety of
     content to the widest possible audience, and thus it has no
     incentive to discriminate against unaffiliated content providers,
     either now or after consummation of the transaction. Nonetheless,
     Applicants state, "if the Commission deems it necessary," News
     Corp. and Hughes have agreed to accept the following enforceable
     undertaking as a condition of grant of their Application:

Neither News Corp. nor DirecTV will discriminate against unaffiliated
programming services in the selection, price, terms or conditions of
carriage.[^294]

With respect to potential discrimination against broadcast stations,
Applicants point to statutory mandatory carriage requirements, which
would prevent them from engaging in such a strategy, even if they had
the incentive to do so.[^295]

102. Several commenters contend that the transaction would give DirecTV
     the incentive and ability to favor News Corp.'s content and
     discriminate against competing cable networks and television
     broadcast stations.[^296] CFA asserts that, although Applicants
     have proposed safeguards to ensure MVPD access to cable
     programming, they have proposed no safeguards to ensure that
     DirecTV does not discriminate against unaffiliated
     programmers.[^297] CFA asserts that News Corp. also might use its
     bargaining power to pressure other MVPDs to discriminate against
     competing programming by offering MVPDs reduced prices for its
     affiliated programming.[^298] CDD contends that, given Liberty's
     significant investments in News Corp., the transaction will give
     the two programmers the incentive and ability to place competing
     program suppliers at a competitive disadvantage.[^299]

103. EchoStar asserts that the transaction will raise barriers for new
     entrants into the video programming market in two ways. First,
     EchoStar contends that integration of News Corp.'s programming with
     DirecTV's distribution will reduce or eliminate DirecTV's
     incentives to carry new programming that competes with News Corp.'s
     programming.[^300] EchoStar also asserts that the transaction will
     foreclose an important outlet for new entrants, because DirecTV is
     currently the largest MVPD that is not affiliated with a
     programmer, and because DirecTV offers a nationwide distribution
     network which allows niche programming to reach a target audience
     that is geographically broad.[^301] CDD agrees, claiming that
     independent producers, unaffiliated motion picture studios, and
     syndicators will be competitively disadvantaged by News Corp. after
     the transaction.[^302] Victory Sports, which operates an RSN and is
     not vertically integrated with an MVPD, expresses concern that that
     the vertical integration of DirecTV's satellite distribution
     platform and News Corp.'s RSNs could discourage good faith
     negotiations for fair market value prices for independent RSN
     offerings.[^303] Similar concerns were expressed with respect to
     the ability of Latino-themed English language and bilingual
     networks to gain access to DirecTV by the Congressional Hispanic
     Caucus.[^304]

104. Commenters contend that News Corp.'s discrimination against
     unaffiliated cable networks will harm the public by reducing the
     diversity of programming available to viewers. NRTC is particularly
     concerned about the transaction's effects on viewers in rural
     areas. NRTC asserts that if the Application is approved, News Corp.
     could become an essential facility for content developers'
     distribution of programming to rural America.[^305] According to
     NRTC, as one of only two MVPDs serving un-cabled rural areas and
     the only such MVPD with programming holdings, News Corp. could
     control the programming available in rural areas by denying
     distribution to competing content providers.[^306] CDD asserts that
     if the transaction is approved, certain safeguards must be imposed
     to ensure that unaffiliated programmers have access to DirecTV's
     platform, including requiring Applicants to make "channel and
     related capacity" available on a non-discriminatory basis to
     unaffiliated programmers that lack market power; requiring that
     non-broadcast local (commercial and non-commercial) programmers
     have access to Applicants' spot-beam capacity; and requiring
     Applicants to increase the amount of national footprint capacity
     available to non-commercial entities beyond what is required by our
     public interest obligations for DBS licensees.[^307]

105. NAB asserts that the transaction will give DirecTV the incentive
     and ability to discriminate against broadcast stations other than
     Fox O&Os.[^308] NRTC asserts that News Corp. will have less
     economic incentive to deliver local signals in markets where it
     does not have an O&O or an affiliate.[^309] NAB and NRTC claim that
     consumers will be harmed by the resulting reduction in programming,
     particularly local programming and programming available to rural
     consumers. Commenters contend that News Corp.'s discrimination
     against competing television broadcast stations will harm the
     public by reducing the diversity of programming available to
     viewers and by limiting viewer access to local programming.[^310]
     With respect to the Applicants proposed condition that the merged
     entity will not discriminate against "unaffiliated programming
     vendors with respect to price, terms, or conditions of carriage on
     the DirecTV platform,"[^311] NAB contends the proposed condition is
     inadequate because it does not address potential discrimination
     against broadcasters, and urges the Commission to expand this
     condition to prohibit discrimination against broadcast stations as
     well as cable programmers.[^312]

106. Applicants respond that these claims of vertical foreclosure
     against unaffiliated programmers are flawed because DirecTV simply
     lacks a large enough share of the MVPD market to foreclose an
     unaffiliated programmer. Such programmers would still be able to
     sell to MVPDs serving approximately 87% of subscribers nationwide.
     Moreover, such a strategy would only hurt DirecTV by reducing the
     attractiveness of its channel lineup. DirecTV's refusal to carry
     programming valued by consumers, regardless of its source, would
     only drive subscribers to competing MVPDs.[^313] Applicants note
     that, even where this issue has arisen in the context of an MVPD
     with much higher market share -- as in the proposed
     EchoStar-DirecTV merger, where the combined market share would have
     been about 20%---the Commission concluded that the transaction
     would not create purchasing market power over national or regional
     programmers.[^314] Because the Commission has previously found 20%
     to be well below levels of concentration at which the Commission
     has historically had cause for concern, Applicants argue DirecTV's
     13% MVPD market share should be dispositive.[^315]

##### Discussion and Condition 

107. Applicants have offered that "neither News Corp. nor DirecTV will
     discriminate against unaffiliated programming services in the
     selection, price, terms or conditions of carriage." We conclude
     that Applicants' proposed commitment to allow unaffiliated
     programmers access to the DirecTV platform on nondiscriminatory
     terms and conditions adequately addresses concerns raised regarding
     unaffiliated video programmers' access to the DirecTV platform. We
     will therefore condition our grant of the Application on compliance
     with this access commitment.[^316] At this time, we will not
     prescribe standards of conduct pursuant to which DirecTV must act
     to comply with this condition although we expect DirecTV to act
     reasonably when dealing with unaffiliated programmers. We note that
     Applicants' proposed commitment is not unlike the nondiscrimination
     requirement in the Act and our program carriage rules.[^317]
     Similar to our treatment of the remainder of Applicants' proposed
     program access commitments in the following section, we clarify
     that aggrieved programmers and MVPDs may seek relief for any
     alleged violations of this condition by using the existing
     enforcement mechanisms found at Section 76.1003 of the Commission's
     rules.[^318]

108. As to broadcast programming, we find it unlikely that, after the
     transaction, DirecTV would discriminate against competing
     television broadcast stations. The applicable statutory and
     regulatory provisions[^319] thoroughly address satellite carriage
     of broadcast television programming. In any market in which DirecTV
     offers local-into-local service pursuant to the statutory copyright
     license, it is required to carry all television broadcast stations
     within that local market that request carriage.[^320] The
     Commission's rules detail the technical terms of carriage, certain
     anti-discrimination provisions based on SHVIA, and the complaint
     process by which aggrieved parties can seek Commission redress if
     DirecTV has failed to meet its carriage obligations.[^321]
     Alternatively, television broadcast stations that provide
     retransmission consent can negotiate the terms and conditions of
     carriage.[^322] We reiterate that, under the SHVIA*,* we will, in
     reviewing carriage complaints against any MVPD, consider any
     unreasonable terms or conditions or negotiating procedures.[^323]

### Discrimination Against Unaffiliated MVPDs

#### Access to National and Non-Sports Regional Cable Programming Networks

##### Position of Parties

109. News Corp. has interests in several satellite cable programming
     networks, including national programming networks offering sports,
     news, or general entertainment,[^324] and regional programming
     networks that do not offer sports.[^325] Applicants acknowledge
     that a vertical relationship could lead to anti-competitive results
     in the distribution market if a programmer discriminated against or
     refused to sell to unaffiliated MVPDs in order to gain competitive
     advantage for its affiliated MVPD. Applicants claim, however, that
     any such concern would be extremely attenuated in this case for
     five principal reasons: (1) News Corp. has no market power in the
     sale of video programming that would enable it to carry out such a
     strategy; (2) it would be commercially irrational for News Corp.
     and DirecTV to attempt foreclosure; (3) the program access rules
     prohibit News Corp. from engaging in such discriminatory
     conduct; (4) the parties are willing to accept a series of program
     access-like undertakings that will remain enforceable even if News
     Corp. ceases to be subject to the Commission's program access
     rules; and (5) vertical foreclosure strategies that involve News
     Corp. attempting to force its "sophisticated partners", including
     Hughes and the various co-owners of many News Corp. programming
     networks, to act against their self-interests, would not work
     because such self-dealing behavior is adequately protected against
     by "existing corporate governance and legal requirements."[^326]

110. Applicants maintain that News Corp's affiliates' combined share of
     the programming market is too small for News Corp. to be able to
     exercise any type of market power. They cite prior Commission
     findings that the programming supply market is extremely
     competitive, with the growth rate of new programmers outpacing the
     growth of new channels on MVPD systems,[^327] and they state that
     News Corp.'s share of national video programming services is
     relatively small (3.9%, or 10 of 257 services listed in the *2002
     Video Competition Report*). Similarly, News Corp. holds an interest
     in only 32 of 339 (9.4%) of the national and regional services
     listed, and its interest in 12 of the 22 regional services is a
     non-controlling minority interest.[^328] News Corp. claims that,
     under these circumstances, it lacks the ability, either now or
     after the transaction closes, to harm DirecTV's rivals.

111. Furthermore, Applicants claim that News Corp. lacks the incentive
     to do so, because a programmer's interests are in securing the
     widest possible dissemination of its programming in order to
     maximize the value of those assets -- a value based on its ability
     to generate advertising revenue and per-subscriber fees.
     Affiliation with DirecTV would not change this, according to
     Applicants, because News Corp. would have to forgo programming
     sales to the remaining 87% of the MVPD market if it were to engage
     in foreclosure strategies. "Moreover, to the extent News Corp.
     denies unaffiliated MVPDs access to its programming, it gains only
     a fraction of any benefits generated for DirecTV (because of its
     minority interest in Hughes), while it incurs most of the costs
     (through its 82% interest in FEG)."[^329]

112. Applicants attempt to rebut allegations that News Corp. could raise
     prices for its programming to supra-competitive levels for all
     MVPDs by forcing DirecTV to accept such supra-competitive rates to
     use as a "benchmark" that other MVPDs must either also accept or
     face the loss of News Corp. programming. In addition to Applicants'
     argument that corporate governance will guard against such
     behavior, discussed in Section VI.C.2, *supra*, they also contend
     that such benchmarking should not be a concern for at least two
     other reasons: (1) News Corp. lacks the requisite market power to
     raise programming prices; and (2) the Commission has consistently
     found that its program access rules are sufficient protection
     against potential abuse in other transactions involving vertically
     integrated MVPDs.

113. Applicants concede that all of News Corp.'s national and regional
     satellite cable programming networks are already subject to the
     Commission's program access rules due to Liberty's approximately
     17.6% interest in News Corp., and, in some cases, direct interests
     in those networks held by Liberty or another cable operator, and
     will continue to be if the proposed transaction is completed.[^330]
     They also acknowledge that the program access rules would not apply
     to all of Fox's national satellite cable programming if Liberty
     Media divests its interest in News Corp. or sells its cable
     systems. Similarly, for the jointly-owned, regional networks to
     fall outside of the program access rules, the joint owner cable
     operators also would have to divest their interests for this
     programming.[^331] Nonetheless, as a condition of approval, News
     Corp. offers to continue to be bound by the program access rules
     applicable to satellite cable program vendors should any or all of
     its programming otherwise fall outside of the Commission's program
     access jurisdiction.[^332] News Corp. submits that it will not
     offer any of its existing or future programming services on an
     exclusive basis to any MVPD and will continue to make such services
     available on a non-exclusive basis and non-discriminatory terms and
     conditions.[^333]

114. In addition, Applicants commit to not entering into exclusive
     arrangements for the distribution of an affiliated programming
     rights holder's satellite cable programming.[^334] Applicants
     submit that this condition prevents them from making exclusive
     arrangements for Liberty's programming in the event Liberty is no
     longer bound by the program access rules for as long as Liberty
     holds its attributable interest in News Corp.

115. Similarly, Applicants state that they will not unduly or improperly
     influence the decision of an affiliated programming rights holder
     to sell its satellite cable programming to other MVPDs or the
     prices, terms and conditions of such sale. This condition extends
     the unfair practices prohibitions applicable to cable operators to
     News Corp.'s and DirecTV's dealings with affiliated programmers.
     Applicants propose that these commitments apply for as long as News
     Corp. has an attributable interest in DirecTV and the program
     access rules are in effect.[^335]

116. Commenters assert that, because of harms arising from News Corp.'s
     increased incentive and ability to withhold its broadcast or cable
     network programming, the Application should be designated for
     hearing, denied, or, if approved, conditioned to prevent such
     harms.[^336] EchoStar contends that News Corp. has market power in
     key segments of the programming market through its control of Fox
     News, Fox movies, and the non-news Fox Cable Networks such as
     FX.[^337] EchoStar and ACA state that such content is among the
     "must have" programming that any MVPD needs if it is to be an
     effective competitor.[^338] EchoStar also argues that Liberty,
     which has a strategic relationship to the Applicants and the
     instant transaction, controls other key programming assets,
     including the several Discovery and Encore channels.[^339] ACA
     argues that transaction-specific program access problems include
     imposing more costly terms and conditions of program access on
     smaller cable operators and using "volume" discounts to justify
     favorable pricing for DirecTV and entering into exclusive
     programming arrangements targeted at DirecTV's smaller cable system
     competitors.[^340] EchoStar maintains that News Corp. could bypass
     the program access rules by delivering its programming to its
     uplink facility terrestrially.[^341] Commenters also question the
     ability of the Audit Committee to monitor every term of every
     agreement with an unaffiliated MVPD and do not consider the
     committee as a sufficient guard against the threat of unreasonable
     terms.[^342]

117. To remedy the claimed deficiencies in the conditions proposed by
     Applicants, parties urge the Commission to adopt several revisions
     and additions. We will discuss revisions and additions suggested to
     apply to News Corp.'s cable programming in general here, and
     address these suggestions and proposed conditions specific to RSN
     or broadcast programming separately below.

118. Several commenters urge applying the program access rules
     permanently to News Corp. programming even if the general
     application of the rules terminates.[^343] In addition, commenters
     and opponents contend that neither the program access rules nor the
     Applicants' proposed program access commitments will adequately
     protect against potential harms arising from the transaction.[^344]
     They argue that the proposed program access conditions do not
     prevent News Corp. from raising the price of programming above
     competitive levels by simply requiring DirecTV to compensate News
     Corp. for its programming at unreasonably high prices with
     unreasonably favorable terms of carriage.[^345] These parties
     observe that such a "sweetheart deal" would then establish
     unreasonable terms for agreements with all other MVPDs, without
     harm to DirecTV or News Corp., because it is effectively
     compensating itself.[^346] Commenters and opponents are not
     convinced that the Applicants' Audit Committee will be able to
     monitor every term of every agreement with an unaffiliated MVPD and
     do not consider the committee as a sufficient guard against the
     threat of unreasonable terms.[^347] ACA contends that the proposed
     commitment does not prevent News Corp. from offering different or
     more costly terms to small cable operators, because although the
     commitment requires nondiscrimination, News Corp. is likely to
     offer the same prices/terms/conditions only to MVPDs with as many
     subscribers as DirecTV.[^348]

119. ACA urges the Commission to seek an enforceable commitment from
     Applicants that News Corp. will not use programming prices, terms
     and conditions to disadvantage smaller market cable
     companies.[^349] Cablevision asks the Commission to revise the
     proposed program access commitment to prevent News Corp. from using
     "sweetheart deals" with DirecTV as an inflated benchmark
     programming price for the industry.[^350] RCN requests that the
     Commission clarify that the term "Affiliated Program Rights Holder"
     refers not only to existing programming affiliates, but also to
     programmers that become affiliated with News Corp. or DirecTV in
     the future.[^351] RCN also urges the Commission to clarify that,
     for enforcement purposes, aggrieved MVPDs may bring program access
     complaints against Applicants using the procedures found at Section
     76.1003 of the Commission's rules.[^352]

120. Consumers Union explains that News Corp.'s non-discrimination
     condition can be useful in preventing egregious competitive abuses
     such as selling Fox programming to DirecTV's competitors at prices
     that are substantially and unjustifiably higher than the price paid
     by DirecTV.[^353] Non-discrimination requirements alone, however,
     will not stop News Corp. from charging DirecTV an artificially high
     price for Fox programming and then requiring any MVPDs seeking to
     carry the programming to either pay a rate based upon that same
     high rate or allow DirecTV to become the major distributor of that
     programming in the MVPD's market, according to Consumers
     Union.[^354] Consumers Union recommends that the Commission impose
     a restriction similar to what the Federal Trade Commission ("FTC")
     applied in the Time Warner/Turner merger. In that instance,
     Consumers Union avers, the FTC established a cable programming
     price index mechanism to evaluate whether the merging companies
     were raising programming prices at a more accelerated pace than
     their historic pattern.[^355]

121. Pegasus urges us to condition approval of the Application on the
     following requirements designed to supplement those proposed by
     Applicants: (i) contracts between Fox and DirecTV would have to be
     approved by a majority of the independent directors of DirecTV and
     parent Hughes; (ii) all contracts between Fox and DirecTV would be
     filed with the Commission and available to the public; (iii) the
     economic terms of any contract between Fox and DirecTV would have
     to be set at the average of those charged to Fox's three largest,
     non-affiliated MVPDs. The CEO and directors of Fox, DirecTV, and
     Hughes would be required to certify compliance with these
     conditions annually. Pegasus asserts that these conditions should
     apply for a period of five years.[^356]

122. EchoStar asserts that to the extent News Corp.'s ownership interest
     in Hughes is anticompetitive, any additional ownership interest
     would only exacerbate the problem. Accordingly, EchoStar urges the
     Commission to limit News Corp.'s equity position in Hughes to
     34%.[^357] EchoStar also urges the Commission to mandate
     independent programming authority at the DirecTV level by means of
     an independent board of directors that can withstand News Corp.'s
     influence,[^358] and suggests several other measures to strengthen
     the Applicants' proposed program access conditions. These include:
     prohibiting satellite exclusives of any kind for News Corp.
     programming; applying the requirement to programming delivered
     terrestrially; extending the requirement to News Corp.'s current
     and future non-video and broadband offerings; making the
     requirement permanent; applying the access condition to Liberty's
     programming assets; clarifying that the nondiscrimination
     requirement applies to all non-price terms; requiring News Corp. to
     offer all programming separately, at published rates that are
     pre-approved by the Commission.[^359] EchoStar further proposes
     that the Commission prohibit the sharing of information between
     News Corp.'s programming divisions and DirecTV about any
     programming negotiation with a competing MVPD, subject to
     penalties.[^360]

123. Applicants respond that they have neither the incentive nor the
     ability to engage in an anti-competitive strategy for any of their
     cable programming.[^361] Applicants restate that DirecTV and News
     Corp. have insufficient power in their respective markets to
     support a strategy of withholding programming or abnormally raising
     its prices, and further the creation of creation of an independent
     audit committee will prevent some of the claimed anti-competitive
     conduct. Likewise, Applicants repeat that the program access rules
     and their proposed program access conditions are effective to
     prevent abuses, and therefore there is no need to regulate DirecTV
     differently than incumbent cable operators.[^362] Applicants argue
     that all of the claimed anti-competitive strategies envisioned by
     the commenters assume either that the Commission's rules are
     totally ineffectual, or that News Corp. would simply violate the
     rules without being discovered. If there is a systematic flaw in
     the rules, Applicants contend the Commission should conduct a
     rulemaking instead of imposing conditions solely on one
     party.[^363]

##### Discussion and Conditions

124. We conclude that the program access rules, combined with the
     Applicants' proposed program access conditions, will be sufficient
     to eliminate any potential for anti-competitive conduct due to the
     vertical relationship between News Corp's satellite cable
     programming networks and DirecTV's distribution platform with
     respect to News Corp.'s general national and non-sports regional
     programming. Accordingly, we adopt the Applicants' proposed
     conditions and decline to impose additional program access
     restrictions for this programming.

125. In enacting the program access provisions of the 1992 Cable Act.
     Congress found that extensive vertical integration between cable
     operators and cable programming vendors created an imbalance of
     power, both between cable operators and programming vendors and
     between incumbent cable operators and their multichannel
     competitors.[^364] Congress determined that this imbalance of power
     limited the development of competition among MVPDs and limited
     consumer choice.[^365] Congress expressed its concern that
     unaffiliated MVPDs faced difficulties gaining access to programming
     required to provide a viable alternative to cable. Congress found
     that vertically integrated program suppliers had the incentive and
     ability to favor their affiliated cable operators.[^366] In
     response, Congress imposed specific conduct restrictions, including
     limits on exclusive contracts, to ensure market entrants could gain
     access to all vertically integrated satellite cable
     programming.[^367] The competitive concerns addressed through the
     program access statute are similar to many of the concerns
     expressed by commenters regarding fair and non-discriminatory
     access to News Corp.'s cable programming. That is, Congress
     essentially recognized that access to all vertically integrated
     satellite cable programming on non-discriminatory terms and
     conditions was needed by all MVPDs and that until competitive
     conditions significantly altered, the Commission must enforce
     prohibitions on unfair and discriminatory terms and conditions of
     carriage. Because Congress' focus at the time was the market power
     in incumbent cable operators, it additionally imposed a prohibition
     on exclusive carriage arrangements among cable operators and
     vertically integrated satellite cable programming vendors.

126. In its 2002 examination of whether to permit the exclusivity
     prohibition to sunset, the Commission reiterated that "access to
     vertically integrated programming continues to be necessary in
     order for competitive MVPDs to remain viable in the marketplace,"
     and that "failure to secure even a portion of vertically integrated
     programming would put a nonaffiliated cable operator or MVPD at a
     significant disadvantage *vis-à-vis* a competitor with access to
     such programming." [^368] In addition, the Commission observed that
     "cable programming -- be it news, drama, sports, music or
     children's programming \-- is not akin to so many widgets," and
     explained that complete loss of access to certain highly popular
     programming networks may harm the foreclosed unaffiliated
     competitor in the marketplace.[^369] The Commission explained,
     "there is a continuum of vertically integrated programming, ranging
     from services for which there may be substitutes (the absence of
     which from a rival MVPD's program lineup would have little impact),
     to those for which there are imperfect substitutes, to those for
     which there are no close substitutes at all (the absence of which
     from a rival MVPD's program lineup would have a substantial
     negative impact).[^370] The Commission concluded that despite the
     progress made in the last ten years in terms of the availability of
     cable programming, "a considerable amount of vertically integrated
     programming in the marketplace today remains "must have"
     programming to most MPVD subscribers," such that the program access
     rules, including particularly the exclusivity provision, continue
     to be necessary to prevent anticompetitive foreclosure of access to
     all of the vertically integrated satellite programming covered by
     the rules.[^371] Further, although the Commission recognized that
     "certain programming services, such as sports programming, or
     marquee programming, such as HBO, may be essential and for
     practical purposes, 'must haves' for program distributors and their
     subscribers," it recognized "the difficulty of developing an
     objective process of general applicability to determine what
     programming may or may not be essential to preserve and protect
     competition." The Commission therefore declined to narrow the scope
     of the exclusivity prohibition to apply only to certain types of
     programming that may be considered "essential programming
     services."[^372]

127. *Permanent Foreclosure.* We note at the outset that all of News
     Corp's satellite cable programming networks are currently covered
     by the non-discrimination and unfair practices prohibitions in the
     program access rules, and will continue to be subject to the rules
     based on the proposed ownership structure of the post-transaction
     entity.[^373] News Corp. meets the definition of a "satellite cable
     programming vendor in which a cable operator holds an attributable
     interest" due to attribution of Liberty Media's interest in News
     Corp.[^374] Some of News Corp's regional sports networks are also
     subject to the program access rules based upon either Liberty
     Media's or another cable operator's direct ownership
     interest.[^375] The rules prohibit permanent foreclosure and overt
     discrimination in pricing of satellite cable programming, thus
     addressing outright concerns raised by EchoStar and others
     regarding continued access to News Corp.-owned or controlled
     national and non-sports regional cable programming. Indeed, as the
     Commission observed in its 2002 review, that "there \[has been\]
     little direct evidence of anticompetitive foreclosure of access to
     vertically integrated programming" in the ten years following
     enactment of the program access rules.[^376] In addition, several
     other specific concerns raised by commenters are addressed
     explicitly by News Corp.'s offered program access commitments, such
     as a prohibition on satellite exclusives for News Corp.
     programming. To ensure that the access and non-discrimination
     requirements of the program access rules will continue to apply to
     News Corp.'s national and regional cable programming, and to obtain
     the additional protections encompassed by the Applicants' related
     commitments, we adopt the following conditions proposed by
     Applicants:

-   News Corp. will not offer any of its existing or future national and
    regional programming services on an exclusive basis to any MVPD and
    will continue to make such services available to all MVPDs on a
    non-exclusive basis and nondiscriminatory terms and
    conditions.[^377]

-   DirecTV will not enter into an exclusive distribution arrangement
    with any Affiliated Program Rights Holder.[^378]

-   As long as Liberty Media holds an Attributable Interest in News
    Corp., DirecTV will deal with Liberty Media with respect to
    programming services it controls as a vertically integrated
    programmer subject to the program access rules.[^379]

-   DirecTV may continue to compete for programming that is lawfully
    offered on an exclusive basis by an unaffiliated program rights
    holder (e.g., NFL Sunday Ticket)[^380]

-   Neither News Corp. nor DirecTV (including any entity over which
    either exercises control) shall unduly or improperly influence: (i)
    the decision of any Affiliated Program Rights Holder to sell
    programming to an unaffiliated MVPD; or (ii) the prices, terms and
    conditions of sale of programming by any Affiliated Program Rights
    Holder to an unaffiliated MVPD.

-   These commitments will apply to News Corp. and DirecTV for as long
    as the FCC deems News Corp. to have an Attributable Interest in
    DirecTV and the FCC's program access rules applicable to satellite
    cable programming vendors affiliated with cable operators are in
    effect (provided that if the program access rules are modified these
    commitments shall be modified to conform to any revised rules
    adopted by the FCC).[^381]

128. We reject as unwarranted the suggestion of certain commenters that
     the exclusivity ban should continue to apply to the
     post-transaction entity even if in the program access exclusivity
     ban sunsets for the rest of the industry.[^382] To let the ban
     sunset, the Commission must find that there is sufficient
     competition in the MVPD market so that the exclusivity prohibition
     is no longer necessary.[^383] If MVPD competition is found to be
     sufficient, then there is no need to restrain the Applicants alone
     in the manner suggested. Additionally, we address the concern
     raised by NRTC and RCN regarding an appropriate enforcement
     mechanism by clarifying that, for enforcement purposes, aggrieved
     MVPDs may bring program access complaints against Applicants using
     the procedures found at Section 76.1003 of the Commission's
     rules.[^384]

129. *Temporary Foreclosure.* As we have found, the program access
     rules, together with the offered conditions, will prohibit
     permanent foreclosure as well as overt discrimination in the prices
     News Corp. charges for national and non-sports regional cable
     programming. Commenters express concern, however, that the proposed
     conditions will be inadequate to prevent News Corp. from uniformly
     raising programming prices to unreasonable levels. Our analysis,
     however, indicates that such a result is only achievable for
     programming in which News Corp. has significant market power. As we
     noted earlier, video programming in general, and cable programming
     in particular, are differentiated products, for which demand and
     substitutability may vary greatly across a continuum.[^385] The
     record does not support a conclusion that either News Corp. or
     other MVPDs consider News Corp.'s national and non-sports regional
     programming networks to be so highly desired by subscribers that
     they will switch MVPD providers to obtain it if temporarily
     foreclosed from accessing it on their incumbent providers'
     systems.[^386] Nor does the record contain any other evidence that
     consumers value this type of programming to such an extent that
     they will change MVPDs rather than substitute different programming
     carried by their chosen MVPD. Rather, we find that News Corp.'s
     general entertainment and news cable programming networks
     participate in a highly competitive segment of programming market
     with available reasonably close programming substitutes.[^387]

130. Further, we find no evidence in the record that News Corp. has
     attempted to temporarily foreclose an MVPD's access to its national
     and non-sports regional programming in order to achieve better
     carriage conditions or higher rates. To the contrary, in most, if
     not all, instances the record indicates that News Corp. has used
     negotiations for carriage of other programming that does have
     significant market power for which there are no close substitutes
     -- its regional sports networks and local broadcast television
     station programming \-- to ensure carriage of many of its general
     entertainment and other cable networks.[^388]
     **\[REDACTED\]**.[^389] There is no evidence in the record to
     suggest that News Corp.'s acquisition of a controlling interest in
     DirecTV is likely to give it any additional market power with
     respect to carriage negotiations for its national and non-sports
     regional cable programming networks. Consequently, we find that
     News Corp. could not effectively use a controlling interest in
     DirecTV to increase rates for national and non-sports regional
     programming to levels above those that would exist absent the
     transaction.

131. We therefore decline to adopt suggestions from commenters and
     opponents that: (a) are already addressed by the additional
     conditions Applicants have offered; (b) intended to remedy
     situations unrelated to this transaction; (c) calculated to remedy
     harms that we have determined are unlikely to occur; (d) would not
     adequately remedy the likely harms of the transaction; (e) single
     Applicants out for special treatment unwarranted by any likely
     adverse consequences of the transaction; or (f) would leave
     Applicants in a worse position following the transaction than they
     are today.[^390] The goal of our license transfer application
     review process is to allow parties to realize the economic
     efficiencies associated with the transaction, while ensuring that
     any harms resulting from the license transfer are mitigated and
     some portion of the benefits of the transfer are passed on to the
     public. An application for a transfer of control of Commission
     licenses is not an opportunity to correct any and all perceived
     imbalances in the industry. Those issues are best left to broader
     industry-wide proceedings.

132. In conclusion, we believe as a general matter that the Commission's
     program access rules are satisfactory to address any imbalance of
     power between News Corp. and competing MVPDs with respect to
     national and non-sports regional cable programming networks.
     Likewise, our acceptance of the offered conditions ensures that any
     imbalance that may exist between DirecTV and some of its
     competitors in the MVPD market is remedied in the same manner as
     with vertically integrated MVPDs that use cable technology to
     deliver their product to consumers, regardless of the effect of any
     post-closing changes in the corporate relationships between News
     Corp. and its various cable programming affiliates. In contrast, as
     described below, the record indicates that News Corp. has
     considerable market power with respect to its regional sports
     networks and its local broadcast station signals, that the
     transaction is likely to increase its incentive and ability to use
     that market power to obtain substantially greater fee increases and
     other carriage concessions for such programming than it can today,
     and that additional remedial actions are therefore warranted for
     such video programming.

#### Access to Regional Sports Cable Programming Networks

##### Background

133. Since the Commission first began tracking regional cable
     programming networks in 1998,[^391] it has repeatedly recognized
     the importance of regional sports programming to MVPD
     offerings.[^392] This acknowledgement is based, in part, on the
     finding that for such programming, there are no readily acceptable
     close substitutes.[^393] The basis for the lack of adequate
     substitutes for regional sports programming lies in the unique
     nature of its core component: regional sports networks ("RSNs")
     typically purchase exclusive rights to show sporting events and
     sports fans believe that there is no good substitute for watching
     their local and/or favorite team play an important game.[^394] The
     Commission's extension of the sunset date for the exclusivity
     program access rules last year was intended, in part, to ensure
     that competing MVPDs would have continued access to the
     satellite-delivered regional sports programming owned by vertically
     integrated cable operators.[^395] We also have long recognized that
     the terrestrial distribution of programming---particularly RSN
     programming---by vertically integrated cable operators could
     competitively disadvantage competing MVPDs if they were denied
     access to the terrestrially delivered programming.[^396]

134. News Corp. is a major owner of RSNs. It owns or has an attributable
     interest in 19 RSNs, 12 of which it manages, which reach 79 million
     television households.[^397] According to NCTA's *Cable
     Developments 2003*, those RSNs produce over 4,700 live events each
     year, and carry 65 of the 80 professional Major League Baseball
     ("MLB"), National Basketball Association ("NBA") and National
     Hockey League ("NHL") teams.[^398] RSNs wholly owned by News Corp.
     carry 45 of the 80 professional teams,[^399] and thus controls a
     significant amount of professional sports programming on regional
     sports networks.

##### Positions of the Parties

135. Applicants contend that it would be unprofitable for News Corp. to
     foreclose access to its RSNs. They assert that DirecTV's maximum
     share of any regional market served by one of the News Corp.'s RSNs
     is less than 13%, and that denying programming to competing MVPDs
     would require News Corp. to forego programming sales to at least
     87% of each regional market.[^400] They further argue that the loss
     in programming revenues from competing MVPDs that would result from
     a strategy of foreclosure could not be offset by any profits it
     might earn as a minority owner of an MVPD with a relatively small
     market share.[^401] Applicants further assert that much of its
     programming is jointly owned by other parties, who could not
     benefit from, and therefore would not tolerate, such a
     strategy.[^402] Applicants also maintain that, even if a
     foreclosure strategy made economic sense, the program access rules
     in unison with their proposed program access commitments require
     them to make all existing and future programming available on a
     nondiscriminatory basis to all MVPDs and prohibit DirecTV from
     entering into exclusive deals with affiliated programmers.[^403]

136. Competing MVPDs consider RSNs critical to any MVPD offering.[^404]
     They contend that, if they cannot offer the "must-have" programming
     which is controlled by News Corp., such as News Corp.'s RSNs, they
     will be unable to compete with DirecTV.[^405] JCC observe that the
     "harm to the competitive MVPD . . . is further increased in
     situations in which there is no readily acceptable substitute for
     the programming, such as regional sports programming."[^406] JCC
     also assert that News Corp. Chairman Rupert Murdoch has "long
     described sports programming as his 'battering ram' to attack pay
     television industries around the world," and argue that acquiring
     DirecTV will give News Corp. the ability to dictate the terms and
     conditions of carriage for such marquee programming.[^407] In
     addition, JCC cite reports that News Corp. has raised the cost of
     its Fox Sports content by more than 30% in one year for some
     systems and has already demonstrated its willingness to withhold
     its RSNs' programming signal from cable operators unwilling to
     adhere to its demands for higher carriage fees.[^408] RCN argues
     that lack of access to local sports programming works particular
     hardships upon competitive MVPDs, citing results of surveys
     conducted for it by professional polling organizations as
     confirming "the vital importance of local sports programming to a
     cable operator's success: the data show that some 40-48% of cable
     subscribers would be less likely to subscribe to cable service if
     it lacked local sports programming and, in one survey, an
     additional 12% of subscribers said they were not sure whether the
     absence of local sports programming would impact their decision
     whether to take the service."[^409] According to RCN, in rough
     terms this indicates that a competitive MVPD that does not have
     local sports programming will have little or no chance of winning
     as subscribers as much as 40-70% of its potential subscriber base,
     with the result being that without local sports, RCN must try to
     reach a break-even penetration rate of 30% of the market from a
     potential subscriber base that only includes 30-60% of the market
     to begin with.[^410]

137. JCC contend that DirecTV already uses its sports programming
     offerings as an important marketing tool and a competitive
     strategy.[^411] Further, they argue that DirecTV siphons customers
     away from cable every time a cable MSO fails to come to terms with
     an RSN.[^412] After the transaction, JCC maintains, this increase
     in DirecTV subscriptions from customers who regard RSNs as "must
     have" programming will generate additional profits for News Corp,
     thus increasing News Corp.'s incentive to precipitate carriage
     disputes over RSNs with rival MVPDs.[^413] JCC also claim that by
     "picking and choosing its targets and timing with care, News Corp.
     would also send powerful signals to the marketplace," which is
     likely to cause other competing MVPDs simply to accept News Corp.'s
     price increases.[^414] Commenters claim that the increased price of
     News Corp.'s RSN programming is likely to harm consumers through
     higher cable rates in the short term, and diminished competition in
     the MVPD marketplace in the long term.[^415] Commenters also
     contend that despite the program access rules, News Corp's
     inflexibility over rates, terms and conditions of carriage of its
     RSNs and its willingness to withhold those networks from cable
     operators if a carriage agreement cannot be reached will be
     exacerbated by the ability to distribute programming via
     DirecTV.[^416] Additionally JCC argue, News Corp. may insist on
     bundling carriage of RSNs with other newer or less desirable
     programming with the result that the "battering ram" of News
     Corp.'s sports programming delivers a "one-two" punch: higher
     prices and mandatory carriage of new -- and expensive --
     programming.[^417] Absent intervention from the Commission, they
     claim, News Corp.'s acquisition of a controlling interest in
     DirecTV can be expected to lead to higher prices and more
     high-profile "showdown" negotiations such as those that have
     occurred with negotiations over Fox Sports Net North in January
     2003 and Fox Sports Net West in 2001.[^418]

138. JCC provide an economic analysis of the competitive effects of the
     transaction authored by William Rogerson ("Rogerson Analysis"),
     which finds that RSNs are "must have programming" for which no good
     substitute exists.[^419] According to Rogerson, this means that
     News Corp. could harm rivals by pursuing exclusionary or
     cost-raising strategies with respect to this programming.[^420]
     Examining several recent incidents where the programming supplier
     withdrew sports programming from an MVPD during carriage
     negotiations, the Rogerson Analysis concludes that significant
     numbers of subscribers leave MVPDs that no longer offer local
     sports programming.[^421]

139. Applicants respond with an economic analysis by Charles River
     Associates, Inc. (the "CRA Analysis") that supports their argument
     that it would not be profitable for post-transaction News Corp. to
     withhold RSN signals.[^422] The CRA Analysis concludes that the
     costs of permanently foreclosing competing MVPDs from access to
     News Corp.'s RSN programming outweigh the benefits of such a
     strategy.[^423] Specifically, the CRA Analysis finds that, in order
     for permanent foreclosure to be a profitable strategy, DirecTV
     would have to more than double its subscribership in the combined
     RSN footprint.[^424] Applicants contend that such subscribership
     increases are implausible.[^425]

140. In support of their claim, Applicants describe the effects of the
     loss of Yankee games by Cablevision following the formation of the
     Yankees Entertainment and Sports ("YES") Network.[^426] According
     to the Applicants, Cablevision lost just 30,000 subscribers---1% of
     its overall subscriber base---as a result of its inability to carry
     Yankee games during the 2002 season, while DirecTV's subscribership
     in the affected region increased by only a few percentage
     points---far less than the increases in market share that
     Applicants contend are required for RSN foreclosure to be
     profitable.[^427] The second example cited by Applicants involved a
     carriage dispute between a Fox RSN and a Time Warner cable system
     in Minnesota, where, according to Applicants, Time Warner reported
     a loss of only 200 of its 180,000 subscribers in the region during
     the two months that it lacked the programming.[^428] Finally,
     Applicants cite Comcast's ongoing refusal to make its RSN in
     Philadelphia available to DirecTV or EchoStar. Applicants contend
     that, although DirecTV has not grown as quickly in this market as
     in others, neither DirecTV nor EchoStar has exited the market, and,
     in fact, both DBS operators have continued to grow.[^429]

141. In response to claims that News Corp. will increase prices for its
     affiliated RSN programming, Applicants assert that, like
     foreclosure, such a strategy would be contrary to News Corp.'s
     economic interest.[^430] According to Applicants, News Corp. cannot
     increase the price of RSN programming without risking a loss of
     subscribers, and vertical integration with DirecTV will not change
     this.[^431] Claiming that News Corp.'s fees for RSN programming
     already maximize the profits that it can earn on the
     programming,[^432] Applicants argue the transaction actually will
     reduce News Corp.'s incentive to raise prices, because News Corp.
     would lose revenue from programming fees when cable operators
     refuse to pay the higher prices and stop carrying the RSNs, and
     DirecTV would lose money due to the increased RSN prices.[^433]
     Applicants further contend that opponents' foreclosure analysis
     fails to take into account the downward pressure on prices
     associated with the transaction, such as elimination of double
     marginalization and other efficiencies.[^434] Finally, Applicants
     claim that regardless of the transaction, News Corp. could achieve
     the benefits of foreclosure of a RSN through the use of
     contracts.[^435]

142. JCC criticize the Applicants' for failing to adequately grapple
     with the key argument that the transaction increases the likelihood
     that News Corp., armed with the increased bargaining power its
     interest in DirecTV will give it, will withhold -- or threaten to
     withhold -- programming from MVPDs in a few select markets for only
     a short period of time in order to obtain additional pricing power
     and negotiating leverage.[^436] JCC use the data and methodology
     from the CRA Analysis to support their temporary foreclosure
     theory. Rogerson, on behalf of JCC, notes that programmers,
     including News Corp., currently use the threat of withdrawing
     programming as a lever to negotiate higher programming prices from
     MVPDs. Any change in circumstances, according to Rogerson, that
     lowers the cost to News Corp. of withdrawing programming will
     increase the credibility of its threat to withdraw programming and
     therefore will increase News Corp.'s ability to force MVPDs to
     accept higher programming prices. News Corp.'s acquisition of
     control of DirecTV reduces the cost to News Corp. of withdrawing
     programming form rivals of DirecTV because: (i) when News Corp.
     withdraws programming from rival MVPDs, some customers will switch
     to DirecTV and DirecTV will earn profits on the customers who
     switch; and (ii) these profits offset the cost to News Corp. of
     withdrawing programming and therefore reduce the net cost of
     withdrawing programming. As Rogerson notes, "this will make the
     threat of withdrawing programming more credible and thus allow News
     Corp. to bargain for higher prices."[^437] Moreover, Rogerson
     concludes, the threat to competition and consumers by temporary
     withdrawals of "must have" programming will "be particularly
     serious in less dense regions of the country served by small and
     medium sized cable operators \[because\] raising the price of
     programming from these firms is more likely to drive them entirely
     out of the market," and this in turn will increase News Corp.'s
     incentive to use its bargaining power in this manner, with the
     potential result of significant price increases.[^438] ACA argues
     that these conclusions confirm that smaller and medium sized cable
     operators outside urban areas of the country are at particular risk
     from the combination of News Corp.'s programming and DirecTV's
     distribution assets, and that the Applicants' proposed program
     access undertakings offer smaller cable operators no protection,
     because, as Rogerson and the Applicants acknowledge, the proposed
     conditions expressly allow quantity discounts and therefore place
     very little constraint on the prices that News Corp. could charge
     smaller cable systems.[^439]

143. According to Rogerson's calculations, temporary withdrawals of
     programming by News Corp. are likely to not only partially offset
     losses during the blackout periods for RSN programming, but are
     "very likely to be profitable for News Corp. after it acquires
     control of DirecTV. These temporary withdrawals will directly harm
     consumers and also provide News Corp. with even more bargaining
     leverage in its negotiations over programming prices with rival
     MVPDs."[^440] Additionally, Rogerson finds, using data contained in
     the CRA Analysis, that if News Corp. temporarily withholds an RSN
     from a targeted MVPD, it breaks even economically if less than
     **\[REDACTED\]** of that MVPD's subscribers migrate to
     DirecTV.[^441] As a consequence, Rogerson concludes, News Corp.
     will \-- because of the transaction -- be able to bargain for
     higher programming prices than it would otherwise, and consumers
     will suffer as these increased input costs are passed along to them
     by their MVPDs.[^442]

144. JCC argue accordingly that News Corp. would not need to achieve
     "enormous increases in subscribership or pricing" using DirecTV to
     make temporary withholdings of must-have programming a viable and
     profitable strategy.[^443] They argue that: (1) internal News Corp.
     documents show that News Corp. already engages in temporary
     programming withdrawals of must-have programming, such as RSNs; (2)
     acquiring control over DirecTV will reduce the costs of such
     tactics to News Corp. and therefore create upward pressure on
     programming prices; and (3) News Corp. recognizes the value of
     effectuating a service interruption in a particular market in order
     to "send a message" to distributors in other markets about the
     costs of resisting its fee and carriage demands.[^444] They claim
     that the transaction changes the present "balance of terror"
     between programmers and MVPD distributors.[^445] JCC explain that
     News Corp. currently does not know whether the loss of subscription
     and advertising revenue resulting from a temporary withdrawal of
     RSN or FOX programming will be recouped via higher carriage fees
     gained from that distributor (and others in adjacent markets) once
     the impasse is resolved. According to JCC, the acquisition
     substantially reduces, if not eliminates, the pre-transaction risks
     to News Corp. of failing to conclude a carriage agreement with a
     cable operator or other MVPD for "must have" programming.[^446] JCC
     emphasize that the key competitive concern is that this transaction
     will enable News Corp. to use temporary foreclosure and/or the
     threat of such foreclosure as a tactical "weapon" to obtain
     supra-competitive prices for Fox programming from all retail
     distributors, and that those prices will ultimately be borne by
     consumers.[^447]

145. Applicants respond that reliance of the JCC upon selective portions
     of internal News Corp. documents is misplaced, and that News Corp.
     does not engage in a temporary foreclosure negotiation strategy
     with respect to its RSNs.[^448] Rather, Applicants claim that News
     Corp. seeks "maximum distribution of its programming."[^449]
     Applicants maintain that in nearly every instance involving renewal
     of an RSN, the parties have been able to reach an agreement without
     service interruptions, and that temporary service interruptions
     have occurred only rarely during negotiations with MVPDs for Fox
     RSN carriage.[^450] Applicants argue further that JCC fail to take
     into account the evidence of the actual negative effects of
     temporary service interruptions to News Corp., where these have
     occurred. Applicants claim that there is no evidence to support
     theories that the acquisition of a partial interest in DirecTV
     would materially change the relative bargaining power of News Corp.
     and MVPDs. In fact, Applicants argue, real-world experience with
     withdrawals of sports programming from cable operators in other
     markets (such as the Cablevision/YES dispute) demonstrates that
     "very little switching" of subscribers to DBS providers carrying
     the foreclosed programming actually occurs.[^451] Finally,
     Applicants reiterate that temporary withholding of RSNs is unlikely
     to occur because News Corp. is likely to suffer significantly
     greater financial losses than the MVPD if the RSN signal is not
     carried.[^452] According to the Applicants, while News Corp. will
     lose the subscriber fees and advertising revenues that it would
     have realized through carriage on the MVPD, the MVPD -- able to
     publicize to its subscribers that the RSN signal will be restored
     once the carriage dispute is concluded \-- suffers nothing "more
     than customer annoyance.[^453]

146. EchoStar takes issue with the characterization of the harm
     inflicted on the MVPD as mere "customer annoyance," and argues that
     "the absence of regional sports . . . from an MVPD's package, even
     for a short period of time, has a debilitating effect on that
     distributor's ability to compete in the region in question . . .
     \[T\]he distributor would have lost existing subscribers, potential
     new subscribers, and would have suffered a serious reputational
     blow. All of these losses would be irreparable -- the subscribers
     who departed or chose another distributor would almost certainly
     not come back when the programming returns."[^454]

#####  Discussion

147. We conclude that News Corp. currently possesses significant market
     power with respect to its RSNs within each of their specific
     geographic regions, and that the proposed transaction will enhance
     News Corp.'s incentive and ability to temporarily withhold or
     threaten to withhold access to its RSN programming to increase the
     fees it receives for the programming, over and above what it could
     negotiate absent the transaction, to the ultimate detriment of the
     public. Moreover, we find that in contrast to the situation with
     respect to access to national and non-sports regional programming,
     neither our program access rules nor Applicants' proposed program
     access commitments are sufficient to protect against these likely
     transaction-specific harms.

148. At the outset, we agree with commenters that there are no
     reasonably available substitutes for News Corp.'s RSN programming
     and that News Corp. thus currently possesses significant market
     power in the geographic markets in which its RSNs are distributed.
     We base these conclusions, in part, on the limited number of teams
     and games of local interest that are available and
     **\[REDACTED\]**,[^455] and on our economic analysis, described
     below, of the effects of temporary withdrawals of such programming
     from MVPD subscribers. An additional feature of RSN programming
     that sets it apart from general entertainment programming is the
     time-sensitivity of the airing of important local professional
     sports events, such as opening days or playoffs. As we have
     previously observed,[^456] RSNs are comprised of assets of fixed or
     finite supply -- exclusive rights to local professional sports
     teams and events -- for which there are no acceptable readily
     available substitutes. These peculiar features of RSN programming
     give rise to somewhat unique competitive problems in terms of
     finding relatively close substitute programming in the event access
     that is foreclosed to rival MVPDs.

149. We also reject News Corp.'s claim that the key competitive harms
     associated with this transaction could be inflicted by means of
     contractual arrangements between the companies, and that therefore
     the claims are not transaction-specific.[^457] To the extent that
     any behavior other than permanent foreclosure is at issue, it
     appears highly unlikely that News Corp. and DirecTV, as separate
     entities, could better manage and coordinate temporary withholdings
     than they could functioning as a single entity. Rather we agree, as
     JCC's expert observes, that News Corp. cannot simultaneously claim
     that the transaction is essential to the accomplishment of all of
     the beneficial efficiencies identified in their Application, while
     simultaneously asserting that it is completely unnecessary to the
     imposition of the harms identified in the record.[^458]

150. Both Applicants and commenters have provided economic analyses,
     which rely in part on empirical data to evaluate whether News
     Corp., after the transaction, will engage in some form of
     foreclosure.[^459] Applicants' analyses find that they would not
     profit from either permanent or temporary foreclosure.[^460]
     Commenters' analyses, in contrast, find that Applicants will have
     an increased incentive and ability to temporarily withhold, or
     credibly threaten to withhold, access to their RSNs.[^461]

151. In addition to the studies submitted by the parties, Commission
     staff conducted its own economic analysis. As commenters correctly
     observe, the increased *ability* of an RSN owner to credibly
     threaten to withhold its signal, even if it does not actually do
     so, changes its bargaining position with respect to MVPDs, and
     could allow the RSN owner to extract higher prices, which are
     ultimately passed on to consumers. The staff's economic analysis is
     premised on the assumption that, if the transaction significantly
     enhances News Corp.'s incentive and ability to withhold signals of
     its RSNs by lowering the costs to News Corp. of employing such
     bargaining tactics, News Corp. will engage in such behavior, and
     that this will result in an increase of rival MVPDs' programming
     costs, and ultimately end-user prices. Key to determining the
     degree to which the transaction lowers News Corp.'s costs of
     engaging in temporary foreclosure is the number of subscribers that
     can be predicted to shift from the affected MVPD to competitor
     DirecTV to access the foreclosed programming, which in turn will
     increase the profits of the post-transaction company as a whole,
     over and above levels achievable under today's conditions.

152. *Permanent Foreclosure.* As discussed in greater detail in Appendix
     D**,** the technical appendix, the staff's economic analysis
     examined the potential profitability of both permanent and
     temporary foreclosure strategies for each of News Corp.'s RSNs.
     Based upon the staff's analysis, we agree with Applicants that a
     strategy of permanent RSN foreclosure, assuming that it were
     permissible under the rules, would be unprofitable for News Corp.
     and therefore unlikely to be pursued any more frequently
     post-transaction than it is today. We therefore do not find that
     permanent foreclosure of RSN programming is likely to be
     transaction-specific harm.

153. *Temporary Foreclosure.* We also agree with commenters who argue
     that a temporary foreclosure strategy is likely to be profitable to
     News Corp. in many instances. The staff's analysis supports the
     further conclusion that this increase in the profitability of
     temporary foreclosure to News Corp. will make the threat of
     withdrawing programming a more credible tactic. By employing this
     tactic News Corp. will be able to negotiate higher prices than it
     could absent its control of DirecTV. On this basis, we find it
     likely that temporary foreclosure will be employed more frequently
     following News Corp.'s acquisition of control of DirecTV than it is
     today, and that this would, in turn, lead to greater programming
     price increases to MVPDs and higher subscription prices to
     consumers than we would expect to find absent News Corp.'s control
     of DirecTV. Increased use of temporary foreclosure strategies would
     thus harm competition and consumers by raising rivals' costs, by
     amounts greater than those News Corp. could reasonably expect to
     gain absent the transaction, thereby causing undue increases in
     MVPD subscription prices.

154. The Applicants additionally argue that we should consider not only
     how the transaction may increase RSN programming prices due to
     temporary foreclosure, but also how the transaction may lead to
     lower programming prices. Specifically, the Applicants claim that
     the reduction in \"double marginalization\" which results from
     vertical integration \"will create a downward incentive for News
     Corp.\'s programming prices. . . .\"[^462]

155. We recognize and agree with the theoretical argument that vertical
     integration can reduce prices by reducing double
     marginalization.[^463] In this case, however, the Applicants have
     neither attempted to quantify this benefit nor provided sufficient
     information for the Commission to quantify the benefit. In
     particular, the Applicants have not presented sufficient
     information concerning the marginal costs to News Corp. of
     producing various types of programming or the relevant demand
     elasticities for different types of programming that are necessary
     for the development of an estimate of the magnitude of this
     benefit.

156. Like the Applicants, the staff's economic analysis of the harms of
     permanent and temporary withholding of programming, described in
     the technical appendix, assumes that DirecTV\'s profit margin does
     not change following the transaction.[^464] We find that, to the
     extent that the elimination of double marginalization and other
     efficiencies will increase DirecTV\'s profit margin on each
     additional customer, the incentives to engage in permanent or
     temporary foreclosure will be enhanced, not reduced. In the absence
     of any estimates of the impact of the elimination of double
     marginalization on the prices of News Corp. programming to other
     MVPDs and how this interacts with the increased incentives to
     withhold when DirecTV's profit margin increases due to lower
     programming costs, we can only conclude that the claimed economic
     efficiencies are insufficient to mitigate the harms we have
     identified.

157. The results of the staff's economic analysis suggest that a
     strategy of temporarily withholding RSN programming from a cable
     operator, but not EchoStar, would be profitable for News Corp. for
     a large percentage of the cable systems that carry News Corp.
     RSNs.[^465] Specifically, if **\[REDACTED\]** of cable customers
     defect to DBS providers following a one month withdrawal of an RSN,
     News Corp. would find it profitable to withdraw RSN programming
     temporarily from cable companies serving **\[REDACTED\]** of RSN
     cable subscribers, assuming that News Corp. receives 50% of
     DirecTV's additional profits.[^466] Under the assumptions that
     **\[REDACTED\]** of cable customers will defect to a DBS provider
     and that News Corp. receives 100% of DirecTV's additional profits,
     then News Corp. would find it profitable to temporarily withdraw
     RSN programming from cable companies serving **\[REDACTED\]** of
     cable RSN subscribers. In addition, based on staff's analysis, we
     also find it reasonable to assume that News' incentives to
     temporarily foreclose a RSN from EchoStar are likely to be even
     stronger than to foreclose from the cable operators. This occurs
     because, unlike the situation with cable operators where DirecTV
     always faces competition from EchoStar for the switching customers,
     when the RSN is removed from EchoStar there will be some areas
     where the competing cable operator will not carry the RSN and
     DirecTV will be the only source for the RSN. Furthermore, in those
     areas where DirecTV would compete with cable providers for
     customers defecting from EchoStar, DirecTV would likely capture a
     significantly greater share of the customers. As we have found
     previously, consumers view EchoStar and DirecTV as closer
     substitutes for each other than cable is for either product.[^467]

158. Examining the effect of the withdrawal of YES programming from
     Cablevision, the staff economic analysis further finds it likely
     that a sufficient number of cable subscribers will leave a cable
     company in response to the temporary withdrawal of RSN programming
     for such a strategy to be profitable. We note that Applicants
     pointed to the YES example to argue that an insufficient number of
     cable subscribers would defect in response to a temporary
     withdrawal of RSN programming. The staff performed an econometric
     analysis of DirecTV's subscriber gains during the 2002 season. The
     results indicate that Cablevision likely lost many more
     subscribers[^468] than the 30,000 subscribers estimated by the
     Applicants' experts.[^469] The staff analysis, in contrast, is
     based on an econometric analysis of the number of subscribers that
     DirecTV gained as a result of the temporary withdrawal of YES. The
     staff analysis estimates that DirecTV gained a number of
     subscribers equal to **\[REDACTED\]** of Cablevision's customer
     base during the first month that New York Yankees games were
     unavailable. According to the results presented in table A-5 in the
     technical appendix, if **\[REDACTED\]** of a cable company's
     subscribers switched to DBS during the temporary withdrawal of an
     RSN, the staff analysis indicates that, depending on the
     assumptions, between **\[REDACTED\]** and **\[REDACTED\]** of News
     Corp.'s RSN subscribers could be vulnerable to this tactic because
     News Corp. would find it profitable to attempt temporary
     foreclosures to increase its RSN fees.

159. The staff analysis thus demonstrates that News Corp., after the
     transaction, will have an increased incentive and ability to engage
     in temporary foreclosure in order to raise the price of RSN
     programming. This raising rivals' cost strategy is likely to
     generate two types of consumer harm. First, and most importantly,
     temporary foreclosure or the credible threat of temporary
     foreclosure as a negotiating strategy is likely to result in rival
     MVPDs agreeing to higher carriage fees or other concessions in
     return for carriage of RSNs than they would absent the transaction,
     and these fee increases will then be passed through to MVPD
     consumers in the form of rate increases. Because the transaction
     effectively lowers the costs to News Corp. of temporary withdrawals
     of its RSN programming, it increases the likelihood and frequency
     of use of this negotiating strategy. Second, staff's analysis
     demonstrates that, to the extent that News Corp. actually withholds
     RSN programming, consumers will lose access to highly desired
     programming and some consumers will leave their preferred MVPD
     provider to access the foreclosed programming on a less-desired
     MVPD platform. Consumers who have moved to an MVPD that requires a
     minimum service contract period will be harmed because they will be
     forced to remain with their less preferred provider for the term of
     their contract, even though the RSN programming may have been
     restored to their original MVPD. Thus, temporary withdrawals of RSN
     programming or threats to withdraw RSN programming would provide
     News Corp. a strong, credible, mechanism to extract higher rates
     for RSN programming from vulnerable MVPDs, and, as a result of the
     transaction, News Corp. will find it profitable to engage in
     temporary foreclosure or will be able to demand higher carriage
     fees for RSNs based only on the threat of temporary foreclosure in
     more instances than it would today.

160. We agree with commenter claims that this enhanced incentive and
     ability to engage in temporary foreclosure will allow News Corp. to
     extract more compensation for its regional sports networks from
     competing MVPDs that it could reasonably expect to achieve absent
     the transaction. The potential public interest harms that would
     result from such a strategy are substantial. News Corp.'s ability
     to raise rivals costs in this manner would harm consumers in
     different ways depending on the type of compensation it obtains.
     When News Corp. secures carriage of other cable programming
     networks from MVPDs in exchange for carriage of its RSNs, MVPDs pay
     for those networks. If News Corp. can secure carriage of more cable
     networks and charge higher fees for such carriage, these fees are
     unlikely to be absorbed solely by the MVPDs, but would be passed on
     to consumers in the form of higher rates. If News Corp. uses
     withholding or threats of withholding in RSN carriage negotiations
     to obtain carriage of its affiliated cable networks that the MVPD,
     absent the threat of foreclosure, would not agree to carry,
     consumers are harmed because MVPDs are forced to make programming
     decisions based on News Corp.'s demands, rather than selecting the
     programming of their choice. In the long term, News Corp.'s use of
     market power to extract artificially high levels of compensation
     from MVPD rivals, or other carriage concessions, could make rival
     MVPDs less viable options for consumers, thus limiting consumer
     choice.

161. Accordingly, we find that the primary public interest harm that is
     likely to flow from the combination of RSN programming and
     nationwide MVPD distribution assets is the competitive harm of
     across-the-board price increases to MVPDs for carriage of News
     Corp. RSNs and/or other carriage concessions, over and above the
     level of price increases or other concessions that News Corp. could
     otherwise expect to obtain, through the more frequent use of
     credible threats of withholding or actual withholding of
     programming. We also find that the transaction would result in
     secondary public interest harms by depriving subscribers of access
     to RSN programming during the period of temporary foreclosure or by
     causing subscribers to change MVPDs to access the foreclosed
     programming, even where they would otherwise not desire to change
     providers with greater frequency than today.

162. In light of the foregoing analysis, we conclude that neither the
     Commission's existing rules nor the Applicants' proposed safeguards
     are sufficient to protect against harms caused by temporary
     foreclosure. We find, contrary to Applicants' arguments, that the
     program access rules will not adequately protect against this harm,
     because they were not intended to regulate or address the level of
     rates *per se*.[^470] Moreover, we recognize that, even if the
     program access rules adequately address rate levels (and not just
     discrimination), News Corp. would still be able to withhold
     programming pending resolution of a program access complaint.[^471]
     Because we find that the proposed transaction poses likely consumer
     harms that will not be adequately mitigated by the Commission's
     existing rules or the Applicants' proposed conditions, we consider
     whether other conditions can mitigate this harm below.

##### Conditions

163. *Positions of the Parties.* As explained above, in addition to the
     existing program access rules, Applicants have proposed to
     undertake additional enforceable program access commitments,[^472]
     which they claim are sufficient to protect the public interest
     against any potential harms arising from the transaction. For the
     reasons stated in Section VI.C.3 and 4.a., *supra,* we accept
     Applicants' proposed additional program access commitments and
     incorporate them in the terms of our license transfer approval.
     And, as noted in Section VI.C.4.a, several commenters generally
     assert that, the transaction will increase News Corp.'s incentives
     and ability to act anticompetitively and therefore the Application
     should be designated for hearing, denied, or, if approved,
     conditioned to prevent such harms. Commenters contend that neither
     the program access rules nor the Applicants' proposed program
     access commitments will adequately protect against potential harms
     arising from the transaction.[^473] Many of the proposed arguments
     and conditions were lodged generally concerning access to all of
     News Corp.'s video programming products. We address commenters'
     suggestions here to the extent they have not already been addressed
     and explain why we reject some proposed remedies and adopt others
     with respect to access to regional sports cable programming.

164. As we stated above, several commenters and opponents contend that
     proposed program access commitments will not prevent News Corp.
     from raising the price, terms or conditions of programming above
     competitive levels by simply requiring DirecTV to compensate News
     Corp. for its programming at unreasonably high prices with
     unreasonably favorable terms of carriage.[^474] These parties
     maintain that such a "sweetheart deal" would then establish
     unreasonable terms for agreements with all other MVPDs, without
     harm to DirecTV or News Corp., because it is effectively
     compensating itself.[^475] Commenters and opponents are not
     convinced that the Applicants' Audit Committee will be able to
     monitor every term of every agreement with an unaffiliated MVPD and
     do not consider the committee as a sufficient guard against the
     threat of unreasonable terms.[^476] ACA contends that the proposed
     commitment does not prevent News Corp. from offering different or
     more costly terms to small cable operators, because although the
     commitment requires nondiscrimination, News Corp. is likely to
     offer the same prices/terms/conditions only to MVPDs with as many
     subscribers as DirecTV.[^477]

165. To remedy the claimed deficiencies in the conditions proposed by
     Applicants, parties urge the Commission to adopt several revisions
     and additions. ACA urges the Commission to seek an enforceable
     commitment from Applicants that News Corp. will not use programming
     prices, terms and conditions to disadvantage smaller market cable
     companies.[^478] In addition, ACA argues that News Corp. should be
     required to offer all News Corp.-controlled satellite programming
     to the National Cable Television Cooperative ("NCTC") or other
     recognized programming buying group on the same effective prices,
     terms and conditions as News Corp. offers such programming to
     DirecTV.[^479] To effectuate this condition, ACA suggests that News
     Corp. be required to disclose to the NCTC and the Commission all
     effective prices, terms, conditions and agreements of any kind
     related to the sale of News Corp.-controlled programming to
     DirecTV.[^480] EchoStar urges that we require News Corp. to supply
     programming to MVPDs on a separate basis (i.e., no bundling),
     publish a rate card showing its fees for all MVPDs with a discount
     rate structure approved in advance by the Commission, and provide
     the Commission with separate accounting records for its programming
     and distribution businesses, showing that the rates paid by DirecTV
     are not so high that DirecTV cannot make a reasonable profit.[^481]

166. Pegasus urges that we add the following requirements designed to
     supplement those proposed by Applicants: (a) contracts between Fox
     and DirecTV would have to be approved by a majority of the
     independent directors of DirecTV and parent Hughes; (b) all
     contracts between Fox and DirecTV would be filed with the
     Commission and available to the public; (c) the economic terms of
     any contract between Fox and DirecTV would have to be set at the
     average of those charged to Fox's three largest, non-affiliated
     MVPDs. The CEO and directors of Fox, DirecTV, and Hughes would be
     required to certify compliance with these conditions annually.
     Pegasus asserts that these conditions should apply for a period of
     five years.[^482] EchoStar proposes that we: prohibit satellite
     exclusives of any kind for News Corp. programming; apply the
     requirement to programming delivered terrestrially; make the
     program access condition permanent; apply the access condition to
     Liberty's programming assets; clarify that the nondiscrimination
     requirement applies to all non-price terms; require News Corp. to
     offer all programming separately, at published rates that are
     pre-approved by the Commission.[^483]

167. Other parties urge the Commission to adopt several revisions and
     additions specifically applicable to RSN programming. In instances
     where News Corp. and an MVPD fail to negotiate and enter into a
     license agreement for carriage of an RSN upon mutually agreeable
     terms and conditions, JCC urge imposition of a condition that
     prohibits News Corp. from refusing to make available or
     conditioning the availability or carriage terms of an RSN it
     controls to any MVPD on whether that MVPD or any other MVPD agrees
     to carry any other News Corp. owned, controlled or affiliated video
     programming service or television broadcast station.[^484] Under
     the JCC proposal, News Corp. would additionally be permitted to
     offer a license agreement for a News Corp. RSN with fees, terms and
     conditions based upon an MVPD's transmission or distribution of
     such News Corp. RSN on the MVPD's most popular tier of service.
     However, prior to taking any action to deauthorize or cause removal
     of an News Corp. RSN from any MVPD's package of video programming
     services offered to any of its subscribers, News Corp. must also,
     upon request by any MVPD, make a good faith offer that enables the
     MVPD to carry and pay license fees for, such News Corp. RSN based
     upon (a) distribution in an existing or a proposed service tier
     other than the MVPD's most popular tier of service; and (b)
     distribution on a stand-alone, a la carte basis.[^485] JCC further
     propose that enforcement of such requirements would be handled
     through complaint to the Commission by an MVPD who believes that
     News Corp. has violated this condition. During the pendency of the
     complaint, JCC propose that News Corp. be prohibited from
     deauthorizing or causing the removal of the RSN programming from
     the aggrieved MVPD's package of video programming services offered
     to its subscribers. Additionally, JCC propose that the Commission
     place the burden of proof on News Corp. to establish that its good
     faith offer provides a genuine choice to the MVPD without imposing
     unreasonable conditions on tier carriage. RCN supports the
     proposals of the JCC, noting that to the extent that large
     incumbent MSOs may be harmed by the anticompetitive conduct of
     post-transaction News Corp., RCN is in even greater jeopardy.[^486]

168. We note here that the JCC proposed a somewhat different remedy for
     potential temporary foreclosure of access to local broadcast
     television station signals during retransmission consent
     negotiations which involves sending disputes to commercial
     arbitration that is discussed in Section VI.C.4.c. Because we are
     adopting the arbitration remedy for both forms of "must have"
     programming, we first explain JCC's rationale in this section. JCC
     urge the Commission to prevent News Corp. from using DirecTV to
     strengthen its leverage and pricing power in retransmission consent
     negotiations by, *inter alia*, establishing a "last offer"
     arbitration mechanism that is designed to reduce News Corp.'s post
     transaction incentive to force competing MVPDs to choose between
     paying higher prices and carrying new Fox channels in order to
     retain access to existing Fox broadcast content, or ceding that
     content to their most powerful MVPD competitor -- DirecTV.[^487]
     JCC explain that the arbitration mechanism is intended to serve as
     a fair and neutral backstop for resolving carriage disputes and
     will thereby reduce News Corp.'s post-transaction incentive and
     ability to threaten or inflict carriage disruptions on subscribers
     of rival MVPDs as a means of extracting supra-competitive prices
     and unfair concessions in carriage negotiations for local broadcast
     stations. The end result of having the arbitration "backstop
     mechanism," they claim, should be to reduce the otherwise likely
     increase in service interruptions and retransmission consent
     disputes arising from the transaction. Both sides, they allege,
     will have an incentive to negotiate reasonably and conclude a
     mutually agreeable arrangement, rather than face the prospect of
     having an arbitrator select one party or the other's last
     offer.[^488]

169. *Discussion.* We agree with commenters that both the program access
     rules and the Applicants' proposed program access commitment are
     insufficient to protect against harms arising from News Corp.'s
     enhanced incentive and ability to use its market power in the
     market for regional sports programming to the detriment of
     consumers. Accordingly, we will modify and supplement Applicants'
     proposed conditions and condition the license transfer to ensure
     that the transaction minimizes the possibility of harm while
     preserving the overall benefits to the public.

170. The concerns that many commenters generally raise with respect to
     News Corp.'s incentive to discriminate or otherwise disadvantage
     rival MVPDs in the terms and conditions of the carriage of all of
     its video programming following the transaction include News
     Corp.'s RSN programming. Commenters have also suggested certain
     conditions under the assumption that News Corp. has no incentive to
     behave anti-competitively towards DirecTV and therefore the rates
     charged to DirecTV can be used as a benchmark for the rates charged
     to rival MVPDs. However, as explained in preceding Section C.4.a,
     we found that many of the suggested additional conditions were
     already covered by Applicants' offer, were not transaction
     specific, were calculated to remedy harms that we have determined
     are unlikely to occur, would not adequately remedy the likely harms
     of the transaction, or would leave Applicants in a worse position
     following the transaction than they are today.[^489] As we stated
     in Section VI C.4.a, an application for a transfer of control of
     Commission licenses is not an opportunity to correct any and all
     perceived imbalances in the industry. In contrast, in the case of
     "must have" RSNs, the very existence of the program access
     non-discrimination rules may create the perverse incentive for News
     Corp. to charge excessive rates for RSNs to DirecTV, in order for
     Applicants to disguise News Corp.'s behavior towards rival MVPDs.
     As we have found, the *de facto* control of DirecTV by News Corp.
     ensures that DirecTV will accept these rates, and rather than
     responding by raising its prices, will act in a manner that
     maximizes the joint profits of the Applicants by holding its rates
     steady. This will enable DirecTV to take advantage of its rivals'
     response to their increased costs with rate increases, and permit
     DirecTV to gain market share. We believe that the same close
     coordination between News Corp. and DirecTV necessary to obtain
     many of the proposed benefits of the transaction ensures that the
     gains from the strategy of raising rivals' costs can be obtained
     and equitably distributed between the shareholders of the two
     firms.

171. We adopt none of the suggested conditions, however, either in whole
     or as stand-alone remedies for the particular harms that we have
     identified regarding access to RSN programming. Many of the
     proposed conditions attempt to remedy the harms we have identified,
     but in our opinion would either fail to do so or would place the
     Applicants at a disadvantage relative to their positions prior to
     the transaction. For example, the proposed non-discrimination
     conditions standing alone are flawed because DirecTV has a national
     footprint which renders all other MVPDs direct rivals of the
     integrated firm, and therefore there are no programming
     transactions to use as a benchmark in determining if a particular
     transaction is discriminatory. JCC's proposal that News Corp. be
     required to make a good-faith offer that enables MVPDs to carry its
     RSNs on an *a la carte* basis or on an existing or proposed
     programming tier other than the MVPDs' most popular tier places
     News Corp. in a worse competitive situation than it was prior to
     the transaction. In addition, this condition would place News Corp.
     at a distinct disadvantage relative to other cable programmers when
     bidding to renew or acquire additional sports rights. Instead, we
     use selected aspects of remedies proposed by various commenters
     with respect to both RSN and broadcast programming to fashion a
     hybrid approach to the temporary foreclosure problem that should
     ensure that the Applicants are able to realize the economic
     efficiencies associated with the acquisition, while adequately
     mitigating the transaction-specific harms likely to arise as a
     result.

172. *Conditions*. Our analysis demonstrates that the primary public
     interest harm likely to follow from the unique combination of News
     Corp.'s RSN programming assets and DirecTV's nationwide
     distribution platform is the competitive harm of an
     across-the-board MVPD price increase resulting from News Corp.'s
     ability to extract rents or other unfair carriage concessions from
     MVPDs for carriage of RSN programming through the more frequent use
     of threats of withholding or actual withholding of RSN programming
     during a period of temporary foreclosure. A secondary public
     interest harm is that MVPD subscribers are deprived of programming
     that is highly desired during such a period.

173. We agree with the JCC that a neutral dispute resolution forum would
     provide a useful backstop to prevent News Corp. from exercising its
     increased market power to force rival MVPDs to either accept
     inordinate affiliate fee increases for access to RSN programming
     and/or other unwanted programming concessions or potentially to
     cede critical content to their most powerful DBS competitor,
     DirecTV. We therefore create a mechanism whereby an aggrieved MVPD
     may choose to submit a dispute with News Corp. over the terms and
     conditions of carriage of RSNs to commercial arbitration to
     constrain News Corp.'s increased incentive to use temporary
     foreclosure strategies during carriage negotiations for RSN
     programming in each region in which News Corp. owns or holds a
     controlling interest or manages any non-broadcast RSN, and require
     News Corp. to permit the MVPD to continue to carry the RSN while
     the dispute is being resolved.

174. By requiring commercial arbitration where negotiations fail to
     produce a mutually acceptable set of prices, terms and conditions,
     we reduce the incentives and opportunities for News Corp. to remove
     programming and thus eliminate the additional credibility of
     programming withdrawal as a bargaining tool. Our arbitration
     condition is also intended to push the parties towards agreement
     prior to a complete breakdown in negotiations. Final offer
     arbitration has the attractive "ability to induce two sides to
     reach their own agreement, lest they risk the possibility that a
     relatively extreme offer of the other side may be selected by the
     arbitrator."[^490]

175. Thus, our remedy is to allow MVPDs to demand commercial arbitration
     when they are unable to come to a negotiated "fair" price for the
     programming. The staff analysis has found that the allure of
     temporary withholding to News Corp. is substantial, even after the
     ability invariably to obtain supracompetitive affiliate fee
     increases is eliminated. Accordingly we do not allow News Corp. to
     deauthorize carriage of the RSN after an MVPD has chosen to avail
     itself of the arbitration condition. We also specify that expedited
     arbitration procedures be used and that the final offers submitted
     to the arbitrator by each side may not include any compensation for
     RSN carriage in the form of the MVPD's agreement to carry any video
     programming networks or any other service other than the RSN.

176. In addition, we agree with ACA to the extent that it argues that
     small and medium-sized MVPDs may be at particular risk of temporary
     foreclosure strategies aimed at securing supra-competitive
     programming rate increases for "must have" programming such as RSNs
     following News Corp.'s acquisition of control of DirecTV. Given the
     size of their subscriber base and financial resources, small and
     medium-sized MVPDs may also be far less able to bear the costs of
     commercial arbitration, even on an expedited basis, than large
     MVPDs, thus rendering the remedy of less value to them. To
     counter-balance the increase in News Corp. market power with
     respect to RSN programming following the transaction, and to
     provide all MVPDs a useful procedure, we specify that an MVPD
     meeting the definition of "small cable company" may choose to
     appoint a bargaining agent to bargain collectively on its behalf in
     negotiating for carriage of regional sports networks with News
     Corp., and News Corp. may not refuse to negotiate carriage of RSN
     programming with such an entity.[^491] The designated collective
     bargaining entity will have all the rights and responsibilities
     granted by our arbitration conditions.

177. The following procedures shall be followed:

*Commercial Arbitration Remedy*

-   An aggrieved MVPD may submit a dispute with News Corp. over the
    terms and conditions of carriage RSN programming in each region in
    which News Corp. owns or holds a controlling interest or manages any
    non-broadcast RSN.

-   Following the expiration of any existing contract, or 90 days after
    a first time request for carriage, an MVPD may notify News Corp.
    within five business days that it intends to request commercial
    arbitration to determine the terms of the new affiliation agreement.

-   Upon receiving timely notice of the MVPD's intent to arbitrate, News
    Corp. must immediately allow continued carriage of the network under
    the same terms and conditions of the expired affiliation agreement
    as long as the MVPD continues to meet the obligations set forth in
    this condition.

-   Carriage of the disputed programming during the period of
    arbitration is not required in the case of first time requests for
    carriage.

-   *"Cooling Off Period."* The period following News Corp.'s receipt of
    timely notice of the MVPD's intent to arbitration and before the
    MVPD's filing for formal arbitration with the American Arbitration
    Association ("AAA"), shall constitute a "cooling off" period during
    which time negotiations are to continue.

-   *Formal Filing with the AAA*. The MVPD's formal demand for
    arbitration, which shall include the MVPD's "final offer," may be
    filed with the AAA no earlier than the fifteenth business day after
    the expiration of the RSN contract and no later than the end of the
    twentieth business day following such expiration. If the MVPD makes
    a timely demand, News Corp. must participate in the arbitration
    proceeding.

-   The AAA will notify News Corp. and the MVPD upon receiving the
    MVPD's formal filing.

-   News Corp. will file a "final offer" with the AAA within two
    business days of being notified by the AAA that a formal demand for
    arbitration has been filed by the MVPD.

-   The MVPD's final offer may not be disclosed until the AAA has
    received the final offer from News Corp.

-   The final offers shall be in the form of a contract for the carriage
    of the programming for a period of at least three years. The final
    offers may not include any provision to carry any video programming
    networks or any other service other than the RSN.

*Rules of Arbitration*

-   The arbitration will be decided by a single arbitrator under the
    expedited procedures of the commercial arbitration rules, then in
    effect, of the AAA (the "Rules"), excluding the rules relating to
    large, complex cases, but including the modifications to the Rules
    set forth in the Order.

-   The parties may agree to modify any of the time limits set forth
    above and any of the procedural rules of the arbitration; absent
    agreement, however, the rules specified herein apply. The parties
    may not, however, modify the requirement that they engage in
    final-offer arbitration.

-   The arbitrator is directed to choose the final offer of the party
    that most closely approximates the fair market value of the
    programming carriage rights at issue.

-   Under no circumstances will the arbitrator choose a final offer that
    does not permit News Corp. to recover a reasonable share of the
    costs of acquiring the programming at issue.

-   To determine fair market value, the arbitrator may consider any
    relevant evidence (and may require the parties to submit such
    evidence to the extent it is in their possession),[^492] including,
    but not limited to:

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-   current or previous contracts between MVPDs and RSNs in which News
    Corp. does not have an interest as well as offers made in such
    negotiations (which may provide evidence of either a floor or a
    ceiling of fair market value);

-   evidence of the relative value of such programming compared to the
    RSN programming at issue (e.g., advertising rates, ratings);

-   contracts between MVPDs and RSNs on whose behalf News Corp. has
    negotiated made before News Corp. acquired control of DirecTV;

-   offers made in such negotiations;

-   internal studies or discussions of the imputed value of RSN
    programming in bundled agreements;

-   other evidence (including internal discussions) of the value of RSN
    programming;

-   changes in the value of non-News Corp. RSN programming agreements;

-   changes in the value or costs of News Corp. RSN programming, or in
    other prices relevant to the relative value of News Corp. RSN
    programming (e.g., advertising rates).

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```
-   The arbitrator may not consider offers prior to the arbitration made
    by the MVPD and News Corp. for the programming at issue in
    determining the fair market value.

-   If the arbitrator finds that one party's conduct, during the course
    of the arbitration, has been unreasonable, the arbitrator may assess
    all or a portion of the other party's costs and expenses (including
    attorney fees) against the offending party.

-   Following resolution of the dispute by the arbitrator, to the extent
    practicable, the terms of the new affiliation agreement will become
    retroactive to the expiration date of the previous affiliation
    agreement. The MVPD will make an additional payment to News Corp. in
    an amount representing the difference, if any, between the amount
    that is required to be paid under the arbitrator's award and the
    amount actually paid under the terms of the expired contract during
    the period of arbitration.

-   Judgment upon an award entered by the arbitrator may be entered by
    any court having competent jurisdiction over the matter, unless one
    party indicates that it wishes to seek review of the award with the
    Commission and does so in a timely manner.

*Review of Award by the Commission*

-   A party aggrieved by the arbitrator's award may file with the
    Commission a petition seeking de novo review of the award. The
    petition must be filed within 30 days of the date the award is
    published.

-   The MVPD may elect to carry the programming at issue pending the FCC
    decision, subject to the terms and conditions of the arbitrator's
    award.

-   In reviewing the award, the Commission will examine the same
    evidence that was presented to the arbitrator and will choose the
    final offer of the party that most closely approximates the fair
    market value of the programming carriage rights at issue.

-   The Commission may award the winning party costs and expenses
    (including reasonable attorney fees) to be paid by the losing party,
    if it considers the appeal or conduct by the losing party to have
    been unreasonable. Such an award of costs and expenses may cover
    both the appeal and the costs and expenses (including reasonable
    attorney fees) of the arbitration.[^493]

178. No later than 20 business days prior to the expiration of an
     affiliation agreement with an MVPD for video programming subject to
     this condition, News Corp. must provide the MVPD with a copy of the
     conditions imposed in this Order. News Corp. must provide a copy of
     the conditions imposed in this Order within 10 business days of
     receiving a first time request for affiliation.

179. The markets and technologies used in the provision of MVPD services
     and video programming continue to evolve over time, rendering
     accurate predictions of future competitive conditions difficult.
     Accordingly, the conditions concerning RSN carriage shall cease to
     be effective six years after the release of this *Order*.[^494] The
     Commission will consider a petition for modification of this
     condition if it can be demonstrated that there has been a material
     change in circumstance or the conditions have proven unduly
     burdensome, rendering the condition no longer necessary in the
     public interest.

#### Access to Broadcast Television Station Signals

##### Background

180. Through its subsidiary Fox Television Stations, Inc. ("FTS"), News
     Corp. owns and operates 35 television broadcast stations (the
     "O&Os") located in 26 DMAs,[^495] most of which are affiliated with
     either the Fox or UPN networks.[^496] In addition to the O&Os, the
     Fox Network has affiliation agreements with 171 independently
     owned, television broadcast stations.[^497] News Corp.'s television
     broadcast stations are carried on every cable system in their DMAs
     pursuant to (1) retransmission consent agreements; (2) informal
     agreements for carriage without compensation pending agreement
     negotiations; or (3) in a few cases, must-carry.[^498] In addition,
     DirecTV and EchoStar carry the News Corp. O&Os in every market
     where the operators offer local-into-local service.[^499] Today,
     the Fox Network originates some of the most popular programming on
     broadcast television.[^500] The vast majority of News Corp. O&Os
     choose retransmission consent over must carry.[^501] In this
     manner, the stations bargain with MVPDs for compensation in
     exchange for the right to retransmit their broadcast signal.
     Although the bargaining may encompass many issues, it is ultimately
     about the "price" an MVPD is willing to pay for carriage of the
     local broadcast station,[^502] and although that price may be in
     the form of monetary compensation, it is more likely to be
     structured in the form of an "in kind" payment whereby the MVPD
     provides channel capacity for a broadcast network's affiliated
     cable programming network and/or other carriage-related
     concessions.[^503] As we have previously recognized, the process
     was intended to provide "incentives for both parties to come to
     mutually beneficial arrangements."[^504] We have additionally
     recognized that "retransmission consent negotiations . . . are the
     market through which the relative benefits and costs to the
     broadcaster and the MVPD are established."[^505] Both programmer
     and MVPD benefit when carriage is arranged: the station benefits
     from carriage because its programming and advertising will likely
     reach more households when carried by MVPDs than otherwise, and the
     MVPDs benefit because the station's programming adds to the
     attraction of the MVPD subscription to consumers.[^506] Thus, the
     local television broadcaster and the MVPD negotiate in the context
     of a roughly even "balance of terror" in which the failure to
     resolve local broadcast carriage disputes through the
     retransmission consent process potentially damages each side
     greatly in their core business endeavor.

181. In addition to this marketplace reality, both MVPDs and
     broadcasters appear convinced that the rules offer the other
     significant protections. For example, JCC argue that a cable
     operator's only potential source of bargaining power in
     retransmission consent negotiations with a broadcast stations is
     the ability to decide not to carry the signal of that station, an
     ability that is restricted by both rule and practical reality,
     since it is the cable operator that bears the brunt of any public
     fall-out arising from a failure to reach agreement with a broadcast
     station, and the broadcast station also has the protection of the
     must carry provisions.[^507] Broadcasters receive additional
     protections in retransmission consent negotiations, according to
     JCC, by means of the Network Non-Duplication rule[^508] and the
     Syndicated Exclusivity rule,[^509] which they claim make obtaining
     a substitute for the local broadcast station signal difficult for
     cable operators because, under Commission rule, stations electing
     retransmission consent may assert network nonduplication and
     syndicated exclusivity protection.[^510] Applicants, for their
     part, similarly claim that MVPDs enjoy significant protections in
     the retransmission consent process under Commission rules. First,
     they note, a broadcast station may not grant retransmission consent
     to any MVPD on an exclusive basis.[^511] Second, a broadcast
     station has an affirmative obligation to negotiate in good faith
     with all MVPDs seeking retransmission consent, and MVPDs are under
     no reciprocal good faith obligation.[^512] Third, Applicants claim
     that although stations may enter into retransmission consent
     agreements with different MVPDs containing different terms and
     conditions, including price terms, such differences must be based
     on "competitive market conditions and in determining the kinds of
     agreements that are presumptively not consistent with competitive
     market consideration, the Commission includes those "the effect of
     which is to hinder significantly or foreclose MVPD
     competition."[^513] Finally, Applicants observe that an aggrieved
     MVPD may bring a complaint against a broadcast station based not
     only upon actions that the Commission has identified as *per se*
     evidence of bad faith, but also based on any other factors that
     support such an inference under a totality of circumstances
     test.[^514] It is against this backdrop that we evaluate the
     parties' claims with respect to the effect of this transaction.

##### Positions of the Parties

182. Applicants assert that the transaction creates no incentive for
     News Corp. to withhold the broadcast signals of its O&Os from other
     MVPDs. Applicants further assert that, although retransmission
     consent negotiations are sometimes difficult, News Corp. has never
     failed to reach a mutually acceptable agreement with any
     MVPD.[^515] Because national, regional, and local advertisers seek
     maximum reach, Applicants claim that it is essential for Fox and
     other broadcast networks to come as close as possible to 100%
     audience reach.[^516] They further claim that because advertising
     is the sole revenue source in the broadcast network business,
     audience reach is even more critical for the success of broadcast
     stations than it is for cable networks, which are partly supported
     by subscriber fees.[^517] They add that audience reach within each
     DMA also is critical to securing local and regional advertising.
     According to the Applicants, the need to secure advertising makes
     it economically irrational to restrict access to O&O signals in the
     hopes of gaining DirecTV subscribers.[^518]

183. Applicants further contend that even if News Corp. sought to
     withhold access to broadcast signals, the Commission's rules
     requiring good faith negotiation and prohibiting exclusive
     retransmission consent agreements would prevent News Corp. from
     using retransmission consent to undermine DirecTV's MVPD
     rivals.[^519] Applicants assert that withholding broadcast signals
     also would hurt News Corp. by reducing retransmission consent
     compensation, including compensation for News Corp.'s cable
     programming services.[^520]

184. Commenters counter that by giving News Corp.'s Fox Network
     guaranteed access to national distribution via DirecTV, the
     transaction will increase the incentive and ability of News Corp.
     to withhold retransmission consent temporarily, to the detriment of
     competing MVPDs and, ultimately, the public.[^521] MVPD commenters
     contend the transaction fundamentally shifts the balance of power
     between MVPDs and Fox broadcast stations in retransmission
     negotiations because Fox will have the option to walk away from
     retransmission consent negotiations and broadcast only on
     DirecTV.[^522] EchoStar and others claim that the transaction will
     enable News Corp. to demand higher retransmission consent fees,
     withhold access to its local television broadcast signals, or
     demand concessions such as carriage of affiliated cable networks
     without fear of failing to secure distribution for any of its
     programming.[^523] Commenters allege that this conduct will harm
     competition and consumers by forcing DirecTV's competitors to raise
     consumer rates to pay higher retransmission consent fees and/or by
     forcing competitors to carry less desirable Fox programming.[^524]

185. Several MVPD commenters contend that local television broadcast
     stations are "must have" programming, which is critical to securing
     and maintaining subscribers.[^525] Commenters also express concern
     that information sharing between Fox programming divisions and
     DirecTV will increase News Corp.'s bargaining power in
     retransmission consent negotiations and thus will adversely affect
     competing MVPDs.[^526] The JCC and EchoStar also contend that News
     Corp. negotiates or influences the terms of retransmission consent
     agreements for not only its O&Os, but also for other stations
     affiliated with the Fox network.[^527]

186. JCC note that News Corp. pioneered the use of retransmission
     consent to spawn new cable programming networks, and that the
     strategy has allowed News Corp. to expand its cable networks faster
     than any other cable programmer.[^528] Commenters assert that small
     and medium-sized cable operators are the most vulnerable to News
     Corp.'s enhanced bargaining power.[^529] ACA contends that,
     although Applicants assert that they only have incentives to
     consent to carriage on mutually agreeable terms, News Corp.'s
     historical conduct towards some small and mid-sized cable operators
     results in agreements that are anything but "mutual" or
     "agreeable."[^530] Instead, ACA claims that negotiations for
     carriage of Fox O&Os are characterized by "take it or leave it"
     proposals and threats to deny carriage that will particularly
     disadvantage DirecTV's smaller competitors in less dense areas of
     the country once News Corp. acquires control of DirecTV.[^531] ACA
     reiterates that its concerns arise from the unique combination of
     assets that the transaction brings together, and argues that the
     ability of a combined News Corp./DirecTV to disadvantage smaller
     competitors through retransmission consent is "unprecedented and
     must be addressed within the context of this proceeding."[^532]

187. Cablevision disputes Applicants' claim that they lack the incentive
     and ability to withhold access to their broadcast programming, and
     contends that similar arguments already have been considered---and
     rejected---by the Commission.[^533] Specifically, Cablevision notes
     that the Commission has previously held that a vertically
     integrated programmer has the incentive and ability to favor its
     affiliated MVPD when that MVPD has the power to reach all potential
     subscribers, who can switch to that provider to receive the
     programming if they view it as valuable.[^534] Cablevision also
     notes that although cable operators argued, as Applicants do here,
     that it would not make economic sense to limit distribution of
     affiliated programming, the Commission found that argument
     unpersuasive.[^535] Cablevision also points to the Commission's
     conclusion that where "must-have" programming is involved, denying
     program access to a competitor is an investment that brings benefit
     because subscribers will switch providers in order to receive
     it.[^536] Cablevision contends that these conclusions apply with
     equal force to post-transaction News Corp., which will have the
     same incentives and abilities to withhold access to its broadcast
     programming as would a vertically integrated MSO.[^537]

188. Most MVPD commenters maintain that the Commission\'s rule that
     broadcasters negotiate in good faith is an inadequate safeguard,
     standing alone, in the context of the proposed transaction.[^538]
     Commenters note that, at the time the good faith provisions were
     adopted, cross-ownership of a cable system and a television
     broadcast station in the same market was prohibited, so the
     Commission was unlikely to have considered the impact of common
     ownership of broadcast stations and an MVPD on retransmission
     consent negotiations.[^539] JCC assert that the retransmission
     consent scheme is not reflective of today's media marketplace or
     other media regulations, and note that, today, most popular
     stations today choose retransmission consent over must-carry.[^540]
     Specifically, JCC assert that retransmission consent was "designed
     for an era when local broadcast station ownership was less
     concentrated, when duopolies were prohibited, and broadcast
     licensees were prohibited from owning a cable system in their local
     markets," citing several regulatory and marketplace changes since
     1992.[^541] Cablevision contends that the power imbalance between
     broadcasters and MVPDs with respect to retransmission consent
     negotiations has been exacerbated by increased concentration in
     media ownership and resulting increases in the number of stations
     affiliated with and controlled by the top four broadcast
     networks.[^542]

189. EchoStar asserts that the Commission's interpretation of the good
     faith negotiation requirement makes violations difficult to prove,
     and observes that the Commission has never granted a DBS operator
     relief under these rules.[^543] JCC argue that News Corp. can abuse
     its market power without its actions qualifying as "outrageous"
     under the Commission's rules.[^544] ACA contends that good faith
     negotiation complaints are not a viable remedy because: (1) they
     require extensive resources; and (2) until the complaint is
     adjudicated, the network signal must be dropped.[^545] Commenters
     further note that the Commission\'s rules regulating broadcasters\'
     retransmission negotiations are scheduled to sunset at the end of
     2005.[^546]

190. Cablevision also expresses particular concern about the effect of
     the transaction on its DBS affiliate, Rainbow DBS.[^547]
     Cablevision claims that Rainbow DBS has the potential to become a
     formidable DBS competitor, so DirecTV has a strong incentive to
     hobble Rainbow DBS' development.[^548] Cablevision contends that
     vertical integration with a supplier of programming and television
     broadcast signals will give DirecTV the ability to disadvantage its
     DBS competition.[^549] Cablevision asserts that the Applicants\'
     argument that News Corp. cannot risk losing viewers is wholly
     inapplicable to Rainbow DBS because, due to Rainbow\'s small
     subscriber base, News Corp. would suffer almost no harm from
     hindering Rainbow DBS' entry into the market.[^550]

191. Applicants respond with the CRA Analysis, which finds that
     permanent withholding of broadcast signals would not be in News
     Corp.'s economic interest. Comparing the costs (*i.e.,* lost
     advertising and other revenues) and benefits (*i.e.,* profits from
     increased subscribership to DirecTV) of withholding the signals of
     News Corp.'s television broadcast stations from competing
     MVPDs,[^551] the CRA Analysis finds that DirecTV would have to
     quadruple its subscribership in News Corp.'s O&O markets in order
     for signal withholding to be a profitable strategy for
     post-transaction News Corp.[^552] Applicants contend that such
     subscribership increases are implausible.[^553]

192. Applicants reject as economically irrational claims that they will
     be able to raise prices for retransmission consent uniformly
     following the transaction.[^554] According to Applicants,
     commenters have failed to recognize that such a strategy would: (1)
     lower expected profits for the O&Os, which are already
     profit-maximizing in their bargaining for retransmission
     consent; (2) lower expected profits for DirecTV by increasing its
     costs for O&O programming; and (3) eliminate certain efficiencies
     that Applicants expect to result from the transaction, including
     elimination of double marginalization.[^555]

193. Applicants further assert that permanent and temporary foreclosures
     are not transaction-specific harms because they could effectively
     be achieved through the use of contracts.[^556] As evidence of
     this, News Corp. points to a retransmission dispute in which
     broadcast television stations owned by Disney were briefly dropped
     from Time Warner cable systems in May 2000 in a dispute over
     retransmission consent. In the time leading up to the removal of
     the signal, Disney agreed with DirecTV to subsidize customers that
     switched from Time Warner to DirecTV.[^557]

194. JCC and Cablevision respond that Applicants' Reply and the CRA
     Analysis fail to address the likelihood of the potential harm of
     temporary foreclosure which they had raised.[^558] JCC assert that,
     while the Applicants have attempted to prove that permanent
     withholding of Fox programming would be unprofitable, it is
     temporary and not permanent foreclosure that is the real threat
     posed by the transaction.[^559] They further contend that control
     of DirecTV effectively reduces the costs and risks to News Corp. of
     employing "take it or leave it" bargaining tactics with competing
     MVPDs seeking to carry "must have" FOX broadcast network
     programming, thus increasing the likelihood that News Corp. will
     engage in such behavior.[^560] JCC contend that the increase in
     bargaining power resulting from the transaction will lead to higher
     prices for consumers, particularly in less dense regions of the
     country served by small to medium-sized cable systems.[^561] JCC
     and Cablevision further contend that News Corp. need only withhold
     -- or threaten to withhold -- programming from a handful of MVPDs
     in a few select markets for only a short period of time in order to
     obtain undue pricing power and negotiating leverage.[^562]

195. Commenters assert that documents filed in the record by Applicants
     demonstrate that: (1) News Corp. already engages in temporary
     foreclosure of local broadcast station programming to obtain more
     favorable rates and terms; (2) acquiring control over DirecTV will
     reduce the costs of such tactics; and (3) News Corp. recognizes
     that service interruptions can send a valuable message to other
     MVPDs about the consequences of resisting its demands.[^563]

196. JCC and Cablevision also use the data and methodology from the
     CRA\'s permanent foreclosure analysis to support their temporary
     foreclosure theory.[^564] For example, Rogerson, on behalf of the
     JCC, finds that, if News Corp. temporarily withholds a broadcast
     station from a targeted MVPD, it breaks even economically if less
     than 1% of that MVPD's subscribers migrate to DirecTV.[^565] In a
     similar vein, Cablevision's Rubinfeld concludes that temporary
     withholding of broadcast programming will be profitable if
     DirecTV's market share increases by just less than 1.5%.[^566] JCC
     further argues that, since the ultimate purpose of temporary
     withholding of programming is to increase prices across a national
     base of over ninety million MVPD households, it is clear that News
     Corp. has every incentive to engage in such conduct.[^567] JCC
     asserts that in the context of temporary foreclosure, DirecTV's
     national footprint is especially important, because it insulates
     Applicants against any potential losses from such foreclosure in
     every market in the country.[^568] Responding to Applicants'
     argument that News Corp.'s already maximizes profits on its
     programming, JCC contends that recent comments made by News Corp.
     executives belie this analysis, and that it is inconsistent with
     Applicants' own economic reasoning, including its theory of raising
     rivals\' costs.[^569]

197. Commenters further assert that there is no basis for concluding
     that Applicants' claimed incentives to eliminate double
     marginalization will offset the competitive harms arising from the
     transaction.[^570] First, they assert that DirecTV is under no
     obligation to pass cost savings arising from the elimination of
     double markup on to consumers.[^571] Second, they contend that
     there is no basis to conclude that Applicants' incentives to
     eliminate double markup---if any---outweigh the incentives to raise
     rivals costs.[^572]

198. Cablevision and its expert Rubinfeld identify several additional
     alleged flaws in the CRA Analysis. First, they claim that the CRA
     Analysis, in calculating lost advertising revenue, fails to
     consider that some customers view Fox signals over-the-air. Second,
     they assert that even a temporary withholding affects the future
     growth of an MVPD, because subscribers selecting a new MVPD will
     consider access to programming in making that decision. Third, they
     contend that the Applicants fail to acknowledge that News Corp. and
     DirecTV could easily engage in joint profit maximization, without
     News Corp.\'s having a 100% ownership interest in DirecTV. Finally,
     they claim that withholding programming from cable competitors may
     confer significant marketing advantages on DirecTV.[^573]

199. Responding to Applicants\' argument that temporary foreclosure of
     broadcast programming cannot be considered a transaction-specific
     harm because the parties could also accomplish it through
     contracts, opponents of the transaction contend that it would be
     difficult for News Corp. and DirecTV to negotiate and monitor
     compliance with the contracts that would divide the benefits of
     temporary foreclosure.[^574] They further argue that, if the
     efficiencies of the transaction cannot be gained through
     arms-length contracting, it is unlikely that the benefits of
     foreclosure can be achieved through arms-length contracting.[^575]

200. Applicants submit a further economic analysis, responding to the
     analyses of Rogerson and Rubinfeld, which finds that an interest in
     DirecTV will not make a temporary foreclosure strategy profitable
     for News Corp. Applicants contend that the Rogerson and Rubinfeld
     analyses: (1) overestimate the numbers of consumers that would
     switch to DirecTV due to temporary withholding; (2) overestimate
     gains to DirecTV based on unrealistic assumptions about the length
     of time that new subscribers would remain with DirecTV; and (3)
     underestimate or disregard potential countermeasures available to
     MVPDs and the potential degradation in the value of programming
     withheld. Applicants assert that by accounting for these factors,
     their analysis correctly finds that temporary foreclosure would not
     be profitable.[^576]

#####  Discussion

201. We find that News Corp. currently possesses significant market
     power in the DMAs in which it has the ability to negotiate
     retransmission consent agreements on behalf of local broadcast
     television stations.[^577] Local broadcast station programming is
     highly valued by consumers, and entry into the broadcast station
     market is difficult. Moreover, we conclude that, absent conditions,
     News Corp.'s acquisition of DirecTV will enhance this market power,
     which could result in several public interest harms. To prevent
     such harms, we will impose conditions that are discussed below.

202. At the outset, we agree with commenters who contend that carriage
     of local television broadcast station signals is critical to MVPD
     offerings. Congress has repeatedly recognized the importance of
     carriage of local television broadcast signals to MVPDs---most
     recently when it enacted the SHVIA, which permitted DBS operators
     to carry local television broadcast signals so that they could
     better compete with cable operators.[^578] As we recently found in
     our annual video competition report, DBS penetration has increased
     more rapidly in markets where local-into-local service is
     available.[^579] We also agree with commenters who contend that
     News Corp. possesses market power in the broadcast station segment
     of the video programming market. We base this finding, in part, on
     the fact that the signals of local television broadcast stations
     are without close substitutes. Moreover, because of the extremely
     limited availability of new television broadcast licenses, entry
     into this segment of the video programming market is highly
     restricted.

203. We further find that News Corp.'s existing control of MVPDs' access
     to a large number of local broadcast stations airing highly popular
     Fox network programming, when combined with ownership of a
     nationwide DBS platform, will likely increase News Corp.'s
     incentive and ability engage in temporary foreclosure strategies
     aimed at increasing its programming fees thereby having the effect
     of raising rival MVPDs' costs by lowering the costs to News Corp.
     of engaging in such behavior. Both Applicants and commenters have
     provided economic analyses that rely, in part, on empirical data to
     evaluate whether News Corp., after the transaction, will engage in
     some form of foreclosure.[^580] Applicants' analyses find that they
     would not profit from either permanent or temporary
     foreclosure.[^581] Commenters' analyses, in contrast, find that
     Applicants will have an increased incentive and ability to
     temporarily withhold access to their broadcast signals.[^582]

204. In addition to the studies submitted by the parties, Commission
     staff conducted its own analysis, which is described in greater
     detail in Appendix D**.** As commenters have correctly observed,
     the *ability* of a television broadcast station to threaten to
     withhold its signal, even if it does not actually do so, changes
     its bargaining position with respect to MVPDs, and could allow it
     to extract higher prices, which ultimately are passed on to
     consumers.[^583] Staff's analysis is, as was true for RSN carriage,
     premised on the assumption that, if the transaction increases News
     Corp.'s incentive and ability to withhold the signals of its O&Os
     by lowering the costs to News Corp. of employing such bargaining
     tactics, News Corp. will engage in such behavior and that this will
     result in an increase of rival MVPDs' costs, and ultimately
     end-user prices. Key to determining the degree to which the
     transaction lowers News Corp.'s costs of engaging in temporary
     foreclosure is the number of subscribers that can be predicted to
     shift from the affected MVPD to competitor DirecTV to access the
     foreclosed programming, which in turn will increase the profits of
     the post-transaction company as a whole. Staff analyzed the
     likelihood of two types of potential post-transaction foreclosure
     of access to News Corp.'s broadcast signals: (1) permanent
     foreclosure, where the signal is permanently removed from rival
     MVPDs; and (2) temporary foreclosure, where the signal is removed
     for a brief period. Staff performed this analysis for all markets
     in which Fox owns the broadcasts station or has an affiliation
     agreement with the station.[^584]

205. *Permanent Foreclosure:* As discussed in greater detail in Appendix
     D, staff's analysis examined the potential profitability of both
     permanent and temporary foreclosure strategies each of News Corp.'s
     O&O broadcast stations. Based upon staff's analysis, we find that,
     for News Corp. to profit from a permanent foreclosure strategy,
     DirecTV would have to capture between **\[REDACTED\]** and
     **\[REDACTED\]** of rival MVPD's subscribers, depending on whether
     News Corp. captures 50% or 100% of the additional profits, and the
     size of the market.[^585] We agree with Applicants that it is
     unlikely that DirecTV would experience subscriber gains of these
     magnitudes as a result of a broadcast programming foreclosure
     strategy. Consequently, we do not believe that use of a permanent
     foreclosure strategy in retransmission consent negotiations is a
     likely harm arising from this transaction.

206. *Temporary Foreclosure:* The case of temporary foreclosure is
     slightly more complicated than that for permanent foreclosure. In
     particular, the analysis of temporary foreclosure required staff to
     consider additional variables, including the likelihood that some
     customers would later return to their initial MVPD service,[^586]
     the timing of the foreclosure, and the timing of subscriber gain
     and loss.[^587] We again agree with commenters who argue that a
     temporary foreclosure strategy is likely to be profitable for News
     Corp. in many instances, and therefore likely to be pursued more
     frequently post-transaction than it is today. The staff analysis
     found that, for News Corp. to profit from a temporary foreclosure
     strategy in which a Fox broadcast signal is withheld for one month,
     DirecTV would have to capture between **\[REDACTED\]** and
     **\[REDACTED\]** of rival MVPD's subscribers, depending on the size
     of the market and whether News Corp. could capture 50% or 100% of
     the additional profits.[^588] We find that the subscriber shifts
     required for temporary foreclosure to be profitable are likely to
     be realized.

207. We base this finding on the effects of the temporary withdrawal of
     the ABC broadcast station from Time Warner subscribers in the
     Houston DMA. As commenters have noted, this example illustrates the
     likely responses of consumers to the anticipation and eventual loss
     of a popular broadcast station from their chosen MVPD.[^589] The
     Applicants argue that this incident is not relevant since the
     withdrawal of the broadcast station was instigated by the MVPD
     rather than the broadcaster, as would occur under the harms alleged
     in this proceeding.[^590] Our use of this incident is not intended
     to analyze the motives behind the withdrawal, however. Rather, we
     use the incident to measure the likely responses of consumers to
     the loss of broadcast programming.

208. Both Cablevision and the Applicants have provided data on the
     subscriber shift that occurred during the ABC -- Time Warner
     dispute. Cablevision reports that 20,000 vouchers were issued for
     free installation of DirecTV to Time Warner customers in Houston,
     or about 3% of Time Warner's subscribers in Houston.[^591]
     Cablevision does not have any information on the number of rebates
     that were actually redeemed for DirecTV service.[^592] However, the
     Applicants provided an accounting of the number of rebate coupons
     redeemed in the Houston area of approximately
     **\[REDACTED\]**.[^593] The number of rebate coupons available was
     limited, however, and there may have been many other Time Warner
     customers that switched to DirecTV without receiving a
     rebate.[^594] We conclude, therefore, that this estimate represents
     merely a lower bound on the number of Time Warner customers that
     switched to DirecTV. Cablevision, using data on the number of
     DirecTV subscribers in the Houston DMA during the time of the
     dispute, estimates that DirecTV **\[REDACTED\]** customers due to
     the withdrawal of the ABC signal from the Time Warner cable systems
     in Houston.[^595] The staff\'s econometric analysis of DirecTV's
     gains in subscribers indicates that DirecTV gained **\[REDACTED\]**
     customers, or **\[REDACTED\]** of Time Warner's customers in
     Houston, as a result of the dispute.[^596] We find this response to
     be representative of the shifts of customers that could occur
     during a long-simmering dispute over retransmission consent.
     According to our analysis, a shift of this magnitude would put
     **\[REDACTED\]** at risk of the harms alleged to result from this
     transaction.

209. Based on this analysis, we conclude that the transaction will
     increase News Corp.'s post-transaction incentive and ability to
     temporarily withhold access to the signals of its television
     broadcast stations as a negotiating tactic by lowering the risks
     and costs to News Corp. of engaging in such foreclosure. We agree
     with commenter claims that this enhanced incentive and ability to
     engage in temporary foreclosure will allow News Corp. to extract
     more compensation for its broadcast station signals from competing
     MVPDs than it could reasonably expect to achieve absent the
     transaction. The potential public interest harms that would result
     from such a strategy are substantial. News Corp.'s ability to raise
     rivals' costs in this manner would harm consumers in different ways
     depending on the type of compensation it obtains. When News Corp.
     secures carriage of other cable programming networks from MVPDs in
     exchange for its broadcast signal, MVPDs pay for those networks. If
     News Corp. can secure carriage of more cable networks and charge
     higher fees for such carriage, these fees are unlikely to be
     absorbed solely by the MVPDs, but would be passed on to consumers
     in the form of higher rates. If News Corp. uses withholding or
     threats of withholding in retransmission consent negotiations to
     obtain carriage of its affiliated cable networks that the MVPD,
     absent the threat of foreclosure, would not agree to carry,
     consumers are harmed because MVPDs are forced to make programming
     decisions based on News Corp.'s demands, rather than selecting the
     programming of their choice. In the long term, News Corp.'s use of
     market power to extract artificially high levels of compensation
     from MVPD rivals, or other carriage concessions, could make rival
     MVPDs less viable options for consumers, thus limiting consumer
     choice.

210. Moreover, during periods of temporary foreclosure, News Corp.'s
     television broadcast signal is not available to the subscribers of
     competing MVPDs. We have previously found that local broadcast
     station signals play a very important role in terms of viewpoint
     diversity and localism, two of our most important Communications
     Act goals and policies.[^597] Loss of access to local broadcast
     stations signals harms consumers who cannot access desired Fox
     programming, local news and public affairs programming, and other
     programming available on the affected stations, even if the loss is
     temporary.

211. We disagree with Applicants\' contention that, even if the
     transaction affected their incentive to engage in such a strategy,
     our rules would prevent them from executing such a strategy
     successfully.[^598] Although the Act and our rules are important
     safeguards by requiring good faith negotiation with MVPDs and
     prohibiting exclusive retransmission consent agreements, these
     statutory and rule provisions do not prevent broadcasters from
     withholding their signals while retransmission consent negotiations
     are in progress, nor do they require that access be provided on
     non-discriminatory terms and conditions.[^599] And, the rules will
     not prevent News Corp. from uniformly raising broadcast programming
     carriage costs to all MVPDs, including DirecTV. Because we find
     that the proposed transaction poses likely consumer harms that will
     not be adequately mitigated by the Commission's existing rules, and
     the Applicants have offered no additional access commitments, we
     consider below whether other conditions can mitigate this harm.

##### Conditions

212. *Positions of the Parties.* Consumers Union and JCC urge the
     Commission to expand the proposed program access commitments
     proposed by Applicants to include the television broadcast
     programming of Fox O&Os and any other Fox affiliates for which News
     Corp. conducts retransmission consent negotiations.[^600] Consumers
     Union explains that extension of News Corp.'s non-discrimination
     condition to local broadcast station programming can be useful in
     preventing egregious competitive abuses such as selling Fox
     programming to DirecTV's competitors at prices that are
     substantially and unjustifiably higher than the price paid by
     DirecTV.[^601] Non-discrimination requirements alone, however, will
     not stop News Corp. from charging DirecTV an artificially high
     price for Fox programming and then requiring any MVPDs seeking to
     carry the programming to either pay a rate based upon that same
     high rate or allow DirecTV to become the major distributor of that
     programming in the MVPD's market, according to Consumers Union.
     Therefore, Consumers Union recommends that the Commission impose a
     restriction similar to what the FTC applied in the Time
     Warner/Turner merger. In that instance, Consumers Union avers, the
     FTC established a cable programming price index mechanism to
     evaluate whether the merging companies were raising programming
     prices at a more accelerated pace than their historic
     pattern.[^602]

213. ACA suggests another variant on the benchmarking proposal
     articulated by Consumers Union. Under ACA's proposal, News Corp.
     also could not impose terms or conditions on other cable operators
     that are "more costly or burdensome" than the terms and conditions
     of current retransmission consent agreements.[^603] Disputes could
     be brought to the Commission, and News Corp. would be required to
     grant the aggrieved cable operator retransmission consent pending
     resolution of the dispute.[^604] ACA's plan would require News
     Corp. to negotiate retransmission consent with smaller cable
     operators on a group basis, consistent with News Corp.'s current
     practices for satellite programming. ACA explains that its
     proposals would maintain News Corp.'s and smaller cable operators'
     ability to negotiate a wide variety of mutually beneficial carriage
     arrangements that may include some compensation for News Corp., or
     conversely, for the cable operator, while preventing News Corp.
     from raising the "price" of retransmission consent to DirecTV's
     competitors as a consequence of gaining control of DirecTV.
     Permitting smaller cable operators to pool their resources and
     address retransmission consent on a group basis, as they have done
     for years on the satellite programming side, will also temper the
     increase in negotiating leverage News Corp. gains from the
     transaction.[^605] ACA also proposes that News Corp. be required to
     grant retransmission consent to small cable operators (i.e., those
     serving 5,000 subscribers or less) for no additional consideration
     beyond continued carriage and channel placement.[^606] ACA states
     that this condition would merely adopt what the Applicants say is
     News Corp.'s current practice -- that News Corp. has granted
     retransmission consent to approximately 320 small cable companies
     "without seeking compensation of any kind, with cash or
     carriage."[^607] Finally, ACA requests that the Applicants be
     required to offer distribution rights to qualifying cable operators
     for the local-into-local broadcast signals carried by
     DirecTV.[^608] Cablevision urges the Commission to impose a similar
     requirement allowing Rainbow DBS to redistribute local signals
     carried by DirecTV.[^609] But, in the main, Cablevision is doubtful
     that behavioral remedies alone will adequately mitigate the
     increase in News Corp.'s market power arising from the transaction,
     and maintains that a structural approach is better. Cablevision
     therefore contends that, if the Application is granted, News Corp.
     should be required to waive the retransmission consent rights of
     all of its O&Os and to elect must-carry on all Cablevision
     systems.[^610]

214. JCC also urges us to prohibit News Corp. from entering into any
     exclusive retransmission consent contracts or other exclusive
     distribution agreements for its O&Os and any other broadcast
     stations on which it negotiates agreements, make its broadcast
     stations available to all MVPDs on a non-discriminatory basis, and
     to require News Corp. to enter into arbitration proceedings to
     negotiate carriage of its broadcast stations in certain
     circumstances.[^611] As described in Section VI.C.4.b *supra*, JCC
     propose that we institute a commercial arbitration remedy for
     aggrieved MVPDs to use when retransmission consent negotiations
     reach an impasse.[^612] The arbitration mechanism, according to
     JCC, is designed constrain the undue pricing power and bargaining
     leverage News Corp. gains by its ability to profit from subscriber
     shifts to DirecTV during periods of temporary foreclosure, and
     thereby mitigate News Corp.'s ability to utilize DirecTV as a
     "tactical weapon" during retransmission consent negotiations with
     unaffiliated MVPDs.[^613] JCC also recommends that we prohibit News
     Corp. from removing its broadcast station signal from the aggrieved
     MVPD's system during the pendency of an arbitration proceeding. RCN
     supports this aspect of JCC's proposal.[^614] JCC also urge us to
     mandate that News Corp. grant MVPDs nondiscriminatory access to any
     nationwide high-definition ("HDTV") feed of Fox network programming
     that News Corp. may implement in the future.[^615] EchoStar urges
     us to: (i) apply the good faith negotiation rules proposed by
     DirecTV in the good faith negotiation proceeding to News
     Corp.;[^616] and (ii) require that retransmission consent fees for
     Fox O&Os do not exceed the lower of: the highest fees agreed to
     with any other network station in the same market *or* the fees
     agreed to for Fox affiliates in other markets.[^617]

215. *Discussion.* Several conditions proposed by commenters are
     intended to remedy situations that are unrelated to the
     transaction. As we stated earlier, we decline to impose
     non-transaction specific conditions. The goal of our transfer
     application review process is to allow parties to realize the
     economic efficiencies associated with a transaction while ensuring
     that any harms resulting from the license transfer are mitigated
     and some portion of the benefits of the transfer are passed on to
     the public. For example, the ACA and Cablevision request that
     DirecTV be required to make its local-into-local broadcast station
     signals available to cable operators when the cable operator cannot
     receive a good quality broadcast signal off-air.[^618] We do not
     have any evidence that the transaction will reduce the quality of
     broadcast signals available to cable operators and we therefore
     decline the condition as being unrelated to the transaction.

216. We also reject the proposed conditions that are calculated to
     remedy harms that we have determined are unlikely to occur.
     EchoStar worries that the sharing of information about requests for
     retransmission request between News Corp.'s owned and operated
     television stations and DirecTV will allow DirecTV to engage in
     strategic actions that will reduce EchoStar's incentives to
     introduce local-into-local service in additional markets.[^619] We
     find this harm unlikely to occur. Evidence in the record indicates
     that **\[REDACTED\]**.[^620]

217. Many of the proposed conditions attempt to remedy the harms we have
     identified, but in our opinion either fail to remedy the harms or
     place the Applicants at a disadvantage relative to their positions
     prior to the transaction. For example, Cablevisions' proposal to
     require the waiver of retransmission consent for News Corp.'s owned
     and operated stations only in areas served by Cablevision fails to
     fully address the harms. Our analysis demonstrates that consumers
     in nearly all areas of the country are likely to be harmed by the
     transaction. In addition, applying Cablevision's condition to all
     of News Corp.'s owned and operated stations would put News Corp. at
     a distinct disadvantage in obtaining carriage of its cable networks
     relative to other broadcast station owners with affiliated cable
     programming networks such as Viacom and Disney.

218. *Conditions.* We impose several conditions on News Corp that
     combine the most attractive aspects of several proposals in the
     record. At the outset, in terms of stations covered by our remedy,
     we realize that today News Corp. does not negotiate retransmission
     consent agreements on behalf of independently owned network
     affiliates.[^621] However, our analysis indicates that the harms we
     believe will occur in markets served by News Corp.'s owned and
     operated stations could also occur in markets served by broadcast
     stations affiliated with the Fox network. Since these stations do
     not possess an ownership interest in DirecTV, we are not concerned
     about a substantial change in leverage in retransmission consent
     negotiations except in situations where News Corp. is able to
     intervene in the negotiations. Accordingly, we extend our
     conditions to apply whenever News Corp. negotiates retransmission
     consent agreements on behalf of independently owned Fox network
     affiliates.

219. We will extend the commitments News Corp. has proposed regarding
     non-discriminatory access to cable programming networks to
     encompass access to any broadcast station that News Corp. owns and
     operates, or on whose behalf it negotiates retransmission consent.
     This will, as Consumers Union has noted, prevent News Corp. from
     engaging in competitive abuses such as selling Fox broadcast
     programming to DirecTV's competitors at prices that are
     substantially and unjustifiably higher than the price paid by
     DirecTV. Congress prohibited non-discrimination for satellite
     programming to ensure this programming was available to competing
     MVPDs. We believe that a similar prohibition toward News Corp.'s
     broadcast stations will counter its market power and make certain
     that this critical programming is available to MVPDs. In addition,
     the good faith and exclusivity requirements of SHVIA, which, by
     their terms, are effective only until January 1, 2006, are extended
     to apply to News Corp. for as long as our program access rules are
     in effect. This should help to temper increases in News Corp.'s
     market power arising from the transaction and protect the public
     interest in continued access to local broadcast stations carried by
     their MVPD as part of their package of video programming services.

220. Our primary condition to alleviate the public interest harms in the
     market for broadcast station retransmission consent is to allow
     MVPDs with 5,000 or more subscribers to elect to submit a dispute
     with News Corp. over the terms and conditions of carriage of
     programming subject to retransmission consent to commercial
     arbitration. We choose this remedy to provide a fair and neutral
     mechanism by which disputants can quickly resolve retransmission
     consent disputes. The arbitration mechanism is intended to limit
     News Corp.'s post-transaction incentive and ability to threaten or
     impose broadcast service interruptions on subscribers of competing
     MVPDs to extract greater price increases than it obtain under
     today's conditions.

221. Upon receiving notice of the intention to submit the dispute to
     arbitration, pursuant to the procedures described in the following
     paragraph, News Corp. must immediately allow continued
     retransmission of the broadcast station signal under the same terms
     and conditions of the expired contract, unless the dispute is a
     first time request for local broadcast station signal carriage by
     an MVPD. The staff analysis clearly demonstrates that, even in the
     absence of the supracompetitive rates, News Corp.'s threats of
     temporary foreclosure can generate significant gains in nearly all
     markets. Consumer reactions in this area are such that the
     additional profits DirecTV would earn from subscribers switching
     MVPDs will likely compensate News Corp. relatively rapidly for the
     lost revenue from reduced distribution of the broadcast signal.

222. We establish the following procedures for arbitration of
     retransmission consent disputes:

*Commercial Arbitration Remedy*

-   The commercial arbitration condition commences following the
    expiration of any existing retransmission consent agreement.

-   Following such expiration, or 90 days after a first time request for
    retransmission consent, an MVPD may notify News Corp. within five
    business days that it intends to request arbitration over the terms
    and conditions of retransmission consent.

-   Upon receiving timely notice of the MVPD's intent to arbitrate, News
    Corp. must immediately allow continued retransmission of the
    broadcast signal under the same terms and conditions of the expired
    retransmission consent agreement as long as the MVPD continues to
    meet the obligations set forth in this condition.

-   Retransmission of the broadcast signal during the period of
    arbitration is not required in the case of first time requests for
    carriage.

-   *"Cooling Off Period."* Following the MVPD's notice of intent to
    submit the dispute to arbitration, but prior to filing for formal
    arbitration with the American Arbitration Association ("AAA"), the
    MVPD and News Corp. will enter a "cooling off" period during which
    negotiations will continue.

-   *Formal Filing with the AAA*. The MVPD's formal demand for
    arbitration, which shall include the MVPD's "final offer," may be
    filed with the AAA no earlier than the fifteenth business day after
    the expiration of the retransmission consent agreement and no later
    than the end of the twentieth business day following such
    expiration. If the MVPD makes a timely demand, News Corp. must
    participate in the arbitration proceeding.

-   The AAA will notify News Corp. and the MVPD upon receiving the
    MVPD's formal filing.

-   News Corp. will file a "final offer" with the AAA within two
    business days of being notified by the AAA that a formal demand for
    arbitration has been filed by the MVPD.

-   The MVPD's final offer may not be disclosed until the AAA has
    received the final offer from News Corp.

-   The final offers shall be in the form of a contract for the
    retransmission of the broadcast signal for a period of three years.
    The final offers may not include any provision to carry any video
    programming networks or any other service other than the broadcast
    signal.

> *Rules of Arbitration*

-   The arbitration will be decided by a single arbitrator under the
    expedited procedures of the Rules, excluding the rules relating to
    large, complex cases, but including the modifications to the Rules
    set forth in the Order.

-   The parties may agree to modify any of the time limits set forth
    above and any of the procedural rules of the arbitration; absent
    agreement, however, the rules specified herein apply. The parties
    may not, however, modify the requirement that they engage in
    final-offer arbitration.

-   The arbitrator is directed to choose the "final offer" of the party
    which most closely approximates the fair market value of the
    programming carriage rights at issue.

-   To determine fair market value, the arbitrator may consider any
    relevant evidence (and may require the parties to submit such
    evidence to the extent it is in their possession),[^622] including,
    but not limited to:

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-   current contracts between MVPDs and Fox-affiliated stations on whose
    behalf News Corp. does not negotiate;

-   current contracts between MVPDs and non-Fox network stations;

-   offers made in the preceding negotiations (which may provide
    evidence of either a floor or a ceiling of fair market value);

-   evidence of the relative value of Fox programming compared to other
    network programming (e.g., advertising rates, ratings);

-   contracts between MVPDs and stations on whose behalf News Corp. has
    negotiated made before News Corp. acquired control of DirecTV as
    well as offers made in such negotiations;[^623]

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-   internal studies of the imputed value of retransmission consent
    agreements in bundled agreements;[^624]

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-   changes in the value of non-Fox retransmission consent agreements;

-   changes in the value or costs of Fox programming or broadcast
    stations, or in other prices relevant to the relative value of Fox
    broadcast programming (e.g., advertising rates).

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-   The arbitrator may not consider offers prior to the arbitration made
    by the MVPD and News Corp. for the programming at issue in
    determining the fair market value.

-   If the arbitrator finds that one party's conduct, during the course
    of the arbitration, has been unreasonable, the arbitrator may assess
    all or a portion of the other parties costs and expenses (including
    attorney fees) against the offending party.

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-   Following the decision of the arbitrator, and to the extent
    practicable, the terms of the new retransmission consent agreement,
    including payment terms, if any, will become retroactive to the
    expiration date of the previous retransmission consent agreement.
    The MVPD will make an additional payment to News Corp. in an amount
    representing the difference, if any, between the amount that is
    required to be paid under the arbitrator's award and the amount
    actually paid under the terms of the expired contract during the
    period of arbitration.

-   Judgment upon an award entered by the arbitrator may be entered by
    any court having competent jurisdiction over the matter, unless one
    party indicates that it wishes to seek review of the award with the
    Commission, and does so in a timely manner.

> *Review of Award by the Commission*

-   A party aggrieved by the arbitrator's award may file with the
    Commission a petition seeking *de novo* review of the award. The
    petition must be filed within 30 days of the date the award is
    published.

-   The MVPD may elect to continue to retransmit the broadcast signal
    pending the FCC decision, subject to the terms and conditions of the
    arbitrator's award.

-   In reviewing the award, the Commission will examine the same
    evidence that was presented to the Arbitrator and will choose the
    final offer of the party that most closely approximates the fair
    market value of the programming carriage rights at issue.

-   The Commission may award the winning party costs and expenses
    (including reasonable attorney fees), to be paid by the losing
    party, if it considers the appeal or conduct by the losing party to
    have been unreasonable. Such an award of costs and expenses may
    cover both the appeal and the costs and expenses (including
    reasonable attorney fees) of the arbitration.[^625]

223. An MVPD meeting the Commission's definition of "small cable
     company" may appoint a bargaining agent to bargain collectively on
     its behalf in negotiating with News Corp. for carriage of the
     programming subject to this condition and News Corp. may not refuse
     to negotiate with such an entity.[^626] The designated collective
     bargaining entity will have all the rights and responsibilities
     granted by these conditions.

224. The costs of arbitration may overwhelm MVPDs with fewer than 5000
     subscribers, thereby providing them with little relief from the
     harms associated with this transaction. Accordingly, as suggested
     by ACA, when dealing with MVPDs with fewer than 5,000 total
     subscribers, we require News Corp. to either elect "must-carry"
     status or negotiate retransmission consent for its owned and
     operated stations without any requirements for cash compensation or
     carriage of programming other than the broadcast signal. While we
     are unwilling to apply such a condition to all MVPDs since it would
     seriously disadvantage News Corp. relative to other producers of
     video programming that also own broadcast stations, we find the
     adverse consequences on News Corp. to be minimal. In the latest
     retransmission consent cycle, News Corp. granted retransmission
     consent to approximately 71% of the cable operators serving markets
     in which it owns and operates broadcast stations without seeking
     compensation of any kind.[^627]

225. No later than 20 business days prior to the expiration of a
     must-carry election or retransmission consent agreement with an
     MVPD, News Corp. must provide the MVPD with a copy of the
     conditions imposed in this Order. News Corp. must provide a copy of
     the conditions imposed in this Order within 10 business days of
     receiving a first time request for retransmission consent.

226. As we observed above, the markets and technologies used in the
     provision of MVPD services and video programming continue to evolve
     over time, rendering accurate predictions of future competitive
     conditions difficult. Accordingly, the conditions concerning
     carriage of programming subject to retransmission consent shall
     cease to be effective six years after the release of this
     *Order*.[^628] The Commission will consider a petition for
     modification of this condition if it can be demonstrated that there
     has been a material change in circumstance or the conditions have
     proven unduly burdensome, rendering the condition no longer
     necessary in the public interest.

#### Access to Programming-Related Technologies

##### Electronic Program Guides/Interactive Program Guides

227. *Background.* In this section we examine the proposed transaction's
     potential impact on the use of electronic program guides ("EPGs")
     and interactive program guides ("IPGs"). An EPG is a software-based
     service or device offered by cable operators and other MVPDs to
     consumers to navigate, organize, and differentiate video program
     offerings.[^629] An IPG is an EPG that allows for consumer
     interactivity. For example, a consumer with an IPG is able to sort
     and select programming, schedule reminders for upcoming
     programming, obtain additional information or descriptions about
     the programming or advertised products, as well as purchase
     pay-per-view and video-on-demand programming using their remote
     control.[^630]

228. News Corp. holds a 42.9% interest in Gemstar -- TV Guide
     International, Inc. ("Gemstar"), the leading provider of EPGs and
     IPGs.[^631] Gemstar currently offers three guide products to MVPDs:
     TV Guide Channel (an EPG), EPG, Jr. (a text-only guide), and TV
     Guide Interactive (an IPG).[^632] News Corp. also states that its
     subsidiary, NDS, has entered into a patent agreement with Gemstar
     and begun to offer an IPG in the United States, although the IPG is
     not yet operational.[^633] The NDS IPG is offered only in
     conjunction with NDS conditional access technology and not on a
     stand-alone basis.[^634]

229. *Positions of the Parties.* Several parties contend that the
     proposed transaction will increase News Corp.'s incentive to tie
     Gemstar's EPG to retransmission consent negotiations with
     unaffiliated MVPDs and that News Corp.'s enhanced bargaining power
     could force these other MVPDs to use the Gemstar EPG to the
     exclusion of alternative, preferred products.[^635] Cablevision
     contends that News Corp. could use its increased leverage in
     retransmission consent negotiations with Cablevision and Rainbow
     DBS to force them to carry the Gemstar EPG.[^636] Cablevision also
     contends that News Corp., through DirecTV, is guaranteed access to
     an MVPD platform even if cable operators do not agree to use the
     Gemstar EPG as a condition for access to the Fox O&O broadcast
     stations.[^637] JCC argue that News Corp., in a carriage dispute,
     could use the EPG "to exploit subscriber dislocation and resentment
     associated with dropped channels, through heightened promotion of
     DirecTV or by placing text messages and click-through DirecTV
     marketing materials on the EPG channel slot normally associated
     with the dropped service."[^638] JCC note the DOJ's position that
     EPGs/IPGs are a relevant antitrust product market and contend that
     EPGs are a necessary component of cable operator product
     offerings.[^639] They claim that cable operators that have
     committed to upgrade their systems would not regard incompatible
     EPGs as viable substitutes and are thus "locked in" to agreements
     with Gemstar.[^640] JCC and ACA claim that News Corp. could use its
     control of Gemstar to disadvantage DirecTV's rivals by raising the
     costs of the Gemstar EPG or otherwise discriminating against cable
     operators, including small cable operators, in the content, unique
     features, or license terms and conditions offered to these
     competitors.[^641] The JCC argue that the proposed transaction
     "threatens to give new impetus to anti-competitive leveraging of
     Gemstar/TV Guide's dominance in the EPG marketplace."[^642]

230. News Corp. contends that any competitive concerns regarding its
     42.9% control of Gemstar are unwarranted because DirecTV has only a
     small share of the MVPD market and that, "in practice, Gemstar has
     not been the default EPG for the DTH systems in which News Corp.
     holds an interest -- for example, BSkyB uses a different EPG
     product."[^643] News Corp.'s argument is premised on the
     Commission's decision regarding the lack of potential harm from an
     EPG/MVPD affiliation in the *AT&T-MediaOne* transaction, where
     AT&T's acquisition of Media One was found to pose no threat to
     competition in the EPG marketplace.[^644] In *AT&T-MediaOne,* the
     Commission identified three potential harms from an EPG/MVPD
     affiliation: (1) the MVPD could steer subscribers toward affiliated
     content providers; (2) the MVPD could harm unaffiliated EPG
     providers by selecting affiliated EPGs for its system; and (3) the
     MVPD could lock EPG providers into exclusive contracts that would
     prevent them from dealing with other MVPDs.[^645] The Commission
     found that the requirement that AT&T reduce its attributable cable
     system ownership interests was sufficient to circumscribe AT&T's
     alleged ability to harm unaffiliated content providers,
     unaffiliated EPGs, and other MVPDs because AT&T, post-divestiture,
     would serve a smaller share of the MVPD market.[^646] Although AT&T
     held a comparable interest to News Corp. in TV Guide (a corporate
     predecessor of Gemstar), News Corp. argues that there is no basis
     for concern here because DirecTV has a much smaller share of the
     MVPD market than that allowed in the *AT&T-MediaOne*
     transaction.[^647]

231. NRTC, however, contends that the potential for vertical foreclosure
     and discrimination in favor of News Corp.'s EPG is greater here
     than in the case of *AT&T-MediaOne* because cable was subject to a
     30% ownership (coverage) cap while full-CONUS DBS operators such as
     DirecTV have 100% nationwide coverage and no market share
     cap.[^648] In addition, CDD argues that given Gemstar's penetration
     to approximately 100 million people in the United States, the
     importance in controlling the EPG cannot be understated and it
     urges the Commission to examine all the proprietary technologies
     and intellectual property relationships involving Gemstar to
     determine the impact that this News Corp.-controlled entity will
     have on a wide number of markets, including consumer electronics,
     VCR-plus, and set-top boxes.[^649] According to Cablevision and
     EchoStar, Gemstar has aggressively asserted its patent rights in
     litigation against competing EPG providers and users of EPGs,
     taking a broad view that its patents encompass the use of EPGs,
     including the interactive grid guide.[^650] EchoStar argues that
     Gemstar, should it prevail on its patent claims, would exert
     monopoly power over all EPG providers, including EchoStar.[^651]
     EchoStar also argues that News Corp., with an assured distribution
     outlet in DirecTV, would be unfettered to extract unreasonable fees
     or other terms and conditions relating to its programming assets by
     leveraging its market power in the EPG realm.[^652] EchoStar and
     the JCC request that the Commission clarify that program access
     rules would extend to EPGs and "\[p\]rohibit the tying of any
     non-programming intellectual property rights to the carriage of
     programming."[^653]

232. CDD also states that Fox stations have been given a preferred
     position on the IPG in their designated market areas and that
     Gemstar has the right to transmit IPG data in the vertical blanking
     interval of each Fox O&O broadcast station.[^654] CDD also contends
     that Gemstar's licensing arrangements with MSOs under which it
     shares a portion of the interactive platform advertising revenue
     that it generates through the MSO raises questions about the
     integration of News Corp. business operations with the cable
     industry, its primary competitor.[^655]

233. In response, News Corp. points out that the Commission concluded in
     *AT&T-MediaOne* that concerns relating to the EPG marketplace are
     more appropriately addressed in a general, industry wide,
     rulemaking and thus the Commission has made clear that an
     individual transfer application would not be the proper forum in
     which to address EPG-specific issues.[^656] News Corp. claims that
     the Commission's decision in *AT&T-MediaOne* established the
     general proposition that an MVPD with less than 30% of MVPD
     subscribers would not have the ability to use a commonly-owned EPG
     to disadvantage other MVPDs, other programmers, or other EPG
     providers and thus the transaction will have no such adverse
     consequences.[^657] News Corp. finds that virtually all of the
     concerns raised by the parties are irrelevant to this proceeding
     because they are wholly speculative and in no way arise from the
     instant transaction.[^658] News Corp. argues that its interest in
     the EPG technology platform already exists, and is not altered in
     any way by the proposed transaction, and it states that it could
     attempt to use retransmission consent rights today to promote the
     use of the Gemstar EPG over cable and satellite MVPDs, if such a
     strategy made economic sense.[^659]

234. *Discussion.* We find that many of the harms alleged are unrelated
     to this transaction. The alleged harms arising from joint control
     of video programming assets and program guides can occur regardless
     of this transaction. Under our general rulemaking authority, we
     have committed to "monitor developments with respect to the
     availability of electronic programming guides to determine whether
     any action is appropriate in the future."[^660] To the extent that
     evidence accrues that demonstrates the necessity of Commission
     action regarding the availability of EPGs, we will consider it at
     that time.[^661]

235. An alleged harm that is specific to this transaction involves News
     Corp.'s purported ability to disadvantage its MVPD rivals through
     either permanent or temporary foreclosure of electronic and
     interactive program guides during contract negotiations and using
     threats of these actions to extract additional concessions. We
     analyze, in turn, the likelihood of News Corp. engaging in such a
     strategy for each of the three program guide products sold by its
     subsidiary, Gemstar-TV Guide: the TV Guide Channel, EPG Jr., and TV
     Guide Interactive.

236. The program guide feature of the TV Guide Channel consists of a
     scrolling list of programming organized by the channels carried by
     the cable system. The TV Guide Channel is available to
     approximately 50 million MVPD subscribers. We find that while this
     product possesses a large market share, News Corp. will be unable
     to use its acquisition of control of DirecTV to extend its
     dominance in the EPG market because of the relative ease by which
     competing video programming producers could enter the market or
     MVPDs could choose to self-supply. In addition, the substitutes
     available to both consumers and MVPDs should limit the shift of
     subscribers from rival MVPDs to DirecTV should News Corp. attempt
     to engage in foreclosure. We do not find high barriers to entry to
     this market given the common technology used to implement an
     on-screen display of programming information as well as the
     existence of an independent supplier of consolidated program
     listings data.[^662] This should eliminate any increased incentives
     arising from the transaction for News Corp. to engage in permanent
     foreclosure. In the event of attempted temporary foreclosure, the
     substitutes available to consumers, which include newspapers,
     magazines, and the Internet, are more than adequate to carry them
     through any temporary withdrawal of the EPG and therefore limit the
     numbers that might switch to DirecTV.

237. With respect to the EPG Jr. product, a text-only program guide, we
     find that News Corp. does not possess the necessary market power to
     engage in the harms alleged by the opponents to this transaction.
     **\[REDACTED\]**.[^663]

238. The TV Guide Interactive product is an on-screen listing of
     television program information with interactive functions that
     enable viewers to navigate, sort, select and schedule television
     programming for viewing using a remote control.[^664]
     Post-transaction, News Corp. will acquire an interest in the
     DirecTV-produced IPG. Under some situations, this might raise
     concerns that the acquisition will enhance News Corp.-controlled
     Gemstar's ability to affect the price of IPGs. However, DirecTV is
     not currently selling its IPG to other MVPDs.[^665] Although the
     transaction will result in an increase in concentration in the IPG
     market, because DirecTV, like the other large MSOs, does not resell
     its IPG product, it is doubtful that this structural change will
     cause a change in the behavior of market participants. We therefore
     do not find that control of DirecTV's IPG product would enhance
     News Corp.'s ability to restrict the supply of IPGs and thereby
     influence price.

239. Our concern regarding potential vertical harms attributable to the
     share of the IPG market controlled by News Corp. is mitigated by
     several factors. First, we note that **\[REDACTED\]**.[^666]
     **\[REDACTED\]**. We also note that the current competitors in the
     market, as well as the most likely entrants, are firms that
     manufacture set-top boxes.[^667] These are firms with existing
     relationships with MVPDs and provide one of the necessary inputs
     \-- set-top boxes \-- that are required in order for the subscriber
     to use an IPG. Attempts by News Corp. to raise prices for TV Guide
     Interactive are likely to be countered by MVPDs switching to
     alternative suppliers with whom they have existing relationships.
     **\[REDACTED\]**.[^668] Thus, we do not find that the proposed
     transaction will likely produce consumer or competitive harms
     related to access to interactive program guides.

240. Our conditions for RSN and retransmission consent negotiations
     should alleviate the concerns raised by the commenters regarding
     News Corp.'s ability to use a tying strategy to leverage RSNs or
     retransmission consent rights to increase the use or price of the
     Gemstar EPG.[^669] As we indicated above, given the nature of the
     IPG market, at present any such benefit from tying must come from
     News Corp's market power as a source of other "essential
     programming." Because the conditions we impose are intended to
     neutralize any additional market power created by the proposed
     transaction in these areas, News Corp. should not be able to
     successfully tie the purchase of the Gemstar products to its RSN or
     local broadcast programming in order to garner more market power in
     the EPG/IPG markets than Gemstar currently holds, as a result of
     the proposed transaction.

241. Some parties have alleged that News Corp., through patent
     litigation initiated by Gemstar-TV Guide, has the opportunity to
     monopolize the IPG market. This in and of itself is not a merger
     specific issue. Moreover we observe that such claims are already an
     area of substantial litigation. **\[REDACTED\]**[^670] \-- we find
     that this issue does not warrant specific attention in this license
     transfer review proceeding. The Commission will, however, continue
     to monitor the situation.

##### Interactive Television

242. *Background.* The Commission has yet to define interactive
     television ("ITV") or classify ITV for regulatory purposes under
     the Communications Act, but has broadly characterized ITV as a
     service or suite of services that support subscriber-initiated
     choices or actions that are related to one or more video
     programming streams.[^671] Services providing such capabilities may
     include video-on-demand, personal video recorder, gaming, e-mail,
     TV-based e-commerce ("t-commerce"), interactive advertising,
     interactive program guides, Internet access, and program-related
     enhanced content.[^672] Although not requiring a return path,
     service offerings such as electronic program guides, might also fit
     within the ITV category. A number of companies are involved in
     developing the technical standards, equipment and software
     necessary to provide ITV services.[^673] In connection with its
     review of the American Online ("AOL") -- Time Warner merger, the
     Commission issued a Notice of Inquiry to consider whether
     industry-wide rules were needed to address any impediments to the
     development of ITV services and markets, particularly with respect
     to cable-delivered ITV services.[^674] In *AOL-Time Warner*, the
     Commission concluded that the newly formed company had the
     incentive and potential ability to use its combined control of
     cable system facilities, video programming, and the AOLTV
     interactive service, to discriminate against unaffiliated video
     programming networks in the provision of ITV services.[^675] The
     Commission held, however, that the terms of the Federal Trade
     Commission's AOL-Time Warner Consent Agreement regarding ITV would
     substantially address concerns about the availability of
     alternatives for the distribution of unaffiliated video programming
     networks' ITV services.[^676] Although the Commission concluded
     that no further merger-related restrictions pertaining to ITV were
     warranted, it did find that open questions regarding distribution
     of ITV services warranted further examination in the aforementioned
     proceeding of general-applicability. The *ITV NOI* remains pending.

243. *Positions of the Parties.* NAB and CDD argue that the proposed
     transaction would result in a single entity with control over both
     content and distribution and therefore allow News Corp. to act as a
     "gatekeeper" with the ability and the incentive to discriminate
     against unaffiliated providers of content and services, including
     providers of ITV and other emerging communications services.[^677]
     NAB contends that discrimination could take "many forms" such as
     the denial of access to the DBS platform or in "such technology
     related areas as interactivity, channel assignment and positioning,
     use of navigation devices and electronic program guides, data
     transfer speed, and downstream and return path traffic."[^678] CDD
     argues that the relationship between News Corp. and Liberty Media,
     which controls Open TV and Wink, and has a stake in ACTV and
     significant cable programming interests, will impact the emerging
     ITV marketplace by disadvantaging competing program suppliers and
     technology companies.[^679]

244. In response, the Applicants argue that they do not have sufficient
     market power in any relevant product or geographic market to
     profitably engage in anti-competitive foreclosure.[^680] They
     further contend that the harms proffered by the parties are
     speculative and are not transaction-specific and therefore do not
     provide a basis either for denying their Application or for
     imposing regulatory conditions.[^681] The Applicants also state
     that News Corp. has no ownership interest in and no agreements
     pending to acquire an interest in Liberty Media.[^682] The
     Applicants further state that "DirecTV will not enter into
     exclusive arrangements for satellite cable programming with
     'affiliated program rights holders' including Liberty, and will not
     'unduly or improperly influence the decision' of such rights
     holders to sell satellite cable programming to other MVPDs, or the
     prices, terms and conditions of such sale."[^683]

245. *Discussion.* In other proceedings, the Commission has found that
     the interactive television market in the U.S. is nascent and "to
     date commercial two-way interactive service deployments have been
     very limited."[^684] In our *2002 Video Competition Report*, we
     reported that "\[c\]able MSOs and DBS operators continue to develop
     these services as measures to increase subscribership, develop new
     streams of revenue, and reduce churn."[^685] The Report also
     indicated that the multiple but incompatible platforms in use today
     have slowed the development of ITV content and applications.[^686]
     Accordingly, we agree with the Applicants that DirecTV's share of
     the MVPD market is too small to enable the merged entity to
     exercise market power in any ITV market. Until this market develops
     further, the vertical harms alleged by NAB and CDD are speculative
     at best.[^687] We therefore find that this transaction would not
     create any public interest harm in this particular line of
     business. We will, however, continue to monitor the development of
     interactive television technologies and services.[^688]

246. With respect to CDD's allegation regarding Liberty, we are not
     convinced that Liberty's unreciprocated financial interest in News
     Corp. will induce DirecTV to ignore its customers and the profits
     they generate, and instead provide programming that its customers
     may not want. Our analyses of the vertical issues in this
     transaction hinge on the assumption that News Corp. and DirecTV
     will act to maximize their profits. CDD's allegation assumes that
     DirecTV will act in a contrary manner, which we find implausible.
     Liberty Media and News Corp. do not share any members of their
     Boards of Directors.[^689] While it is true that Liberty owns a
     substantial share of News Corp. stock, this stock carries only
     limited voting rights that do not include a vote on the nominees
     for the Board of Directors. A formal mechanism does not exist,
     beyond arm's length market transactions, by which Liberty Media can
     influence the programming choices of DirecTV.

#####  Conditional Access Technology and Set-top Boxes.

247. *Positions of the Parties.* Cablevision, CDD, and EchoStar argue
     that News Corp.'s control of DirecTV and NDS would give it the
     incentive and ability to discriminate against MVPD competitors in
     its provisioning of conditional access technology and interactive
     applications.[^690] Sun Microsystems alleges no particular
     transaction-specific harm but requests that the Commission require
     or "at a minimum encourage" DirecTV to migrate to Multimedia Home
     Platform ("MHP") based set-top box standards, which will allow for
     interoperability with CableLabs' Open Cable Application Platform
     ("OCAP") and ATSC's Digital Application Software Environment
     ("DASE").[^691] CDD contends that the Application should be denied
     or at least conditioned on Applicants providing non-discriminatory
     access to all related distribution technologies and devices,
     including conditional access and interactive marketing
     software/processing.[^692]

248. The Applicants respond that the harms alleged by the respective
     commenters are speculative and, therefore, do not provide a basis
     for either denying their Application or for imposing regulatory
     conditions.[^693] They also argue that Sun's requested condition
     falls outside the scope of this proceeding because it "would
     conflict with the Commission's well-established policy against
     picking winners and losers among competing technologies and its
     preference to let the market decide such issues."[^694]

249. *Discussion.* As the Applicants note, our preference is to allow
     the market to determine which technologies succeed and which fail.
     We see no reason on the record before us to presume that the
     set-top box market will fail to deploy the technologies that best
     serve consumers, and therefore decline to impose the condition
     proposed by Sun Microsystems.

250. With respect to conditional access systems, we find that NDS does
     not possess sufficient market power in the United States to
     profitably discriminate against competing MVPDs. Set-top box
     manufacturers Scientific-Atlanta and Motorola are the dominant
     providers of conditional access systems to domestic MVPDs.[^695]
     Accordingly, any attempt by NDS to disadvantage DirecTV's rivals
     would almost certainly be unavailing. We do not impose license
     conditions to mitigate hypothetical harms.

#### Access to Fixed Satellite Services 

251. *Background.* A portion of the Application before us involves the
     transfer of control of the licenses of PanAmSat from Hughes to News
     Corp.[^696] PanAmSat is a significant provider of fixed satellite
     services ("FSS")[^697] in the United States and currently is 81%
     owned by Hughes.[^698] Most distribution of video programming to
     MVPD service providers (and to over-the-air television
     broadcasters) is carried over FSS. Upon closing of the proposed
     transaction, News Corp. would be, in addition to its broadcast
     television and cable network holdings, both an MVPD and an FSS
     provider.

252. MVPDs typically retransmit programming received from distant
     points, rather than originate programming at the locale where
     transmission takes place. To obtain these signals, MVPDs rely
     primarily on FSS provided over a number of geo-stationary orbit
     ("GSO") satellites.[^699] For national distribution of video
     programming within the United States, a full CONUS satellite
     "footprint" is needed.[^700] A significant portion of the capacity
     on FSS satellites in the United States is dedicated to video
     distribution.[^701]

253. There are three major FSS operators licensed by the United States:
     SES AMERICOM, PanAmSat, and Loral Space.[^702] Other providers
     include New Skies, Anik, and various Latin American satellites
     partly available for North American use. PanAmSat owns and operates
     a fleet of 22 satellites that operate in FSS bands, and with that
     capacity carries video programming for broadcasters and other
     programmers, as well as Internet backbone support, communications
     network support and pipelines for telecommunications
     providers.[^703] SES AMERICOM and its subsidiaries provide similar
     services through a fleet of 18 satellites.[^704]

254. Applicants state that News Corp., as one of the world's largest
     users of satellite video services, will be able to offer valuable
     customer insight to PanAmSat.[^705] And, because PanAmSat derives
     more than 65% of its revenues from carrying video services,
     Applicants claim that News Corp's insight "should prove an
     invaluable tool in devising strategies for developing new markets
     and new services around the world."[^706] Applicants argue,
     therefore, that the proposed transaction will create synergies
     throughout Hughes.[^707] Further, Applicants argue that PanAmSat's
     new ownership structure will neither increase FSS concentration,
     nor raise any prospect of competitive harm in the MVPD
     marketplace.[^708]

255. NRTC, however, argues that once News Corp. acquires an interest in
     PanAmSat, it could manipulate the prices paid by broadcasters,
     cable programmers, and others who rely on PanAmSat for video
     distribution backhaul, thereby raising costs for competitors and
     ultimately, their customers.[^709] Applicants responded by stating
     that PanAmSat's current market position is essentially the same as
     it was in October 2002 when the Commission released its
     *EchoStar-DirecTV HDO* and found that PanAmSat's market position
     was such that "any anti-competitive schemes were 'unlikely to occur
     and even more unlikely to succeed.'"[^710]

256. *Discussion.* Although Hughes controls a significant share of the
     FSS capacity through its ownership of the PanAmSat satellites, News
     Corp. does not operate any FSS satellites. Thus, upon consummation
     of the proposed transaction, News Corp. would control the identical
     percentage to that controlled currently by Hughes. It is therefore
     evident that the proposed transaction does not increase
     concentration in the FSS capacity. In addition, as we have
     previously noted,[^711] PanAmSat is already under common control
     with a DBS provider -- DirecTV -- and the proposed transaction
     would not change that situation. No opponent or commenter has made
     a credible showing as to why News Corp.'s ownership of PanAmSat, as
     compared to Hughes,' would adversely impact competition in the
     provision of FSS, in the video programming markets, or any other
     relevant satellite service or market.

257. As we have discussed, there are situations in which it would be
     profitable for an integrated firm to pursue a vertical foreclosure
     strategy against downstream rivals that use the firm's goods or
     services.[^712] Thus, it is possible that News Corp, once it has
     acquired PanAmSat, might have an incentive to use its market power
     in the provision of FSS capacity (assuming, arguendo, that it would
     have such power) to competitively harm video programming rivals who
     use FSS. For instance, News Corp. could degrade the quality of the
     FSS service provided to rivals, restrict supply, or raise the price
     of FSS, all in attempt to gain additional share (and earn
     additional profits) in the video programming market.

258. We find that such attempts are unlikely to occur and even more
     unlikely to succeed. First, with PanAmSat's share of the FSS
     capacity, it remains doubtful that News Corp. would have sufficient
     market power to carry out such a scheme. Second, there appears to
     be sufficient excess capacity in the FSS market so that if News
     Corp./PanAmSat attempted to raise the rates it charges to its video
     programming rivals, or degrade the service it provides to them, it
     likely would lose these customers to other FSS providers. Thus,
     unilateral restriction of FSS supply would likely be very costly to
     News Corp. and would likely achieve very little in the marketplace.
     Market power in an upstream market is a necessary condition for
     competitive harms to occur in a vertical merger. We find no change
     in the competitive landscape that would cause us to alter our prior
     conclusion that PanAmSat possesses limited market power in the
     provision of FSS capacity. We therefore conclude that News Corp.'s
     acquisition of PanAmSat will be unlikely to cause competitive harm
     in the provision of FSS or in the video programming markets.

# Other Potential Public Interest Harms

## Impact of the Transaction on Diversity

### Background

259. As stated above, the Commission's public interest review includes
     an evaluation of the proposed transaction's affect on the quality
     and diversity of communications services to consumers.[^713]
     Commenters have raised issues concerning the proposed transaction's
     impact on program and viewpoint diversity. Commenters contend that
     the transaction will adversely affect both program diversity and
     viewpoint diversity, either as a direct result of the combination
     of an MVPD, programmer, and broadcaster, or as a result of
     competitive harms posed by the transaction. Applicants counter that
     the transaction presents no potential harms to viewpoint
     diversity[^714] and will increase programming geared to linguistic,
     ethnic, and cultural minorities.[^715] Commenters disagree,
     claiming that the Applicants have not shown that any
     transaction-specific benefits relating to diversity will result
     from the proposed transaction.[^716] Below, we analyze the
     diversity issues raised by commenters. We conclude that potential
     harms to viewpoint and program diversity will be addressed by the
     conditions we are imposing on our approval of the Application.

### Program Diversity

260. *Positions of the Parties.* One of the Commission's goals is to
     promote program diversity, which refers to the availability of a
     variety of programming formats such as comedy, drama, and
     newsmagazines, as well as specific content categories such as
     health, business, food and content targeted to ethnic or racial
     groups.[^717] EchoStar asserts that the transaction will have
     anticompetitive effects on the market for video programming which
     also will harm diversity. EchoStar states that the transaction
     would foreclose what is currently the largest unaffiliated
     distribution network, and that vertical integration would reduce or
     eliminate DirecTV's incentives to offer programming that competes
     with News Corp. offerings.[^718] EchoStar contends that harm to
     competition in the video programming market could result in fewer
     viable independent programmers, and therefore less diversity.[^719]
     Cablevision asserts that by combining content, broadcasting, and an
     MVPD platform, the transaction will give News Corp. substantial
     leverage and market power that will result in fewer programming
     choices for cable subscribers and reduced local broadcast
     programming.[^720] Cablevision repeats its claim that vertical
     integration with an MVPD would allow News Corp. to make a credible
     threat that it will withhold broadcast retransmission consent
     rights, giving News Corp. leverage to demand carriage of its
     affiliated cable programming.[^721] Cablevision contends that this
     pressure to carry News Corp. programming would harm program
     diversity by thwarting cable operators' ability to select the
     programming that their subscribers consider most desirable,
     including new or independent programming services.[^722]
     Cablevision asserts that News Corp. would be using the very rights
     conferred upon broadcasters to promote diversity and localism to
     contravene those policy goals.[^723] Commenters also assert that,
     after the transaction, News Corp. would have the incentive and
     ability to deny access to its affiliated cable network programming
     to competing MVPDs, which would weaken or eliminate these
     competitors, thereby harming diversity in the distribution of video
     programming.[^724]

261. *Discussion.* Although the Applicants assert that the proposed
     transaction would not harm program diversity, but would increase
     program diversity[^725] we find that, absent our conditions, the
     transaction would be likely to reduce program diversity. As we
     conclude above in our discussion of the video programming market,
     the transaction will enhance News Corp.'s incentive and ability to
     engage in temporary foreclosure of access to its RSN and broadcast
     television station programming in order to raise rival MVPDs' costs
     for News Corp. programming and/or secure other carriage
     concessions. Such a strategy of foreclosure would reduce program
     diversity on a short term basis because consumers lack access to
     the foreclosed programming. In the long run, the increased costs
     paid by MVPDs to News Corp. also can reduce program diversity. For
     example, to obtain RSN or local broadcast station programming from
     News Corp., an MVPD may accede to News Corp.'s demands to carry its
     affiliated cable networks, or to pay supracompetitive rates for
     News Corp. programming. Absent these increased costs, the MVPD
     might have elected to carry a new niche network that would have
     expanded the types of programming available to its subscribers. We
     find, however, that by constraining News Corp.'s ability to
     threaten to foreclose programming and thereby raise prices, and by
     requiring Applicants to submit bids to the arbitrator for RSN and
     broadcast station programming on an unbundled basis, the conditions
     we impose herein will protect against the potential harms to
     program diversity posed by this transaction.

### Viewpoint Diversity

262. Another of the Commission's goals in the area of media policy is
     protection of viewpoint diversity. Accordingly, the Commission has
     restricted ownership of media outlets in certain ways. The
     Commission's rationale has been that ownership diversity leads to
     viewpoint diversity, a rationale that has been sustained in
     court.[^726] Our rules do not, however, prohibit cross ownership of
     DBS and broadcast outlets, nor have they ever prohibited such
     ownership structures.

263. *Positions of the Parties.* CDD and others contend that the
     transaction will result in a loss of both local and national
     perspectives.[^727] They assert that if the transaction is
     approved, News Corp. will have the incentive and ability to
     competitively disadvantage unaffiliated content providers and to
     launch new programming networks on its own distribution system,
     allowing it to dominate what programming is available to
     consumers.[^728] CFA contends that the transaction will result in a
     degree of concentration and lack of diversity of media voices that
     is in direct contravention of the public interest.[^729]

264. NRTC is concerned that the transaction may adversely affect
     viewpoint diversity by eliminating a "voice" in all markets where
     DirecTV offers DBS service and Fox provides over-the-air broadcast
     service.[^730] NRTC states that this potential for harm to
     viewpoint diversity is greater in smaller markets, which have fewer
     distinct voices.[^731] NRTC asserts that the Commission cannot
     evaluate the effects of the proposed transaction on viewpoint
     diversity without first determining how many homes have access to
     cable, because without this information, it cannot determine how
     many media outlets will be available post-transaction in various
     markets.[^732]

265. NAB contends that, absent conditions, the proposed transaction will
     harm local television broadcast stations, endangering the stations'
     ability to advance the core public interest goals of diversity and
     localism.[^733] NAB asserts that the post-transaction News Corp.
     will have the incentive and ability to use a national network feed
     to distribute the programming it currently offers via local
     television broadcast stations.[^734] According to NAB, the ability
     to "bypass" television broadcast station affiliates would give
     post-transaction News Corp. enhanced bargaining power in its
     relationships with its affiliates.[^735] NAB contends that the
     transaction also gives DirecTV the incentive and ability to
     discriminate against local television broadcast stations not
     affiliated with the Fox Network, which may take the form of refusal
     to carry unaffiliated stations, discriminatory channel positioning,
     or technological discrimination.[^736] NAB also is concerned that
     the sharing of information between Fox Network and DirecTV on the
     terms of retransmission consent and affiliation agreements could
     give both entities negotiating leverage over local broadcasters
     with respect to such agreements.[^737] NAB urges us to condition
     the Application on a prohibition on bypass of local Fox affiliates,
     a prohibition on discrimination by DirecTV against unaffiliated
     local television stations, and a ban on information exchange
     between News Corp. and DirecTV concerning affiliation agreements
     and retransmission consent agreements.[^738] NAB also asserts that
     the Applicants should be required to expand local-into-local
     service into all markets by 2006 in order to ensure that the
     proposed transaction does not slow the rollout of local-into-local
     service.[^739]

266. APTS/PBS urge us to impose conditions on approval of the
     transaction to promote diversity, including forbidding DirecTV from
     segregating local broadcast stations on wing satellites,[^740] and
     requiring DirecTV to carry the free, over-the-air non-duplicative
     digital signals of public television stations where local
     television stations are being carried pursuant to SHVIA.[^741]
     Maranatha also urges us to condition grant of the Application on a
     requirement that DirecTV continue to offer local broadcast
     television signals on a single satellite dish on grounds that the
     transaction may result in DirecTV using a second dish to favor News
     Corp. O&Os and discriminate against other broadcasters.[^742]

267. Applicants assert that News Corp. would have no incentive to engage
     in an affiliate bypass strategy, and that such a strategy, even if
     practical, would be counter to News Corp.'s own interests.[^743]
     Applicants assert that NRTC is seeking a DBS cross-ownership ban
     and that NRTC's arguments are without merit.[^744] In support of
     this, Applicants note that the Commission has considered and
     rejected cable-DBS cross ownership restrictions, although such
     cross ownership presents more obvious competitive issues than does
     broadcast-DBS cross ownership.[^745] They further assert that
     prohibiting broadcast-DBS cross ownership would be contrary to
     recent trends in media ownership regulation and the vacation/repeal
     of the cable-broadcast cross-ownership rule.[^746] In light of
     these actions, as well as DBS' smaller share of the MVPD market,
     Applicants contend that there is no basis for limiting
     broadcast-DBS cross ownership.[^747] Applicants state that the
     transaction will have no effect on viewpoint diversity in small
     markets because Fox does not own any stations in such markets, so
     there will be no change in the number of voices in these
     markets.[^748] They further state that in large markets where Fox
     does own broadcast stations, a wealth of other media outlets will
     ensure viewpoint diversity, so the transaction will have little or
     no effect.[^749]

268. *Discussion.* We do not agree with NAB's assessment of the
     likelihood that post-transaction News Corp. will harm local
     stations by engaging in an affiliate bypass strategy and therefore
     adversely affect localism and diversity. As we explain elsewhere in
     this *Order,* we find that the transaction only creates a *de
     minimis* increase in the likelihood that News Corp. will engage in
     a bypass strategy and we conclude that therefore, there is no need
     to impose safeguards against such a strategy.[^750] With respect to
     NAB's claim that the transaction will give DirecTV the incentive
     and ability to discriminate against unaffiliated broadcasters, we
     explain above that this is an unlikely result of the proposed
     transaction. Because we find that the transaction will not enhance
     DirecTV's incentive or ability to discriminate against unaffiliated
     broadcasters,[^751] we conclude that the combination does not pose
     a risk of harm to localism or diversity on that basis. As we
     explain elsewhere in this *Order*, the mandatory carriage
     provisions of the SHVIA and our rules implementing the statute will
     ensure that broadcasters will have access to the DirecTV platform
     in all markets where DirecTV offers local-into-local service.
     Finally, we disagree with NAB that information sharing between
     DirecTV and Fox will adversely affect broadcasters negotiating
     agreements with either entity, and we will not impose a condition
     limiting the Applicants' communications concerning such agreements.
     As we explain in our discussion of limitations on information
     sharing in section VI.C.4, *supra*, we find that the
     confidentiality provisions of the retransmission consent and
     program carriage agreements make such information sharing unlikely.
     In addition, NAB also has not specified what harms could result
     from such information sharing even if it could be accomplished.

269. We do not agree with NRTC that News Corp.'s ownership of local
     television broadcast stations and an MVPD outlet in certain markets
     will harm viewpoint diversity. NRTC has not demonstrated how common
     ownership of DirecTV and local broadcast television stations would
     result in a loss of diversity of viewpoint that would be harmful to
     the public interest, particularly given the prevalence of the
     multiple sources of news and informational programming from
     broadcast, MVPD and print sources, and the fact that DBS is not
     currently a source of local news or other local content.

270. We also disagree with commenters who contend that the transaction
     will reduce viewpoint diversity by giving News Corp. the incentive
     and ability to discriminate against unaffiliated program producers
     (*i.e.*, those who sell programs to networks). We find that our
     program carriage rules, combined with Applicants' proposed
     commitment not to discriminate against unaffiliated programmers,
     are sufficient to protect against any potential harms.[^752]

271. In contrast, we agree with Commenters who contend that the
     transaction can enhance News Corp.'s incentive and ability to
     persuade competitors to carry its affiliated programming.
     Specifically, as we held above, the transaction may enhance News
     Corp.'s incentive and ability to extract higher compensation from
     competing MVPDs in exchange for carriage of its most popular
     programming---RSN and broadcast programming. Such compensation may
     include monetary compensation, but also carriage of News Corp.
     affiliated networks. To obtain RSN or broadcast programming from
     News Corp., an MVPD may accede to News Corp.'s demands to carry its
     affiliated cable networks, or to pay supracompetitive rates for
     News Corp. programming. Absent these demands and higher costs, the
     MVPD might have elected to carry an independent rival network that
     would have expanded the sources of programming available to its
     subscribers. However, we find that this potential harm is remedied
     by the conditions we have imposed with respect to competing MVPD
     access to such programming.[^753]

272. We decline to adopt APTS/PBS's proposal that we require DirecTV to
     carry the digital signals of public television stations. The public
     television station digital signal carriage condition does not
     address a potential harm specific to the proposed transaction.
     Given that this proposal does not relate to a transaction-specific
     issue, it is not appropriately considered in this proceeding. The
     Commission will not consider industry-wide concerns or establish
     rules or policies of general applicability in this license transfer
     proceeding.[^754] The record contains no evidence that the
     transaction will give News Corp. an increased incentive or ability
     to discriminate against public television stations, or any other
     evidence of a potential harm which would warrant the imposition of
     requirements different from those to which other MVPDs are subject
     with regard to digital carriage of public television stations.

273. With regard to APTS/PBS's proposed condition to restrict DirecTV
     from segregating local broadcast stations to wing satellites, we
     recognize that the proposed transaction may give DirecTV greater
     incentive to favor News Corp.'s Fox broadcast network programming
     and therefore to move other broadcasters onto other satellites.
     There is not a majority to decide whether this increased incentive
     results in a merger-specific harm. Nor is there a majority willing
     to resolve APTS/PBS\'s request that the Commission clarify its
     requirements under SHVIA and specifically, that, in providing
     local-into-local service pursuant to SHVIA, DirecTV could not place
     some local broadcast stations on wing satellites. The rationale for
     their decisions is contained in each of the Commissioners\'
     separate statements.

## Effect on Network-Affiliate Relationships ("Bypass" Issue)

274. *Positions of the Parties*. NAB contends that as a result of the
     proposed transaction, News Corp. will have a strong incentive and
     ability to "bypass" local Fox broadcasting affiliates and instead
     distribute Fox programming via a national feed.[^755] NAB asserts
     that News Corp. would realize immediate benefits from such an
     action, including immediate cost savings from reduced or eliminated
     retransmission consent payments and increased advertising
     revenue[^756] that would otherwise have gone to local Fox
     affiliates.[^757] NAB argues that this change will give DirecTV
     substantially increased leverage over local affiliates, endangering
     their ability to serve local interests or provide diversity.[^758]
     According to NAB, a bypass strategy would result in short-term harm
     to Fox affiliates in the form of lost retransmission consent fees,
     but also long-term harm to the network-affiliate relationship so
     critical to the American system of broadcasting.[^759] To remedy
     this potential harm, NAB urges us to prohibit DirecTV from
     transmitting a Fox network feed in any market currently served by a
     non-Fox-owned local affiliate.[^760] Applicants respond that a
     bypass strategy scenario makes no sense. Applicants contend they
     gain more from a broadcast affiliation system which reaches nearly
     100% of the country than could be gained through a bypass model
     based on DirecTV's 13% market share.[^761]

275. *Discussion.* Contrary to the contentions of NAB, we find that the
     transaction creates only a *de minimis* increase in the Applicants'
     ability and incentive to engage in a bypass strategy. Accordingly,
     we will not condition our approval of the transaction on the bypass
     prohibition proposed by NAB. NAB's bypass argument is a variation
     of the argument made by MVPDs that the transaction will give News
     Corp. the incentive and ability to engage in permanent foreclosure
     of access to its broadcast signals by competing MVPDs, which we
     analyzed above. The only difference between the bypass and
     permanent foreclosure strategies is that a bypass strategy would
     impose even greater revenue losses on News Corp. If it bypasses
     local affiliates, News Corp. will lose not only the advertising
     revenue associated with those rival MVPD subscribers that do not
     receive over-the-air broadcast signals but also the advertising
     revenue associated with all non-DirecTV subscribers. We do not find
     that it would be profitable for News Corp. to engage in permanent
     foreclosure in the previous situation, and we find it even less
     likely in NAB's proposed scenario. **\[REDACTED\]**.[^762]
     **\[REDACTED\]**. In any event, because the proposed transaction
     would have a *de minimis* impact on News Corp.'s incentive to
     engage in this behavior, we do not view it as a likely outcome of
     the transaction.

## Collusion with Cable MSOs

276. *Positions of the Parties.* EchoStar argues that the proposed
     transaction will give News Corp. new incentives to coordinate with
     other vertically integrated distributors (the large cable MSOs) to
     the detriment of independent distributors and consumers.[^763]
     EchoStar argues that the proposed transaction will give News Corp.
     an opportunity to engage in collusive practices, as it will make
     complementary the interests of News Corp. and the large vertically
     integrated cable operators and will allow mutually beneficial, but
     anticompetitive, deals between those companies. Further, it claims
     that such collusion presents only upside and no cost if News Corp.
     and a vertically integrated cable MSO enter into an agreement to
     raise the prices of the News Corp. programming carried by the cable
     MSO's systems and the cable MSO's programming carried by DirecTV,
     because the higher programming fees would cancel each other out for
     the two companies, while independent distributors and consumers
     would bear the burden of this anticompetitive behavior in the form
     of higher programming prices and subscription fees.[^764] EchoStar
     argues that the criteria used by the DOJ and the FTC to determine
     the likelihood of lessened competition through coordinated
     interaction as a consequence of a horizontal merger are present in
     this transaction.[^765] EchoStar argues that the relevant MVPD
     markets are concentrated and exhibit comparatively substantial
     barriers to entry.[^766] In the average geographic region, EchoStar
     contends, the incumbent cable provider holds roughly 80% of the
     MVPD market, and DirecTV holds about 10%, resulting in a highly
     concentrated market (an HHI over 6000). Accordingly, EchoStar
     claims that collusion or coordination is likely.

277. EchoStar also argues that News Corp. has a history of collusive
     behavior with the largest cable MSOs.[^767] Furthermore, EchoStar
     avers that the involvement of the same firms and same individuals
     substantially raises the risk of repeated collusion. EchoStar
     asserts that in 1996 and 1997, News Corp.'s announcement that it
     intended to enter the DBS business in the United States (by means
     of a merger with EchoStar) caused Primestar Partners (a cable
     MSO-DBS joint venture) to react and convince News Corp. to pull out
     of the deal with EchoStar in favor of a transaction with Primestar.
     According to EchoStar, the DOJ found that when it was clear that
     News Corp. would not compete with cable operators, the cable
     companies dropped their resistance to carrying certain Fox
     programming networks. As a result, DOJ brought suit against
     Primestar and News Corp. alleging collusion. The Primestar/News
     Corp. transaction was abandoned in the face of this
     litigation.[^768]

278. EchoStar further argues that easy detection of deviation from the
     collusive arrangement makes it easier to maintain collusive
     arrangements. According to EchoStar, there would be no need to
     detect deviations because of the win-win arrangement whereby the
     two vertically integrated distributors would agree to raise all of
     their programming prices. In addition, EchoStar argues that the
     higher prices could be embedded in superficially legitimate program
     carriage agreements, so there would be no need to police deviations
     from some illicit backroom deal.[^769] Regarding punishment for
     deviation, EchoStar states that deviations from collusion can be
     policed automatically by the kind of mutually beneficial agreement
     that the proposed deal would make possible \-- for example, if one
     partner wanted to charge an independent distributor lower
     programming rates, it might no longer be able to finance the higher
     programming rates charged by the other partner. In addition,
     EchoStar argues that our program access rules would work perversely
     to ensure uniformly high programming prices and effectively police
     deviations.[^770]

279. EchoStar argues that even without explicit collusion, News Corp.
     and cable MSOs have incentives to avoid hard competition with one
     another, especially on price, because, as carriers of each others'
     programming, the interested companies would share in each others'
     revenues, and so would avoid vigorous price competition at the MVPD
     level, which would effectively decrease the size of the total
     programming revenue pie.[^771] In addition, EchoStar believes that
     News Corp./Hughes faces tough decisions about how aggressively to
     court cable consumers, and a revenue stream from cable programming
     alters that calculus by allowing News Corp. to earn some revenue
     from consumers remaining with cable. Thus, according to EchoStar,
     given the significant costs of luring customers from cable to
     satellite, it is predictable that programming revenue would make
     rational less aggressive competitive efforts than would otherwise
     be expected. EchoStar also notes that because News Corp. owns the
     Fox broadcast network, and to the extent that high cable and DBS
     prices push consumers to avoid pay programming altogether, News
     Corp. could recover some of its losses by increasing Fox network
     advertising revenues.[^772]

280. EchoStar provides three scenarios to illustrate how collusion
     between News Corp. and the cable industry would undermine
     competition, raise rates and reduce choice for consumers. Under the
     "Programming Quid Pro Quo" scenario, in exchange for carrying a
     cable company's affiliated programming network at an inflated rate,
     News Corp. could demand that the cable company reciprocate with an
     inflated rate for a Fox network, to the detriment of non-vertically
     integrated MVPDs and consumers. Due to the non-discrimination
     program access provisions, both programmers would charge the same
     inflated rate to all MVPDs. Non-integrated MVPDs would have no
     programming assets with which to barter in this fashion, and
     therefore would simply have to absorb the higher rate without any
     corresponding benefit.[^773] In its second scenario, EchoStar
     argues that rival MVPDs and consumers may be harmed by News Corp.
     and the cable industry extending their mutually beneficial
     arrangements to the set-top box market, with agreements to share
     standards, software, patents, and other assets to the exclusion of
     other MVPDs.[^774] Finally, EchoStar argues that News Corp. will
     likely partner with cable operators for an alternative means of
     providing broadband services, rather than using DSL or
     facilities-based satellite broadband.[^775]

281. Applicants deny the existence and the likelihood of a "cable cabal"
     made up of vertically integrated cable operators that would
     coordinate their behavior with DirecTV to compete less vigorously
     with one another. The Applicants argue that antitrust theory
     supports the notion that collusion of this sort is very difficult
     to establish and maintain, citing, for example, problems with the
     prevention of individual cartel members cheating on the
     cartel.[^776] Applicants argue that EchoStar fails to establish how
     this problem will be avoided and disputes EchoStar's claim that
     News Corp.'s incentives in the proposed transaction are the same as
     those in the PrimeStar transaction. The Applicants contend that the
     PrimeStar transaction involved News Corp. investing in an
     organization made up of cable operators, while the present
     transaction involves News Corp. investing in a DBS operator that
     has dedicated itself to competing with cable operators.[^777]
     Finally, Applicants argue that consistent comments from cable
     operators opposing this proposed transaction and reflecting a
     recognition of a strengthened DBS competitor further negate
     EchoStar's theory that the transaction will result in collusion and
     the reduction of price competition between cable and DBS
     operators.[^778]

282. *Discussion.* We find EchoStar's theories of cable collusion
     unpersuasive. The record in this proceeding indicates that the MVPD
     market has been and will remain fiercely competitive between cable
     operators and DBS providers. EchoStar's claims regarding potential
     collusion between cable MSOs and the Applicants post-transaction
     are highly speculative.

283. Moreover, several fundamental bases supporting EchoStar's collusion
     theory are flawed. At the outset, EchoStar\'s arguments concerning
     market concentration are misdirected. EchoStar estimates market
     concentration in the MVPD market based on the national market
     shares of the three major MVPD platforms (i.e., the cable MSOs and
     the two incumbent full-CONUS DBS providers) and assumes that
     vertically integrated cable MSOs will collude with the Applicants
     to raise programming prices. In assessing the likelihood of
     collusion on the prices of video programming, however, it is the
     characteristics of the programming market and not the MVPD market
     that are relevant. Even a cursory examination of the programming
     market reveals, however, that there are numerous owners of cable
     networks and that many of the programming owners are not vertically
     integrated with MVPDs.[^779] This suggests that, if the News Corp.
     and vertically integrated cable MSOs collude to raise the price of
     their programming, this attempted price increase alone would prove
     unprofitable.

284. We also disagree with several of EchoStar's factual claims
     regarding the history of collusion in the MVPD industry. EchoStar
     does not accurately describe the first PrimeStar lawsuit brought by
     DOJ and 45 states.[^780] News Corp., in fact, was not involved with
     that lawsuit, which involved integrated cable programmers that
     created a joint venture, PrimeStar, used to coordinate their
     activities. In the transaction before us, there is no joint venture
     to tie together the disparate economic interests of the parties. We
     note that in the case of PrimeStar, the firms had to form a company
     to create a mechanism by which they could commit to sell to only
     one DBS competitor, which was jointly owned. That mechanism
     included a joint economic interest and an enforcement provision to
     avoid the cheating problem. The proposed transaction creates no
     such mechanism.

285. With respect to the second PrimeStar lawsuit, DOJ filed suit to
     block a horizontal merger in which MVPDs in the same relevant
     market as DBS, and also owning a DBS firm, PrimeStar, agreed to
     acquire a potential DBS competitor that owned rights to DBS orbital
     slots and in which News Corp. owned an interest.[^781] As in the
     previous case, the solution to reduce competition was to tie
     together the economic interests of the firms through a formal joint
     venture. While neither case involved explicit collusion, both did
     involve creating formal organizations to force the firms to
     cooperate to achieve specific goals. The proposed transaction would
     create no such formal linkage of DBS and cable operators. The
     record is devoid of evidence of a history in the MVPD industry of
     the sort of loosely organized collusive relationships involving
     News Corp. and vertically integrated cable operators alleged by
     EchoStar.

286. EchoStar is also incorrect in its claim that there is no need to
     detect and punish deviation from a collusive arrangement. There are
     strong incentives in the video programming industry to deviate from
     collusive agreements because the marginal cost of acquiring
     additional viewers is near zero. Because the costs of programming
     production remain the same regardless of the number of viewers,
     each additional viewer and resulting dollar is almost entirely
     profit for a video programmer, thereby creating strong incentives
     to lower price and increase the reach of the programming,
     particularly in the face of a competitor that has naively agreed to
     maintain high prices. In addition to the existence of strong
     incentives to cheat on collusive agreements, it is difficult to
     detect cheating in collusive agreements in video programming
     markets. **\[REDACTED\]**.[^782] **\[REDACTED\]**.

287. EchoStar's contention that following the transaction, the
     Applicants will have a reduced incentive to compete with vertically
     integrated cable operators on the basis of the revenue stream they
     obtain from providing video programming runs counter to the
     allegations of many commenters and our analysis of the potential
     vertical harms likely to result from this transaction. As we
     discussed above with respect to temporary foreclosure of RSN and
     local broadcast television signals, the profit margin DirecTV earns
     from each additional subscriber is substantial. This creates a
     strong incentive to drive customers to DirecTV, even when it
     requires sacrificing profits from video programming sales. In the
     case of regional sports networks and retransmission consent we
     found that in addition to having an incentive, the Applicants
     possess the ability to behave in this manner.

288. We examine EchoStar's three collusion scenarios in turn. EchoStar's
     proposed scenario regarding collusion between vertically integrated
     cable operators and the Applicants in the video programming market
     is at best a highly unlikely scenario unsupported by any facts in
     the record. EchoStar's hypothesis that it "and other non-vertically
     integrated MVPDs would have no programming assets with which to
     barter in this fashion, and therefore would simply have to absorb
     the higher rate without any corresponding benefit," ascribes a
     degree of market power and lack of substitutes to a broad range of
     video programming products which in general does not exits.[^783]
     EchoStar's scenario of collusion in the set-top box market is
     curious. EchoStar claims that integrated MVPDs will "share
     standards, software, patents, and other assets,"[^784] yet provides
     no evidence that any other integrated MVPD owns any assets used in
     set-top boxes.[^785] Finally, EchoStar's allegation that following
     the transaction DirecTV will abandon all forms of broadband access
     in favor of partnerships with providers of cable broadband services
     is wholly unsupported and defies the evidence contained in several
     recently announced partnerships with major providers of DSL
     broadband access.[^786]

## Exclusive Arrangements with Unaffiliated Programmers 

289. *Positions of the Parties.* Some commenters are concerned that the
     combination will allow DirecTV to secure exclusive contracts for
     desirable programming that is *not* affiliated with News Corp. to
     the detriment of competing MVPDs and consumers.[^787] These
     commenters seek to end DirecTV's ability to enter into exclusive
     contracts with unaffiliated programmers, such as the NFL.[^788]
     EchoStar contends that News Corp.'s ability to offer worldwide
     distribution to content providers will result in exclusive
     arrangements for DirecTV.[^789] According to EchoStar, News Corp.'s
     dominant presence in Great Britain, Asia, and Latin America will
     enable it to out-bid EchoStar for sporting events such as World Cup
     Soccer or the Olympic Games.[^790] EchoStar contends that News
     Corp.'s ability to outbid EchoStar would not be the result from
     normal, market-based competition, but from the leveraging of market
     power abroad to create market power in the United States.[^791]

290. ACA is concerned that News Corp. will have strong incentives to
     expand DirecTV's practice of entering into exclusive arrangements
     for popular content, such DirecTV's current NFL Sunday Ticket
     offering. ACA contends that such arrangements could be used to
     target small cable competitors that are ill-equipped to secure such
     deals.[^792] Accordingly, ACA urges the Commission to require
     Applicants to make such "all" News Corp. and DirecTV programming,
     including unaffiliated programming carried by DirecTV, available to
     small cable operators under reasonable prices, terms, and
     conditions.[^793] CFA agrees, asserting that the Applicants'
     program access commitments must be expanded to prevent News Corp.
     from entering into exclusive arrangements with third parties.[^794]

291. *Discussion.* The record does not demonstrate that the transaction
     is likely to increase DirecTV's incentive and ability to secure
     exclusive programming contracts with unaffiliated programmers, as
     its share of the MVPD market is not being increased by the
     transaction. In several prior mergers involving MVPDs, the
     Commission has rejected arguments that the post-merger entity
     should be required to abide by an exclusivity restriction with
     respect to programming of unaffiliated programming vendors.[^795]
     Similarly, the Commission considered whether to expand the
     exclusivity provision to non-vertically integrated programmers in
     the last program access proceeding and found that such an expansion
     would directly contradict Congress' intent in limiting the program
     access provisions to a specific group of market participants.[^796]
     Commenters have failed to offer a cogent rationale for doing so in
     the context of this proceeding.[^797]

292. We disagree with the contention that the transaction will increase
     News Corp.'s ability to outbid EchoStar by leveraging its market
     power abroad in the worldwide distribution of sporting events to
     create market power in the United States. In making this claim,
     EchoStar apparently confuses News Corp.'s ownership of satellite
     assets covering broad geographic areas with the ability to deliver
     large audiences worldwide. In fact, only eight percent of
     television households throughout the world subscribe to DBS
     services.[^798] The vast majority of the world's television
     households (61%) receive video programming only via free
     over-the-air television.[^799] It is the ability to deliver large
     audiences via free over-the-air television, not large geographic
     areas, that increases a distributor's ability to secure rights to
     sports programming of worldwide interest, and News Corp. is
     competing for such rights with many international broadcasters who
     can deliver larger audiences.[^800] In addition, the sporting
     events EchoStar is concerned about are governed by organizations
     such as Federation Internationale de Football Association
     ("FIFA")[^801] or the International Olympic Committee ("IOC"),
     which seek to maximize distribution of the events, not restrict
     supply and raise prices. IOC, for example, only grants distribution
     rights to broadcasters who can guarantee the broadest coverage
     throughout their respective countries free of charge.[^802]
     Therefore, while News Corp. has the ability to distribute the
     Olympics through its free over-the-air television O&Os and
     affiliates, its ownership of or acquisition of satellite
     distribution platforms---which are not free to the public---is
     unlikely to expand or enhance News Corp.'s ability to secure rights
     to the Olympics. To the extent that other U.S. programming
     distributors are willing and able to offer wider, free distribution
     of these few events, they are likely to remain on at least an equal
     footing with News Corp. in the bidding for distribution rights.

293. In conclusion, we find objections concerning exclusive programming
     arrangements with third parties unrelated to the present
     transaction. There is no evidence in the record to support a
     finding that the proposed transaction will increase the incentive
     or ability of DirecTV to enter into exclusive arrangements with
     programmers, and commenters have not convinced us of the benefits
     to the public of limiting the ability of unaffiliated programmers
     to enter into exclusive contracts with DirecTV.

## Applicants' Conduct in Foreign Jurisdictions

294. *Positions of the Parties.* Several parties contend that News
     Corp.'s alleged anticompetitive track record and market power with
     respect to its MVPD satellite provider BSkyB in the United Kingdom
     (UK) should be factored into the Commission's determination of the
     potential harms of this proposed transaction.[^803] EchoStar and
     JCC argue that News Corp.'s operation of BSkyB offers a "preview of
     what can be expected in the U.S."[^804] JCC claim that BSkyB's UK
     track record underscores the risks that this transaction will
     expand opportunities for News Corp. to artificially inflate
     programming costs and impose unfair tying and bundling requirements
     for content it controls in order to harm rival content suppliers
     and distributors.[^805] EchoStar recommends that the Commission
     should not accept News Corp.'s claim that it lacks market power in
     the United States programming markets and accordingly should
     conduct its own investigation in light of the anticompetitive
     incentives recognized by the UK regulatory authority, the conduct
     of News Corp.'s vertically integrated UK subsidiary, and the UK
     regulatory authority's finding that News Corp. is dominant in UK
     programming markets.[^806]

295. Applicants respond that the "preview" should be encouraging for
     domestic consumers because BSkyB offers a fully digital,
     interactive service with a host of features not yet available in
     the United States.[^807] Moreover, Applicants claim that the
     allegations of BSkyB's malfeasance in the UK are irrelevant to the
     Commission's review of the proposed transaction based on the
     Applicants' reliance on a 1999 Commission decision regarding an
     MCI-EchoStar-News Corp. license transfer application.[^808]
     Finally, Applicants urge the Commission to reject EchoStar's
     request to subject News Corp. to certain conditions imposed on
     BSkyB in 1996 by UK regulatory authorities regarding prior approval
     of rate cards, channel unbundling, the submission of various
     accounts, and its control of proprietary encryption
     technology.[^809] Applicants contend that there is no support
     offered by EchoStar for this type of unprecedented MVPD regulation,
     even on cable operators with far greater market share than DirecTV,
     and note that EchoStar did not recommend such conditions for itself
     in 1999 when News Corp. purchased a 32% share of EchoStar.[^810]

296. *Discussion.* In *MCIT/EchoStar*, the Commission was unpersuaded by
     arguments calling for the imposition of program access conditions
     on EchoStar in its acquisition of MCI and News Corp. satellite
     licenses.[^811] One of the primary bases for these proposed
     conditions was the conduct of News Corp.'s BSkyB satellite service
     in the UK and the resulting program access conditions imposed on
     BSkyB by the UK regulatory authority.[^812] The Commission did not,
     however, analyze BSkyB's conduct in the UK when it decided not to
     impose program access conditions. Instead, the Commission declined
     to impose the conditions because of an inadequate record to support
     a finding that EchoStar had market power and because of the ability
     of MVPDs to use the Commission's program access rules for redress
     if a News Corp. programming arrangement resulted in price
     discrimination or unfair practices.[^813] Thus, the Commission
     precedent discussed by Applicants is of limited assistance.

297. While the Commission generally does not consider harms resulting
     from a transaction occurring outside the United States in its
     public interest analysis of a transaction unless the transaction
     directly impacts a relevant domestic market, nothing in relevant
     statutory or case law would prevent the Commission from considering
     the conduct of the Applicants in foreign jurisdictions to determine
     the likelihood of similar future conduct in the United
     States.[^814] Evidence regarding foreign conduct could provide
     useful guidance as to how Applicants might act in the United States
     if they had similar media assets and economic incentives. Based on
     our understanding of the UK BSkyB experience, however, we do not
     believe the proposed transaction would result in sufficiently
     parallel market conditions to warrant great reliance upon BSkyB's
     UK experience.

298. The UK's Office of Fair Trading (OFT) conducted two formal
     investigations of BSkyB's wholesale business practices. In its 1996
     decision, OFT examined several complaints lodged against BSkyB,
     including its wholesale pricing for programming, programming
     packaging, programming rights, and conditional access
     services.[^815] OFT's investigation determined that several of
     BSkyB's business practices warranted scrutiny, which led to BSkyB
     agreeing to submit separate accounting information for its
     wholesale and retail operations.[^816] BSkyB also committed to
     modify certain of its programming carriage requirements in response
     to concerns raised by OFT.[^817] OFT determined that the
     undertakings to which BSkyB agreed were sufficient to avoid a
     formal referral to the UK's Monopolies and Mergers
     Commission.[^818]

299. In its 2002 review of BSkyB, OFT again reviewed numerous aspects of
     BSkyB's business practices in response to various complaints from
     BSkyB's wholesale customers and retail competitors.[^819] OFT
     focused on three main areas: whether BSkyB had imposed a margin
     squeeze on its retail competitors; whether discounts in BSkyB's
     mixed program bundling scheme prevented rival premium channel
     providers from entering the market; and whether BSkyB's rate card
     discounts were anti-competitive.[^820] In framing its
     investigation, OFT determined that BSkyB held a dominant position
     in the market for the wholesale supply of certain premium sports
     channels and certain premium films channels.[^821] Under UK law,
     however, dominance in and of itself is not a violation of the UK
     Competition Act of 1998. Rather, abuse of a dominant position must
     be shown. OFT determined that BSkyB had not abused its dominant
     position in either sports or film programming, nor in the manner in
     which it made that programming available to its competitors. OFT
     determined that there was insufficient cause to find that BSkyB had
     exercised a margin squeeze on its competitors.[^822] It further
     determined BSkyB's mixed bundling wholesale price strategy was not
     an abuse of its dominant position.[^823] Finally, OFT determined
     that BSkyB's rate card discounts were not an abuse of its dominant
     position and had not forestalled entry into the wholesale market
     for premium channels.[^824] Thus, in its most recent investigation
     of BSkyB's business practices, which built upon its previous
     investigation, the principle UK regulator determined that BSkyB's
     behavior did not violate UK competition law. We assume that OFT
     continues to examine BSkyB's behavior as it continues to maintain
     its position of dominance.[^825]

300. There is no evidence in the record indicating that BSkyB's current
     wholesale provision of programming is in violation of UK
     competition law, and although the company was found in an earlier
     investigation to be engaging in marginally anticompetitive
     activities, those same concerns appear to have dissipated during
     the more recent review. We do not believe it would be fair to focus
     on a set of behaviors, which BSkyB agreed to modify via specific
     undertakings and have since been modified or superceded by properly
     competitive behavior in the UK pay TV market, as evidenced by the
     lack of UK regulatory censure or referral for anticompetitive
     remedies. Furthermore, although it is instructive to examine the
     behavior of News Corp.'s various subsidiaries, we find that each of
     those subsidiaries functions in essentially a unique commercial
     environment and is subject to specific national regulatory regimes.
     To arbitrarily apply a set of conditions, as espoused by EchoStar,
     without taking into consideration the specific conditions and
     competitive dynamic of the relevant market, in this case the MVPD
     market in the United States, would be arbitrary and inappropriate.

## Competitive Harms in Latin America and Impact on U.S. Consumers and Programmers

301. *Positions of the Parties.* EchoStar argues that the Commission
     should consider the impact the proposed transaction will have on
     MVPD markets in Latin America, as well as the resulting indirect
     impact on U.S. consumers and independent programmers.[^826]
     EchoStar claims that the only two Direct-to-Home satellite
     providers in Latin America are affiliates of Hughes and News Corp.,
     Galaxy Latin America and Sky Latin America, and cable is not a
     significant competitor to those two MVPDs. EchoStar argues that the
     proposed transaction will result in a near monopoly for MVPD
     services in Latin America, which will indirectly impact U.S.
     consumers by increasing the leverage of News Corp. as a
     "monopsonist" in Latin America to extract concessions from
     programmers in other countries, including the U.S.[^827] EchoStar
     contends that the Commission has adequate authority to take this
     alleged harm under consideration based on the Commission's inquiry
     in 1997 involving Hughes acquisition of PanAmSat. EchoStar claims
     that in 1997 the Commission dismissed a concern regarding Sky Latin
     America, who had leased capacity from PanAmSat, because, in part,
     the programming ventures at issue would remain under separate
     ownership. Under the proposed transaction, EchoStar argues that the
     separate ownership relied upon in 1997 would be eliminated.[^828]
     Tectelcom Tecnica em Telecommunicacoes Ltda. ("Tecsat"), a
     Brazilian company, also raises concerns about the competitive
     impact of the transaction in Brazil where News Corp. provides
     satellite subscription service in competition with DirecTV.[^829]

302. Applicants urge the Commission to reject EchoStar's call to
     consider the impact of the proposed transaction on Latin America.
     First, Applicants note the Commission's prior holding that the
     effects of a transaction arising outside of the United States are
     not relevant to the Commission's public interest analysis of the
     transaction.[^830] Second, Applicants argue that the 1997 merger of
     Hughes and PanAmSat is not analogous to the proposed
     transaction.[^831] The Applicants contend that the impact on the
     Latin America video market was raised by a party, Comsat, not the
     Commission, and was more relevant to that transaction because the
     relevant market for that transaction was the international
     telecommunications service market. The Applicants conclude that the
     proposed transaction does not address that market and raises no
     similar issues.[^832]

303. *Discussion.* We find that commenters have failed to provide
     persuasive evidence as to why the Latin America MVPD market is
     relevant to our consideration of the harms resulting from the
     proposed transaction. As the Applicants indicate, the Commission
     generally does not consider harms resulting from a transaction
     occurring outside the United States in our public interest analysis
     of a transaction, unless the transaction directly impacts a
     relevant United States market.[^833] We also agree with the
     Applicants that the 1997 Hughes-PanAmSat transaction targeted a
     different market from the markets at issue here.

## DirecTV and Fox Network Service in Alaska and Hawaii

304. *Positions of Parties.* Microcom argues that the Commission should
     deny the proposed transaction unless the Commission conditions its
     approval with measures designed to address the alleged failure of
     Hughes and News Corp. to provide satellite service to Alaska
     consumers.[^834] Microcom contends that DirecTV has failed to
     provide Alaska and Hawaii with comparable service to that provided
     in other states even though existing regulation requires them to do
     so.[^835] Microcom also contends that News Corp. is the only major
     broadcaster that has effectively denied many Alaska commercial
     establishments Fox network programming by refusing to allow DBS
     satellite reception of distant Fox affiliate stations by commercial
     establishments outside the grade B contour of the local Fox
     affiliates and requiring that these establishments install a C-band
     satellite system to receive the programming from a satellite many
     cannot see, *i.e.*, that is below or close to the horizon.[^836]

305. The Applicants argue that Microcom's allegations are meritless and
     do not represent cognizable reasons for the Commission to deny
     approval of the proposed transaction or to condition it as Microcom
     suggests. The Applicants claim that DirecTV has always provided
     Alaska with the same programming it offers to continental U.S.
     subscribers although with larger satellite dish antennas for
     reception.[^837] The Applicants also dispute the allegation that
     commercial establishments in Alaska are denied DBS reception of
     distant affiliate signals, noting that copyright law permits
     satellite carriers to retransmit distant signals for private home
     viewing only and not into commercial establishments.[^838]

306. *Discussion.* The Commission's rules require that DBS licensees
     provide service where technically feasible to Alaska and Hawaii,
     and DBS licensees must offer packages of services in Alaska and
     Hawaii that are reasonably comparable to what they offer in the
     contiguous 48 states.[^839] The issues raised by Microcom regarding
     DBS service to Alaska and Hawaii are not specific to this
     transaction and are more appropriately being addressed in another
     Commission proceeding focused specifically on those issues.[^840]
     Further, issues raised regarding News Corp.'s provision of distant
     affiliate signals involve interpretation of copyright law and are
     not properly addressed in this proceeding.[^841]

## Exclusion of Non-Network Affiliated Broadcasters from the Benefits of Local-Into-Local Carriage

307. *Positions of the Parties.* Johnson Broadcasting contends that
     DirecTV has denied it local-into-local carriage, as a licensee of
     TV station KLDT, Lake Dallas, Texas, in violation of the
     SHVIA.[^842] Since SHVIA's implementation, Johnson Broadcasting
     claims DirecTV has attempted to undermine the Act's policy
     objectives by excluding non-network affiliated broadcasters from
     the benefits of local-into-local carriage.[^843] Johnson
     Broadcasting states that DirecTV alleged that Johnson Broadcasting
     filed its request for carriage one day late and therefore denied
     Johnson's request. Johnson Broadcasting argues that the deadline
     fell on a Sunday and therefore filed the next day, Monday, in
     accordance with Commission filing rules. As a result, Johnson
     Broadcasting filed a complaint with the Commission's Cable Services
     Bureau, which was subsequently denied.[^844] Johnson Broadcasting
     now has an Application for Review regarding its complaint pending
     before the Commission. Johnson Broadcasting contends that it will
     not be eligible for carriage on DirecTV's system until January 1,
     2006, as a result of DirecTV's denial of local-into-local
     carriage.[^845] Johnson Broadcasting seeks the imposition of
     several conditions. First, before acting on the proposed
     transaction, the Commission should first ensure that all
     broadcasters be guaranteed the right to mandatory carriage in any
     market where DirecTV provides local-into-local service. Second, the
     Commission should grant Johnson Broadcasting's Application for
     Review and order DirecTV to commence carriage of KLDT in the Dallas
     DMA.[^846]

308. The Applicants argue that this license transfer proceeding is not
     the proper forum to litigate Johnson Broadcasting's complaint and
     note that the Media Bureau and a federal district court have
     already dismissed this same mandatory carriage complaint against
     DirecTV.[^847]

309. *Discussion.* We agree that this license transfer review proceeding
     is not the proper forum to address Johnson's Broadcasting's
     complaint, and Johnson Broadcasting has provided no evidence
     indicating that DirecTV is in violation of SHVIA on an
     industry-wide basis. Accordingly, we reject the conditions proposed
     by Johnson Broadcasting.

## Lack of Final Media Ownership Rules

310. *Positions of the Parties.* The National Hispanic Media Coalition
     (NHMC) argues that the Commission should deny the proposed
     transaction application and find that a substantial and material
     question exists as to whether the proposed transaction is in the
     public interest because the Commission has not provided the public
     with final media ownership rules allegedly needed to determine the
     relevant factual showings and/or legal standards for reviewing the
     proposed transaction. Initially, NHMC argued that the Commission
     had not released final rules at the time initial comments were due
     on the proposed transaction application.[^848] Subsequently, NHMC
     contended in its reply comments that the Commission had only
     recently released an erratum to the *Media Ownership Order* and had
     not published final rules in the Federal Register as of the
     deadline for reply comments.[^849] As a result, NHMC argues that,
     if the Commission were to issue a decision on the proposed
     transaction during this time of legal limbo where the Commission
     lacks final multiple ownership and cross-interest rules, the
     decision would violate the fair notice and opportunity for comment
     provisions of the Administrative Procedure Act.[^850] If the
     Commission does not deny the proposed transaction application for
     these reasons, NHMC argues that the Commission must release a new
     public notice allowing interested parties to file comment on the
     proposed transaction within 30 days upon release of final media
     ownership rules.[^851]

311. The Applicants argue that NHMC's request is groundless and largely
     moot and therefore should be rejected.[^852] The Applicants note
     that the new media ownership rules were released with the
     Commission's *Media Ownership* *Order* on July 2, 2003.[^853]
     Further, the Applicants contend that the new media ownership rules
     are irrelevant to their license transfer Application because the
     Application does not involve any broadcast licenses of the type
     that are at issue in the *Media Ownership Order* and thereby
     subject to the broadcast license transfer processing freeze.[^854]

312. *Discussion.* Since the filing of NHMC's reply comments, the
     Commission has released its final media ownership rules.[^855]
     Those rules, however, were stayed by the United States Court of
     Appeals for the Third Circuit.[^856] As a result, the previous
     media ownership rules have been reinstated. Thus, all commenters
     have had, and continue to have, available what are now the current
     media ownership rules at the deadlines for initial and reply
     comments on the proposed transaction. Moreover, because this is a
     permit-but-disclose proceeding, interested parties, including NHMC,
     were able to file comments addressing the impact of the current
     media ownership rules on the proposed transaction in the form of
     oral or written ex parte presentations throughout this up
     proceeding. Finally, these rules are part of the Commission's
     continuing biennial review process and therefore will be subject to
     change at least every two years. For these reasons, we do not find
     NHMC's arguments compelling and will not release a subsequent
     public notice seeking comment as requested.

## Protection of General Motors Class GMH Stockholders

313. *Positions of the Parties.* Wyser-Pratte Management Co.
     (Wyser-Pratte) petitioned the Commission to deny the proposed
     transaction or condition its approval of the proposed transaction
     on the equitable treatment of holders of General Motors Class H
     Common Stock ("GMH stock")[^857] so that GMH stockholders are
     treated as favorably in the proposed transaction as GM, the holder
     of all of Hughes common stock.[^858] Wyser-Pratte alleges that the
     proposed transaction discriminates against GMH stockholders through
     a \$275 million distribution from Hughes to GM as a part of the
     transaction for claimed "value enhancements" for GMH stockholders
     arising from the conversion of GMH from a tracking stock to an
     asset-based stock.[^859] Wyser-Pratte claims the proposed
     transaction will result in proceeds of sale of Hughes to News Corp.
     at \$15 per share to GM and \$14 per share to GMH
     shareholders.[^860] Wyser-Pratte argues based on Commission
     precedent that the Commission is obligated to protect the rights of
     GMH shareholders in the Commission's review of the proposed
     transaction.[^861]

314. *Discussion.* We disagree with Wyser-Pratte that its claim falls
     within the scope of our review of the proposed transaction. While
     it is true that the Commission does consider the rights and
     interests of the relevant companies (shareholders) and consumers
     (ratepayers) in its review of license transfers, we agree with the
     Applicants that it is beyond the scope of our review to consider
     allegations of unfair premiums paid to specific classes of
     shareholders in a given transaction.[^862] The Commission is not
     the proper forum for what is, in effect, a shareholder derivative
     suit seeking a share of an alleged control premium. Such claims are
     properly within the jurisdiction of the appropriate state
     court.[^863] Accordingly, we dismiss Wyser-Pratte's petition as
     beyond the scope of our review of the proposed transaction.

# analysis of potential public interest benefits

315. We now consider the efficiencies and other public interest benefits
     that Applicants claim will result from the proposed merger. As
     discussed below, we find that the proposed transaction is likely to
     yield several cognizable benefits. First, we find that News Corp.,
     in its management of BSkyB, Sky Italia, and its other DTH
     operations, has demonstrated a willingness to take risks in
     introducing and promoting new and innovative services. Based on
     this management history, and in particular, its record of
     innovation in many media businesses, including its introduction of
     interactive services in the United Kingdom, we find credible the
     Applicants\' claim that News Corp. will accelerate the introduction
     of new services, and, in particular, interactive television
     services by DirecTV, and that the public will benefit from the
     entry of this innovative and aggressive competitor in the MVPD
     market. Second, we conclude that consumers will benefit, and our
     goals of promoting localism and competition will be furthered, to
     the extent that the transaction increases the number of DMAs that
     receive local-into-local broadcast television channels. To ensure
     that this benefit is realized, we impose a condition described
     below that is intended to ensure that News Corp. will adhere to its
     promised build-out plans. Third, we find that the proposed
     transaction is likely to yield some benefits in the form of
     increased economies of scale and scope, improved customer
     satisfaction and reduced churn, and a reduction in double
     marginalization. We assign little weight to those claimed benefits,
     however, for the reasons given below. Finally, as discussed below,
     we do not recognize as potential public interest benefits the
     Applicants\' claims that the proposed transaction will result in
     increased operating efficiencies, improved access to capital, or
     expanded program and employment diversity and equal opportunity.

## Analytical Framework

316. The Commission has recognized that \"\[e\]fficiencies generated
     through a merger can mitigate competitive harms if such
     efficiencies enhance the merged firm's ability and incentive to
     compete and therefore result in lower prices, improved quality,
     enhanced service or new products."[^864] Under Commission
     precedent, however, the Applicants bear the burden of demonstrating
     that the potential public interest benefits of the proposed
     transfer outweigh the potential public interest harms.[^865]

317. There are several criteria the Commission applies in deciding
     whether a claimed benefit should be considered and weighed against
     potential harms. First, the claimed benefit must be *transaction-*
     or *merger-specific.* This means that the claimed benefit \"must be
     likely to be accomplished as a result of the merger but unlikely to
     be realized by other means that entail fewer anticompetitive
     effects.\"[^866] Second, the claimed benefit must be *verifiable.*
     Because much of the information relating to the potential benefits
     of a merger is in the sole possession of the Applicants, they are
     required to provide sufficient evidence supporting each benefit
     claim so that the Commission can verify the likelihood and
     magnitude of the claimed benefit.[^867] In addition, as the
     Commission has noted, \"the magnitude of benefits must be
     calculated net of the cost of achieving them.\"[^868] Furthermore,
     speculative benefits that cannot be verified will be discounted or
     dismissed. Thus, as the Commission explained in the *EchoStar --
     DirecTV HDO,* \"benefits that are to occur only in the distant
     future may be discounted or dismissed because, among other things,
     predictions about the more distant future are inherently more
     speculative than predictions about events that are expected to
     occur closer to the present.\"[^869] Third, the Commission has
     stated that it \"will more likely find marginal cost reductions to
     be cognizable than reductions in fixed cost.\"[^870] The Commission
     has justified this criterion on the ground that, in general,
     reductions in marginal cost are more likely to result in lower
     prices for consumers.[^871]

318. Finally, the Commission applies a \"sliding scale approach\" to
     evaluating benefit claims. Under this sliding scale approach, where
     potential harms appear \"\'both substantial and likely, the
     Applicants' demonstration of claimed benefits also must reveal a
     higher degree of magnitude and likelihood than we would otherwise
     demand.\'"[^872]

## Claimed Benefits

319. The Applicants claim that the proposed transaction will generate
     several types of public interest benefits. These claimed benefits
     are summarized and evaluated below.

### Improvements in DirecTV's Service Offerings Resulting from News Corp's Innovative Management

320. Claiming that News Corp. "has a proven track record of innovation
     in programming and DTH services," Applicants contend that News
     Corp. will apply its innovative management style to Hughes.[^873]
     In particular, the Applicants claim that News Corp. will enhance
     DirecTV\'s interactive television offerings and increase the
     penetration of integrated set-top boxes among DirecTV customers.

321. *Interactive Television.* News Corp. claims that it will use its
     experience from launching interactive television ("ITV") services
     in the U.K. through BSkyB to "enhance the ITV capabilities
     available to DirecTV subscribers and to create a greater level of
     awareness among consumers."[^874] According to Applicants, BSkyB's
     SkyActive service offers interactive news and delivers "online
     shopping, banking, games, e-mail, travel, tourism, and information
     services with all the look, feel, and immediacy that customers
     expect from television."[^875] Subscribers can "choose from
     multiple segments being broadcast simultaneously on a news
     channel," "view multiple screens of programming within a certain
     genre and click on the one that interests them, and can choose from
     among multiple camera angles during the broadcast of sporting
     events."[^876] Applicants contend that an ITV offering will make
     DirecTV a better competitor in the MVPD market.[^877]

322. Applicants have additionally stated that, as a first step toward
     introducing "robust interactive services," the merged entity would
     release a new user interface in 2004 that will be incorporated in
     all new set-top-boxes and will be downloaded to as many as 10
     million legacy set-top-boxes that are already operating in
     subscribers' homes.[^878] Applicants further state that, by the end
     of 2004, the parties will incorporate new middleware into
     subscriber set-top-boxes that will enable DirecTV to introduce new
     interactive services, including interactive news, weather, traffic,
     and games.[^879]

323. Several parties opposing the transaction contend that allowing News
     Corp. to apply its experience and assets relating to ITV services
     to DirecTV will result in public interest harms, rather than a
     benefit.[^880] These arguments are addressed in section VI.C.4.d,
     *supra.*

324. *Integrated Set-top Boxes.* Applicants also claim that the proposed
     transaction will increase the penetration of digital video
     recorders ("DVRs") contained in integrated set-top boxes. According
     to Applicants, the merged entity, by "drawing on the marketing
     expertise within FEG, BSkyB and other affiliated companies . . .
     \[will\] create consumer awareness of and demand for the
     product."[^881] Applicants state that they plan to deploy
     set-top-boxes with integrated DVRs at more competitive prices by
     2005.[^882] In addition, they claim that they are "exploring the
     potential of incorporating digital terrestrial television tuners
     into DirecTV set-top boxes."[^883] They further claim that "these
     digital signals can be seamlessly processed by the set-top-box with
     the DirecTV satellite signal in a manner that will be transparent
     to the viewer."[^884] Applicants also contend that the "proposed
     transaction should result in a significant reduction in signal
     piracy" because of the post-transaction combination of efforts by
     DirecTV (which currently uses its own proprietary conditional
     access technology) and News Corp.\'s subsidiary, NDS, a leading
     provider of conditional access technology.[^885]

325. *Discussion.* We find that News Corp., under the leadership of
     Rupert Murdoch, has demonstrated a willingness to take risks,
     introduce innovative services, and fundamentally change the nature
     of competition in multiple media markets. And in numerous cases,
     this willingness to take risks has benefited both News Corp. and
     consumers. For example, in its management of BSkyB, Sky Italia, and
     its other DTH operations, News Corp has demonstrated a willingness
     to take risks in introducing and promoting new services, including,
     in particular, interactive services and new programming channels.
     We further find that these innovations have generated increased
     subscriber growth and reduced churn, indicating increased consumer
     satisfaction. For example, in October 1998 BSkyB introduced digital
     satellite service and aggressively promoted it by giving away
     set-top boxes and introducing a new low-cost entry-level digital
     tier.[^886] Between its introduction of digital DTH service in
     October 1998 and June 2002, News Corp. increased the total number
     of subscribers to BSkyB from 3,547,000 to 6,101,000 (an increase of
     72%), while reducing churn significantly.[^887] Moreover, the
     majority of this increase followed the introduction of digital
     interactive services.[^888] In fact, in the first six months after
     the introduction of interactive TV news in June 2000, BSkyB\'s
     subscribership increased by 12 percent.[^889] News Corp. has also
     aggressively introduced new programming and programming services in
     its Sky Italia and STAR operations. For example, Sky Italia
     launched a new 24-hour news channel in August 2003.[^890]
     Similarly, in Asia, STAR expanded its offering of services, ranging
     from radio to television to interactive digital cable TV,[^891] and
     including the introduction of Xing Kong Wei Shi, the first all-new
     channel granted cable carriage in mainland China.[^892]

326. News Corp. has pursued a similar strategy of innovation and
     aggressive competition in the United States and in many cases has
     successfully challenged incumbent broadcast and cable programming
     networks. For example, in the mid-1980s, News Corp. purchased six
     television stations and then challenged the long-standing dominance
     of the then big-three broadcast television networks by launching a
     fourth broadcast network, despite widespread skepticism that no
     such network could survive.[^893] Over the years, News Corp.
     acquired additional independent broadcast television stations and
     entered into affiliation agreements with more, and News Corp.
     helped the local stations build market share by, among other
     things, introducing prime-time local news broadcasts (the 10:00
     p.m. time slot), by introducing new and popular programming on the
     Fox network (such as *The Tracey Ullman Show, Married. . . .With
     Children, The Simpsons, America\'s Most Wanted,* *The X-Files,* and
     *24)* and by outbidding CBS for the right to broadcast National
     Football Conference games.[^894] News Corp. has been similarly
     aggressive in introducing new cable networks. For example, its
     launch of Fox News Channel brought a new perspective on cable news
     and brought heightened competition to a market that previously had
     been dominated by CNN.[^895] Similarly, News Corp., by accumulating
     stakes in a number of regional networks and by aggressively bidding
     for broadcast rights, built Fox Sports Net into the largest RSN
     that now challenges ESPN.[^896] Finally, News Corp. has introduced
     new and innovative programming on its various overseas DTH
     platforms.[^897]

327. Given News Corp.\'s history of taking significant risks and
     introducing new and innovative media services, including in
     particular DTH services, we find credible the Applicants\' claim
     that they will accelerate the introduction of new DTH services,
     including interactive services. Moreover, it has been reported that
     cable MSOs, in anticipation of the consummation of this proposed
     transaction, are already stepping up plans to introduce new
     interactive services.[^898] In this regard, we find that News
     Corp.\'s recent acquisition of *MEDIA*HIGHWAY from Thomson for
     \$66.5 million indicates a commitment on the part of News Corp. to
     interactive television.[^899] Although we can not estimate exactly
     the value to consumers of News Corp.\'s innovative management
     style, we find it to be a major benefit to the public of the
     transaction.[^900]

328. On the other hand, we find that the Applicants have not
     demonstrated that their claims concerning increased penetration of
     integrated set-top-boxes are either credible or
     transaction-specific. More specifically, we find that the
     Applicants make broad claims about set-top boxes without providing
     adequate supporting evidence. In addition, with respect to the
     claim that they might integrate digital terrestrial television
     tuners into DirecTV set-top boxes, they do not explain why this
     integration could not take place in the absence of the transaction.

### Increased Offering of Local-into-Local, HDTV, and Broadband Services

329. Applicants claim that, after the merger, News Corp.: (1) will bring
     its commitment to local-into-local to DirecTV and thus increase the
     number of DMAs in which local broadcast signals are available;
     (2) will increase the amount of HDTV programming that DirecTV makes
     available; and (3) will develop new options for consumer broadband
     services.[^901] Applicants state that they will consider using new
     satellites and new technologies to achieve that goal, and they
     specifically point to the possibility of using Ka-band satellite
     capacity and/or integrating digital terrestrial tuners into the
     DirecTV set-top boxes. Applicants further assert that News Corp.
     will work aggressively to expand broadband options to better
     compete with cable's video and broadband offerings.

330. NRTC and ACA respond that Applicants have not explained how the
     merged firm will expand local-into-local service and have not made
     a commitment as to how many markets it will serve. NRTC asserts
     that, while Applicants claim that they will increase both
     local-into-local and HDTV, they do not explain how they will
     accomplish both at the same time.[^902] NRTC asserts that the same
     is true with respect to broadband services \-- that the Applicants
     have failed to discuss how or when DirecTV's satellite broadband
     offerings will be expanded.[^903] ACA asserts that News Corp. could
     increase the availability of HDTV nationwide by broadcasting HD on
     Fox Network.[^904] JCC claim that Applicants admit that Hughes can
     expand DirecTV's local-into-local offerings absent the
     transaction.[^905] EchoStar contends that these claims are not
     transaction-specific, and that DirecTV, absent the transaction, has
     access to all the means cited by Applicants for providing
     local-into-local in additional markets. EchoStar also states that
     DirecTV has already announced that, without the merger, it will
     offer additional HDTV, for a total of seven HDTV channels. Finally,
     EchoStar asserts that, to the extent that News Corp. enters into
     partnering arrangements with existing broadband providers, this
     will not create new broadband options.[^906]

331. Responding to critics\' questioning of the claim that the merger
     will result in an increase in the number of DMAs receiving local
     broadcast television signals via satellite, Applicants point to
     News Corp\'s expertise and commitment to local services, and the
     economies of scale and scope and improved access to capital that
     will result from the transaction. And they contend that these
     factors provide sufficient evidence that such an expansion will
     occur. With respect to NRTC and EchoStar\'s argument concerning
     expanded broadband deployment, Applicants acknowledge that Hughes
     already provides broadband and could engage in various partnering
     solutions, but maintain that, as a result of the proposed
     transaction, DirecTV will be able to increase these offerings, due
     to its improved capital structure.[^907]

332. Applicants subsequently committed to a schedule for providing a
     greater number of local channels and/or HDTV channels than DirecTV
     previously announced. Specifically, they committed to provide by
     end of 2004, either local channels in 30 additional DMAs, or 30
     more national HDTV channels, or some combination of additional
     local-into-local DMAs and HDTV channels, based on the bandwidth
     requirements.[^908] In addition, Applicants claim that, in the
     longer term, they will design and launch a new generation of
     satellites as early as 2006 and no later than 2008 that will
     provide much greater capacity for DirecTV services. This effort,
     which involves a financial commitment above that which Hughes's
     current owner has authorized, will enable DirecTV to provide local
     broadcast channels in all 210 DMAs, including local channels in
     HDTV format in select markets.[^909] Applicants stated that, "as
     early as 2006 and no later than 2008, (1) DirecTV will offer a
     seamless, integrated local channel package in all 210 DMAs, and (2)
     DirecTV will offer at least 200 to 300 channels of local and
     national HDTV programming." Applicants claim that DirecTV will be
     the strongest possible competitor to cable *only if* it can provide
     consumers with their local broadcast channels and with HDTV
     programming and that they intend to extend that capability as
     quickly and efficiently as possible.[^910]

333. *Discussion.* The Commission has long recognized the importance of
     local broadcast television and its contribution to the
     Commission\'s goal of fostering localism in media. To the extent
     that the transaction results in an increase in the amount of
     DBS-provided local-into-local service and/or the number of HDTV
     channels offered to subscribers, this should increase competition
     in MVPD markets and should benefit consumers through increased
     choice, lower prices, or both. In addition, we find that increasing
     the number of DMAs in which DirecTV subscribers can receive local
     broadcast television stations furthers the Commission\'s goal of
     promoting localism.[^911]

334. Applicants have alleged that a benefit of the transaction will be
     the provision by the end of 2004, by DirecTV of either local
     channels in an additional 30 DMAs or 30 more channels of HDTV, or a
     combination of local channels and HDTV channels that have similar
     bandwidth requirements above and beyond what had been previously
     funded, projected or planned by Hughes/DirecTV.[^912] In order to
     ensure that Applicants live up to their commitment to achieve the
     important public interest benefit of increased local channel
     service to all regions of the country, we require, as a condition
     of our license transfer approval, that, by year end 2004,
     Applicants provide local channel service in an additional 30 DMAs
     beyond what had been previously funded, projected or planned by
     Hughes/DirecTV. In the event that circumstances beyond DirecTV's
     control limit its ability to fulfill this license condition,
     DirecTV may petition the Commission for waiver pursuant to
     Commission rules.[^913]

### Increased Operating Efficiencies 

335. Applicants claim that, as a result of the transaction, DirecTV will
     realize savings in annual overhead and other operating expenses in
     the range of \$65 million to \$135 million. These savings,
     according to the Applicants, will be due largely to News Corp.'s
     experience in direct to home satellite services and its commitment
     to cost-efficient operations. The major elements of these claimed
     savings are: (1) savings of \$40-80 million from reduced customer
     service costs, of which \$20-40 million is assumed to be
     merger-specific; (2) savings of \$40-80 million from reduced
     general and administrative expenses; and (3) savings of \$7-15
     million from drawing on News Corp.'s experience and rationalizing
     operational areas of overlap.[^914]

336. ACA responds that, to the extent that the Applicants might realize
     any efficiencies, they will provide the merged firm with resources
     to support anticompetitive conduct.[^915] EchoStar and JCC state
     that the claimed efficiencies are unsupported by the evidence, are
     not transaction-specific and verifiable, and that the benefits of
     those efficiencies would flow to News Corp. rather than to
     consumers.[^916]

337. *Discussion.* Excluding for the moment savings that result from
     integration of the current distribution facilities of News Corp.
     and DirecTV, Applicants have not provided sufficient supporting
     evidence for us to verify and quantify the claimed savings
     resulting from increased operating efficiency. More importantly,
     Applicants have not demonstrated that the claimed savings in
     operating costs are transaction specific. In this regard, we note
     that many of the claimed savings are related to the introduction of
     "best practices," but Applicants fail to demonstrate why DirecTV,
     by itself or through other means that pose fewer competitive risks
     than the merger, could not also introduce those same best
     practices. For example, Applicants claim that, with the proposed
     transaction, DirecTV might reduce its costs by scaling back its
     reliance on third-party customer service centers, and performing
     that function in-house. Applicants estimate annual savings of
     \$40-\$80 million annually by instituting this change. Applicants
     claim that half those savings would be transaction specific, but
     provide no evidence that the incentive or ability to increase the
     use of in-house service centers is unique to News Corp. or that
     specific synergies exist by which News Corp. could operate in-house
     customer service facilities more efficiently than an outside
     contractor, or than could DirecTV itself if it provided customer
     service solely on an in-house basis. In fact, DirecTV currently has
     ten customer service centers, one of which is operated in-house.

338. Applicants also estimate annual savings of \$7-15 million by
     rationalizing operational areas, including the sharing of national
     distribution facilities operated by Fox Cable Networks and by
     DirecTV.[^917] We note, however, that News Corp. will have only a
     partial interest in DirecTV, and this may affect the feasibility of
     realizing benefits related to rationalizing operational
     areas.[^918] In particular, the Applicants have not demonstrated
     that, with a 34% interest in DirecTV, News Corp. could realize
     benefits above that which DirecTV could already realized through
     contractual agreement with News Corp. or some other entity.[^919]
     Thus, we exclude these savings from estimated benefits of this
     transaction*.*

### Economies of Scope and Scale 

339. Applicants claim that the proposed transaction, by more than
     doubling the post-transaction entity's subscriber base (from 11.4
     million for DirecTV alone to over 23 million subscribers for News
     Corp./DirecTV worldwide), will allow the merged entity to take
     advantage of economies of scale and scope. For example, Applicants
     claim that, by spreading the costs of research and development
     (\"R&D\") over all News Corp.\'s satellite operations and by
     pursuing common technology standards for both hardware and
     software, will be able to develop and introduce innovations more
     economically.[^920] Applicants further claim that the transaction
     will permit the merged entity to explore more efficiently
     next-generation technologies, such as improved video and audio
     compression, improved spectrum efficiency using 8PSK and other
     advanced modulation techniques and Turbo coding.[^921] Finally,
     Applicants claim that the vertical integration that will result
     from the transaction will reduce the risks of developing and
     launching new programming.[^922]

340. In addition, Applicants contend that the proposed transaction can
     achieve "significant economies of scope and scale" in the area of
     set-top boxes.[^923] According to Applicants, DirecTV's set-top
     boxes, which use a DirecTV proprietary standard, can be
     incorporated into the set-top-box platform used by News Corp.
     satellite affiliates.[^924] They argue that, by specifying the
     design of its set-top-boxes in greater detail than DirecTV has in
     the past, set-top-box manufacturers will be able to minimize their
     development costs and maximize component purchasing power,
     resulting in lower costs to DirecTV.[^925] Applicants further argue
     that research and development costs can be reduced by pursuing
     common technology standards across DirecTV and its other satellite
     affiliates.[^926] According to Applicants, these cost savings will
     amount to about \$10 per set-top box (or approximately \$60 million
     annually).[^927] The Applicants claim that these cost savings will
     not only benefit the customer purchasing a new set-top-box, but
     also reduce the subsidies required by the operators.[^928]
     Applicants contend that "this will all be possible without swapping
     out set top boxes."[^929]

341. JCC counter that, in concluding that set-top-box costs will
     decrease by \$10 per box, Applicants have, erroneously, assumed
     that News Corp. manufactures its own set-top-boxes. JCC maintain
     that the third party set-top-box vendors already compete to provide
     the best technology at the lowest price, and that the proposed
     transaction will only decrease the number of buyers in that
     market.[^930] EchoStar claims that any savings would flow to News
     Corp.'s shareholders, and not to consumers.[^931]

342. *Discussion.* To the extent that the proposed transaction enables
     the parties to combine their R&D efforts and to spread the cost of
     those R&D efforts over multiple satellite operations, this may
     increase the merged entity's incentive to innovate, which could
     result in new products and services that would not have been
     introduced absent the proposed transaction. To the extent this
     occurs, such benefits should be taken into account. On the other
     hand, if the innovations were developed by a third party who could
     sell its innovation to DBS or DTH providers worldwide (or if,
     absent the transaction, News Corp. and DirecTV would sell their
     innovations generally), then, as JCC point out, it is not clear
     that the proposed transaction would increase the incentive to
     innovate.

343. Similarly, if the merged entity can secure larger volume discounts
     from suppliers, and then pass those lower costs through to
     consumers in the form of lower end-user prices, this likewise would
     constitute a public interest benefit that should be considered in
     balancing the potential harms and benefits of the proposed
     transaction. If, on the other hand, the volume discounts take the
     form of savings in fixed costs, and those savings are not passed on
     to consumers, then we would be less inclined to treat such savings
     as a public interest benefit.

344. Based on the evidence presented by Applicants, we believe that the
     transaction is likely to enable the merged entity to achieve
     certain economies of scale and scope, particularly in R&D, that
     absent the transaction the parties individually could not have
     achieved. At the same time, it is not clear that all \$60 million
     estimated by Applicants would qualify as a cognizable public
     interest benefits, either because the savings are not transaction
     specific (such as when innovations are produced by third parties
     and sold generally) or because it is not clear that the savings
     will be flowed through to consumers. Thus, while we believe that
     the proposed transaction will yield certain transaction-specific,
     cognizable benefits resulting from economies of scale and scope, we
     do not accept the total savings estimated by Applicants.
     Accordingly, while we accept these benefits in theory, we do not
     give significant weight to them in our balancing of potential
     public interest harms and benefits.

### Improved Customer Satisfaction and Reduced Churn 

345. Applicants claim that, because the post-transaction entity will
     offer more and better quality DBS products, customer satisfaction
     will increase. This in turn should enable DirecTV to increase its
     subscriber base and reduce churn and generally make it more
     competitive vis-à-vis other MVPD providers.[^932] Applicants also
     contend that the proposed transaction, by bringing together the
     conditional access technology owned by News Corp.\'s NDS
     subsidiary, and DirecTV\'s conditional access technology, will
     enable the merged entity to reduce signal piracy.[^933] Based on
     Applicants\' estimates of incremental new subscribers and its
     estimates of savings resulting from reduced churn, Applicants
     project an annual increase in earnings of \$450 million to \$525
     million by 2006.[^934] Applicants assert that these revenues will
     be used for additional initiatives that will produce better
     products and services.

346. JCC counter that the claim of efficiencies related to increased
     customer satisfaction is simply a restatement of the claim that
     News Corp. will bring innovative offerings to DirecTV, and that
     this claim is too vague to be recognized.[^935] EchoStar argues
     that this claim rests on the earlier assumptions of increased
     local-into-local, HDTV, interactive services and DVRs, and that
     Applicants have not shown those claims to be transaction-specific.
     Noting that the claim relating to reduced churn is based in part on
     BSkyB's low churn rate, EchoStar further argues that that News
     Corp. faces different MVPD competitors in the U.K., and it points
     out that News Corp. has not specified how they will reduce churn
     for DirecTV.[^936]

347. *Discussion.* As various opponents of the transaction suggest, this
     claimed benefit, to a large extent, duplicates portions of previous
     claims, including claims that the proposed transaction will allow
     News Corp. to: (1) introduce more innovative services; (2) provide
     more local-into-local and HDTV; and (3) take advantage of economies
     of scale and scope. To the extent that this claimed benefit is
     duplicative of other claimed benefits, the benefits should not be
     counted twice. On the other hand, to the extent that the earlier
     benefits are cognizable, it is appropriate, in evaluating the
     earlier claims, to consider not only the cost savings, but also the
     demand response to any resulting decrease in price.

348. To the extent that the earlier benefits would reduce churn, that
     reduction would be a cognizable component of those benefits,
     provided that the earlier benefits are found to be
     transaction-specific. Applicants have not attempted to quantify
     these potential consumer benefits, however, but have only estimated
     the potential revenue gain to the merged entity of between \$450
     million and \$525 million by 2006. When we balance potential harms
     and benefits of the transaction, however, we will not give
     significant weight to the Applicants\' estimate because it is not
     clear whether some benefits are counted twice and because there is
     no attempt to quantify the benefits that might flow through to
     consumers.

### Improved Capital Structure 

349. *Positions of the Parties.* Applicants claim that, because Hughes
     is a wholly owned and controlled subsidiary of GM and currently has
     only a tracking stock, it is limited in its ability to pursue
     outside financing. The proposed transaction, Applicants claim, will
     eliminate this problem. ACA responds that DirecTV, while under the
     control of General Motors, attracted substantial investment,
     including a \$1.5 billion investment from AOL. ACA further argues
     that GM's decision on how much to invest in Hughes should have no
     bearing on the public interest.[^937]

350. *Discussion.* Although the proposed transaction may improve
     Hughes\' access to capital, as Applicants contend, we do not
     believe this to be a transaction-specific benefit. Rather, the gist
     of Applicants\' argument is that DirecTV cannot obtain direct
     access to the capital markets (because it only has a tracking
     stock) and that General Motors has no significant interest in
     further significant investments in this business. To the extent
     that access to capital is a problem, however, it could be
     ameliorated through other means that pose fewer competitive risks
     than the proposed transaction, such as spinning off DirecTV so that
     it has its own traded stock. Thus, since the capital structure
     could be improved through other means that pose fewer competitive
     risks, this claimed benefit is not transaction-specific.

### Reduction in Double Marginalization

351. Applicants claim that the reduction in \"double marginalization\"
     which results from vertical integration \"will create a downward
     incentive for News Corp.\'s programming prices.\"[^938] As
     discussed in greater detail above, we agree that vertical
     integration can reduce prices by reducing double
     marginalization.[^939] Nevertheless, because Applicants have
     neither attempted to quantify this benefit nor provided sufficient
     information for the Commission to quantify the benefit, we will not
     take it into account when weighing the potential harms and benefits
     of the proposed transaction.

### Increased Program and Employment Diversity 

352. *Positions of the Parties.* Applicants contend that the transaction
     will benefit the public by increasing programming geared to
     linguistic, ethnic, and cultural minorities, and by promoting
     employment diversity.[^940] These claims are summarized and
     discussed below.

353. Applicants assert that the proposed transaction would increase
     program diversity because the transaction will bring News Corp.'s
     "deep commitment" to diversity to Hughes, resulting in DirecTV's
     carriage of more programming targeted at culturally, ethnically,
     and linguistically diverse audiences.[^941] In support of this
     claim, News Corp. cites several examples of its commitment to
     diversity in programming, including television programming and
     films with prominent minority cast members and minority
     directors.[^942] Applicants assert that the nationwide reach of DBS
     service will allow News Corp. to efficiently aggregate and reach
     niche audiences. In response to these claims, as with other
     diversity benefits claimed by Applicants, commenters contend that
     Applicants have failed to show that there is anything lacking in
     DirecTV's commitment to diverse programming.[^943] Moreover,
     several commenters contend that the transaction poses potential
     harms to program diversity.[^944]

354. The Commission has traditionally sought to increase employment of
     women and minorities by broadcasters and MVPDs through its equal
     employment opportunity ("EEO") rules and policies.[^945] The
     Commission's rules prohibit discrimination in hiring and
     employment. In addition, FCC EEO outreach rules require
     broadcasters and MVPDs to: provide wide dissemination of job
     vacancies; undertake initiatives such as jobs fairs and internships
     to assist jobseekers develop skills and training; and evaluate
     regularly the efficacy of these efforts.[^946]

355. Applicants contend that the proposed transaction will serve the
     public interest by promoting employment diversity.[^947] Applicants
     submit that News Corp. is a leader in promoting employment
     diversity, and that its commitment to such diversity will be
     expanded to DirecTV as a result of the proposed transaction.[^948]
     Applicants cite several News Corp. EEO initiatives, including its
     Diversity Development Department, which is focused on ensuring a
     diverse workforce as well as diversity in procurement.[^949]
     Applicants report that News Corp.'s efforts have resulted in
     increased opportunities for writers, directors, producers and
     actors from diverse backgrounds.[^950] Applicants also cite News
     Corp.'s internship and apprenticeship programs,[^951] a Fox
     mentoring program for minority film and television
     entrepreneurs,[^952] and the fact that the Fox group of companies
     now has a much more diverse group of suppliers.[^953] Applicants
     assert that, after consummating the transaction, it will: (1)
     launch a mentoring program for female and minority entrepreneurs
     who seek to launch niche cable channels; (2) recruit and/or seek to
     promote women and minorities into leadership positions at
     Hughes; (3) implement an internship program at Hughes designed to
     attract diverse candidates; (4) evaluate and/or modify Hughes'
     procurement programs to ensure that they provide opportunities for
     minorities; and (5) upgrade Hughes' internal and external
     communications to facilitate diversity initiatives.[^954]

356. As with Applicants' program diversity claims, commenters contend
     that these claimed benefits are not transaction-specific. More
     specifically, they argue Applicants have not shown that DirecTV is
     any less committed to diversity than is News Corp.[^955]

357. *Discussion.* We agree with commenters that Applicants have failed
     to demonstrate that either the claimed program diversity or
     employment diversity benefits are transaction-specific. Applicants
     have described several News Corp. initiatives, which are much like
     those we seek to promote through our EEO rules.[^956] They have
     also identified a significant amount of News Corp. programming
     developed by production staff from diverse backgrounds which is
     targeted to diverse viewing audiences. In addition, News Corp.
     contends that it has taken steps to create a more diverse base of
     suppliers of equipment and services. These data may very well
     evidence high levels of program diversity and successful EEO
     policies at News Corp. However, Applicants have not demonstrated
     that DirecTV would not adopt similarly effective EEO initiatives or
     provide similarly diverse programming absent the transaction. As
     several commenters note, there is no evidence in the record that
     DirecTV's current programming is not diverse, or that its EEO
     polices need improvement. Thus, we cannot find that these claimed
     diversity benefits are transaction specific.

# balancing potential public interest harms and benefits

358. Our task under the Communications Act is to determine whether the
     "public interest, convenience and necessity will be served" by the
     granting of the Application.[^957] The public interest standard
     involves a balancing of potential public interest harms of the
     proposed transaction and the potential public interest
     benefits.[^958] The Applicants bear the burden of proving, by a
     preponderance of the evidence that the proposed transaction, on
     balance, serves the public interest.[^959] Our options at this
     stage are to approve the application without conditions, approve it
     with conditions, or hold a hearing if we are unable to make the
     findings required for approval.[^960] The Application and the
     substantial record before us make clear that, on balance, the
     public interest will be served by approval of the application as
     amended by the conditions that we impose herein.

359. The proposed transaction would combine News Corp., a major supplier
     of, *inter alia,* video programming, including one of four national
     broadcast networks, 35 owned and operated local broadcast
     television stations as well as various cable programming program
     networks, with Direct TV, the second largest MVPD and one of the
     two incumbent nationwide DBS providers. Integration of programming
     with distribution is not new in the media industry. Broadcasters,
     cable operators and DBS providers are all permitted to own
     programming assets, although the terms and conditions of the sale
     of vertically integrated satellite cable programming to rival
     distribution networks is subject to certain rules to ensure that
     vertical integration does not cause anticompetitive outcomes.[^961]

360. The potential harms of the combination of News Corp. and Hughes'
     assets are in many respects those inherent in such
     supplier/distributor integration, and in balancing the potential
     public interest harms and benefits, we take into account how such
     potential harms have been dealt with in related contexts. On the
     one hand, certain of the potential competitive harms inherent in
     vertically integrated programming/MVPD providers have been
     recognized as requiring special remedies to prevent potential
     abuses. On the other hand, the remedies chosen, at least in recent
     years, have not generally been structural remedies, such as
     prohibitions on common ownership of programming and distribution
     assets, but behavioral remedies, such as requirements for program
     access and nondiscrimination.[^962] This choice reflects the
     general recognition that vertical integration is less likely than
     horizontal integration to have anticompetitive effects and is more
     likely to promote efficiency.[^963]

361. There are, of course, obvious differences among broadcast
     television, cable, and direct broadcast satellite distribution
     systems. Full-CONUS direct broadcast satellite distribution
     systems, such as DirecTV's, are both multichannel and nationwide in
     scope, and this transaction will result in an unprecedented level
     of integration of both broadcast and cable programming assets with
     an incumbent nationwide DBS provider. At the same time, while the
     two primary incumbent DBS competitors have attracted enough
     subscribers nationwide to rank them among the largest MVPDs, they
     rank far behind cable operators in most local markets, including
     all the most populous urban areas.[^964] Cable remains the
     predominant provider of MVPD services in these markets.

362. We must choose the action on the pending application that will
     serve the public interest with due attention to the context and
     structure of the current marketplace. Our primary objective is to
     promote the interest of the consumer of video programming---to
     maximize the variety, quality and innovation of available
     programming and minimize its price where possible. The mechanism of
     choice to achieve this goal is generally to encourage a competitive
     marketplace.

363. The proposed transaction will shift control of one of the two
     incumbent full-CONUS DBS providers from a non-media owner who has
     made no secret of its desire to exit the business in recent years
     to a media company that has a proven record of innovation and
     success in providing satellite television services (and,
     incidentally, competing with cable distribution systems) in other
     markets throughout the world. As indicated above, we find that the
     potential improvement in DirecTV's service offerings under News
     Corp.'s innovative and aggressively competitive management, while
     inherently difficult to quantify precisely, would be a major public
     interest benefit. Another tangible benefit that we can ensure will
     be realized is News Corp.'s commitment to achieve the important
     public interest benefit of increased local channel service
     offerings to all regions of the country.

364. Based on our review of the record, we have found that where
     Applicants lack market power, such as in the programming-related
     technologies and fixed satellite services markets, no potential
     public interest harms will arise.[^965] At the same time, we also
     have found that the proposed transaction would create the potential
     for competitive and other public interest harms in areas in which
     the Applicants have market power and the transaction would increase
     their incentive and ability to exercise that market power to the
     detriment of the public. We reiterate that because local MVPD
     markets already are highly concentrated,[^966] changes in vertical
     relationships between a major input and output supplier in such a
     market can have significant competitive effects.

365. Applicants themselves have suggested conditions, analogous to those
     applicable to vertically integrated cable companies, to mitigate
     potential harms. We accept these proposed conditions as sufficient,
     together with our existing program access rules, to protect against
     any potential competitive harms with respect to ensuring
     non-discriminatory access to the DirecTV platform for unaffiliated
     programming providers and for ensuring non-discriminatory access to
     national and non-sports regional programming for rival MVPDs.
     Consequently, we impose no additional remedial actions with respect
     to these video programming products beyond those offered by the
     Applicants.

366. In contrast, based on our review of the record, we find substantial
     evidence that competitive and consumer harms would likely result
     from the increase in News Corp.'s ability to leverage its market
     power with respect to both regional sports networks and local
     broadcast television once it acquires control of DirecTV. The
     record indicates that temporary withdrawal of regional sports
     programming networks and local broadcast television station signals
     during disputed carriage negotiations will cause a significant
     number of customers to shift from their current MVPD, which is
     subject to the foreclosure, to DirecTV. In addition, there is
     significant evidence in the record that the per-subscriber profits
     generated by each additional DirecTV subscriber are sufficiently
     large that the increased downstream revenues resulting from
     temporary foreclosure are likely to exceed the costs of foreclosure
     in many local markets. Accordingly, we find that, as a result of
     the transaction, the increased profits accruing to DirecTV and News
     Corp. as a result of the temporary withdrawal of regional sports
     programming and broadcast signals will give News Corp. an increased
     incentive to adopt a strategy of temporary foreclosure in order to
     uniformly raise the price of its broadcast television and regional
     sports programming and/or obtain other carriage concessions. News
     Corp.'s post-transaction ability to act anti-competitively to
     increase its competitors' programming costs is greater than it
     would otherwise be due to News Corp.'s post-transaction ability to
     off-set temporary revenue losses arising from foreclosure with
     increased profits accruing to DirecTV as subscribers drop the
     affected MVPD and subscribe to News Corp's affiliated MVPD. This
     increased ability and incentive to seek and obtain higher
     programming prices and/or obtain other carriage concessions through
     temporary foreclosure would likely lead to higher prices to MVPD
     consumers and thereby harm the public interest. To avoid public
     interest harms that would result from such conduct, we impose
     several conditions to maintain the balance of bargaining power
     between News Corp. and other MVPDs at roughly pre-transaction
     levels.

367. In addition, we have found that the increase in News Corp.'s market
     power with respect to its RSN and local broadcast station
     programming would likely, if not checked, permit News Corp. to
     inflict additional collateral damage on rival MVPDs. For example,
     the incremental increase in News Corp.'s market power resulting
     from its acquisition of control of DirecTV could be used to force
     MVPDs to carry or use technologies such as its electronic and
     interactive programming guides as conditions of accessing its "must
     have" programming. We also found that this same potential for
     increased use of temporary foreclosure would reduce program
     diversity on a short term basis because consumers lack access to
     the foreclosed programming and that, in the long run, the increased
     costs paid by MVPDs to News Corp. would also likely reduce program
     diversity because absent these increased costs, the MVPD might have
     elected to carry a new niche network that would have expanded the
     types of programming available to its subscribers. We made similar
     findings with respect to the impact of the transaction on viewpoint
     diversity.

368. To mitigate the increased market power the transaction provides to
     News Corp. with respect to carriage negotiations for RSN and local
     broadcast station signals, we impose the additional conditions
     described above and set forth in Appendix F below. With respect to
     local television broadcast stations on whose behalf News Corp.
     negotiates retransmission consent, we extend the good faith and
     exclusivity requirements of SHVIA beyond their scheduled sunset
     date to run concurrently with the program access rules applicable
     to satellite cable programming. In addition, we extend News Corp.'s
     proposed non-discrimination safeguards to its broadcast
     programming, so that News Corp. must make its programming subject
     to retransmission consent available to all MVPDs on a
     non-discriminatory basis. To deter the more frequent use of
     temporary foreclosure strategies following News Corp.'s acquisition
     of control of DirecTV, the principal harm associated with vertical
     integration identified in the record, we direct News Corp. to
     submit carriage disputes over RSNs and local broadcast stations, at
     an MVPD's request, to commercial arbitration. Our commercial
     arbitration remedy is intended to provide a neutral backstop
     mechanism for the MVPD if commercial negotiations fail to produce a
     carriage agreement that is mutually satisfactory to News Corp. and
     the MVPD. Under our condition, an MVPD purchasing News Corp. RSN
     programming or negotiating a retransmission consent agreement may
     elect to send its dispute to commercial arbitration with a right of
     appeal to the Commission. In connection with the election of
     arbitration, we limit the power of News Corp. to withdraw its
     broadcast and RSN networks pending resolution of the carriage
     dispute by the arbitrator. In addition, cable operators with fewer
     than 5000 subscribers, for whom arbitration would be unreasonably
     expensive, are given special relief with respect to retransmission
     consent, and those with fewer than 400,000 subscribers are
     permitted to bargain collectively and collectively avail themselves
     of the arbitration remedy for both RSN and broadcast programming.

369. In assessing the potential harms and benefits of the proposed
     transaction, we note that the major benefit---improved service
     offerings under News Corp.'s innovative and aggressive
     management---while adequately supported under the rather unique
     circumstances of this case, is inherently difficult to quantify.
     Other claimed benefits, such as merger-related efficiencies, that
     are not so difficult to quantify have not been adequately supported
     by Applicants on the record here. Finally, consistent with our
     commitment to localism and as a tangible confirmation of the
     benefits of the proposed transaction, we adopt, as a condition of
     our approval, the requirement that, by year end 2004, DirecTV will
     offer local channel service in an additional 30 DMAs.

370. With these conditions to mitigate the potential harms and confirm
     the potential benefits, a fair and balanced assessment of the
     proposed transaction demonstrates that News Corp.'s acquisition of
     a controlling interest in Hughes will, as required by the
     Communications Act, serve "the public interest, convenience, and
     necessity."[^967]

# CONCLUSION

371. We conclude that the positive public interest benefits promised by
     this transaction are sufficient to support the Commission's
     approval of GM's, Hughes', and News Corp.'s Application, under the
     public interest balancing test of section 310(d) of the
     Communications Act, subject to the conditions specified in this
     Order.

# ordering clauses

372. Accordingly, having reviewed the Application and the record in this
     matter, IT IS ORDERED, pursuant to Sections 4(i) and (j), 214(a),
     214(c), 309, and 310(d) of the Communications Act of 1934, as
     amended, 47 U.S.C. §§ 154(i), 154(j), 214(a), 214(c), 309, 310(d),
     that the application for consent to transfer control to The News
     Corporation Ltd., News Publishing Australia Limited, and Fox
     Entertainment Group, Inc., various Commission authorizations as set
     forth in Appendix G, including DBS and fixed satellite space
     station authorizations, earth station authorizations, and other
     related authorizations, held by wholly- or majority-owned
     subsidiaries of General Motors Corporation and Hughes Electronics
     Corporation IS GRANTED subject to the conditions stated below.

373. IT IS FURTHER ORDERED that as a condition of this grant The News
     Corporation Ltd., its wholly- and majority-owned subsidiaries, and
     Hughes Electronics Corporation shall comply with the conditions set
     forth in Appendix F of this Order.

374. IT IS FURTHER ORDERED that, pursuant to sections 4(i) and (j), 309
     and 310(b) and (d) of the Communications Act of 1934, as amended,
     47 U.S.C. §§ 154(i) and (j), 309, 310(b) and (d), that the Petition
     to Adopt Conditions to Authorization and Licenses filed by the U.S.
     Department of Justice and Federal Bureau of Investigation, on
     November 25, 2003, IS GRANTED, and that the authorizations and
     licenses related thereto which are to be assigned or transferred as
     a result of this Order are subject to compliance with provisions of
     the Agreement between General Motors Corporation, Hughes
     Electronics Corporation, and The News Corporation Limited on the
     one hand, and the U.S. Department of Justice and the Federal Bureau
     of Investigation on the other, as further set forth in Paragraph 38
     and Appendix E of this Order, which Agreement is designed to
     address the national security, law enforcement, and public safety
     concerns of the U.S. Department of Justice and the Federal Bureau
     of Investigation regarding the authority granted herein, is fully
     binding upon General Motors Corporation, Hughes Electronics
     Corporation, and The News Corporation Limited and those
     subsidiaries, successors and assigns of both companies that provide
     telecommunications services within the United States. Nothing in
     the Agreement is intended to limit any obligation imposed by
     Federal law or regulation.

375. IT IS FURTHER ORDERED, pursuant to Sections 4(i) and (j), 214(a),
     214(c), 309, and 310(d) of the Communications Act of 1934, as
     amended, 47 U.S.C. §§ 154(i), 154(j), 214(a), 214(c), 309, 310(d),
     that the Petitions to Deny filed by EchoStar Corporation, Center
     for Digital Democracy, and National Hispanic Media Coalition and
     all similar petitions ARE DENIED.

376. IT IS FURTHER ORDERED that the Petition to Condition the Transfer
     of Control filed by Wyser-Pratte Management Co., Inc., and the
     Petition to Designate the Application for Hearing filed by National
     Rural Telecommunications Cooperative ARE DENIED.

377. IT IS FURTHER ORDERED that this Memorandum Opinion and Order SHALL
     BE EFFECTIVE on December 19, 2003,[^968] in accordance with Section
     1.103 of the Commission\'s rules, 47 C.F.R. § 1.103.

     Federal Communications Commission

     Marlene H. Dortch

     Secretary

**APPENDIX A**

**LIST OF COMMENTERS**

**[Petitions To Deny]{.underline}**

Center for Digital Democracy ("CDD")

EchoStar Satellite Corporation ("EchoStar")

National Hispanic Media Coalition ("NHMC")

National Rural Telecommunications Cooperative ("NRTC")

**[Initial Comments]{.underline}**

Advance/Newhouse Communications, Cable One, Cox Communications & Insight
Communications

("JCC")

American Cable Association ("ACA")

Association of Public Television Stations and the Public Broadcasting
Service ("APTS")

Cablevision Systems Corporation ("Cablevision")

Intelsat Global Service Corporation ("Intelsat")

Johnson Broadcasting of Dallas, Inc. ("Johnson")

Maranatha Broadcasting Company, Inc. ("Maranatha")

Microcom ("Microcom")

National Association of Broadcasters ("NAB")

RCN Telecom Services, Inc. ("RCN")

**[Opposition and Reply Comments]{.underline}**

General Motors, Hughes Electronics Corporation and The News Corporation
Limited ("Applicants")

**[Reply Comments]{.underline}**

Advance/Newhouse Communications, Cable One, Cox Communications & Insight
Communications

("JCC")

American Cable Association ("ACA")

Cablevision Systems Corporation ("Cablevision")

Consumer Federation of America, Consumers Union, Center for Digital
Democracy & Media Access

Project ("CFA")

Maranatha Broadcasting Company, Inc. ("Maranatha") (late-filed)

National Hispanic Media Coalition ("NHMC") (late-filed)

# Appendix B {#appendix-b .unnumbered}

# Modifications to Rules for Arbitration {#modifications-to-rules-for-arbitration .unnumbered}

# Involving Regional Sports Networks {#involving-regional-sports-networks .unnumbered}

1.  We modify the Rules in several respects as they apply to arbitration
    involving regional sports networks.

```{=html}
<!-- -->
```
1.  **Initiation of Arbitration.** Arbitration shall be initiated as
    provided in Rule R-4 except that, under Rule R-4 (a) (ii) the MVPD
    shall not be required to submit copies of the arbitration provisions
    of the contract, but shall instead refer to this Order in the demand
    for arbitration. Such reference shall be sufficient for the AAA to
    take jurisdiction.

2.  **Appointment of the Arbitrator.** Appointment of an arbitrator
    shall be in accordance with rule E-4 of the Rules. Arbitrators
    included on the list referred to in rule E-4 (a) of the Rules shall
    be selected from a panel jointly developed by the American
    Arbitration Association and the Commission and will be based on the
    following criteria:

#### The arbitrator shall be a lawyer admitted to the bar of a state of the United States; {#the-arbitrator-shall-be-a-lawyer-admitted-to-the-bar-of-a-state-of-the-united-states .unnumbered}

#### The arbitrator shall have been practicing law for at least 10 years; {#the-arbitrator-shall-have-been-practicing-law-for-at-least-10-years .unnumbered}

#### The arbitrator shall have prior experience in mediating or arbitrating disputes concerning media programming contracts; {#the-arbitrator-shall-have-prior-experience-in-mediating-or-arbitrating-disputes-concerning-media-programming-contracts .unnumbered}

#### The arbitrator shall have negotiated or have knowledge of the terms of comparable cable programming network contracts. {#the-arbitrator-shall-have-negotiated-or-have-knowledge-of-the-terms-of-comparable-cable-programming-network-contracts. .unnumbered}

3.  **Exchange of Information.** At the request of any party, or at the
    discretion of the arbitrator, the arbitrator may direct the
    production of current and previous contracts between either of the
    parties and MVPDs, broadcast stations, video programming networks,
    and sports teams, leagues, and organizations as well as any
    additional information that is considered relevant in determining
    the value of the programming to the parties. Parties may request
    that access to information of a commercially sensitive nature be
    restricted to the arbitrator and outside counsel and experts of the
    opposing party.

4.  **Administrative Fees and Expenses.** If the arbitrator finds that
    one parties' conduct, during the course of the arbitration, has been
    unreasonable, the arbitrator may assess all or a portion of the
    other parties costs and expenses (including reasonable attorneys'
    fees) against the offending party.

5.  **Locale**. In the absence of agreement between the parties, the
    arbitration shall be held in the city that contains the headquarters
    of the MVPD.

6.  **Form of Award.** The arbitrator shall render a written award
    containing the arbitrator\'s findings of fact and reasons supporting
    the award. If the award contains confidential information, the
    arbitrator shall compile two versions of the award; one containing
    the confidential information and one with such information redacted.
    The version of the award containing the confidential information
    shall only be disclosed to persons bound by the Protective Order
    issued in connection with the arbitration. The parties shall include
    such confidential version in the record of any review of the
    arbitrator's decision by the Commission.

#   {#section .unnumbered}

# Appendix C {#appendix-c .unnumbered}

# Modifications to Rules for Arbitration {#modifications-to-rules-for-arbitration-1 .unnumbered}

# Involving Retransmission Consent {#involving-retransmission-consent .unnumbered}

1.  We modify the Rules in several respects as they apply to arbitration
    over retransmission consent.

2.  **Initiation of Arbitration.** Arbitration shall be initiated as
    provided in Rule R-4 except that, under Rule R-4 (a) (ii) the MVPD
    shall not be required to submit copies of the arbitration provisions
    of the contract, but shall instead refer to this Order in the demand
    for arbitration. Such reference shall be sufficient for the AAA to
    take jurisdiction

3.  **Appointment of the Arbitrator.** Appointment of an arbitrator
    shall be in accordance with rule E-4 of the Rules. Arbitrators
    included on the list referred to in rule E-4 (a) of the Rules shall
    be selected from a panel jointly developed by the American
    Arbitration Association and the Commission and will be based on the
    following criteria:

#### The arbitrator shall be a lawyer admitted to the bar of a state of the United States;

#### The arbitrator shall have been practicing law for at least 10 years;

#### The arbitrator shall have prior experience in mediating or arbitrating disputes concerning media programming contracts;

#### The arbitrator shall have negotiated or have knowledge of the terms of retransmission contracts.

4.  **Exchange of Information.** At the request of any party, or at the
    discretion of the arbitrator, the arbitrator may direct the
    production of current and previous contracts between either of the
    parties and MVPDs and broadcast stations as well as any additional
    information that is considered relevant in determining the value of
    the programming to the parties. Parties may request that access to
    information of a commercially sensitive nature be restricted to the
    arbitrator and outside counsel and experts of the opposing party.

5.  **Administrative Fees and Expenses.** If the arbitrator finds that
    one parties' conduct, during the course of the arbitration, has been
    unreasonable, the arbitrator may assess all or a portion of the
    other parties costs and expenses (including reasonable attorneys'
    fees) against the offending party.

6.  **Locale**. In the absence of agreement between the parties, the
    arbitration shall be held in the city that contains the headquarters
    of the MVPD.

7.  **Form of Award.** The arbitrator shall render a written award
    containing the arbitrator\'s findings of fact and reasons supporting
    the award. If the award contains confidential information, the
    arbitrator shall compile two versions of the award; one containing
    the confidential information and one with such information redacted.
    The version of the award containing the confidential information
    shall only be disclosed to persons bound by the Protective Order
    issued in connection with the arbitration. The parties shall include
    such confidential version in the record of any review of the
    arbitrator's decision by the Commission.

# appendix D {#appendix-d .unnumbered}

# Technical Appendix {#technical-appendix .unnumbered}

# Staff Analysis of the Likelihood of Foreclosure in the Broadcast Television Programming Market

1.  The two primary scenarios of competitive harm that have been alleged
    are: (1) permanent foreclosure, where the broadcast signal is
    permanently removed from rival MVPDs and (2) temporary foreclosure,
    where the broadcast signal is removed for a brief period, possibly
    during the negotiations for retransmission consent. We first analyze
    the allegations that following the transaction Applicants will have
    an incentive to permanently withhold consent to retransmit the local
    broadcast signal from rival MVPDs. While Cablevision and JCC believe
    that temporary foreclosure is much more likely in this
    situation,[^969] other commenters argue that permanent foreclosure
    is also a legitimate concern.[^970] Our analysis is similar for both
    forms of the alleged harm. We determine the number of consumers that
    must switch to DirecTV to compensate News Corp. for the loss in
    revenue that occurs when the signal is removed from rival MVPDs. We
    refer to this as the critical value. If more than this number of
    customers are likely to switch to DirecTV following the withdrawal
    of the local broadcast signal, then News Corp. would find it
    profitable to withhold the local broadcast signal from a rival MVPD.

## Permanent Withdrawal of the Broadcast Signal from Rival MVPDs

1.  Concerned parties in this proceeding have alleged that the
    transaction will give News Corp. an increased incentive and ability
    to profitably withhold consent to retransmit broadcast television
    signals from rival MVPDs.[^971] Applicants argue that permanently
    withholding the right to retransmit the signals of News Corp. owned
    and operated ("O&O") broadcast television stations would not be
    profitable given the likely reactions of consumers.[^972] Applicants
    estimate that DirecTV would need to increase its market share from
    13% to between 44% and 53%, depending on the assumptions used.[^973]
    We analyze the incentives to engage in permanent withdrawal of the
    broadcast signal from rival MVPDs weighing the arguments of the
    parties over the various methods and assumptions used in the
    analysis. [^974] In addition to analyzing the incentives to withhold
    the signals of News Corp.'s owned and operated stations, we analyze
    the incentives to withhold the local broadcast signals of
    independently owned affiliates. We perform this calculation because
    evidence in the record indicates that **\[REDACTED\]**.[^975] We
    begin with determining the loss News Corp. will suffer if it
    permanently removes its local broadcast signal from rival MVPDs. If
    News Corp. removes its signal from rival MVPDs it stands to lose the
    advertising revenues from those consumers that remain with the rival
    MVPDs but no longer receive the local broadcast station's signal.
    Since the signal remains available over the air, some fraction of
    the rival MVPD viewers will continue to watch News Corp. broadcast
    programming, therefore reducing the economic loss suffered by News
    Corp. News Corp. stands to gain a share of the additional profits
    DirecTV will earn from the consumers that switch from rival MVPDs as
    well as the advertising revenues those new subscribers generate for
    the local broadcast station. Our critical value is then the number
    of rival MVPD subscribers that must switch to DirecTV in order for
    the revenue loss from the foreclosure to equal the revenue gain to
    News Corp.[^976]

2.  The analysis requires a number of values to complete the
    calculation. News Corp. has provided information on the advertising
    revenues earned by each of its broadcast stations and the Fox
    broadcast network, and in the absence of any objections from
    commenters, we accept these values as presented.[^977] In addition,
    we use information on the advertising revenues of independently
    owned local affiliates from the BIA Master Access Database.
    Applicants also have presented calculations on the additional
    profit, or profit margin, DirecTV earns on each additional
    subscriber. Applicants use a value of **\[REDACTED\]** before
    factoring in a subscriber acquisition cost of **\[REDACTED\]** per
    subscriber.[^978] Cablevision questions the values used by
    Applicants, and instead suggests that a more reasonable value would
    be \$29.84 prior to factoring in subscriber acquisition costs.[^979]
    They base their proposal on an unexplained analysis of SEC filings.
    We find Applicants' detailed documentation of DirecTV revenues,
    variable costs, and subscriber acquisition costs convincing, and
    will use these values in our analysis. We also must account for the
    fact that subscriber acquisition costs are a one-time expense
    associated with the acquisition of a new customer. To do this we
    follow the standard method, used by both Applicants and commenters,
    of amortizing those costs over the length of time that the
    subscriber is expected to stay with DirecTV.[^980] To perform the
    amortization, two values are required, the average tenure of a
    subscriber and an appropriate discount, or interest, rate to use in
    spreading out the one-time cost over the tenure of the subscriber.
    Cablevision assumes the average tenure of a subscriber to be 60
    months based on an analyst's report,[^981] while Applicants report
    that the actual value for DirecTV subscribers is **\[REDACTED\]**
    months.[^982] We will use an average subscriber tenure of
    **\[REDACTED\]** months since DirecTV is likely to have more
    accurate information regarding its subscribers than is an
    unaffiliated analyst, though we note that the difference between
    these two values is relatively minor. The difference between the
    discount rates used by Applicants and JCC in their analyses is more
    substantial. Applicants use a rate of **\[REDACTED\]**, based on the
    so-called hurdle rate used by DirecTV in its planning
    processes,[^983] and Cablevision offers a range of between 5% and
    10% with a stated preference for using News Corp.'s weighted average
    cost of capital of 8%.[^984]

3.  We find that the use of the hurdle rate would be an inappropriate
    value to use for discounting cash flows. The hurdle rate is "the
    rate of interest in a capital budgeting study that a proposed
    project must exceed before it can be regarded as worthy of
    consideration."[^985] "The hurdle rate is often based on the cost of
    capital or the weighted average cost of capital, adjusted by a
    factor to represent the risk characteristics of the projects under
    consideration."[^986] We prefer to use a more objective measure of
    the opportunity cost of capital to the firm such as the weighted
    average cost of capital.[^987] However, we note that News Corp.'s
    weighted average cost of capital is unusually low when compared with
    MVPDs.[^988] We will use 10% as our discount rate, this is a
    reasonable compromise between News Corp.'s weighted average cost of
    capital, which does not include the impact of MVPD operations, and
    the weighted average cost of capital of firms in the MVPD industry.

4.  The previous discussion focused on determining the profit margin on
    customers serviced by DirecTV. However, not all customers receiving
    DirecTV services are serviced by DirecTV; some are serviced by the
    National Rural Telecommunications Cooperative (NRTC). Some of the
    customers that shift to DirecTV service in the event of a permanent
    withdrawal of a broadcast station signal will be serviced by NRTC
    rather than DirecTV. DirecTV earns a substantially lower margin on
    these customers. Applicants estimate that this value is less than
    **\[REDACTED\]** per NRTC subscriber per month.[^989] Absent any
    further data, we will use this value as the profit margin on DirecTV
    customers serviced by NRTC in our analysis. We will assume that the
    customers switching to DirecTV after a permanent withdrawal will be
    serviced by DirecTV and NRTC in the same proportion as existing
    customers in the DMA.

5.  Before performing the calculation we must identify reasonable values
    for the share of rival MVPD customers that will use over-the-air
    reception to obtain the broadcast signal. Applicants, in their
    analysis, use the figure of 33%.[^990] Cablevision assumes values of
    33% and 50% and JCC use the complete range of possible values.[^991]
    No one has presented any evidence to indicate what an appropriate
    value should be. We will use a value of 33%, since in our judgment
    it is a reasonable approximation, being twice the fraction of
    television households that currently receive video programming only
    via broadcast reception.[^992]

6.  We also need to determine the allocation of the additional profits
    that would be generated by the withholding of programming.
    Applicants have suggested the use of two different figures: 34%,
    representing the fraction of Hughes Electronics that would be
    acquired by News Corp. pursuant to the transaction documents as well
    as 50%, representing the fraction of Hughes that News Corp. is
    permitted to acquire without further approval by Hughes
    stockholders.[^993] Cablevision and JCC argue that a value of 100%
    is more appropriate and would be consistent with joint profit
    maximization.[^994] News Corp. counters that there are strong checks
    on News Corp.'s ability to engage in self-dealing, including an
    independent audit committee.[^995] Cablevision and JCC argue that
    the harms being analyzed result from the joint profit maximizing
    behavior of both firms and that "News Corp. and DirecTV would simply
    strike a bargain that maximized their joint profits and then
    distribute the gains so that everyone would be better off."[^996] We
    reject the 34% value since the new Hughes certificate of
    incorporation allows News Corp. to acquire up to 50% ownership
    without further approval by Hughes stockholders.[^997] We instead
    analyze the transaction's effects assuming a 50% division of the
    additional joint profits earned through the withdrawal of
    programming, as well as 100%. We analyze the worst-case scenario
    where News Corp. obtains 100% of the additional joint profits
    generated by a foreclosure strategy for several reasons. As our
    discussion of corporate governance has pointed out, the incentive
    and ability of DirecTV's audit committee to ensure arms-length
    contracting between News Corp. and DirecTV is limited.[^998] In
    addition, we note that any split of the additional profits in excess
    of News Corp.'s ownership share would not make Hughes stockholders
    worse off. This is because any DirecTV profits achieved through
    foreclosure would result directly from the actions of News Corp.,
    and those profits would not otherwise be available to Hughes
    stockholders. The proposed joint endeavors between News Corp. and
    DirecTV that are a basis for many of the Applicant's claimed
    benefits provide ample opportunities to compensate News Corp. for
    the losses in programming revenue associated with foreclosure and
    make the strategy profitable for both firms and their stockholders.

7.  Applicants calculate the critical value based on the average
    advertising revenues of all News Corp. owned and operated stations
    as well as average market shares of cable and DBS in the United
    States.[^999] Applicants find that on average, it would not be
    profitable to engage in permanent foreclosure. We find this analysis
    incomplete and suffering from the "fallacy of division."[^1000]
    Accordingly, we will calculate the critical values that would make
    permanent foreclosure of broadcast station's programming at the
    smallest geographic level possible. Ideally that would be at the
    level of a cable franchise within a Nielsen Designated Market Area
    ("DMA"). However, we do not have reliable figures on cable
    subscribers by franchise in a DMA. We do have estimates of the cable
    and DirecTV households in a DMA.[^1001] Therefore we perform our
    calculations at the DMA level and assume that the programming is
    withdrawn from all competing MVPDs within the DMA. We find this a
    reasonable assumption and a feasible strategy since
    **\[REDACTED\]**.[^1002]

8.  Our analysis of the incentives for News Corp. to permanently
    withhold retransmission consent of broadcast signals from rival
    MVPDs indicates that this strategy is unlikely to be profitable to
    News Corp. and its affiliates. If News Corp. could claim 50% of
    joint profits of a withdrawal strategy, it would find a withdrawal
    of the local broadcast station from rival MVPDs to be profitable if,
    depending on the broadcast station, between **\[REDACTED\]** and
    **\[REDACTED\]** of cable customers switched to a DBS provider. If
    News Corp. receives 100% of the joint profits from the strategy, the
    percentage of rival MVPD customers that must switch to make
    temporary foreclosure profitable is between **\[REDACTED\]** and
    **\[REDACTED\]** for the various local broadcast stations. Table A-1
    presents the percentage of all rival MVPD subscribers that reside in
    areas where News Corp. would find it profitable to permanently
    withdraw the local broadcast signal. This value will depend on the
    percent of rival MVPD subscribers that shift in response to the
    removal of the local broadcast station from their chosen MVPD. We
    hypothesize a range of values from **\[REDACTED\]** to
    **\[REDACTED\]**. If we can expect **\[REDACTED\]** of rival MVPD
    customers to defect to DirecTV following a withdrawal of the
    broadcast station, News Corp. would find the withdrawal a profitable
    endeavor against companies serving **\[REDACTED\]** of all rival
    MVPD subscribers if News Corp. can lay claim to 50% of the
    additional joint profits. If News Corp. gains 100% of the additional
    joint profits, **\[REDACTED\]** of all rival MVPD subscribers would
    be at risk from suffering under a permanent withdrawal of the
    programming.

9.  Table A-1. Percentage of Rival MVPD Subscribers at Risk of a
    Permanent Withdrawal of their Local Broadcast
    Signal.**\[REDACTED\]**

## Temporary Withdrawal of the Broadcast Signal from Rival MVPDs

10. Commenters raise the concern that the more likely harm to rivals
    will occur from the temporary withdrawal of the broadcast signal
    from rival MVPDs, rather than permanent withdrawal. Cablevision
    estimates that DirecTV need only add between 0.7 and 1.4 points to
    its market share for temporary withholding of the broadcast signal
    to be profitable.[^1003] Applicants argue that using more
    appropriate assumptions, DirecTV would need to increase its market
    share by **\[REDACTED\]** points.[^1004] In our analysis of the
    incentives to engage in temporary foreclosure, we build upon the
    assumptions evaluated in our permanent withholding analysis, and
    examine several new factors.

11. The possibility of temporary foreclosure presents a different risk
    of competitive harms. Under this strategy, News Corp. would remove
    its broadcast signal from rival MVPDs for a short period of time,
    thereby limiting the loss in advertising revenues it incurs. JCC
    point out that this withdrawal benefits Applicants in two
    ways.[^1005] The first benefit is the same as that analyzed under
    the hypothesis of permanent foreclosure where the additional
    customers switching to DirecTV generate profits that accrue to
    DirecTV and are shared with News Corp. The second benefit accrues
    solely to News Corp. That benefit is the increased compensation for
    retransmission consent that News Corp. will be able to extract from
    MVPDs due to the reduction in the costs of withholding
    retransmission consent and the greater credibility that the threat
    of withholding carries. Our analysis of the incentives to
    temporarily foreclose the local broadcast signals from rival MVPDs
    is only able to measure the effect of the first benefit, the
    additional profits that are earned when consumers switch to DirecTV.
    The effect of the increased credibility of withholding of
    retransmission on the compensation for retransmission of the local
    broadcast station's signal is difficult to quantify. As JCC point
    out, the effect of this increased credibility can have a substantial
    effect on compensation, even when the profits that accrue from
    switching subscribers cannot compensate for the advertising revenues
    lost due to foreclosure.[^1006] However, the extent of the effect
    depends on the relative strengths of the bargaining positions of
    News Corp. and MVPDs. There is no evidence in the record regarding
    the relative strengths of News Corp. and MVPDs in this area,
    therefore we are unable to estimate the full magnitude of the
    increase in the incentive and ability to obtain additional
    compensation in return for granting retransmission consent. Our
    analysis will provide an estimate of increased incentive and ability
    that is likely to occur due to the additional profit News Corp.
    earns when consumers switch from rival MVPDs to DirecTV, as such it
    is an estimate of the *minimum* increase in incentive and ability to
    obtain additional compensation from MVPDs.

12. Unlike the case of permanent foreclosure, with temporary
    foreclosure, the timing of the various effects becomes important.
    Because some of the consumers that switch to DirecTV will return to
    their previous MVPD after the period of withdrawal, we must account
    for the timing of the subscriber acquisition costs as well as the
    timing of consumers' return to their original MVPD. We adopt a
    discounted cash flow approach to allow us to compare these benefits
    and costs over time.[^1007] DirecTV requires that customers agree to
    purchase 12 months of programming before DirecTV will provide free
    or subsidized equipment and installation.[^1008] Because
    **\[REDACTED\]**, we assume that all of the customers that switch to
    DirecTV agree to purchase twelve months of programming.[^1009] After
    that period of time, a number will return to their previous MVPD.
    Applicants report that **\[REDACTED\]** of new DirecTV customers
    drop service over the course of one year.[^1010] They believe that a
    larger fraction of the customers induced to switch because of the
    temporary withholding will leave and consequently assume that
    **\[REDACTED\]** customers will leave after the first year.[^1011]
    Following the initial churn of these new customers, Applicants
    assume that these new customers will exit at DirecTV's average churn
    rate of **\[REDACTED\]** per month.[^1012] Cablevision and JCC argue
    that customers who switched to DirecTV due to the temporary
    withdrawal are, if anything, less likely to churn than the average
    DirecTV customer.[^1013] We assume this initial churn rate is
    **\[REDACTED\]**, which is **\[REDACTED\]** the normal 12 month
    churn rate of DirecTV. We base this value on the regression analysis
    described later in this appendix where we analyze the impact on
    DirecTV customer disconnects of the introduction of the YES cable
    network on Cablevision cable systems in New York, which signaled the
    return of New York Yankees baseball games to those systems. Our
    analysis also indicates that **\[REDACTED\]**. Therefore, following
    the initial churn of these new customers, we assume that the
    continuing churn rate of these new customers will be equal to
    **\[REDACTED\]** per month.

13. Cablevision suggests that an additional adjustment should be made to
    account for the positive impact the temporary foreclosure would have
    on the future growth rate of DirecTV.[^1014] We reject this proposed
    adjustment. In Section I.C of this appendix we examine the effects
    of the temporary withdrawal of a local broadcast station signal from
    one of DirecTV's competitors and **\[REDACTED\]**.

14. With these assumptions, as well as those discussed in analyzing the
    impact of permanent withholding of the local broadcast station's
    signal, the losses and gains from a temporary foreclosure can be
    calculated. Applicants, as well as Cablevision, propose that the
    calculation for the withholding of retransmission rights for a local
    broadcast station be based upon a one month withholding.[^1015] We
    will adopt this assumption as well. In the first period News Corp.
    will suffer the loss of a month's worth of advertising revenue. In
    the succeeding month, the temporary foreclosure will have ended and
    News Corp. will no longer suffer the loss associated with it and is
    assumed to earn the same advertising revenue and compensation from
    retransmission consent as it did prior to the withholding. The gain
    experienced by News Corp. will be its share of the profit margin
    from each new customer that arrives from a rival MVPD. News Corp.
    also will be assessed its share of the one-time subscriber
    acquisition costs associated with each new subscriber. For 11
    successive months, News Corp. will earn its share of the profit
    margin on the customers that shifted due to the temporary
    foreclosure. It continues to receive these profits because these
    customers, in order to receive free installation and equipment, have
    committed to purchase 12 months of DirecTV programming. However, in
    the thirteenth month, when the new customers' commitments expire,
    DirecTV will lose **\[REDACTED\]** of the customers it acquired due
    to the temporary foreclosure. In each continuing month, DirecTV will
    lose **\[REDACTED\]** of the remaining customers. Given this monthly
    pattern of gains and losses, we discount the earnings of future
    periods using a discount rate of 10%. We calculate the number of
    rival MVPD customers that must switch to DirecTV for the one month
    withdrawal to be profitable to News Corp. and DirecTV for each owned
    and operated broadcast station as well as independently owned
    affiliates of the Fox Broadcast Network.

15. Our analysis indicates that a temporary withdrawal of local
    broadcast signals from rival MVPDs is a credible negotiating tactic.
    It demonstrates that in most areas of the country, following the
    transaction, News Corp. can earn additional profits based on the
    consumers that switch to DirecTV when the local broadcast signal is
    withheld from rival MVPDs. Rival MVPDs facing this situation during
    retransmission consent negotiations will have two choices, either
    give News Corp. additional considerations for retransmission consent
    or have News Corp. earn those additional profits through the
    mechanism of temporary withholding. If News Corp. could claim 50% of
    joint profits of a withdrawal strategy, it would find a withdrawal
    of the local broadcast station's signal from rival MVPDs to be
    profitable if, depending on the broadcast station, between
    **\[REDACTED\]** and **\[REDACTED\]** of cable customers switched to
    DirecTV. If News Corp. receives 100% of the joint profits from the
    strategy, the percentage of rival MVPD customers that must switch to
    make temporary foreclosure profitable is between **\[REDACTED\]**
    and **\[REDACTED\]** for the various broadcast stations. Table A-2
    presents the percentage of rival MVPD subscribers that reside in
    areas where News Corp. would find it profitable to temporarily
    withhold the local broadcast signal. This value depends on the
    percent of subscribers to rival MVPDs that shift in response to the
    one month withdrawal of the local broadcast station from their MVPD.
    We examine the extent of the profitability of temporary withholding
    for a range of values of the consumer response. If **\[REDACTED\]**
    of rival MVPD customers defect to DirecTV following a withdrawal of
    the local broadcast station, News Corp. would find the withdrawal
    profitable in areas with **\[REDACTED\]** of rival MVPD subscribers
    if News Corp. can lay claim to 50% of the joint profits. If News
    Corp. gains 100% of the joint profits, **\[REDACTED\]** of rival
    MVPD subscribers are at risk from suffering under a temporary
    withdrawal of the programming.

16. Table A-2. Percentage of Rival MVPD Subscribers at Risk of a
    Temporary Withdrawal of their Local Broadcast
    Signal.**\[REDACTED\]**

## Estimation of the Impact of the Withdrawal of a Broadcast Station from Rival MVPDs on DirecTV

17. The preceding analysis of the incentives to either permanently or
    temporarily withhold a broadcast signal from a rival MVPD informs us
    about the necessary responses from consumers to make the
    hypothesized harms real. Cablevision has analyzed the results of a
    retransmission consent dispute between Time Warner and the ABC owned
    and operated broadcast television station in Houston.[^1016] Based
    on their early analysis, they believe that as many as 3% of Time
    Warner's subscribers may have switched to DirecTV. Subsequent
    econometric analysis led to a refinement in their conclusion.
    Cablevision argues that DirecTV **\[REDACTED\]** of MVPD subscribers
    in the Houston DMA.[^1017] Applicants argue that the situation in
    Houston is not relevant since it involved a case of a cable company
    removing the broadcast signal from its system rather than a
    broadcaster withholding the signal from a cable company.[^1018] We
    disagree with the Applicant's position. The value of the Houston
    incident is not in determining which firm found it more advantageous
    to carry through on the removal or withholding of the signal. The
    value is in analyzing how Time Warner customers reacted when the
    signal was no longer available on the cable system. To that extent,
    Applicants have not convinced us that the specific details in
    Houston bias estimates of consumer reactions to the withdrawal of a
    broadcast signal from a cable system.

18. We approach the problem from the standpoint of researchers
    estimating the impact of a policy. We obtain data from two separate
    groups. A control group which is unaffected by the policy for the
    entire period under observation, and a treatment group, that for
    some period of time has the policy applied to them. In the case at
    hand, the policy or treatment is the removal of the ABC affiliate
    from the Time Warner cable system. Our treatment group consists of
    those ZIP codes within the Houston DMA that where Time Warner offers
    service to at least 75% of the households. For our control group we
    use those ZIP codes within the Houston DMA where Classic Cable or
    Northwoods Cable offer service to at least 75% of the
    households.[^1019] Both firms in the control group carried the ABC
    affiliate on an uninterrupted basis during 2000. We measure the
    effect of these events on the growth rate in DirecTV subscribers for
    each month between December 1999 and July 2000.

19. We use an econometric method known as "fixed effects
    estimation."[^1020] This method estimates DirecTV's subscriber
    growth rate in a ZIP code as depending on a ZIP code-specific
    effect, which varies across ZIP codes, but does not vary over time,
    and a time-specific effect which varies over time, but is the same
    across all ZIP codes. The treatment effect is measured by indicator
    variables for the Time Warner ZIP codes for each month between
    December of 1999 and July of 2000. These indicator variables will
    measure the difference between DirecTV's growth in Time Warner ZIP
    codes and in the Classic and Northwoods ZIP codes after accounting
    for the factors that are due either to constant characteristics of
    the ZIP code, such as household income, population density, and
    consumer preferences, or effects at one point in time that affect
    both sets of ZIP codes equally, such as changes in DirecTV
    programming.

20. The estimated monthly difference in DirecTV's growth rate in areas
    served by Time Warner as compared to the control group that was not
    in a retransmission consent dispute is given in table A-3. The
    results indicate a statistically significant increase in the growth
    rate of DirecTV in the ZIP codes where consumers were continually
    being told that they were likely to be losing access to the ABC
    affiliate on the incumbent cable operator.[^1021]

21. Table A-3. Additional DirecTV Subscriber Growth in Houston due to
    Retransmission Consent Dispute between ABC and Time Warner.
    **\[REDACTED\]**

22. We can calculate the impact of the warnings and actual withdrawal of
    the ABC affiliate from Time Warner cable systems in Houston by
    applying the excess growth rates **\[REDACTED\]**.[^1022]
    **\[REDACTED\]** Therefore, we estimate that the effect on DirecTV
    of the withdrawal of broadcast programming from the rival cable
    operator was an additional **\[REDACTED\]** subscribers. We estimate
    that because of the 39-hour withdrawal of the ABC affiliate Time
    Warner lost **\[REDACTED\]** of its customer base to DirecTV. If we
    assume that EchoStar gained customers at a rate equivalent to its
    market share relative to DirecTV, Time Warner would have lost a
    further **\[REDACTED\]** of its customer base to EchoStar.

23. We would like to verify our assumptions about the churn rate of
    DirecTV customers following the return of the signal, but are unable
    to do so, because the churn resulting from this incident would not
    evidence itself until 2001 when the 1-year contracts signed by
    consumers expired. The data submitted by DirecTV exhibits a
    discontinuity between 2000 and 2001 due to the acquisition and
    conversion of PrimeStar customers. Consequently, we must rely on our
    analysis of churn following the return of withdrawn regional sports
    programming.

# Staff Analysis of the Likelihood of Foreclosure in the Regional Sports Network Market

24. The analysis of the incentive and ability of News Corp. to withhold
    carriage of regional sports networks (RSNs) from DirecTV's
    competitors in the MVPD market closely follows the methods used in
    the analysis of the same issue in the local broadcast programming
    market. We calculate the number of consumers that must switch to
    DirecTV to compensate for the loss in revenue when a cable system no
    longer carries the RSN. As with our analysis of the withholding of
    broadcast television station signals, we consider cases of permanent
    and temporary withholding.

## Permanent Withdrawal of the Regional Sports Network from Rival MVPDs

25. The case of permanent foreclosure differs slightly from that
    examined in the local broadcast station segment since RSN
    programming is generally not available over the air. If News Corp.
    removes its RSN from a rival MVPD it loses the advertising revenues
    associated with all of those subscribers, not just a fraction as was
    the case with the local broadcast station. In addition to a loss in
    advertising revenue, there is also the loss in the affiliate fees
    paid by the rival MVPD for the right to carry the RSN. The gain to
    News Corp. of a permanent withholding strategy is its share of the
    joint profits earned from the consumers that switch from the rival
    MVPD, as well as the affiliate fees and advertising revenues those
    consumers bring with them.

26. Applicants assert that permanent withholding of a RSN from a rival
    MVPD is not a rational economic act.[^1023] Their analysis, using
    the same method as they employed in analyzing the permanent
    withholding of a broadcast station, indicates that for the strategy
    to be profitable DirecTV's market share must increase between 93%
    and 128%.[^1024]

27. News Corp. has provided the affiliation revenue and subscriber
    counts of each MVPD distributing a RSN it manages, as well as the
    aggregate advertising revenues for each network.[^1025] From these
    data we calculate the average advertising revenue per subscriber for
    each RSN. We also calculate the average revenue per subscriber for
    each RSN carried by each MVPD. In association with subscriber
    counts, these are the costs of removing a RSN from a rival MVPD.

28. A portion of the benefits of removing a RSN from a rival MVPD are
    the additional profits that accrue from those customers that switch
    to DirecTV service. We use the same value we used when calculating
    the critical values for the withholding of a broadcast station
    signal. News Corp. also receives the RSN affiliate fees and
    advertising revenue the switching customers generate. We make one
    significant modification from the analysis of permanent withholding
    of broadcast station signals. We assume that the RSN is withdrawn
    from the competing cable company, but not from EchoStar. We make
    this assumption because **\[REDACTED\]**.[^1026] The effect of this
    assumption is to reduce the number of cable subscribers defecting to
    DirecTV following the withdrawal of the RSN from the rival cable
    provider. Since EchoStar also carries the RSNs, some of the
    defecting cable subscribers will choose to purchase service from
    EchoStar rather than DirecTV. News Corp. will not share in any of
    the additional profit EchoStar earns from those customers, but it
    will receive advertising revenues as well as affiliate fees. We
    assume that switching cable subscribers go to the two DBS companies
    in the same proportion as the firms' national market shares, 42%
    will go to EchoStar and 58% will go to DirecTV.[^1027] As in the
    previous analysis, we calculate the critical values for situations
    where News Corp. can lay claim to 50% and 100% of the joint profits
    generated by the withdrawal of the RSN.[^1028]

29. We calculate a critical value for each of **\[REDACTED\]** cable
    systems carrying a RSN owned and managed by News Corp.[^1029] This
    allows us to replicate the pattern of previous withdrawals and
    **\[REDACTED\]**, as well as address ACA's claims that small cable
    companies are particularly vulnerable to this tactic.[^1030] We do
    not calculate a critical value for any RSNs carried by EchoStar
    because we do not possess sufficient information about the locations
    and market shares of the cable systems that carry and do not carry
    the relevant RSNs to make precise calculations regarding News
    Corp.'s incentives to withhold programming. However, to the extent
    that DirecTV and EchoStar are much closer substitutes, News Corp.
    would have an even greater incentive to withhold programming from
    EchoStar since a larger fraction of EchoStar's customers would be
    likely to shift to DirecTV than to cable.

30. The analysis of the incentives for News Corp. to permanently
    withhold regional sports networks from rival MVPDs indicates that
    this is unlikely to be a profitable endeavor for News Corp. If News
    Corp. could claim 50% of the joint profits from a withdrawal
    strategy, it would find permanently withholding a RSN from a rival
    MVPD to be profitable if between **\[REDACTED\]** and
    **\[REDACTED\]** of cable customers switched to a DBS provider. If
    News Corp. receives 100% of the joint profits from the strategy, the
    percentage of the rival MVPD's customers that must switch to make
    permanent foreclosure profitable is between **\[REDACTED\]** and
    **\[REDACTED\]**. Table A-4 presents the percentage of all rival
    cable subscribers that reside in areas where News Corp. would find
    it profitable to permanently withdraw its RSN. This value will
    depend on the percent of rival cable subscribers that shift to DBS
    in response to the removal of the local broadcast station from their
    chosen MVPD. We hypothesize a range of values from **\[REDACTED\]**
    to **\[REDACTED\]**. If we can expect **\[REDACTED\]** of rival
    cable customers to defect to DBS following a withdrawal of the RSN,
    News Corp. **\[REDACTED\]** when they can lay claim to 50% of the
    additional joint profits. If News Corp. gains 100% of the additional
    joint profits, **\[REDACTED\]** of all rival cable subscribers would
    be at risk from suffering under a permanent withdrawal of the
    programming.

31. Table A-4. Percentage of Cable Subscribers at Risk of a Permanent
    Withdrawal of Regional Sports Programming.**\[REDACTED\]**

## Temporary Withdrawal of Regional Sports Networks from Rival MVPDs

32. JCC argue that the more likely harm is from temporary withdrawal of
    an RSN during pricing disputes as a tactic to negotiate higher
    affiliate fees, rather than the threat to permanently withdraw the
    RSN.[^1031] They estimate that as few as **\[REDACTED\]** of cable
    subscribers must shift to DirecTV for a strategy of temporary
    withholding to be a credible threat in affiliate fee
    negotiations.[^1032] Applicants instead contend that at least
    **\[REDACTED\]** of cable subscribers must shift to DirecTV for News
    Corp. to earn a profit by temporarily withholding a RSN.[^1033]

33. The analysis of temporary foreclosure of RSNs by News Corp. takes a
    slightly different tack than the analysis of temporary foreclosure
    of the local broadcast stations' signals. In that analysis, the
    losses and gains of foreclosure were based on advertising revenue,
    which were the same regardless of which MVPD in a DMA was the rival.
    With RSNs, the losses from foreclosure also depend upon the
    affiliate fees, and those vary across MVPDs. Therefore we will
    analyze a temporary foreclosure situation assuming that News Corp.
    removes an RSN from a specific MSO, but not from EchoStar. Again, we
    analyze this scenario because **\[REDACTED\]**. As with our analysis
    of permanent foreclosure of a RSN, we do not have adequate data to
    allow us to analyze the likelihood of a temporary withdrawal of a
    RSN from EchoStar, **\[REDACTED\]**.

34. Applicants' in their calculations assume that the withdrawal of the
    RSN lasts for three months, after which time it is returned to the
    rival MVPD.[^1034] JCC suggests that a more appropriate assumption
    would be a one month withdrawal, the same period as Applicants and
    Cablevision use to analyze the profitability of withdrawal of a
    broadcast television station signal.[^1035] As with the temporary
    foreclosure analysis of the local broadcast station market, we will
    assume that the foreclosure lasts for one month, during which time a
    fraction of the MSO's subscribers will shift to a DBS provider
    carrying the RSN. We assume that switching cable subscribers go to
    the two DBS companies in the same proportion as their national
    market shares, 42% will go to EchoStar and 58% will go to
    DirecTV.[^1036] We will also assume that the rate at which customers
    return to their original MVPD is the same regardless which DBS firm
    they moved to. The pattern will match that of our local broadcast
    station analysis in that no customers will leave the DBS firms for
    the first 12 months following the temporary foreclosure,
    **\[REDACTED\]** will leave once their contracts expire, and in all
    following months, **\[REDACTED\]** of the remaining customers will
    return to their original MVPDs.

35. Under this scenario, the cost to News Corp. of the temporary
    foreclosure in the first month is the foregone affiliate fees from
    the cable company for the first month, as well as the advertising
    revenues those subscribers would have generated. In subsequent
    months, News Corp. will continue to lose a fraction of the affiliate
    fees and advertising revenue from the cable provider since a portion
    of the cable subscriber base will have switched to EchoStar and
    DirecTV, although over time as subscribers shift back to cable, this
    loss diminishes. The gain to News Corp. in the first month consists
    of its share of DirecTV's profit margin minus the subscriber
    acquisition cost. It receives this gain from the 58% of defecting
    cable subscribers that choose to switch to DirecTV. It also receives
    affiliate fees and advertising revenue from DirecTV and EchoStar for
    the fractions of defecting subscribers that switch to those
    services. In the second through twelfth months, News Corp. receives
    its share of DirecTV's additional profits as well as the RSN
    affiliate fees and advertising revenues from the DBS providers. In
    the thirteenth month, **\[REDACTED\]** of the former cable customers
    that switched to DirecTV and EchoStar will return to the cable MSO.
    In each subsequent month, EchoStar and DirecTV will lose
    **\[REDACTED\]** of the remaining customers. These flows of costs
    and benefits are discounted in the same manner as in our analysis of
    the broadcast station segment.

36. Our analysis of the incentives for News Corp. to engage in a
    strategy of temporary foreclosure against any of the
    **\[REDACTED\]** MSOs carrying a News Corp.-managed RSN indicates
    that there is a strong possibility that this type of behavior can be
    profitable following the transaction. If News Corp. could claim 50%
    of the additional joint profits, it would find a one month temporary
    withdrawal of the RSN to be profitable if, depending on the RSN and
    cable operator, between **\[REDACTED\]** and **\[REDACTED\]** of
    cable customers switched to a DBS provider. If News Corp. can lay
    claim to 100% of the additional joint profits, the percentage of
    cable customers that must switch to make temporary foreclosure
    profitable is between **\[REDACTED\]** and **\[REDACTED\]** for the
    various cable operators and RSNs. Table A-5 presents the percentage
    of rival cable subscribers that reside in areas where News Corp.
    would find it profitable to temporarily withhold its RSN. This value
    depends on the percent of subscribers to cable companies that shift
    in response to the one month withdrawal of the RSN. We examine the
    extent of the profitability of temporary withholding for a range of
    values of the consumer response. If **\[REDACTED\]** of cable
    customers defect to DirecTV following a withdrawal of the RSN, News
    Corp. would find the withdrawal profitable in areas with
    **\[REDACTED\]** of RSN cable subscribers if News Corp. can lay
    claim to 50% of the joint profits. If News Corp. gains 100% of the
    joint profits, **\[REDACTED\]** of RSN cable subscribers are at risk
    from suffering under a temporary withdrawal of the programming.

37. Table A-5. Percentage of Cable Subscribers at Risk of a Temporary
    Withdrawal of Regional Sports Programming.**\[REDACTED\]**

## Estimation of the Impact on DirecTV of the Withdrawal of Regional Sports Networks from Rival MVPDs

38. Parties in this proceeding have alleged that News Corp., once the
    transaction has been completed, will have an incentive to engage in
    temporary foreclosure as a strategy to increase rates for the
    Fox-managed RSNs, as well as shift subscribers from rival MVPDs to
    DirecTV. At the heart of these claims are suppositions about how
    consumers react when a RSN is removed from one MVPD, but remains
    available on other MVPDs. We estimate the actual shifts in
    subscribers that occurred during periods when the Yankees
    Entertainment and Sports Network (YES) was unavailable to
    subscribers of the Cablevision cable system and the EchoStar DBS
    service, but was available to DirecTV subscribers.

39. On March 19, 2002 the YES network was launched as a regional sports
    network in the New York area. At the time of launch, the network had
    agreements with several professional sports teams, as well as an
    assortment of local high school and college sporting events. At
    launch, the network carried New York Yankees baseball games.[^1037]
    In November of 2002 New Jersey Nets basketball games became
    available.[^1038] These teams had previously been available on
    competing RSNs which were carried by many local cable companies and
    both DBS providers.[^1039] Prior to launch, YES network reached
    affiliate agreements with 35 cable companies as well as
    DirecTV.[^1040] It did not reach an agreement with either
    Cablevision or EchoStar. On March 31, 2003, approximately 25 minutes
    prior to the start of the first Yankees game of the season,
    Cablevision and YES reached an interim agreement for
    carriage.[^1041] EchoStar still does not carry the YES network.

40. This episode of availability, followed by withdrawal, followed by
    availability exhibits the pattern of temporary foreclosure proposed
    by some parties in this proceeding. Several parties have argued that
    this episode can provide a prime example of the likely shifts in
    MVPD subscribers when faced with a temporary withdrawal of a
    RSN.[^1042] Applicants argue that the impact on Cablevision of the
    loss of New York Yankees games, as well as other professional sports
    teams, was on the order of 30,000 customers.[^1043] However no party
    conducted a thorough examination of the effect of this episode on
    the numbers of DirecTV subscribers, while accounting for
    pre-existing patterns of subscriber shifts which are naturally
    occurring in the MVPD marketplace.[^1044]

41. We approach the problem in the same fashion as we estimated the
    impact of the warnings and ultimate withdrawal of the ABC affiliate
    in Houston. We obtain data from two separate groups. A control group
    which is unaffected by the policy for the entire period under
    observation, and a treatment group, that for some period of time has
    the policy applied to them. The policy or treatment is the removal
    of Yankees and Nets games from the cable system. Our treatment group
    consists of those ZIP codes within the New York DMA that are wholly
    served by Cablevision. For our control group we use those ZIP codes
    within the New York DMA that are wholly served by Time Warner, which
    had reached an agreement to carry the YES network.[^1045] We measure
    the effect of these events on the growth rate in DirecTV subscribers
    for each month between January 2001 and June 2003.

42. Table A-6 presents the estimated treatment effects for each month
    since January 2002. The values represent the additional percentage
    growth in subscribers above what would have been predicted to occur
    had Cablevision been carrying the YES network. The pattern is growth
    rates follows what we might reasonably expect to see happen.
    **\[REDACTED\]**.

43. Table A-6. Additional DirecTV Subscriber Growth in New York due to
    YES Dispute with Cablevision. **\[REDACTED\]**

44. We can calculate the short-term impact of the withdrawal of New York
    Yankees games by applying the excess growth rates
    **\[REDACTED\]**.[^1046] **\[REDACTED\]**.[^1047] Therefore we
    estimate that the withdrawal of Yankees games during April of 2002
    cost Cablevision **\[REDACTED\]** of its customer base. If we assume
    that a similar shift away from Cablevision would occur if both
    competitors, EchoStar and DirecTV, carried the desired programming
    but Cablevision did not, our results indicate that DirecTV would
    capture **\[REDACTED\]** of Cablevision's customers and EchoStar
    would capture **\[REDACTED\]** during a one month withdrawal of
    programming. Over the entire one-year course of the dispute, our
    analysis predicts that DirecTV gained an additional **\[REDACTED\]**
    subscribers due to the absence of the YES network on Cablevision and
    EchoStar. This equates to an increase of **\[REDACTED\]** of DirecTV
    customers and a loss of **\[REDACTED\]** to Cablevision.

45. Applicants have argued that the maximum shift from Cablevision to
    DirecTV was on the order of 30,000 subscribers for the entire one
    year period. We reject that estimate for a number of reasons. First
    and foremost, we have no information on how this value was generated
    and what factors it takes into account. Cablevision's SEC reports
    indicate that between December 2000 and December 2001 the percentage
    of homes served rose from 68.0% to 69.4%. However, by the end of
    March 2002, this penetration rate had fallen to 69.1% of homes
    passed. This decline continued through March 2003, when it reached a
    low of 67.5%. The most recent figures, for June of 2003, indicate
    that this trend has been reversed, with the penetration rate rising
    to 67.6%. Cablevision passes slightly more than 4 million homes in
    the New York area, so each point of penetration corresponds to
    approximately 40,000 customers. This naive analysis would indicate
    that Cablevision may have lost 64,000 customers over the course of
    the year in which it did not carry YES. Cablevision's own data
    indicate a substantial loss in customers, a loss in excess of the
    30,000 claimed by Applicants.

46. We also need to assess the extent to which the return of withdrawn
    programming to an MVPD provider influences the behavior of
    consumers. Applicants argue that once the temporarily withdrawn
    programming has returned to an MVPD those households that switched
    to DirecTV are more likely to leave DirecTV and return to their
    previous service providers.[^1048] Other parties however argue that
    those customers that switched may be less likely to move back for a
    number of reasons, including a concern that the programming may be
    withdrawn again.[^1049] Using the same technique as we did to
    examine the shift in consumers, we can examine the churn, or
    disconnect, rate of DirecTV subscribers in Time Warner and
    Cablevision service areas of the New York DMA. Our previous
    regression results indicate that **\[REDACTED\]**. Estimating
    exactly the same regression specification with the exception of
    using the percentage of customers disconnecting in a month as the
    dependent variable, we find **\[REDACTED\]**. We would have expected
    the monthly disconnect rate in Cablevision ZIP codes to have been
    **\[REDACTED\]**. Therefore, we will assume that the disconnect rate
    is **\[REDACTED\]** that for other DirecTV customers in the time
    period when the DirecTV contracts expire for those customers who
    shifted due to the temporary withdrawal. Applicants report that
    **\[REDACTED\]** of customers drop DirecTV service after 1 year, so
    we estimate that **\[REDACTED\]** of customers induced to switch to
    DirecTV during a temporary withdrawal will drop DirecTV service once
    their contract expires.

APPENDIX E

HUGHES ELECTRONICS CORPORATION\
(hereinafter called the "Corporation")

AMENDED AND RESTATED BY-LAWS

EXHIBIT 1

1.  [STOCKHOLDERS]{.underline}

    1.  [Annual Meeting; Notice of Stockholders Nominations and Other
        Proposed Stockholder Action]{.underline}. The Annual Meeting of
        the stockholders for the purpose of electing Directors and for
        the transaction of such other business as may properly come
        before the meeting in accordance with these By-Laws, shall be
        held at such place, on such date, and at such time as may be
        fixed by the Board of Directors (the "Board") and stated in the
        notice of meeting.

        a.  Nominations of persons for election to the Board and the
            proposal of business to be transacted by the stockholders
            may be made at an Annual Meeting of stockholders (i)
            pursuant to the Corporation's notice with respect to such
            meeting, (ii) by or at the direction of the Board or (iii)
            by any stockholder of record of the Corporation who was a
            stockholder of record at the time of the giving of the
            notice provided for in the following paragraph, who is
            entitled to vote at the meeting and who has complied with
            the notice procedures set forth in Section 1(b) below.

        b.  For nominations or other business to be properly brought
            before an Annual Meeting of stockholders by a stockholder
            pursuant to clause (iii) of the foregoing paragraph, (i) the
            stockholder must have given timely notice thereof in writing
            to the Secretary of the Corporation; (ii) such business must
            be a proper matter for stockholder action under the General
            Corporation Law of the State of Delaware (the "DGCL"); (iii)
            if the stockholder has provided the Corporation with a
            Solicitation Notice (as defined herein) such stockholder
            must, in the case of a proposal, have delivered a proxy
            statement and form of proxy to holders of at least the
            percentage of the Corporation's voting shares required under
            applicable law to carry any such proposal, or, in the case
            of a nomination or nominations, have delivered a proxy
            statement and form of proxy to holders of a percentage of
            the Corporation's voting shares reasonably believed by such
            stockholder to be sufficient to elect the nominee or
            nominees proposed to be nominated by such stockholder, and
            must, in either case, have included in such materials the
            Solicitation Notice; and (iv) if no Solicitation Notice
            relating thereto has been timely provided pursuant to this
            Section 1, the stockholder or Beneficial Owner proposing
            such business or nomination must not have solicited a number
            of proxies sufficient to have required the delivery of such
            a Solicitation Notice under this Section 1.

To be timely, a stockholder's notice shall be delivered to the Secretary
of the Corporation at the principal executive offices of the Corporation
not later than the close of business on the 120th day nor earlier than
the close of business on the 150th day prior to the first anniversary
(the "Proxy Mailing Anniversary") of the date on which the Corporation
first mailed its proxy materials for the preceding year's Annual Meeting
of stockholders; [provided]{.underline}, [however]{.underline}, that if
the date of the Annual Meeting is advanced more than 30 days prior to or
delayed by more than 30 days after the anniversary of the preceding
year's Annual Meeting, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later of (i) the
150th day prior to the first anniversary of the preceding year's Annual
Meeting or (ii) the 10th day following the day on which public
announcement of the date of such meeting is first made.

Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a
Director all information relating to such person as would be required to
be disclosed in solicitations of proxies for the election of such
nominees as Directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and such person's
written consent to be named as a nominee and to serve as a Director if
elected; (ii) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of such business, the
reasons for conducting such business at the meeting and any material
interest in such business of such stockholder; and (iii) as to the
stockholder giving the notice (A) the name and address of such
stockholder, as they appear on the Corporation's books, (B) the class
and number of shares of the Corporation that are owned beneficially or
of record by such stockholder, and (C) whether either such stockholder
intends to deliver a proxy statement and form of proxy to holders of, in
the case of a proposal, at least the percentage of the Corporation's
voting shares required under applicable law to carry the proposal or, in
the case of a nomination or nominations, a sufficient number of holders
of the Corporation's voting shares to elect such nominee or nominees (an
affirmative statement of such intent, a "Solicitation Notice").

Notwithstanding anything in the second sentence of Section 1(b) to the
contrary, in the event that (x) the number of Directors to be elected to
the Board is increased and (y) there is no public announcement naming
all of the nominees for Director or specifying the size of the increased
Board made by the Corporation on or prior to the 120th day prior to the
Proxy Mailing Anniversary, a stockholder's notice required by this
By-Law shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Corporation.

Only persons nominated in accordance with the procedures set forth in
this Section 1(b) shall be eligible to serve as Directors and only such
business shall be conducted at an Annual Meeting of stockholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this Section 1(b). The chairman of the meeting
shall have the power and the duty to determine whether a nomination or
any business proposed to be brought before the meeting has been made in
accordance with the procedures set forth in these By-Laws and, if any
proposed nomination or business is not in compliance with these By-Laws,
to declare that such defective proposed business or nomination shall not
be presented for stockholder action at the meeting and shall be
disregarded.

Nominations by stockholders of persons for election to the Board may be
made at a special meeting of stockholders if the stockholder's notice
required by this Section 1(b) shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close
of business on the later of the 150th day prior to such special meeting
or the 10th day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by
the Board to be elected at such meeting.

For purposes of this Section 1, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

Notwithstanding the foregoing provisions of this Section 1(b), a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
matters set forth in this Section 1(b). Nothing in this Section 1(b)
shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.

2.  [Special Meetings; Notice]{.underline}.

Special meetings of the stockholders, other than those required by
statute, may be called at any time by (a) the Board pursuant to a
resolution approved by a majority of the Board, (b) the Chairman or a
Vice Chairman or (c) any stockholder of the Corporation who Beneficially
Owns (as defined herein) 10% or more of the Corporation's Voting
Securities (as defined herein) then outstanding. No other person or
persons may call a special meeting of stockholders except as provided in
the Company's Certificate of Incorporation, as amended from time to time
(the "Certificate of Incorporation"). Only such business as is stated in
the notice may be acted upon thereat. The foregoing notwithstanding,
unless otherwise provided in the Certificate of Incorporation, whenever
the holders of any one or more outstanding series of Preferred Stock
shall have the right, voting separately by class or by series, as
applicable, to elect Directors at any Annual Meeting or special meeting
of stockholders, the calling of special meetings of the holders of such
class or series shall be governed by the terms of the applicable
resolution or resolutions of the Board establishing such series of
preferred stock pursuant to the Certificate of Incorporation. The Board
may postpone or reschedule any previously scheduled special meeting.

Nominations of persons for election to the Board may be made at a
special meeting of stockholders at which Directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board, or (b) by any stockholder of record of the
Corporation who is a stockholder of record at the time of the giving of
notice provided for in Section 1(b) of this Article I entitled to vote
at the meeting who complies with the notice provisions set forth in
Section 1(b) of this Article I.

3.  [Notice of Meetings; Adjournment]{.underline}.

Except as otherwise provided herein or required by "applicable law"
(meaning, here and hereinafter, as required from time to time by the
DGCL) or the Certificate of Incorporation, written notice of the place,
date, and time of all meetings of the stockholders and the purpose or
purposes for which such meeting is called shall be given by mailing,
postage prepaid, a copy of such notice addressed to each stockholder of
the Corporation entitled to vote at such meeting at his address as
recorded on the books of the Corporation, not less than 10 nor more than
60 days before the date on which the meeting is to be held.

Any meeting may be adjourned from time to time, whether or not there is
a quorum, either (i) in the discretion of the chairman of the meeting
where necessary for the proper and orderly conduct of the meeting
(including, without limitation, where necessary to tabulate any vote the
tabulation of which is necessary for the continued conduct of the
meeting) or (ii) by vote of the holders of a majority of the voting
power of the shares of stock present at the meeting.

When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is
taken; [provided]{.underline}, [however]{.underline}, that if the date
of any adjourned meeting is more than 30 days after the date for which
the meeting was originally noticed, or if a new record date is fixed for
the adjourned meeting, written notice of the place, date and time of the
adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.

4.  [Quorum]{.underline}.

At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger
number may be required by these By-Laws, the Certificate of
Incorporation or by applicable law. Where a separate vote by a class or
classes or series is required by law or by the Certificate of
Incorporation, a majority of the shares of such class or classes or
series present in person or represented by proxy shall constitute a
quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting from time to time, without notice other
than by announcement to the meeting, to another date, place and time
until a quorum shall be present.

5.  [Organization]{.underline}.

The Chairman of the Board of the Corporation, or, in his or her absence,
such person as the Board may have designated or, in the absence of such
a person, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or represented by
proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. The Secretary of the Corporation, or if he or
she is not present, any Assistant Secretary, or in the absence of any
Assistant Secretary of the Corporation, any person the chairman of the
meeting appoints shall act as the Secretary of the meeting.

6.  [Place of Meeting]{.underline}.

Meetings of the stockholders for the election of Directors or for any
other purpose shall be held at such time and place, either within or
outside the State of Delaware, as shall be designated from time to time
by the Board and stated in the notice of the meeting or in a duly
executed waiver of notice thereof.

7.  [Conduct of Business]{.underline}.

The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be
announced at the meeting. The Board may adopt by resolution such rules
and regulations for the conduct of meetings as it shall deem
appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board, the chairman of any meeting shall
have the right and authority to prescribe such rules, regulations and
procedures and to do all such acts as, in the judgment of the chairman,
are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board or prescribed by
the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business at
the meeting; (ii) rules and procedures for maintaining order at the
meeting and the safety of those present; (iii) limitations on attendance
at or participation in the meeting of stockholders of record of the
Corporation, their duly authorized and constituted proxies and such
other persons as the chairman of the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants.

8.  [Proxies and Voting]{.underline}.

At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing or
by a transmission permitted by law filed in accordance with the
procedure established for the meeting. Unless otherwise provided in the
Certificate of Incorporation, each stockholder represented at a meeting
of stockholders shall be entitled to cast one vote for each share of
capital stock entitled to vote thereat held by such stockholder. If the
Certificate of Incorporation provides for the issuance of any class or
series of stock which is convertible into any other class or series of
stock, as a condition to counting the votes cast by any holder of shares
at any annual or special meeting of stockholders, the Board or a duly
authorized committee thereof, in its discretion, may require the holder
of any shares to furnish such affidavits or other proof as the Board or
such committee deems necessary and advisable to determine whether such
shares have been converted pursuant to the terms governing the issuance
and conversion of such shares in the Certificate of Incorporation. Any
copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to this paragraph may be
substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission
could be used, provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the entire
original writing or transmission. All voting, except as may be required
by law, including voting for the election of Directors may be by a voice
vote; [provided]{.underline}, [however]{.underline}, that upon demand
therefor by a stockholder entitled to vote or by his or her proxy, or
upon resolution by the Board in its discretion or by action of the
chairman of the meeting, in his or her discretion, a stock vote may be
taken. Every stock vote shall be taken by written ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the
meeting. Unless otherwise specified by the Certificate of Incorporation
or these By-Laws, (i) at all meetings of stockholders for the election
of Directors, a plurality of the votes cast shall be sufficient to
elect, and (ii) any other question brought before any meeting of
stockholders shall be determined by the votes cast affirmatively or
negatively by the holders of a majority of the stock represented and
entitled to vote thereon.

9.  [Stock List]{.underline}.

The officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder of the
Corporation who is present. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the
list required by this Section 9 or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.

10. [Inspector of Elections]{.underline}.

Before any meeting of stockholders, the Board shall appoint one or more
inspectors to act at the meeting and make a written report thereof. The
Board may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is
able to act at a meeting of stockholders, the chairman of the meeting
shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or
her ability.

The inspectors shall, in accordance with these By-Laws and the
Certificate of Incorporation, ascertain the number of shares outstanding
and the voting power of each, determine the shares represented at the
meeting and the validity of proxies and ballots, count all votes and
ballots, determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination made by the
inspectors, and certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots.

The inspectors may appoint or retain other persons or entities to assist
the inspectors in the performance of their duties. In determining the
validity and counting of proxies and ballots, the inspectors shall act
in accordance with applicable law.

2.  [BOARD OF DIRECTORS]{.underline}

    1.  [Number, Election and Term of Directors]{.underline}.

Except as otherwise fixed by or pursuant to the provisions of the
Certificate of Incorporation relating to the rights of the holders of
any class or series of preferred stock, the number of Directors of the
Corporation shall be fixed from time to time by resolution adopted by a
majority of the entire Board, but the number of Directors shall at no
time be less than eleven (11) and initially shall be eleven (11).
Directors need not be stockholders. Directors shall (except as
hereinafter provided for the filling of vacancies) be elected by the
holders of the shares of stock entitled to vote thereon, by a plurality
vote thereof, at the Annual Meeting of stockholders. Each Director so
elected shall hold office until such Director's successor is duly
elected and qualified, or until such Director's death, or until such
Director's earlier disqualification, resignation, retirement or removal.

2.  [Certain Definitions]{.underline}. For the purposes of these
    By-Laws:

"Acquisition-Related Agreements" means the Merger Agreement, the Stock
Purchase Agreement and any other Transaction Agreements (as defined in
the Stock Purchase Agreement).

"Affiliate" with respect to any person shall mean any other person who,
directly or indirectly, controls, is controlled by or is under common
control with such person.

"Beneficially Owns" (and variations thereof) shall have the same meaning
as under Section 13(d) of the Exchange Act and Regulation 13D-G
thereunder (or any successor provision of law).

"Employee Director" means a Director, who at the time of taking office
as a Director, is an employee of the Corporation or any Subsidiary of
the Corporation.

"Independent Director" means a director who qualifies as an "independent
director" under the rules and regulations of the New York Stock Exchange
in effect from time to time; [provided]{.underline},
[however]{.underline}, that if, at any particular time, the New York
Stock Exchange has not then adopted a definition of "independent
director", "Independent Director" shall mean a director who, as
determined in good faith by the Board (other than the \"Independent
Director\" in question), has no relationship to the Corporation that may
interfere with the exercise of his or her independence from management
of the Corporation and the Corporation and no material relationship with
any member of the Purchaser Group (as defined in the Certificate of
Incorporation) or any Purchaser Successor (as defined in the Certificate
of Incorporation).

"Merger Agreement" shall mean the Agreement and Plan of Merger, dated as
of April 9, 2003, as amended, by and among the Corporation, The News
Corporation Limited and GMH Merger Sub, Inc.

"Purchaser" means The News Corporation Limited and any successor (by
merger, consolidation, transfer of assets or otherwise) to all or
substantially all of its business and assets, which also succeeds to
ownership of all or substantially all of its ownership of Voting
Securities.

"Stock Purchase Agreement" shall mean the Stock Purchase Agreement.
dated as of April 9, 2003, as amended, by and among The News Corporation
Limited, GMH Merger Sub, Inc., and General Motors Corporation.

"Subsidiary" with respect to a Person, means any corporation, limited
liability company, partnership, trust or unincorporated organization of
which such Person owns, directly or indirectly, 50% or more of the
outstanding stock or other equity interests, the holders of which are
entitled to vote for the election of the board of directors or others
performing similar functions with respect to such corporation, limited
liability company, partnership, trust or unincorporated organization.

"Voting Securities" means the common stock, par value \$0.01 per share,
of the Corporation and any shares of capital stock of the Corporation
entitled to vote generally in the election of Directors. A stated
percentage of the Voting Securities shall mean a number of shares of the
Voting Securities as shall equal in voting power that stated percentage
of the total voting power of the then outstanding shares of Voting
Securities entitled to vote in the election of Directors.

3.  [Nomination of Directors]{.underline}.

    a.  Only persons who are nominated in accordance with the following
        procedures shall be eligible for election as Directors of the
        Corporation, except as may be otherwise provided in the
        Certificate of Incorporation with respect to the right of
        holders of any class or series of preferred stock of the
        Corporation to nominate and elect a specified number of
        Directors in certain circumstances. Nominations of persons for
        election to the Board may be made at any Annual Meeting of
        stockholders, or at any special meeting of stockholders called
        for the purpose of electing Directors, (i) by or at the
        direction of the Nominating Committee or (ii) by any stockholder
        of record of the Corporation who is a stockholder of record at
        the time of the giving of notice provided for in Section 1(b) or
        Section 2 of Article I entitled to vote at the meeting who
        complies with the notice provisions set forth in Section 1(b) of
        Article I.

4.  [Newly Created Directorships and Board Vacancies]{.underline}.

Subject to applicable law and except as otherwise provided for or fixed
by or pursuant to the Certificate of Incorporation relating to the
rights of the holders of any class or series of preferred stock with
respect to such class or series of preferred stock, newly created
Directorships resulting from any increase in the authorized number of
Directors or, subject to Section 12(b) of this Article II below, any
vacancies on the Board resulting from death, resignation, retirement,
disqualification, removal from office or other cause between meetings of
stockholders shall be filled only by the affirmative vote of a majority
of all of the Directors then in office, even if less than a quorum, or a
duly appointed committee of the Board, but in any event not by the
stockholders. Directors so chosen shall hold office until such
Director's successor shall have been duly elected and qualified or until
his earlier death, resignation, retirement, disqualification or removal
from office in accordance with the Certificate of Incorporation, these
By-Laws, or any applicable law or pursuant to an order of a court. No
decrease in the number of authorized Directors constituting the entire
Board shall shorten the term of any incumbent Director.

5.  [Regular Meetings]{.underline}.

A meeting of the Board shall be held after the Annual Meeting of the
stockholders and regular meetings of the Board shall be held at such
place or places, on such date or dates, and at such time or times as
shall have been established by the Board and publicized among all
Directors. Meetings may be held either within or outside the State of
Delaware. A notice of each regular meeting shall not be required.

6.  [Special Meetings]{.underline}.

Special meetings of the Board may be called by the Chairman of the
Board, by the Vice Chairman, by the President or by two or more
Directors then in office and shall be held at such place, on such date,
and at such time as they or he or she shall fix. Meetings may be held
either within or outside the State of Delaware. Notice thereof, stating
the place, date and time of each such special meeting shall be given
each Director by whom it is not waived by mailing written notice not
less than four (4) days before the meeting or personally by telephone,
or electronic mail, facsimile transmission of notice, or by similar
means of communication not less than 12 hours before the meeting or on
such shorter notice as the person or persons calling the meeting may
deem necessary and appropriate under the circumstances. Unless otherwise
indicated in the notice thereof, any and all business may be transacted
at a special meeting.

7.  [Quorum]{.underline}.

Except as may be otherwise provided by applicable law, the Certificate
of Incorporation or these By-Laws, at all meetings of the Board, a
majority of the entire Board shall constitute a quorum for the
transaction of business. The act of a majority of the Directors present
at any meeting at which there is a quorum shall be the act of the Board.
The Directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum
shall be present.

8.  [Participation in Meetings by Conference Telephone]{.underline}.

Members of the Board, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.

9.  [Conduct of Business; Action by Written Consent]{.underline}.

At any meeting of the Board, business shall be transacted in such manner
as the Board may from time to time determine, and all matters shall be
determined by the vote of a majority of the Directors present, except as
otherwise provided herein or required by law. The Board may take action
without a meeting if all members thereof consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the
Board.

10. [Powers]{.underline}.

The property, business and affairs of the Corporation shall be managed
by or under the direction of the Board which may exercise all such
powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders
of the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:

\(1\) To declare dividends from time to time in accordance with law;

\(2\) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;

\(3\) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;

\(4\) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;

\(5\) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;

\(6\) To adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for Directors, officers, employees and
agents of the Corporation and its Subsidiaries as it may determine;

\(7\) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, officers, employees and agents of the
Corporation and its Subsidiaries as it may determine; and

\(8\) To adopt from time to time regulations, not inconsistent with
these By-Laws, for the management of the Corporation's business and
affairs.

11. [Compensation of Directors]{.underline}.

Unless otherwise restricted by the Certificate of Incorporation, the
Board shall have the authority to fix the compensation of the Directors.
The Directors may be paid their expenses, if any, of attendance at each
meeting of the Board and may be paid a fixed sum for attendance at each
meeting of the Board or paid a stated salary or paid other compensation
as Director. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.

12. [Removal; Employee Director Removal]{.underline}.

    a.  Except as otherwise provided by the Certificate of
        Incorporation, any Director may be removed from office with or
        without cause but only by the affirmative vote of the holders of
        a majority of the combined voting power of the then outstanding
        shares of stock of the Corporation entitled to vote for the
        election of Directors, voting together as a single class.

    b.  Notwithstanding anything set forth in this Section 12, unless
        otherwise determined by the Board, an Employee Director shall
        cease to be qualified to serve as a Director and shall
        automatically be removed from office (an "Employee Director
        Removal") without any action on the part of the stockholders or
        the other members of the Board, if such person ceases to be an
        employee of the Corporation or any one of its Subsidiaries, with
        the removal of such Director to take place upon the earliest
        of (i) such Director's cessation of employment, (ii) delivery by
        such Employee Director to the Corporation, or such Subsidiary or
        Subsidiaries, as the case may be, of a notice of resignation of
        employment, or (iii) delivery by the Corporation or one of its
        Subsidiaries, as the case may be, to such Employee Director of a
        notice of termination of employment.

13. [Special Election or Appointment]{.underline}.

Notwithstanding anything to the contrary contained in Section 3 and
Section 4 of this Article II, any Directors elected or appointed
(including to fill a vacancy due to the increase of the size of the
Board), in accordance with Exhibit A to the Merger Agreement (or
otherwise agreed upon by and among the parties to the Merger Agreement)
so as to take office not later than immediately following the Merger
Effective Time (as defined in the Merger Agreement), shall be deemed to
be validly elected and appointed irrespective of the provisions of the
above referenced Sections.

3.  [COMMITTEES]{.underline}

    1.  [Committees of the Board]{.underline}.

The Board, by a vote of a majority of the entire Board then in office,
may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at
the pleasure of the Board and shall, for those committees and any others
provided for herein, elect a Director or Directors to serve as the
member or members, designating, if it desires, other Directors as
alternate members who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of any
member of any committee and any alternate member in his or her place,
the member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board to act
at the meeting in the place of the absent or disqualified member.
Notwithstanding the foregoing provisions of this Section if either (A)
required by the applicable rules and regulations of the New York Stock
Exchange or the Securities and Exchange Commission (in each case, as may
be amended from time to time) or (B) under the Certificate of
Incorporation the Board is required to consist of a majority of
Independent Directors, then from and after the Merger Effective Time,
and for so long as the conditions in clauses (A) or (B) above are
satisfied, the Standing Committees (as defined herein), shall at all
such times consist solely of Independent Directors, except as otherwise
provided by these By-Laws. Without limiting the foregoing, the Board
shall designate the following committees (the "Standing Committees"):
Audit Committee, Nominating / Corporate Governance Committee and
Compensation Committee.

2.  [Conduct of Business]{.underline}.

Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all
the duly delegated powers and authority of the Board in the management
of the business and affairs of the Corporation. The Board shall have the
power to prescribe the manner in which proceedings of any such committee
shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its
proceedings shall be conducted. Unless the Board or such committee shall
otherwise provide, regular and special meetings and other actions of any
such committee shall be governed by the provisions of Article II
applicable to meetings and actions of the Board. Each committee shall
keep regular minutes and report to the Board when required.

3.  [Audit Committee]{.underline}.

    a.  The Audit Committee shall have at least three (3) members.

    b.  The Audit Committee shall have such responsibilities, and such
        powers and authority, as are required under the rules and
        regulations of the New York Stock Exchange, applicable law and
        the rules and regulations of the Securities and Exchange
        Commission, or as are normally incident to the functions of an
        audit committee (including authority to retain counsel and
        consultants to assist it in carrying out its responsibilities)
        or as may be determined by the Board.

    c.  The Audit Committee shall have the sole authority on behalf of
        the Corporation to assert, defend or settle any claims under and
        relating to any Acquisition-Related Agreement, except as may be
        expressly provided in Section 9.4(f) of the Stock Purchase
        Agreement.

    d.  The Audit Committee shall have sole authority to review,
        consider and pass upon any Related Party Transaction, and no
        such transaction shall be effected without the approval of or
        authorization of a majority of the Audit Committee, provided
        that the committee may ratify any such transaction.

    e.  The Audit Committee shall have the powers to (i) engage advisers
        at the reasonable expense of the Corporation to assist in its
        review and decision regarding any matter including any Related
        Party Transaction; (ii) utilize internal Corporation resources,
        including requiring the assistance of an executive employee of
        the Corporation; and (iii) review Corporation contracts, books
        and records.

    f.  The Audit Committee may have additional responsibilities as
        shall be set forth in the Audit Committee Charter from time to
        time.

    g.  Until such time as the United States Department of Justice,
        Federal Bureau of Investigation, and the United States
        Department of Homeland Security confirm to the Corporation in
        writing that the following provisions need no longer apply, then

        i.  All members of the Audit Committee shall be United States
            citizens.

        ii. The Audit Committee shall have sole authority over the
            establishment, oversight and evolution of policies,
            practices and procedures related to or materially affecting
            the Corporation's actions concerning (a) requests from a
            Foreign government or other Foreign entity to conduct
            electronic surveillance using the domestic communications
            network or to obtain information relating to domestic
            communications or electronic surveillance conducted using
            the domestic communications network, (b) requests or
            directives from a Foreign government or other Foreign entity
            to alter, affect or obtain information about the operations,
            security, personnel or infrastructure of the domestic
            communications network, (c) any decision by the Corporation
            involving document preservation requests from any government
            agency in the United States related to the domestic
            communications network, where those decisions relate to
            Foreign laws or requests from a Foreign government or other
            Foreign entity, (d) any requests or directives from a
            Foreign government or other Foreign entity relating to the
            preservation, storage, retention or destruction of documents
            related to the domestic communications network, (e) any
            attempt by a Foreign government or other Foreign entity to
            induce an employee of the Corporation to violate United
            States law, and (f) any decision by the Corporation relating
            to compliance with lawful U.S. process where Foreign laws or
            requests from a Foreign government or other Foreign entity
            may be a factor. For the purposes of this subsection only,
            the term "Foreign" means non-U.S.; and the term "domestic
            communications" means (x) wire communications or electronic
            communications (whether stored or not) from one U.S.
            location to another U.S. location and (y) the U.S. portion
            of a wire communication or electronic communication (whether
            stored or not) that originates or terminates in the United
            States.

For the purposes of this Section 3 only, "Related Party Transaction"
means any transaction or series of transactions between the Corporation
or any of its subsidiaries on the one hand, and another party or parties
on the other hand, in such amounts and related to such matters that the
Audit Committee determines could be considered an interested transaction
between the Company or its subsidiaries and such other party or parties.

4.  [Compensation Committee]{.underline}.

    a.  The Compensation Committee shall be composed of at least
        three (3) Directors. The Compensation Committee shall have the
        power and authority to approve, adopt and implement the
        incentive, stock option and similar plans of the Corporation and
        its Subsidiaries. The Compensation Committee shall have the
        power to approve, disapprove, modify or amend all plans designed
        and intended to provide compensation primarily for officers of
        the Corporation. The Compensation Committee shall review, fix
        and determine from time to time the salaries and other
        remunerations of all officers of the Corporation.

    b.  The Compensation Committee shall have such powers and authority
        as necessary to carry out the foregoing responsibilities and
        shall have such other responsibilities, and such other powers
        and authority, as may be determined by the Board.

    c.  The Compensation Committee may have additional responsibilities
        as shall be set forth in the Compensation Committee Charter from
        time to time.

5.  [Nominating / Corporate Governance Committee]{.underline}.

    a.  The Nominating / Corporate Governance Committee shall be
        composed of at least three (3) Directors. The Nominating /
        Corporate Governance Committee shall have the full and exclusive
        power and authority to evaluate Director candidates for election
        to the Board and committees of the Board, to nominate Directors
        for election to the Board at any annual or special meeting of
        stockholders. The Committee shall also be responsible for
        matters related to service on the Board, and associated issues
        of corporate governance.

    b.  The Nominating / Corporate Governance Committee shall have such
        powers and authority as necessary to carry out the foregoing
        responsibilities and shall have such other responsibilities, and
        such other powers and authority, as may be determined by the
        Board.

    c.  The Nominating / Corporate Governance Committee may have
        additional responsibilities as shall be set forth in the
        Nominating / Corporate Governance Committee Charter from time to
        time.

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4.  [OFFICERS]{.underline}

    1.  [General]{.underline}.

The officers of the Corporation shall be elected by the Board and shall
be a Chairman of the Board (who must be a Director), a President (who
shall also be the Chief Executive Officer), a Secretary and a Treasurer.
The Board, in its sole discretion, may also choose one or more Vice
Chairmen, Senior Executive Vice Presidents, Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers. Any number of offices may be
held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The Board may, from time
to time, delegate the powers or duties of any officer to any other
officers or agents, notwithstanding any contrary provision hereof.

2.  [Election; Removal]{.underline}.

The Board at its first meeting held after each Annual Meeting of
stockholders shall elect the officers of the Corporation who shall hold
their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time solely by the
Board, which determination may be by resolution of the Board or in any
By-Law provisions duly adopted or approved by the Board and all officers
of the Corporation shall hold office until their successors are chosen
and qualified, or until their earlier resignation or removal. The
salaries of the officers elected by the Board shall be fixed from time
to time by the Board or by such officers as may be designated by
resolution of the Board, upon recommendation or action of the
Compensation Committee. Any officer elected by the Board may be removed
at any time by the Board with or without cause. Only the Board may fill
any vacancy occurring in any office of the Corporation.

3.  [Chairman of the Board]{.underline}.

The Chairman of the Board shall be initially appointed in accordance
with the Merger Agreement, shall preside at all meetings of the Board
and of stockholders (unless the Board designates another person) and,
except where by applicable law the signature of the President is
required, the Chairman of the Board shall possess the same power as the
President to sign all contracts, certificates and other instruments of
the Corporation which may be authorized by the Board. The Chairman of
the Board shall also perform such other duties and may exercise such
other powers as may from time to time be assigned by these By-Laws or by
the Board.

4.  [Vice Chairmen of the Board]{.underline}.

The Vice Chairmen, if such are appointed by the Board, shall report and
be responsible to the Chairman of the Board or, if the Board so directs,
the President and Chief Executive Officer. The Vice Chairmen shall have
such powers and perform such duties as from time to time may be assigned
or delegated to him or her by the Board or are incident to the office of
Vice Chairman. During the absence, disability, or at the request of the
Chairman of the Board, a Vice Chairman shall perform the duties and
exercise the powers of the Chairman of the Board. In the absence or
disability of both the Vice Chairmen and the Chairman of the Board, the
President or another person designated by the Board shall perform the
duties and exercise the powers of the Vice Chairmen, and unless
otherwise determined by the Board, the duties and powers of the
Chairman.

5.  [President and Chief Executive Officer]{.underline}.

The President shall report and be responsible to the Board and shall be
initially appointed in accordance with the Merger Agreement. The
President shall be the Chief Executive Officer of the Corporation and
shall have general supervision of the business of the Corporation and
shall have the authority to see that all orders and resolutions of the
Board are carried into effect and shall have such powers and perform
such duties as from time to time may be assigned or delegated to him or
her by the Board or are incident to the office of President. During the
absence or disability of the Vice Chairman (if there be one so
appointed), or at the request of the Chairman of the Board, the
President shall perform the duties and exercise the powers of the Vice
Chairman of the Board. During the absence or disability of the Chairman
of the Board and the Vice Chairman, or at the request of the Chairman of
the Board, the President shall perform the duties and exercise the
powers of the Vice Chairman and the Chairman of the Board. In the
absence or disability of the President, the person designated by the
Board shall perform the duties and exercise the powers of the President,
and unless otherwise determined by the Board, the duties and powers of
the Vice Chairman.

6.  [Senior Executive Vice Presidents]{.underline}.

The Senior Executive Vice Presidents shall have such powers and perform
such duties as from time to time may be prescribed for them respectively
by the Board or are incident to the office of Senior Executive Vice
President.

7.  [Executive Vice Presidents]{.underline}.

The Executive Vice Presidents shall have such powers and perform such
duties as from time to time may be prescribed for them respectively by
the Board or are incident to the office of Executive Vice President.

8.  [Senior Vice Presidents]{.underline}.

The Senior Vice Presidents shall have such powers and perform such
duties as from time to time may be prescribed for them respectively by
the Board or are incident to the office of Senior Vice President.

9.  [Vice Presidents]{.underline}.

The Vice Presidents shall have such powers and perform such duties as
from time to time may be prescribed for them respectively by the Board
or are incident to the office of Vice President.

10. [Secretary]{.underline}.

The Secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the Board may order, a
book of minutes of all meetings of stockholders, the Board and its
committees, with the time and place of holding, whether regular or
special, and if special, how authorized, the notice thereof given, the
names of those present at Board and committee meetings, the number of
shares present or represented at stockholders' meetings, and the
proceedings thereof. The Secretary shall keep, or cause to be kept, a
copy of the By-Laws of the Corporation at the principal executive office
of the Corporation or such other place as the Board may order.

The Secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the
Corporation's transfer agent or registrar, if one be appointed, a stock
register, or a duplicate stock register, showing the names of the
stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same, and
the number and date of cancellation of every certificate surrendered for
cancellation.

The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders, and of the Board and any committees thereof
required by these By-Laws or by law to be given, shall keep the seal of
the Corporation in safe custody and shall have such other powers and
perform such other duties as may be prescribed by the Board.

11. [Treasurer]{.underline}.

The Treasurer shall have custody of the corporate funds and securities
of the Corporation and shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the Corporation, and shall send or cause to be sent to
the stockholders of the Corporation such financial statements and
reports as are required by law or these By-Laws to be sent to them.

The Treasurer shall deposit all monies and valuables in the name and to
the credit of the Corporation with such depositories as may be
designated by the Board. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, shall render to the
President and the Board, whenever they request it, an account of all
transactions and of the financial condition of the Corporation, and
shall have such other powers and perform such other duties as may be
prescribed by the Board.

12. [Other Officers]{.underline}.

Such other officers or assistant officers as the Board may designate
shall perform such duties and have such powers as from time to time may
be assigned to them by the Board. The Board may delegate to any other
officer of the Corporation the power to choose such other officers and
to prescribe their respective duties and powers.

13. [Execution of Contracts and Other Documents]{.underline}.

Each officer of the Corporation may execute, affix the corporate seal
and/or deliver, in the name and on behalf of the Corporation, deeds,
mortgages, notes, bonds, contracts, agreements, powers of attorney,
guarantees, settlements, releases, evidences of indebtedness,
conveyances, or any other document or instrument which is authorized by
the Board or is required to be executed in the ordinary course of
business of the Corporation, except in cases where the execution,
affixation of the corporate seal and/or delivery thereof shall be
expressly and exclusively delegated by the Board to some other officer
or agent of the Corporation.

14. [Action with Respect to Securities of Other
    Corporations]{.underline}.

Powers of attorney, proxies, waivers of notice of meeting, consents and
other instruments relating to securities owned by the Corporation may be
executed in the name of and on behalf of the Corporation by the Chairman
of the Board or the President or any other officer or officers
authorized by the Board, the Chairman of the Board or the President, and
any such officer may, in the name of and on behalf of the Corporation,
vote, represent and exercise on behalf of the Corporation all rights
incident to any and all shares of any other corporation and take all
such action as any such officer may deem advisable to vote in person or
by proxy at any meeting of security holders of any corporation in which
the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership
of such securities and which, as the owner thereof, the Corporation
might have exercised and possessed if present. The Board may, by
resolution from time to time, confer like powers upon any other person
or persons.

5.  [STOCK]{.underline}

    1.  [Certificates of Stock]{.underline}.

The interest of each stockholder of the Corporation shall be evidenced
by certificates for shares of stock in such form as the appropriate
officers of the Corporation may from time to time determine, provided
that the Board may provide by resolution or resolutions that some or all
of any or all classes or series of the stock of the Corporation shall be
represented by uncertificated shares. Notwithstanding the adoption of
such a resolution or resolutions by the Board, each stockholder shall be
entitled, upon request, to a certificate certifying the number of shares
owned by him or her and signed in the name of the Corporation (i) by the
Chairman or Vice Chairman of the Board, the President or any Executive
Vice President, Senior Vice President or Vice President and (ii) by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer. Where a certificate is countersigned by (i) a transfer agent
or (ii) a registrar, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar whose
signature appears on the certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued,
it may be issued by the Corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
Except as expressly provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of the
holders of certificates representing stock of the same class and series
shall be identical.

2.  [Transfers of Stock]{.underline}.

Transfers of shares of capital stock of the Corporation shall be made
only on the stock record of the Corporation by the holder of record
thereof or by his, her or its attorney thereunto authorized by the power
of attorney duly executed and filed with the Secretary of the
Corporation or the transfer agent thereof, and, in the case of
certificated shares, only on surrender of the certificate or
certificates representing such shares, properly endorsed or accompanied
by a duly executed stock transfer power. Upon receipt of proper transfer
instructions from the registered owner of uncertificated shares, such
uncertificated shares shall be cancelled and issuance of new equivalent
uncertificated shares or certificated shares shall be made to the person
entitled thereto and the transaction shall be recorded in the books of
the Corporation. Registration of transfer of any shares shall be subject
to applicable provisions of the Certificate of Incorporation and
applicable law with respect to the transfer of such shares. The Board
may make such additional rules and regulations as it may deem expedient
concerning the issue and transfer of certificates representing shares of
the capital stock of the Corporation.

3.  [Record Date]{.underline}.

    a.  In order that the Corporation may determine the stockholders
        entitled to notice of or to vote at any meeting of stockholders
        or any adjournment thereof, or entitled to receive payment of
        any dividend or other distribution or allotment of any rights,
        or entitled to exercise any rights in any other lawful action,
        the Board may fix, in advance, a record date in respect of such
        meeting, which record date shall not be more than 60 nor less
        than 10 days before the date of such meeting;
        [provided]{.underline}, [however]{.underline}, that if no record
        date is fixed by the Board, the record date for determining
        stockholders entitled to notice of or to vote at a meeting of
        stockholders shall be at the close of business on the day next
        preceding the day on which notice is given or, if notice is
        waived, at the close of business on the day next preceding the
        day on which the meeting is held, and, for determining
        stockholders entitled to receive payment of any dividend or
        other distribution or allotment of rights or to exercise any
        rights of change, conversion or exchange of stock or for any
        other purpose, the record date shall be at the close of business
        on the day on which the Board adopts a resolution relating
        thereto. A determination of stockholders of record entitled to
        notice of or to vote at a meeting of stockholders shall apply to
        any adjournment of the meeting; [provided]{.underline},
        [however]{.underline}, that the Board may fix a new record date
        for the adjourned meeting.

    b.  Notwithstanding Section 3(a) of this Article V, the record date
        for determining stockholders entitled to express consent to
        corporate action in writing without a meeting shall be as fixed
        by the Board or as otherwise established under this Section
        3(b). Any person seeking to have the stockholders authorize or
        take corporate action by written consent without a meeting
        shall, by written notice addressed to the Secretary and
        delivered to the Corporation, request that a record date be
        fixed for such purpose. The Board may fix a record date for such
        purpose, which shall be no more than 10 days after the date upon
        which the resolution fixing the record date is adopted by the
        Board and shall not precede the date such resolution is adopted.
        If the Board fails within 10 days after the Corporation receives
        such notice to fix a record date for such purpose, the record
        date shall be the day on which the first written consent is
        delivered to the Corporation in the manner described in Section
        3(c) below unless prior action by the Board is required under
        the DGCL, in which event the record date shall be at the close
        of business on the day on which the Board adopts the resolution
        taking such prior action.

    c.  Every written consent purporting to take or authorizing the
        taking of corporate action and/or revocations (each such written
        consent and related revocation is referred to in this Section
        3(c) as a "Consent") shall bear the date of signature of each
        stockholder who signs the Consent, and no Consent shall be
        effective to take the corporate action referred to therein
        unless, within 60 days of the earliest dated Consent delivered
        in the manner required by this Section 3(c), Consents signed by
        a sufficient number of stockholders to take such action are so
        delivered to the Corporation. A Consent shall be delivered to
        the Corporation by delivery to its registered office in the
        State of Delaware, its principal place of business, or an
        officer or agent of the Corporation having custody of the book
        in which proceedings of meetings of stockholders are recorded.
        Delivery to the Corporation's registered office, to its
        principal place of business or to such officer or agent shall be
        made by hand or by certified or registered mail, return receipt
        requested. In the event of the delivery to the Corporation of a
        Consent, the Secretary of the Corporation shall provide for the
        safe-keeping of such consent and shall promptly conduct such
        ministerial review of the sufficiency of the Consents and of the
        validity of the action to be taken by stockholder consent as he
        or she deems necessary or appropriate, including, without
        limitation, whether the holders of a number of shares having the
        requisite voting power to authorize or take the action specified
        in the Consent have given consent; [provided]{.underline},
        [however]{.underline}, that if the corporate action to which the
        Consent relates is the removal or replacement of one or more
        members of the Board, the Secretary or the Corporation shall
        promptly designate two persons who shall not be members of the
        Board, to serve as inspectors with respect to such Consent and
        such inspectors shall discharge the functions of the Secretary
        of the Corporation under this Section 3(c). If the Certificate
        of Incorporation provides for the issuance of any class or
        series of stock which is convertible into any other class or
        series of stock, as a condition to counting the votes cast by
        any holder of shares at any annual or special meeting of
        stockholders, or in connection with any Consent of stockholders,
        the Board or a duly authorized committee thereof, in its
        discretion, may require the holder of any shares to furnish such
        affidavits or other proof as the Board or such committee deems
        necessary and advisable to determine whether such shares have
        been converted pursuant to the terms governing the issuance and
        conversion of such shares in the Certificate of Incorporation.
        If after such investigation the Secretary or the inspectors (as
        the case may be) shall determine that the Consent is valid and
        that the action therein specified has been validly authorized,
        that fact shall forthwith be certified on the records of the
        Corporation kept for the purpose of recording the proceedings of
        meetings of stockholders, and the Consent shall be filed in such
        records, at which time the Consent shall become effective as
        stockholder action. In conducting the investigation required by
        this Section 3(c), the Secretary or the inspectors (as the case
        may be) may, at the expense of the Corporation, retain special
        legal counsel and any other necessary or appropriate
        professional advisors, and such other personnel as they may
        reasonably deem necessary or appropriate to assist them, and
        shall be fully protected in relying in good faith upon the
        opinion of such counsel or advisors.

4.  [Lost, Stolen or Destroyed Certificates]{.underline}.

The Board may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate, the Board
may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same
in such manner as the Board shall require and/or to give the Corporation
a bond in such sum as it may direct as indemnity against any claim that
may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.

5.  [Regulations]{.underline}.

The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board may
establish.

6.  [Record Owners]{.underline}.

The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.

6.  [NOTICES]{.underline}

    1.  [Notices]{.underline}.

Whenever written notice is required by law, the Certificate of
Incorporation or these By-Laws, except as otherwise specifically
provided herein or required by law, all notices required to be given to
any stockholder, Director, officer, employee or agent shall be in
writing and may in every instance be effectively given by hand delivery
to the recipient thereof, by depositing such notice in the mails,
postage paid, recognized overnight delivery service or by sending such
notice by facsimile, receipt acknowledged, or by prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder,
Director, officer, employee or agent at his or her last known address as
the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered
through the mails or by telegram or facsimile shall be the time of the
giving of the notice.

2.  [Waivers]{.underline}.

A written waiver of any notice, signed by a stockholder, Director,
officer, employee or agent, whether before or after the time of the
event for which notice is to be given, shall be deemed equivalent to the
notice required to be given to such stockholder, Director, officer,
employee or agent. Neither the business nor the purpose of any meeting
need be specified in such a waiver. Attendance at any meeting shall
constitute waiver of notice of such meeting except attendance for the
sole purpose of objecting to the timeliness of notice.

7.  [MISCELLANEOUS]{.underline}

    1.  [Facsimile Signatures]{.underline}.

In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-Laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as
authorized by the Board or a committee thereof.

2.  [Corporate Seal]{.underline}.

The Board may provide a suitable seal, containing the name of the
Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary
or Assistant Treasurer.

3.  [Reliance upon Books, Reports and Records]{.underline}.

Each Director, each member of any committee designated by the Board, and
each officer of the Corporation shall, in the performance of his or her
duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of
its officers or employees, or committees of the Board so designated, or
by any other person as to matters which such Director or committee
member reasonably believes are within such other person's professional
or expert competence and who has been selected with reasonable care by
or on behalf of the Corporation.

4.  [Fiscal Year]{.underline}.

The fiscal year of the Corporation shall be as fixed by the Board.

5.  [Time Periods]{.underline}.

In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that
an act be done during a period of a specified number of days prior to an
event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.

6.  [Disbursements]{.underline}.

All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as
the Board may from time to time designate.

8.  [INDEMNIFICATION]{.underline}

    1.  [Power to Indemnify in Actions, Suits or Proceedings Other Than
        Those by or in the Right of the Corporation]{.underline}.

Subject to Section 3 of this Article VIII, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason
of the fact that such person is or was a Director or officer of the
Corporation, or is or was a Director or officer of the Corporation
serving at the request of the Corporation as a director or officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such person's
conduct was unlawful.

2.  [Power to Indemnify in Actions, Suits or Proceedings by or in the
    Right of the Corporation]{.underline}.

Subject to Section 3 of this Article VIII, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a Director or officer of
the Corporation, or is or was a Director or officer of the Corporation
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

3.  [Authorization of Indemnification]{.underline}.

Any indemnification under this Article VIII (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Director or officer is
proper in the circumstances because such person has met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII,
as the case may be. Such determination shall be made, with respect to a
person who is a Director or officer at the time of such determination,
(i) by a majority vote of the Directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (ii) by a
committee of such Directors designated by a majority vote of such
Directors, even though less than a quorum, or (iii) if there are no such
Directors, or if such Directors so direct, by independent legal counsel
in a written opinion or (iv) by the stockholders. Such determination
shall be made, with respect to former Directors and officers, by any
person or persons having the authority to act on the matter on behalf of
the Corporation. To the extent, however, that a present or former
Director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith,
without the necessity of authorization in the specific case.

4.  [Good Faith Defined]{.underline}.

For purposes of any determination under Section 3 of this Article VIII,
a person shall be deemed to have acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe such person's
conduct was unlawful, if such person's action is based on the records or
books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of
legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or
another enterprise by an independent certified public accountant or by
an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used
in this Section 4 shall mean any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise of which
such person is or was serving at the request of the Corporation as a
Director, officer, employee or agent. The provisions of this Section 4
shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII,
as the case may be.

5.  [Indemnification by a Court]{.underline}.

Notwithstanding any contrary determination in the specific case under
Section 3 of this Article VIII, and notwithstanding the absence of any
determination thereunder, any Director or officer may apply to the Court
of Chancery in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this Article VIII. The
basis of such indemnification by a court shall be a determination by
such court that indemnification of the Director or officer is proper in
the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case
may be. Neither a contrary determination in the specific case under
Section 3 of this Article VIII nor the absence of any determination
thereunder shall be a defense to such application or create a
presumption that the Director or officer seeking indemnification has not
met any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful,
in whole or in part, the Director or officer seeking indemnification
shall also be entitled to be paid the expense of prosecuting such
application.

6.  [Expenses Payable in Advance]{.underline}.

Expenses incurred by a Director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.

7.  [Nonexclusively of Indemnification and Advancement of
    Expenses]{.underline}.

The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses
may be entitled under the Certificate of Incorporation, any By-Law,
agreement, vote of stockholders or disinterested Directors or otherwise,
both as to action in such person's official capacity and as to action in
another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1
and 2 of this Article VIII shall be made to the fullest extent permitted
by law. The provisions of this Article VIII shall not be deemed to
preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the
power to or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise.

8.  [Insurance]{.underline}.

The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director or officer of the Corporation, or is or
was a Director or officer of the Corporation serving at the request of
the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the
power or the obligation to indemnify such person against such liability
under the provisions of this Article VIII.

9.  [Certain Definitions]{.underline}.

For purposes of this Article VIII, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its Directors or
officers, so that any person who is or was a Director or officer of such
constituent corporation, or is or was a Director or officer of such
constituent corporation serving at the request of such constituent
corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions
of this Article VIII with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued. For purposes of
this Article VIII, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include
any service as a Director, officer, employee or agent of the Corporation
which imposes duties on, or involves services by, such Director or
officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VIII.

10. [Survival of Indemnification and Advancement of
    Expenses]{.underline}.

The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.

11. [Limitation on Indemnification]{.underline}.

Notwithstanding anything contained in this Article VIII to the contrary,
except for proceedings to enforce rights to indemnification (which shall
be governed by Section 5 hereof), the Corporation shall not be obligated
to indemnify any Director or officer in connection with a proceeding (or
part thereof) initiated by such person unless such proceeding (or part
thereof) was authorized or consented to by the Board of the Corporation.

12. [Indemnification of Employees and Agents]{.underline}.

The Corporation may, to the extent authorized from time to time by the
Board, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those
conferred in this Article VIII to Directors and officers of the
Corporation.

9.  [AMENDMENTS]{.underline}

    a.  Subject to paragraph (b) of this Article IX below, and in
        furtherance and not in limitation of the powers conferred by
        law, in addition to any affirmative vote of the holders of any
        particular class or series of the capital stock of the
        Corporation required by law, the Certificate of Incorporation or
        these By-Laws, the affirmative vote of the holders of at least a
        majority of the voting power of all of the then-outstanding
        shares entitled to vote generally on matters requiring approval
        of stockholders, voting together as a single class, shall be
        authorized to adopt, alter, amend or repeal any provision of
        these By-Laws, and, subject to the power of the holders of
        capital stock of the Corporation to adopt, alter, amend or
        repeal the By-Laws under the DGCL, the Board is also expressly
        authorized to adopt, alter, amend or repeal any provision of
        these By-Laws.

    b.  Notwithstanding any of the foregoing, (i) Article II, Sections
        1, 2, 3, 12, 13, (ii) Article III, Sections 1, 3, 4, 5, (iii)
        Article IV, and (iv) this Article IX of these By-Laws, may only
        be amended, altered or repealed (x) by the affirmative vote of
        at least a majority of the Directors, including at least a
        majority of Independent Directors then serving on the Board,
        or (y) by the affirmative vote of the holders of at least a
        majority of the voting power of all of the then-outstanding
        shares entitled to vote generally on matters requiring approval
        of stockholders, voting together as a single class, but
        excluding such shares Beneficially Owned by Purchaser, or (z) in
        the event any person, together with its Affiliates, shall have
        acquired ownership of sixty-five percent (65%) or more of the
        Corporation's Voting Securities then outstanding, pursuant to
        paragraph (a) of this Article IX above.

**EXHIBIT 2**

**Proposed Resolutions of the Board of Directors of**

**The News Corporation Limited (the \"Corporation\")**

**WHEREAS,** the Board of Directors has previously approved a series of
transactions (the \"*Transactions*\") pursuant to which the
Corporation\'s subsidiary, Fox Entertainment Group, Inc., a Delaware
corporation (\"*FEG*\") will acquire 34% of the outstanding common stock
of Hughes Electronics Corporation (\"*Hughes*\");

**WHEREAS,** the United States Department of Justice, United States
Department of Homeland Security and Federal Bureau of Investigation
(together, the "*Executive Agencies*") have sought assurances that the
Corporation, as a non-U.S. entity, will not be able to influence
Hughes's compliance with lawful requests relating to issues of U.S.
national security and law enforcement; and

**WHEREAS,** in response to the Executive Agencies' requests, it is
proposed that the Corporation and Hughes take certain necessary actions
to amend the By-laws that will be in effect upon consummation of the
Transactions so as to read as set forth in the form of amended and
restated by-laws of Hughes attached hereto as [Exhibit A]{.underline} (
the \"*Hughes By-law Amendment*\"), which amendment provides, among
other things and subject to the terms thereof, that the Hughes\' Audit
Committee shall be comprised exclusively of U.S. citizens and shall have
exclusive jurisdiction over the establishment, oversight and evolution
of policies related to U.S. national security and law enforcement
concerns;

**IT IS THEREFORE RESOLVED,** that the Board of Directors recognizes,
understands and accepts the Hughes By-law Amendment and hereby
determines that it is advisable, desirable and in the best interests of
the Corporation and its stockholders to, in order to implement the
Hughes By-law Amendment, amend (i) the Stock Purchase Agreement, dated
as of April 9, 2003, as amended, by and among the Corporation, Hughes
and General Motors Corporation and (ii) the Agreement and Plan of
Merger, dated as of April 9, 2003, as amended, by and among the
Corporation, Hughes and GMH Merger Sub, Inc., in each case in the manner
contemplated by the form of letter agreement attached hereto as [Exhibit
B]{.underline} (the "*Letter Agreement*"); and it is further

> **RESOLVED,** that the Board of Directors accepts and acknowledges
> that, subject to the terms of the Hughes By-law Amendment, each member
> of the Hughes Audit Committee shall be a U.S. citizen; and it is
> further

**RESOLVED,** that the Board of Directors understands the national
security and law enforcement bases of the Hughes By-law Amendment and
that the adoption of the Hughes By-law Amendment is a condition of the
Executive Agencies' consent to the U.S. Federal Communications
Commission's approval of the transfer of certain licenses and assets
associated with the acquisition of Hughes shares by FEG.

**EXHIBIT 3**

![](media/image1.png){width="5.988888888888889in" height="7.75in"}

![](media/image2.png){width="5.992361111111111in"
height="7.754861111111111in"}

**APPENDIX F**

**CONDITIONS**

#  {#section-1 .unnumbered}

**I. PROGRAM CARRIAGE CONDITION TO PREVENT DISCRIMINATION AGAINST ALL
FORMS OF UNAFFILIATED VIDEO PROGRAMMING**

-   Neither News Corp. nor DirecTV will discriminate against
    unaffiliated programming services in the selection, price, terms or
    conditions of carriage.

    **II. PROGRAM ACCESS CONDITIONS TO ENSURE NON-DISCRIMINATORY ACCESS
    TO ALL SATELLITE CABLE PROGRAMMING**

-   News Corp. will not offer any of its existing or future national and
    regional programming services on an exclusive basis to any MVPD and
    will continue to make such services available to all MVPDs on a
    non-exclusive basis and nondiscriminatory terms and conditions.

-   DirecTV will not enter into an exclusive distribution arrangement
    with any Affiliated Program Rights Holder.[^1050]

-   As long as Liberty Media holds an Attributable Interest in News
    Corp., DirecTV will deal with Liberty Media with respect to
    programming services it controls as a vertically integrated
    programmer subject to the program access rules.

-   DirecTV may continue to compete for programming that is lawfully
    offered on an exclusive basis by an unaffiliated program rights
    holder (*e.g*., NFL Sunday Ticket).

-   Neither News Corp. nor DirecTV (including any entity over which
    either exercises control) shall unduly or improperly influence: (i)
    the decision of any Affiliated Program Rights Holder to sell
    programming to an unaffiliated MVPD; or (ii) the prices, terms and
    conditions of sale of programming by any Affiliated Program Rights
    Holder to an unaffiliated MVPD.

-   These commitments will apply to News Corp. and DirecTV for as long
    as the FCC deems News Corp. to have an Attributable Interest in
    DirecTV and the FCC's program access rules applicable to satellite
    cable programming vendors affiliated with cable operators remain in
    effect (provided that if the program access rules are modified these
    commitments shall be modified to conform to any revised rules
    adopted by the FCC).[^1051]

-   For enforcement purposes, aggrieved MVPDs may bring program access
    complaints against Applicants using the procedures found at Section
    76.1003, 47 U.S.C. § 76.1003, of the Commission's rules.

    **III. ADDITIONAL CONDITIONS CONCERNING ACCESS TO REGIONAL SPORTS
    CABLE PROGRAMMING NETWORKS**

> When negotiations fail to produce a mutually acceptable set of price,
> terms and conditions for carriage of a regional sports network
> ("RSN"), an MVPD may choose to submit a dispute to commercial
> arbitration in accordance with the following procedures:
>
> ***Commercial Arbitration Remedy***

-   An aggrieved MVPD may submit a dispute with News Corp. over the
    terms and conditions of carriage of RSN programming in each region
    in which News Corp. owns or holds a controlling interest or manages
    any non-broadcast RSN.

-   Following the expiration of any existing contract, or 90 days after
    a first time request for carriage, an MVPD may notify News Corp.
    within five business days that it intends to request commercial
    arbitration to determine the terms of the new affiliation agreement.

-   Upon receiving timely notice of the MVPD's intent to arbitrate, News
    Corp. must immediately allow continued carriage of the network under
    the same terms and conditions of the expired affiliation agreement
    as long as the MVPD continues to meet the obligations set forth in
    this condition.

-   Carriage of the disputed programming during the period of
    arbitration is not required in the case of first time requests for
    carriage.

-   *"Cooling Off Period."* The period following News Corp.'s receipt of
    timely notice of the MVPD's intent to arbitrate and before the
    MVPD's filing for formal arbitration with the American Arbitration
    Association ("AAA") shall constitute a "cooling-off' period during
    which time negotiations are to continue.

-   *Formal Filing with the AAA*. The MVPD's formal demand for
    arbitration, which shall include the MVPD's "final offer," may be
    filed with the AAA no earlier than the fifteenth business day after
    the expiration of the RSN contract and no later than the end of the
    twentieth business day following such expiration. If the MVPD makes
    a timely demand, News Corp. must participate in the arbitration
    proceeding.

-   The AAA will notify News Corp. and the MVPD upon receiving the
    MVPD's formal filing.

-   News Corp. will file a "final offer" with the AAA within two
    business days of being notified by the AAA that a formal demand for
    arbitration has been filed by the MVPD.

-   The MVPD's final offer may not be disclosed until the AAA has
    received the final offer from News Corp.

-   The final offers shall be in the form of a contract for the carriage
    of the programming for a period of at least three years. The final
    offers may not include any provision to carry any video programming
    networks or any other service other than the RSN.

***Rules of Arbitration***

-   The arbitration will be decided by a single arbitrator under the
    expedited procedures of the commercial arbitration rules, then in
    effect, of the AAA (the "Rules"), excluding the rules relating to
    large, complex cases, but including the modifications to the Rules
    set forth in Appendix B.

-   The parties may agree to modify any of the time limits set forth
    above and any of the procedural rules of the arbitration; absent
    agreement, however, the rules specified herein apply. The parties
    may not, however, modify the requirement that they engage in
    final-offer arbitration.

-   The arbitrator is directed to choose the final offer of the party
    that most closely approximates the fair market value of the
    programming carriage rights at issue.

-   Under no circumstances will the arbitrator choose a final offer that
    does not permit News Corp. to recover a reasonable share of the
    costs of acquiring the programming at issue.

-   To determine fair market value, the arbitrator may consider any
    relevant evidence (and may require the parties to submit such
    evidence to the extent it is in their possession),[^1052] including,
    but not limited to:

    -   current or previous contracts between MVPDs and RSNs in which
        News Corp. does not have an interest as well as offers made in
        such negotiations (which may provide evidence of either a floor
        or a ceiling of fair market value);

    -   evidence of the relative value of such programming compared to
        the RSN programming at issue (*e.g*., advertising rates,
        ratings);

    -   contracts between MVPDs and RSNs on whose behalf News Corp. has
        negotiated before News Corp. acquired control of DirecTV;

    -   offers made in such negotiations;

    -   internal studies or discussions of the imputed value of RSN
        programming in bundled agreements;

    -   other evidence (including internal discussions) of the value of
        RSN programming;

    -   changes in the value of non-News Corp. RSN programming
        agreements;

    -   changes in the value or costs of News Corp. RSN programming, or
        in other prices relevant to the relative value of News Corp. RSN
        programming (*e.g*., advertising rates).

-   The arbitrator may not consider offers prior to the arbitration made
    by the MVPD and News Corp. for the programming at issue in
    determining the fair market value.

-   If the arbitrator finds that one party's conduct, during the course
    of the arbitration, has been unreasonable, the arbitrator may assess
    all or a portion of the other party's costs and expenses (including
    attorney fees) against the offending party.

-   Following resolution of the dispute by the arbitrator, to the extent
    practicable, the terms of the new affiliation agreement will become
    retroactive to the expiration date of the previous affiliation
    agreement. The MVPD will make an additional payment to News Corp. in
    an amount representing the difference, if any, between the amount
    that is required to be paid under the arbitrator's award and the
    amount actually paid under the terms of the expired contract during
    the period of arbitration.

-   Judgment upon an award entered by the arbitrator may be entered by
    any court having competent jurisdiction over the matter, unless one
    party indicates that it wishes to seek review of the award with the
    Commission, and does so in a timely manner.

***Review of Award by the Commission***

-   A party aggrieved by the arbitrator's award may file with the
    Commission a petition seeking de novo review of the award. The
    petition must be filed within 30 days of the date the award is
    published.

-   The MVPD may elect to carry the programming at issue pending the FCC
    decision, subject to the terms and conditions of the arbitrator's
    award.

-   In reviewing the award, the Commission will examine the same
    evidence that was presented to the arbitrator and will choose the
    final offer of the party that most closely approximates the fair
    market value of the programming carriage rights at issue.

-   The Commission may award the winning party costs and expenses
    (including reasonable attorney fees) to be paid by the losing party,
    if it considers the appeal or conduct by the losing party to have
    been unreasonable. Such an award of costs and expenses may cover
    both the appeal and the costs and expenses (including reasonable
    attorneys' fees) of the arbitration.

    ***Provisions Applicable to Small MVPDs***

    -   An MVPD meeting the definition of a "small cable company" may
        appoint a bargaining agent to bargain collectively on its behalf
        in negotiating carriage of RSNs with News Corp. and News Corp.
        may not refuse to negotiate carriage of RSN programming with
        such an entity.[^1053] The designated collective bargaining
        entity will have all the rights and responsibilities granted by
        these conditions.

        ***Additional Provisions Concerning Arbitration***

-   No later than 20 business days prior to the expiration of an
    affiliation agreement with an MVPD for video programming subject to
    this condition, News Corp. must provide the MVPD with a copy of the
    conditions imposed in this Order. News Corp. must provide a copy of
    the conditions imposed in this Order within 10 business days of
    receiving a first time request for affiliation.

-   This condition will expire six years after the release of the Order.

-   The Commission will consider a petition for modification of this
    condition if it can be demonstrated that there has been a material
    change in circumstance or the conditions have proven unduly
    burdensome, rendering the condition no longer necessary in the
    public interest.

    **IV. CONDITIONS CONCERNING ACCESS TO LOCAL BROADCAST TELEVISION
    STATION SIGNALS**

> When negotiations fail to produce a mutually acceptable set of price,
> terms and conditions for a retransmission consent agreement with a
> local broadcast television station that News Corp. owns and operators
> or on whose behalf it negotiates retransmission consent, an MVPD may
> choose to submit a dispute to commercial arbitration in accordance
> with the following procedures:
>
> ***Commercial Arbitration Remedy***

-   The commercial arbitration condition commences following the
    expiration of any existing retransmission consent agreement.

-   Following such expiration, or 90 days after a first time request for
    retransmission consent, a MVPD may notify News Corp. within five
    business days that it intends to request arbitration over the terms
    and conditions of retransmission consent.

-   Upon receiving timely notice of the MVPD's intent to arbitrate, News
    Corp. must immediately allow continued retransmission of the
    broadcast signal under the same terms and conditions of the expired
    retransmission consent agreement as long as the MVPD continues to
    meet the obligations set forth in this condition.

-   Retransmission of the broadcast signal during the period of
    arbitration is not required in the case of first time requests for
    carriage.

-   *"Cooling Off Period."* Following the MVPD's notice of intent to
    submit the dispute to arbitration, but prior to filing for formal
    arbitration with the American Arbitration Association ("AAA"), the
    MVPD and News Corp. will enter a "cooling-off' period during which
    negotiations will continue.

-   *Formal Filing with the AAA*. The MVPD's formal demand for
    arbitration, which shall include the MVPD's "final offer," may be
    filed with the AAA no earlier than the fifteenth business day after
    the expiration of the retransmission consent agreement and no later
    than the end of the twentieth business day following such
    expiration. If the MVPD makes a timely demand, News Corp. must
    participate in the arbitration proceeding.

-   The AAA will notify News Corp. and the MVPD upon receiving the
    MVPD's formal filing.

-   News Corp. will file a "final offer" with the AAA within two
    business days of being notified by the AAA that a formal demand for
    arbitration has been filed by the MVPD.

-   The MVPD's final offer may not be disclosed until the AAA has
    received the final offer from News Corp.

-   The final offers shall be in the form of a contract for the
    retransmission of the broadcast signal for a period of three years.
    The final offers may not include any provision to carry any video
    programming networks or any other service other than the broadcast
    signal.

> ***Rules of Arbitration***

-   The arbitration will be decided by a single arbitrator under the
    expedited procedures of the Rules, excluding the rules relating to
    large, complex cases, but including the modifications to the Rules
    set forth in Appendix C.

-   The parties may agree to modify any of the time limits set forth
    above and any of the procedural rules of the arbitration; absent
    agreement, however, the rules specified herein apply. The parties
    may not, however, modify the requirement that they engage in
    final-offer arbitration.

-   The arbitrator is directed to choose the "final offer" of the party
    which most closely approximates the fair market value of the
    programming carriage rights at issue.

-   To determine fair market value, the arbitrator may consider any
    relevant evidence (and may require the parties to submit such
    evidence to the extent it is in their possession),[^1054] including,
    but not limited to:

    -   current contracts between MVPDs and Fox-affiliated stations on
        whose behalf News Corp. does not negotiate;

    -   current contracts between MVPDs and non-Fox network stations;

    -   offers made in the preceding negotiations (which may provide
        evidence of either a floor or a ceiling of fair market value);

    -   evidence of the relative value of Fox programming compared to
        other network programming (*e.g*., advertising rates, ratings);

    -   contracts between MVPDs and stations on whose behalf News Corp.
        has negotiated made before News Corp. acquired control of
        DirecTV as well as offers made in such negotiations;

    -   internal studies of the imputed value of retransmission consent
        agreements in bundled agreements;

    -   changes in the value of non-Fox retransmission consent
        agreements;

    -   changes in the value or costs of Fox programming or broadcast
        stations, or in other prices relevant to the relative value of
        Fox broadcast programming (*e.g*., advertising rates).

-   The arbitrator may not consider offers prior to the arbitration made
    by the MVPD and News Corp. for the programming at issue in
    determining the fair market value.

-   If the arbitrator finds that one party's conduct, during the course
    of the arbitration, has been unreasonable, the arbitrator may assess
    all or a portion of the other party's costs and expenses (including
    attorney fees) against the offending party.

-   Following the decision of the arbitrator, and to the extent
    practicable, the terms of the new retransmission consent agreement,
    including payment terms, if any, will become retroactive to the
    expiration date of the previous retransmission consent agreement.
    The MVPD will make an additional payment to News Corp. in an amount
    representing the difference, if any, between the amount that is
    required to be paid under the arbitrator's award and the amount
    actually paid under the terms of the expired contract during the
    period of arbitration.

-   Judgment upon an award entered by the arbitrator may be entered by
    any court having competent jurisdiction over the matter, unless one
    party indicates that it wishes to seek review of the award with the
    Commission, and does so in a timely manner.

> ***Review of Award by the Commission***

-   A party aggrieved by the arbitrator's award may file with the
    Commission a petition seeking *de novo* review of the award. The
    petition must be filed within 30 days of the date the award is
    published.

-   The MVPD may elect to continue to retransmit the broadcast signal
    pending the FCC decision, subject to the terms and conditions of the
    arbitrator's award.

-   In reviewing the award, the Commission will examine the same
    evidence that was presented to the Arbitrator and will choose the
    final offer of the party that most closely approximates the fair
    market value of the programming carriage rights at issue.

-   The Commission may award the winning party costs and expenses
    (including reasonable attorney fees) to be paid by the losing party,
    if it considers the appeal or conduct by the losing party to have
    been unreasonable. Such an award of costs and expenses may cover
    both the appeal and the costs and expenses (including reasonable
    attorney fees) of the arbitration.

> ***Provisions Applicable to Small MVPDs***

-   An MVPD meeting the Commission's definition of "small cable company"
    may appoint a bargaining agent to bargain collectively on its behalf
    in negotiating with News Corp. for carriage of the programming
    subject to this condition and News Corp. may not refuse to negotiate
    with such an entity.[^1055] The designated collective bargaining
    entity will have all the rights and responsibilities granted by
    these conditions.

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-   When dealing with MVPDs with fewer than 5,000 total subscribers, we
    require News Corp. to either elect "must-carry" status or negotiate
    retransmission consent for its owned and operated stations and any
    affiliated station on whose behalf it negotiates retransmission
    consent without any requirements for cash compensation or carriage
    of programming other than the broadcast signal.

> ***Additional Provisions Concerning Arbitration***

-   No later than 20 business days prior to the expiration of a
    must-carry election or retransmission consent agreement with an
    MVPD, News Corp. must provide the MVPD with a copy of the conditions
    imposed in this Order. News Corp. must provide a copy of the
    conditions imposed in this Order within 10 business days of
    receiving a first time request for retransmission consent.

-   This condition will expire six years after the release of the Order.

-   The Commission will consider a petition for modification of this
    condition if it can be demonstrated that there has been a material
    change in circumstance or the condition has proven unduly
    burdensome, rendering the condition no longer necessary in the
    public interest.

> ***Non-discriminatory Access to Local Broadcast Television Station
> Signals***

-   The non-discrimination commitments that News Corp. has proposed and
    we have imposed as conditions regarding non-discriminatory access to
    satellite cable programming networks are extended to any broadcast
    station that News Corp. owns and operates or on whose behalf it
    negotiates retransmission consent.

> ***Good Faith and Exclusivity Requirements of SHVIA***

-   The good faith and exclusivity requirements of SHVIA, in effect by
    their terms until January 1, 2006, are extended to apply to
    retransmission consent negotiations undertaken by News Corp. for
    carriage of its local broadcast station signals so long as the
    program access rules are in effect.

# VI. CONDITION TO INCREASE LOCAL-INTO-LOCAL BROADCAST TELEVISON SERVICE OFFERINGS {#vi.-condition-to-increase-local-into-local-broadcast-televison-service-offerings .unnumbered}

-   By year end 2004, DirecTV must provide local broadcast channels to
    subscribers in an additional 30 designated market areas ("DMAs")
    beyond what had been previously funded, projected or planned by
    Hughes/DirecTV.

-   In the event that circumstances beyond DirecTV's control limit its
    ability to fulfill this license condition, DirecTV may petition the
    Commission for waiver pursuant to Section 1.3 of the Commission
    rules, 47 C.F.R. § 1.3.

**VII. CONDITIONS TO MITIGATE NATIONAL SECURITY, LAW ENFORCEMENT,
FOREIGN POLICY AND TRADE POLICY CONCERNS**

Pursuant to the request of the U.S. Department of Justice ("DOJ") and
the Federal Bureau of Investigation ("FBI"), with the concurrence of the
Department of Homeland Security ("DHS"),[^1056] the transfer of control
is conditioned on:

-   GM causing Hughes to adopt, and Hughes adopting, prior to the
    closing of the subject transaction, the Hughes By-law Amendment;

-   The adoption by the Board of Directors of News Corp. of the Proposed
    Resolutions; and

-   Compliance by Hughes and News Corp., respectively, with the
    commitments set forth in the Hughes By-laws Amendment, the Proposed
    Resolutions, and the Letter Agreement.

    **APPENDIX G**

    **LICENSES AND AUTHORIZATIONS TO BE TRANSFERRED**

**File No. SAT-T/C-20030502-00083** is the Lead File number for the
space station series of applications. The complete list of File Numbers
follows:

+-------------------+--------------------------------------------------+
| **[Satellite      |                                                  |
| Space             |                                                  |
| Station           |                                                  |
| s]{.underline}:** |                                                  |
+-------------------+--------------------------------------------------+
| **File Number**   | **Licensee/Call Signs**                          |
+-------------------+--------------------------------------------------+
| SAT-T             | DIRECTV Enterprises, LLC                         |
| /C-20030502-00083 |                                                  |
|                   | *Call Sign(s)*: DBS8402; S2369; DBS8402;         |
|                   | DBS8402; S2430; S2417; DBS8804                   |
+-------------------+--------------------------------------------------+
|                   |                                                  |
+-------------------+--------------------------------------------------+
| SAT-T             | Hughes Network Systems, Inc.                     |
| /C-20030505-00084 |                                                  |
|                   | *Call Sign(s)*: S2132; S2133; S2185; S2187;      |
|                   | S2188; S2190; S2191                              |
+-------------------+--------------------------------------------------+
|                   |                                                  |
+-------------------+--------------------------------------------------+
| SAT-T             | PanAmSat Licensee Corporation                    |
| /C-20030502-00085 |                                                  |
|                   | *Call Sign(s)*: S2368; PAS-2R; PAS-4; CS91004;   |
|                   | PAS-6; PAS-8; S2359; PAS-9; S2229; S2380; S2382; |
|                   | S2131; S2128; S2381; S2377; GAL V; GAL VIII(i);  |
|                   | S2146; S2378; S2253; S2422; SBS‑6; KS39          |
+-------------------+--------------------------------------------------+
|                   |                                                  |
+-------------------+--------------------------------------------------+
| SAT-T             | USSB II, Inc.                                    |
| /C-20030502-00086 |                                                  |
|                   | *Call Sign(s)*: DBS8107; DBS8107                 |
+-------------------+--------------------------------------------------+

**File No. SES-T/C-20030502-00582** is the Lead File number for the
earth station series of applications. The complete list of File Numbers
follows (*see also* Public Notice, Report No. SES 00565, December 31,
2003):

+-------------------+--------------------------------------------------+
| **[Satellite      |                                                  |
| Earth             |                                                  |
| Station           |                                                  |
| s]{.underline}:** |                                                  |
+-------------------+--------------------------------------------------+
| **File Number**   | **Licensee/Call Signs**                          |
+-------------------+--------------------------------------------------+
| SES-T             | Hughes Network Systems, Inc.                     |
| /C-20030502-00582 |                                                  |
|                   | *Call Sign(s)*: E000166; E030007; E880787;       |
|                   | E880788; E880789; E881110; E881111; E881112;     |
|                   | E890426; E890427; E890428; E890628; E890629;     |
|                   | E890630; E891001; E891002; E900192; E900682;     |
|                   | E940455; E940460; E950471; E950472; E950473;     |
|                   | E970067; E990170 (VSAT Transmit/Receive)         |
+-------------------+--------------------------------------------------+
| SES-T             | Hughes Network Systems Limited                   |
| /C-20030502-00583 |                                                  |
|                   | *Call Sign(s)*: E000362; E010187; E020195;       |
|                   | E020205; E020206; E020207; E020208               |
|                   | (Transmit/Receive)                               |
+-------------------+--------------------------------------------------+
| SES-T             | Hughes Network Systems, Inc.                     |
| /C-20030502-00584 |                                                  |
|                   | *Call Sign(s)*: E020241; E020242; E030004;       |
|                   | E030005; E030006; E880970; E881109; E890627;     |
|                   | E900013; E910612; E940478;                       |
|                   | SES-STA-20021101-01942 (Transmit/Receive)        |
+-------------------+--------------------------------------------------+
| SES-T             | USSB II, Inc.                                    |
| /C-20030502-00585 |                                                  |
|                   | *Call Sign(s)*: E930437 (Receive Only)           |
+-------------------+--------------------------------------------------+
| SES-T             | USSB II, Inc.                                    |
| /C-20030502-00586 |                                                  |
|                   | *Call Sign(s)*: E930485 (Transmit Only)          |
+-------------------+--------------------------------------------------+
| SES-T             | California Broadcast Center, LLC                 |
| /C-20030502-00587 |                                                  |
|                   | *Call Sign(s)*: E010237; E020091                 |
|                   | (Transmit/Receive)                               |
+-------------------+--------------------------------------------------+
| SES-T             | PanAmSat Licensee Corporation                    |
| /C-20030502-00588 |                                                  |
|                   | *Call Sign(s)*: E010334; E970080 (Receive Only)  |
+-------------------+--------------------------------------------------+
| SES-T             | PanAmSat Licensee Corporation                    |
| /C-20030502-00589 |                                                  |
|                   | *Call Sign(s)*: E950067; E970051 (Transmit Only) |
+-------------------+--------------------------------------------------+
| SES-T             | PanAmSat Licensee Corporation                    |
| /C-20030502-00590 |                                                  |
|                   | *Call Sign(s)*: E000048; E000049; E000063;       |
|                   | E000274; E000363; E000364; E000488; E010019;     |
|                   | E010112; E010113; E010131; E010133; E020309;     |
|                   | E030012; E4132; E7465; E881286; E881304;         |
|                   | E890530; E900089; E920340; E920377; E930088;     |
|                   | E940333; E940368; E940532; E950267; E950307;     |
|                   | E950502; E950508; E970352; E970391; E970392;     |
|                   | E980460; E980467; E980501; E980502; E980503;     |
|                   | E990024; E990091; E990092; E990093; E990214;     |
|                   | E990223; E990224; E990323; E990334; E990363;     |
|                   | E990364; E990365; E990433; KA244; KA245; KA391;  |
|                   | KA450; KA71 (Transmit/Receive)                   |
+-------------------+--------------------------------------------------+
| SES-T             | PanAmSat Licensee Corporation                    |
| /C-20030502-00591 |                                                  |
|                   | *Call Sign(s)*: E010118; E010280; E990055        |
|                   | (Temporary Transmit/Receive)                     |
+-------------------+--------------------------------------------------+
| SES-T             | PanAmSat Licensee Corporation                    |
| /C-20030502-00592 |                                                  |
|                   | *Call Sign(s)*: E2178; E3943; E860175; E900621;  |
|                   | E900757; KL92 (Common Carrier Transmit/Receive)  |
+-------------------+--------------------------------------------------+
| SES-T             | DIRECTV Enterprises, LLC                         |
| /C-20030505-00601 |                                                  |
|                   | *Call Sign(s)*: E950423; E950424; E980170;       |
|                   | E980341 (Receive Only)                           |
+-------------------+--------------------------------------------------+
| SES-T             | DIRECTV Enterprises, LLC                         |
| /C-20030505-00602 |                                                  |
|                   | *Call Sign(s)*: E930229; E930304 (Transmit Only) |
+-------------------+--------------------------------------------------+
| SES-T             | DIRECTV Enterprises, LLC                         |
| /C-20030505-00603 |                                                  |
|                   | *Call Sign(s)*: E010129; E010130; E020172;       |
|                   | E930191; E950349; E980285; E980338; E980340;     |
|                   | E980473; E990159 (Transmit/Receive)              |
+-------------------+--------------------------------------------------+
| SES-T             | DIRECTV Enterprises, LLC                         |
| /C-20030505-00604 |                                                  |
|                   | *Call Sign(s)*: E990545 (Temporary               |
|                   | Transmit/Receive)                                |
+-------------------+--------------------------------------------------+
| SES-T             | DIRECTV Latin America, LLC (D-I-P)               |
| /C-20030505-00605 |                                                  |
|                   | *Call Sign(s)*: E990232 (Transmit/Receive)       |
+-------------------+--------------------------------------------------+
| SES-T             | Hughes Communications Satellite Services, Inc.   |
| /C-20030505-00606 |                                                  |
|                   | *Call Sign(s)*: E960001; E970079; E970094        |
|                   | (Receive Only)                                   |
+-------------------+--------------------------------------------------+
| SES-T             | Hughes Network Systems, Inc.                     |
| /C-20030505-00607 |                                                  |
|                   | *Call Sign(s)*: E861092; E873438 (Temporary      |
|                   | Transmit/Receive)                                |
+-------------------+--------------------------------------------------+

**File No. 0001293908** is the Lead File number for the wireless radio
series of applications. The complete list of File Numbers follows:

+----------------------+-----------------------------------------------+
| **[Wireless          |                                               |
| Lice                 |                                               |
| nses]{.underline}:** |                                               |
+----------------------+-----------------------------------------------+
| **File Number**      | **Licensee/File Nos.**                        |
+----------------------+-----------------------------------------------+
| 0001293908           | DIRECTV, Inc.                                 |
|                      |                                               |
|                      | *Call Sign(s)*: WPTZ691 (IG)                  |
+----------------------+-----------------------------------------------+
| 0001293894           | Hughes Electronics Corporation                |
|                      |                                               |
|                      | *Call Sign(s)*: WNEU9099 (MG)                 |
+----------------------+-----------------------------------------------+
| 0001293921           | Hughes Network Systems, Inc.                  |
|                      |                                               |
|                      | *Call Sign(s)*: WPVW320 (IG)                  |
+----------------------+-----------------------------------------------+

**SEPARATE STATEMENT OF**

**CHAIRMAN MICHAEL K. POWELL**

*Re: General Motors Corporation and Hughes Electronics Corporation,
Transferors and The News Corporation Limited, Transferee, for Authority
to Transfer Control*

The Commission has now completed a multi-year review, involving two
separate transfer applications, to transfer control of Commission
licenses involving nationwide DBS provider DirecTV. Unlike the transfer
application involving Echostar Communications---which ultimately became
the first major transaction blocked by this Commission in decades
because it would have harmed the public interest by combining the only
two nationwide DBS providers in the country[^1057]---this transaction,
as conditioned, involving General Motors, Hughes Electronics Corporation
and The News Corporation ("News Corp.") will bring significant benefits
to the American public.

As a result of this transaction, DirecTV will be a stronger competitor
in the pay-television space, especially against market-leading cable
operators. This increased competition to cable will spur new innovative
services and programming, lower prices and increased service quality not
just to current and future DirecTV subscribers, but to all
pay-television subscribers as cable operators throughout the country
will be forced to respond to this new nationwide competitive threat.

This transaction, as proposed, did raise concerns about use and abuse of
market power. Our strict and narrowly tailored conditions, however, will
prevent the realization of these harms to the public. For example, we
were concerned that the merged entity would discriminate against
unaffiliated programmers, preventing DirecTV subscribers from accessing
compelling programming from a multiplicity of diverse sources. To
address this concern, we condition this transaction to ensure that
unaffiliated programmers have access to the DirecTV platform on
nondiscriminatory terms and conditions.

We were concerned that the merged entity would force across-the-board
MVPD price increases by using its increased incentive and ability to
threaten to or actually withhold highly valued programming by
consumers---namely local broadcast signals and regional sports
networks[^1058]---to extract excessive rents or unfair carriage
concessions from MVPDs---programming costs almost certain to be passed
on to subscribers. We addressed this concern by setting up a commercial
arbitration remedy that will help reign in excessive programming price
increases and ensure that the public will not lose access to the valued
programming during negotiations and arbitration. In addition, we ensure
that News Corp.'s other affiliated programming will be offered to all
MVPDs on a non-discriminatory basis.

Finally, this transaction will result in more local programming being
carried by DirecTV in more local markets. In fact, as a condition of
this license transfer, we mandate that the merged entity provide, by
year end 2004, local channel service in an additional 30 DMAs beyond
what had been previously funded, projected or planned by Hughes/DirecTV.
As DBS providers continue to carry local broadcasting services to more
and more Americans and in the process become a more effective competitor
against cable, both of our collective localism and competition goals are
enhanced. I share the desires of my colleagues to see more DBS providers
carry local broadcast signals and local programming into more local
markets---especially to rural America.[^1059]

In short, facilities-based competition among satellite and cable
providers has led to more innovation, more programming and more
subscribers. As a result of this transaction those trends, along with
competitive prices and better quality of service will continue for the
American public. I, therefore, approve this transaction, as conditioned,
as I believe it serves the public interest.

**SEPARATE STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY**

*General Motors Corporation and Hughes Electronics Corporation,
Transferors, and The News Corporation Limited, Transferee, For Authority
to Transfer Control, MB Docket No. 03-124*

I write separately to clarify my rationale for not supporting the
imposition of a proposed condition to restrict DirecTV from segregating
some, but not all, local broadcast stations to wing satellites. As the
Order specifically states, "\[w\]ith regard to APTS/PBS's proposed
condition to restrict DirecTV from segregating local broadcast stations
to wing satellites, we recognize that the proposed transaction may give
DirecTV greater incentive to favor News Corp.'s Fox broadcast network
programming and therefore to move other broadcasters onto other
satellites. There is not a majority to decide whether this increased
incentive results in a merger specific harm."

I do not believe the issue is merger specific because any incentive to
use wing satellites for some, but not all, broadcast stations is
applicable to all DBS providers, not just News Corp. In fact, the
National Association of Broadcasters and the Association of Local
Television Stations filed a petition asking for modification or
clarification of the Commission's rules regarding carriage of television
broadcast stations by DBS providers in a manner that requires
subscribers to obtain a second satellite dish antenna.[^1060] Since the
Bureau's decision in that matter is subject to an application for review
by the full Commission, I believe that this issue is best addressed in
the context of that proceeding. In the interim, the Bureau's decision
provides that if any DBS provider chooses to carry local stations using
a second dish to receive some those stations, it must do so in a manner
that does not violate Section 76.66 of our rules and Section 338(d) of
the Communications Act.[^1061]

**DISSENTING STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

*Re: General Motors Corporation and Hughes Electronics, Corporation,
Transferors and The News Corporation Limited, Transferee, For Authority
to Transfer Control*

Here we go again. Today the Commission demonstrates how serious \-- and
seriously misguided \-- it was when it voted on June 2 to eviscerate
media concentration protections. Presented with the opportunity to
signal whether it intends to protect the important goals of diversity,
competition, and localism, or to allow instead ever greater and more
threatening levels of media consolidation, the majority flashes the
green light for the next great wave of media consolidation.

News Corp was already a media giant:

-   In the U.S., News Corp. owns television stations reaching over 44
    percent of the country. (WNYW-5, New York; WWOR-TV-9, New York;
    KTTV-11, Los Angeles; KCOP-13, Los Angeles; WFLD-32, Chicago;
    WPWR-TV-50, Chicago; WTXF-TV-29, Philadelphia; WFXT-25, Boston;
    KDFW-4, Dallas; KDFI-27, Dallas; WTTG-5, Washington, DC; WDCA-20,
    Washington, DC; KMSP-TV-9, Minneapolis; WFTC-29, Minneapolis;
    WJBK-2, Detroit; WAGA-5, Atlanta; WUTB-24, Baltimore; KRIV-26,
    Houston; KTXH-20, Houston; WTVT-13, Tampa Bay; WRBW-65, Orlando;
    WOFL-35, Orlando; WJW-8, Cleveland; KSAZ-TV-10, Phoenix; KUTP-45,
    Phoenix; KDVR-31, Denver; KTVI-2, St. Louis; WITI-6, Milwaukee;
    WDAF-TV-4, Kansas City; KSTU-13, Salt Lake City; WBRC-6, Birmingham;
    WHBQ-TV-13, Memphis; WGHP-8, Greensboro; KTBC-7, Austin; WOGX-51,
    Ocala).

-   In nine markets, it owns more than one television station (New York,
    Los Angeles, Chicago, Dallas, Washington, DC, Minneapolis, Houston,
    Orlando and Phoenix).

-   It owns a major national broadcast network (Fox).

-   It owns numerous cable and DBS channels, including regional sports
    networks across the country (among them FX, Fox News Channel, Fox
    Movie Channel, Fox Sports, Fox Sports en Espagnol, National
    Geographic Channel, Speed Channel).

-   It owns the most widely used electronic program guide for navigating
    television content (Gemstar-TV Guide).

-   It owns newspapers, magazines, and publishing (including *New York
    Post*, *The Weekly Standard* and HarperCollins Publishers).

-   It owns studios (including Twentieth Century Fox, Searchlight, Fox
    Television Studios, Twentieth Century Fox Television).

-   It will now own a nationwide multi-channel direct broadcast
    satellite system (DirecTV).

-   And it will now also own a major fixed satellite service provider
    that carries video broadcast and cable programming for delivery to
    distribution systems (PanAmSat).

-   This list constitutes News Corp's major holdings in the United
    States. This conglomerate also has massive media holdings in other
    nations spanning the globe.

When is "Big Media" big enough? With spectrum always scarce and
diversity hanging by a thread, where is the logic \-- where is the
public interest benefit \-- of giving more and more media power to fewer
and fewer players? In the end, it all comes back to this: to putting too
much power in one conglomerate's hands and creating opportunities for
abuse that accompany such concentrated power. Any public interest
benefits that may potentially come about from this huge consolidation of
commercial power are vastly outweighed by the potential for significant
harm to consumers, the industry and the country. I therefore dissent
from allowing this merger to go forward.

The majority seems to recognize that the agreement that the parties
presented to the Commission for approval was seriously flawed. But the
majority's strategy to apply band-aids in several places to stem what is
in fact a public interest hemorrhage did not \-- because it could not
\-- work. This agreement was probably beyond repair. Certainly the
band-aids applied by the majority don't fix it.

The Applicants point to several claimed public interest benefits of the
proposed merger. Yet, even the majority discounts all but two of these
benefits as not supported by the record. The majority relies on the
potential public interest benefits of innovative services that will be
offered under News Corp.'s management and on additional markets in which
DirecTV will provide carriage for local television stations. As to the
former, the majority admits it is difficult to quantify, but points to
the innovative service offerings available on News Corp.'s satellite
systems in other parts of the world which include interactive sports
betting and casinos. As to the claimed second benefit, the major DBS
providers have already been increasing their local station carriage for
competitive reasons and, as several commenters point out, DirecTV is
altogether able to expand those offerings without this merger.

The *Order* is even more telling in its handling of potential harms
emanating from this transaction. The majority finds that News Corp. has
market power in its programming services, that this transaction
increases its ability and incentive to use its market power to raise
programming costs, and that these increases would ultimately be passed
on to consumers. Indeed, all of the Commissioners appear to agree that
in the transaction, as proposed by the Applicants, the harms outweigh
the benefits. In addition to my belief that the conditions imposed in
this *Order* are not adequate to address the harms acknowledged by the
majority, I am further concerned that the majority fails to acknowledge
other real and potential harms associated with the merger. These
include:

-   ***Media Concentration***: Although the majority at least attempts
    to address the harms of vertical integration, it dismisses outright
    horizontal integration harms that can arise from allowing one
    company to own broadcast outlets across the country ***and*** a
    nationwide multi-channel distribution system -- an unprecedented
    level of consolidation. Instead, the majority concludes that
    broadcast outlets do not serve the same market as cable and DBS. The
    majority further discounts any harms to localism or diversity,
    finding instead that market forces will ensure adequate sources of
    information. To trust that in the unforgiving environment of the
    market, the public interest will somehow magically trump the urge to
    build power and profit is a leap of faith that this Commissioner,
    for one, is unprepared to take. The majority ought to know better.
    This is the same flawed logic we saw in the Commission's June 2
    decision. In addition, the majority fails to analyze the impact of
    this merger on ensuring independent and diverse programming. Alleged
    economies of scale do precious little to nurture program or
    viewpoint diversity.

> Given the majority's analysis, I am concerned that this merger is
> merely the beginning of another wave of consolidation. News Corp. has
> indicated it may continue growing by acquiring additional television
> duopolies and other properties. Indeed, the majority apparently
> presumes that additional News Corp. acquisitions of television
> stations, radio stations, and newspapers is in the public interest
> under the Commission's new bright-line media ownership rules. And
> other Big Media conglomerates, encouraged by today's decision, will
> now feel emboldened or compelled to consolidate further. My service as
> a Commissioner has taught me that the response to one company's
> acquisition is almost invariably another company's request to grow
> bigger so that it can "compete" and "survive."
>
> The majority's conclusion that broadcast stations do not compete in
> the same market as cable and DBS, along with its unwillingness closely
> to examine harms to diversity and localism, make clear that this
> Commission has no intention to slow, or even critically to examine,
> cross-platform mergers between broadcast stations and cable or DBS
> systems.

-   ***Community Standards and Indecency***: Some have suggested that
    there may be a link between increasing consolidation and increasing
    indecency on our airwaves. As I traveled across this country holding
    hearings and attending forums earlier this year, I heard time and
    again that ownership matters when it comes to what is offered up to
    viewers and listeners, particularly to our children. I am troubled
    that today's decision comes on the heels of complaints that News
    Corp. aired indecent material on the *2003 Billboard Music Awards*
    just last week. This is not the first instance of such viewer
    complaints against News Corp. Many of the indecency complaints I
    have seen come into the Commission involve stations owned by large
    media companies. I raise the issue here not because of any specific
    broadcast program, but because the Commission has refused to study
    the possible relationship between indecency and media concentration.
    I believe such a study is relevant to decisions such as the one we
    make today and that, indeed, we should not be making these decisions
    until we have credibly considered the matter. As we allow media
    conglomerates to grow ever larger, many Americans are concerned that
    the race to the bottom will accelerate and that broadcaster
    consideration for local community standards will continue to erode.

> Yet, today, before we even consider these complaints or address the
> impact of increasing consolidation on increasing indecency, we reward
> News Corp. with a nationwide programming distribution system. And what
> will be the effect? Will we see even more attempts to air
> progressively coarser content? As we move towards more interactive
> programming, will we see gambling intrude itself into our homes on
> DirecTV as News Corp. provides on its overseas satellite system? Will
> we see wider distribution of shows that continue to push the envelope
> of outrageousness even further?

-   ***Increasing Consumer Rates***: Applicants cite economic
    efficiencies that will result from their agreement and claim that
    the merger will give them the scale and scope to compete more
    effectively. There may well be some such efficiencies, although the
    baleful tale of many recent high visibility corporate mega-mergers
    does not provide much proof of commercial success. Be that as it
    may, Applicants did not demonstrate that any of these alleged
    savings would be passed on to consumers nor did they evince great
    enthusiasm for so doing. It is telling that Applicants produced so
    little data as to how this transaction could possibly discipline
    rising cable rates. The likelihood of its doing so is so remote as
    to be invisible. Lower prices seldom ensue from industry
    combinations. When we approve a transaction that further increases
    concentration in programming production and distribution, it is
    reasonable to assume that we are setting the stage for upward
    pressure on consumer rates. An entirely plausible outcome of this
    decision is escalating rates for multi-channel services from both
    cable systems and DirecTV. When faced with a similar scenario, the
    Federal Trade Commission in the Time Warner/Turner merger adopted a
    benchmark price index mechanism. Here, the majority dismisses such
    an approach, adopting instead so-called baseball arbitration. I am
    not convinced that arbitration has succeeded in bringing down costs
    in baseball. More to the point, this is not baseball and it is
    surely not a game. Although the majority allows the Commission to
    review the arbitration decisions, it then ties the Commission's
    hands by requiring us to choose between each party's final offer.
    This reduces the Commission's obligation to protect the public
    interest to a multiple choice test. Let's be clear here: what the
    arbitrators will most often be arbitrating are two companies'
    proposals about how much more programming is going to cost. The only
    question to be decided is: how much more. Payment for higher
    programming license fees will be borne, of course, by consumers.

> Moreover, although the majority seems to recognize the possibility of
> increased consumer rates from this level of consolidation, it
> inexplicably provides a sunset for these conditions of six years. This
> sunset is adopted without any explanation of why the majority expects
> these harms to be resolved within that timeframe.

I am troubled by other aspects of this decision.

I am troubled by the lack of analysis on the foreign ownership
implications of the transaction. In section 310(b) of the Act, Congress
adopted a broad provision that limits the ability of foreign entities to
own or operate parts of our communications system. This foreign
ownership restriction applies across a broad range of communications
services. For decades, the Commission applied these restrictions to DBS.
Last year, with inadequate justification, the Commission determined that
the foreign ownership restrictions in 310(b) should not apply to DBS. As
a result, the majority, in approving this deal under which News Corp.,
an Australian company, purchases control of a U.S. DBS licensee,
concludes that it need not consider the foreign ownership implications.

I am troubled by the majority's failure to consider the impact of this
merger on minority communities. The Congressional Hispanic Caucus in a
recent letter raised numerous serious issues related to the negative
impact of this merger on the Latino community, on minority-owned
independent programmers and on local and Latino-focused programming. The
majority fails to do justice to these concerns.

I am troubled that the Commission is approving this merger without
resolving issues specific to the Applicants that have been raised
regarding service in Alaska and Hawaii. Parties have filed complaints
that DirecTV fails to provide reasonably comparable packages of services
to Alaska and Hawaii, as required by our rules. If these companies are
violating Commission rules, we should address these issues as part of
our public interest analysis.

Finally, I am troubled by the failure to clarify that DirecTV, or any
other DBS provider, may not discriminate against some local broadcasters
by requiring consumers to obtain a second dish to receive those
broadcasters. In 1999, Congress passed the Satellite Home Viewer
Improvement Act (SHVIA). That Act required that, if a provider carries
any local broadcast signals, it must carry all local broadcast signals,
and must do so at a nondiscriminatory price and in a nondiscriminatory
manner. In 2002, Commissioner Martin and I issued a joint statement
making clear our view that a plan to require consumers to obtain a
second dish to receive only some of the local broadcast stations in a
market did not comply with the statute or Commission rules.

In sum, I simply cannot support the level of concentration by a single
owner that will result from this merger absent compelling public
interest circumstances. Unfortunately, I do not find that the potential
public interest benefits of this transaction outweigh the real and
potential harms. This decision is the wrong decision -- wrong for the
media industry, wrong for consumers, wrong for democracy in America.

**SEPARATE STATEMENT OF**

**COMMISSIONER KEVIN J. MARTIN**

Re: General Motors Corporation and Hughes Electronics Corporation
(Transferors) and News Corporation Limited (Transferee) for Authority to
Transfer Control, Order, MB Docket No. 03-124)

> I support the Commission's decision to approve this transaction. While
> the merger of News Corp. and DirecTV presents potential harms and
> benefits, I believe that, on balance, the merger as conditioned will
> benefit consumers, competition, and the public interest.

I write separately to express my disappointment that a majority of my
colleagues is unwilling to grant the public television community's
request to clarify the requirements under the Satellite Home Viewer
Improvement Act ("SHVIA") and specifically require that, in providing
local-into-local service pursuant to SHVIA, DirecTV could not place
certain local broadcast stations on wing satellites.[^1062]

As I have stated before, I believe Congress provided that DBS operators
would have the opportunity to carry local broadcast stations, but if
they choose to do so, they would have to provide consumers with *all*
the local broadcast stations.[^1063] These "carry one, carry all"
provisions of SHVIA include a prohibition against discriminatory
treatment of the broadcast signals.[^1064] As I have explained in detail
previously, I believe Congress's non-discrimination provision prevents
DBS providers from placing "preferred" broadcasters on a main satellite
and relegating certain "disfavored" broadcasters to a second
satellite.[^1065] Non-discrimination requires that all broadcast
stations be placed on the same dish. The Association of Public
Television Stations and the Public Broadcasting Service, therefore, are
asking no more than to require the merged entity to comply with the
governing statute and our rules when rolling out "local-into-local"
service to consumers across America. Licensees must *always* comply with
the statute and our rules, and I am disappointed that only one of my
colleagues was willing to make this clear.

This is an unfortunate day for public television stations, religious
broadcasters and Spanish language broadcasters---the stations most often
relegated to the second dish. Indeed, over 31 public broadcast stations
in 20 markets have been denied carriage on the same dish as other
broadcasters. Local religious broadcast stations are almost uniformly
placed on the second dish, if they are carried at all. Similarly,
numerous Spanish language station owners have all documented to the
Commission the discriminatory treatment that their stations receive;
most are carried on the second dish, unless they are willing to *pay*
for placement on the main satellite. Recent reports have shown that very
few consumers bother to acquire the second dish, which has meant that
very few consumers can access these stations. Consumers and broadcasters
deserve better, and the statute requires it.

It is important to emphasize that a DBS operator's roll-out of
local-into-local stations need not be at the expense of public
television, religious and Spanish language broadcasters. SHVIA does not
hinder a DBS provider from expanding the markets -- including rural
markets -- in which it carries local broadcast signals. The use of a
second dish is a spectrum allocation issue. If DBS providers choose to
use a "two-dish" solution to provide local broadcast service to more
communities, compliance with the non-discrimination provision simply
requires that all the local stations be treated similarly, whether they
are placed on the main or wing satellite.

I, along with my colleague Commissioner Copps, continue to believe that
this is a vital issue to all public, religious and Spanish-language
broadcasters. I am disappointed that we were the only Commissioners
willing to vote to clarify that DBS operators must place all
broadcasters -- or at least all public broadcasters -- on the same dish.
I also am disappointed that not one other Commissioner was even willing
to address this fundamentally unfair policy and to clarify that these
broadcasters are entitled to equal treatment under the law.

As my colleagues in the majority point out, this issue is the subject of
an Application for Review that has been pending for over a year and a
half, in which the Association of Public Television Stations challenges
a Bureau decision that allows a DBS provider to place certain
broadcasters on a second dish.[^1066] Given the current legal status and
the continued, prolonged absence of Commission action in that docket,
and in the face of a direct request from the public broadcast community
in this proceeding, I am uncomfortable avoiding this issue any longer.
Moreover, the Order recognizes that this is a merger-specific issue: "We
recognize that the proposed transaction may give DirecTV greater
incentive to favor News Corp.'s Fox broadcast network programming and
therefore to move other broadcasters onto other satellites."[^1067] I
agree that this issue does raise merger-specific concerns.

Finally, I note that a clarification of the legal requirements of
SHVIA's non-discrimination provision here would be the industry-wide
solution that some have called for. I fail to see why any Commissioner
supportive of such a solution would not vote for that resolution when
presented with that opportunity here.

**DISSENTING STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

> *Re: General Motors Corporation and Hughes Electronics Corporation,
> Transferors, and The News Corporation Limited, Transferee, MB Docket
> No. 03-124*

Deciding whether a fox should guard a hen house is a far more serious
exercise than this Order reflects. Granted, the birds in this case are
not hens but valuable satellites with a national footprint from which
nearly 12 million people receive video programming through DirecTV. And
the Fox in this case is already one of the world's largest media
conglomerates, with a vast array of global content and distribution
assets. The acquisition of Hughes Electronics Corporation by News
Corporation (News Corp.) will result in unprecedented control over local
and national media properties in one global media empire. Its shockwaves
will undoubtedly recast our entire media landscape.

Never before has a single corporation been armed with a national video
distribution platform; a major broadcast network; television stations in
nearly every major media market -- reaching more than 44 percent of the
country -- with guaranteed carriage rights on other distribution
platforms; multiple cable networks (11 national and 22 regional,
including sports networks with exclusive rights); a major film and
television studio; newspaper, magazine and book publishing operations;
significant video programming and broadcasting satellite backhaul
capacity; and the leading program guide and programming-related
technologies to facilitate a consumer's viewing experience. With this
unprecedented combination, News Corp. could be in a position to raise
programming prices for consumers, harm competition in video programming
and distribution markets nationwide, and decrease the diversity of media
voices. I wish the full dangers of this combination would have been more
thoroughly examined and confronted.

This Order makes a mockery of the Commission's public interest test.
Consumers have absolutely no assurance of benefiting in any way from the
merger's claimed synergies, yet they potentially suffer great harm. From
the onset, I have had grave concerns about this transaction, yet I have
sought to impose meaningful conditions to make the Order better than it
otherwise would have been. Unfortunately, not all of those conditions
were imposed, and I do not believe that any supposed public interest
benefits of this transaction outweigh its very real harms.

It has long been a goal of mine, and many other policymakers, to ensure
that every community in America can get all of their local televisions
signals directly from their satellite provider. That is why I am so
disappointed that this Order does nothing to even hold News Corp. to the
shallow promises they made to the Commission to provide local channels
to consumers in all 210 television markets across the country. Instead,
it limply adopts the requirement that DirecTV provide service to the top
130 markets by the end of 2004, leaving the smaller markets in Rural
America high and dry.

I felt strongly that the Commission should require DirecTV to provide
real local-into-local service, meaning every local broadcast television
signal, over satellite to all 210 television markets across the country
by 2006. It is especially critical to have required a firm date by which
DirecTV must uplink and offer local broadcast signals for every
television market in America, from the largest to the smallest.
Consumers living in rural areas deserve the same benefits as their more
urban counterparts.

Instead, I learned in the process of reviewing this matter that News
Corp. has no intention of ever providing real local-into-local satellite
service to every market in the country. A close examination of their
commitments revealed them to mean that they consider it enough to offer
some reasonably close local station as part of an undefined "local
channel package", or simply add a digital tuner in the box in smaller
markets and hope the customer can receive a signal. For those who live
in outlying rural areas, tough luck. What could have been the most
important public interest benefit of this merger turns out to be nothing
more than a sham, and the Commission is going along with it, no
questions asked.

It is especially demoralizing to know that my home town of Rapid City,
South Dakota, television market #175, may never get its own local
broadcasters beamed down from space. The loss to the citizens of Rapid
City is emblematic of the problems so many communities will face for the
foreseeable future. They may never receive high-quality satellite
signals of their local news, weather, sports and other locally-based
programming. Most importantly, people living in outlying areas like
Kadoka, South Dakota, who cannot otherwise receive Rapid City
broadcasts, will never receive them by satellite, and slapping an
antenna on their dishes will offer them nothing.

We hear a lot of talk about localism. Here, we had the opportunity to do
something about it. Instead, we let News Corp. gain all the benefits of
this merger while asking them to do nothing in return for Rural America,
or anyone else, for that matter. We abandoned Rural Americans to the
fickle exigencies of the marketplace, with every assurance that it will
fail to provide them the same quality of service enjoyed by their more
urban counterparts.

By today's action, the FCC allows the ever-expanding tide of vertical
and horizontal media concentration to intensify. It signals, yet again,
the FCC's unwillingness to take a hard look at media consolidation. It
vests more control of our nation's media in the hands of an already
powerful media conglomerate. And it raises the compulsion for other
companies to follow suit, to, so-to-speak, "keep up with the Murdochs."

This unprecedented combination could dramatically impact News Corp.'s
programming and distribution rivals. It fundamentally alters the
relationship of News Corp. to its rivals, as it now becomes a vertically
integrated competitor to all other MVPDs in every single MVPD market,
and the first of only two nationwide programming platforms to have its
own programming. It increases the incentive and ability to act
anticompetitively with respect to all rivals.

News Corp. is now in a position to distribute programs or sporting
events either on its broadcast network, cable networks, regional
networks, television stations, or even over pay-per-view. Imagine the
increased bargaining power of News Corp. as it sits at various
negotiating tables in these interconnected industries, finding itself on
all sides at once, and with an increased arsenal of weapons against
rival programmers or distributors. News Corp. will be in a position to
demand higher programming fees or demand concessions without fear of
losing distribution.

The Order does contain some useful protections. When a nationwide
distributor merges with such a large programmer, there rightly should be
consumer protections to prevent the vertically integrated company from
withholding programming from rivals or offering it on discriminatory
prices, terms or conditions. The parties' commitments, including abiding
by our program access rules and other nondiscrimination safeguards, are
positive steps which I am pleased are included as express conditions of
approval.

The Order properly finds public interest harm involving even temporary
foreclosure of retransmission consent of News Corp.'s broadcast
television properties or contractual rights to carry Fox-controlled
regional sports networks. The addition of DirecTV's nationwide platform
increases the likelihood that News Corp. can capitalize on a strategy of
withholding consent to carry these programs, even temporarily. Small and
medium sized cable operators and other distributors are particularly
vulnerable to News Corp.'s enhanced bargaining power.

News Corp.'s bargaining clout is even more heightened for its regional
sports networks, for which few, if any, competitive alternatives exist.
In both the U.K. and Australia, News Corp. employs a strategy of seizing
key sporting rights and using them to secure favorable carriage terms.
Indeed, as early as 1996, Rupert Murdoch made clear his intention to use
his company's formidable sports programming assets as a "battering ram"
to squeeze out concessions from his rivals.

For this reason, the Order appropriately adopts a fair and neutral
mechanism to resolve disputes, requiring News Corp. to agree to
undertake binding arbitration with its distribution rivals. Any
mitigation of harm that this arbitration condition brings, however,
would be thwarted if News Corp. has the ability during the pendency of
the arbitration to deny its rival the right to carry the disputed
programming. So it is absolutely critical that the Order prevents News
Corp. from yanking sports programming during the arbitration process.
This may save consumers not only their viewing of popular programming,
but the cost and other savings from what News Corp. could have otherwise
battered out of its rivals and their customers. Empirical evidence in
the record shows that dropping such programming harms viewers, leads to
higher prices and results in significant losses to the competing
multichannel video programming distributor.

Yet, the benefits of these conditions disappear without a trace after
six years. I would have explicitly left room to extend these protections
for up to six additional years, for a total of twelve years, and
required the Commission to undertake a full review of the continued need
for these conditions through a notice and comment proceeding. Given the
duration of some of today's contracts, and the possibility that the
identified harms of capitalizing on DirecTV's status persist, a mere
six-year term does not suffice. The requirement for the Commission to
undertake a full notice and comment proceeding would have provided the
Commission valuable information to assess any harms of this merger, and
would have kept a check on News Corp.'s incentive to use its new
leverage to harm consumers.

In addition, to account for possible overall rate increases, I would
have established a benchmarking process or pricing index mechanism to
evaluate whether the merging parties are raising prices at a more
accelerated pace than their historic pattern. Such a mechanism has been
implemented in the past for vertical relationships between programmers
and distributors. This benchmarking process would have ensured that
rates not rise too quickly for all distributors, and would have been a
better way to address the merger-specific harms identified in the Order.

I am deeply worried that with this extraordinary combination, News Corp.
will be in a position to raise rates for all of its programming, thus
driving up MVPD prices around the country and harming consumers. At the
same time that it is competing with cable and other distributors for
subscribers, it could raise the costs to those distributors for the
underlying programming, or could pressure the companies for other
benefits such as favorable channel placement. None of the merger's
protections addresses the likelihood that News Corp. engages in profit
maximizing behavior and raises programming prices for all distributors.
In fact, in some ways, the merger conditions could be used to send
valuable signals to other MVPDs about the prices, terms and conditions
of programming carriage or the consequences of resisting News Corp.'s
demands. Without quantifiable benchmarks or pricing standards, there is
insufficient assurance to the public that this transaction will not
result in increased prices for all.

I have many other concerns with this transaction. The merger furthers
concentration in local media markets by consolidating ownership over
local media outlets under one global media conglomerate. In major media
markets across the country, it combines one, sometimes two, local
television stations, with one of typically three major multichannel
video programming distributors. In New York, for example, it combines a
television duopoly, a newspaper, and a DBS operator. In Puerto Rico,
some cable subscribers are served by a system owned by Liberty Media, a
significant investor in News Corp. who stands to benefit from DirecTV's
gains. The Commission should have conducted a specific market-by-market
review of the effects of consolidation on competition, localism and
diversity in particular local media markets. Moreover, under the
Commission's relaxed media ownership rules, News Corp. would be free to
acquire additional duopolies, radio stations and newspapers in those
same local media markets, furthering their control over what local
viewers see, hear and read.

This merger also threatens disruptive effects for competing programmers,
particularly independent programmers and producers. Even without the
merger, through the use of retransmission consent, News Corp. has been
able to expand its cable networks faster than any other cable
programmer. I will continue to monitor closely whether News Corp.
provides opportunities for both established and new networks,
particularly new entrants, to negotiate carriage on fair and reasonable
terms on DirecTV. New Spanish-language networks, for example, have
reached agreement with cable providers and are attempting to negotiate
carriage on DirecTV. Given DirecTV's history of promoting a diversity of
programming, I would be concerned if its acquisition by News Corp.
resulted in a loss of diverse, independent or minority-owned programming
to an eager public in order to favor networks it owns.

I am also concerned with News Corp.'s ability to leverage its program
guide and interactive holdings. Gemstar-TV Guide, with a leading
position in electronic and interactive program guides, recently gave
DirecTV use of its intellectual property, technology and brand. I expect
this same flexible licensing approach to continue to be made available
to others on a timely and fair basis.

News Corp. has a history of taking risks, and the Applicants have
committed to launching several new interactive services on the DirecTV
platform in 2004, using a new DirecTV user interface and middleware
licensed or provided by News Corp. subsidiaries. Provided this "enhanced
viewing experience" moves beyond the more rudimentary interactive gaming
services offered today, this promises to benefit consumers in
significant ways. With the prospect of interactive services more
imminent, the Commission must be cognizant of the ways in which a
distributor or particular middleware or program guide vendor could favor
affiliated programming to the detriment of non-affiliated programmers. I
would be concerned if News Corp. stood as a gatekeeper to interactive
services and features or demanded from rival distributors exclusive use
of particular EPG, IPG, interactive middleware or security software or
systems during its carriage negotiations. While the software solutions
for interactivity are still emerging, DirecTV gives News Corp.'s
subsidiaries an increased incentive and ability to discriminate in
software and applications, or to endure losses in one business unit for
the greater good of the corporate whole. Should problems emerge, they
could be addressed through general rulemakings or through recourse to
the nation's antitrust authorities.

I sympathize with my colleagues who seek to resolve the placement of
local broadcast stations on second satellite dishes under the Satellite
Home Viewer Improvement Act. I believe this can be accomplished through
a general rulemaking, and I have been assured by the Chairman that the
Commission will resolve this issue early next year.

I caution that as a large and prominent global media conglomerate, it is
incumbent on News Corp. to lead in serving the overall public interest
and modeling appropriate behavior for the industry. "Take it or leave
it" bargaining tactics would not convince me of a corporate commitment
to good faith negotiation. With respect to diversity opportunities
within its business units and in its programming, I urge continued
efforts to promote diversity within the Fox Entertainment Group's
employment, management and executive ranks. I am pleased to see a
commitment by the companies to increase the amount of programming on
DirecTV targeted at culturally, ethnically, and linguistically diverse
audiences. Given the increased concentration in local media markets, I
also expect to see such diversity reflected in the coverage of issues of
concern to local communities or minority groups across the country.
Diversity in viewpoints should be encouraged everywhere in our media.

I am troubled by reports that Fox's independent affiliates are having
difficulty maintaining their independence in decisions involving
programming or the use of their digital spectrum. Local control over
programming is required by law and vital to our system of American
broadcasting. It is the local stations, after all, that are accountable
to the FCC for their community's standards of broadcasting.

These many concerns call for a more serious examination of the
concentration resulting from the merger, or other more comprehensive
structural or behavioral conditions. While this Order does contain some
important protections, not all the effects on consumers and competition
have been fully analyzed or remedied to assure fair competition and
protection of consumer interests. I dissent.

[^1]: *See Consolidated Application of General Motors Corporation and
    Hughes Electronics Corporation, Transferors, and the News
    Corporation Limited, Transferee, for Authority to Transfer Control,*
    May 2, 2003 ("*May 2003 Filing*"). The term, "Application," refers
    to the *May 2003 Filing* and the letter from William M. Wiltshire,
    Harris, Wiltshire & Grannis, LLP to Marlene H. Dortch, Secretary,
    FCC (May 30, 2003) (clarification of Application). The Media Bureau
    placed the Application on public notice on May 16, 2003, DA 03-1725,
    MB Docket No. 03-124, establishing a comment cycle for this
    proceeding. *See* Appendix A for a list of parties filing in this
    proceeding and the abbreviations by which they are identified
    herein.

[^2]: DBS is the acronym used in the United States to describe the
    domestic implementation of the satellite service known
    internationally as the broadcasting satellite service ("BSS"). *See*
    47 C.F.R. § 25.201.

[^3]: In this Order, "**\[REDACTED\]**" indicates confidential or
    proprietary information, or analysis based on such information,
    submitted pursuant to the First and/or Second Protective Orders.
    *See News Corporation,General Motors Corporation, and Hughes
    Electronics Corporation, Order Adopting Protective Order,* DA
    03-1761 (rel. May 22, 2003); *News Corporation, General Motors
    Corporation, and Hughes Electronics Corporation, Order Concerning
    Second Protective Order,* DA 03-2376 (rel. July 22, 2003). The
    unredacted version of this Order is available upon request only to
    those parties who have executed and filed with the Commission signed
    acknowledgements of the Second Protective Order. Qualified
    representatives who have not yet signed the required acknowledgement
    may do so in order to obtain the unredacted Order.

[^4]: *See, e.g., Most Cable MSOs Get Deals Done on Retransmission
    Consent*, [Warren's Cable Regulation Monitor]{.smallcaps}, Jan. 13,
    2003: Joanne Ostrow, *Denver ABC Affiliate Engages in Big Dispute
    with AT&T Broadband*, [The Denver Post]{.smallcaps}, Dec. 31, 2002;
    Bruce Orwall and Joe Flint, *Disney, Time Warner Sign Deal, Settling
    Their Nasty, Public Feud*, [Wall St. J.]{.smallcaps}, May 26, 2000.

[^5]: *See* Application, Volume I, C for a chart summarizing the
    relevant News Corp. ownership structure prior to the proposed
    transaction; *see also* News Corporation Limited, SEC Form 20-F,
    Annual Report for the fiscal year ended June 30, 2003 at 5, 72
    ("*News Corp.20-F 2003 Annual Report*").

[^6]: *See* *News Corp.20-F 2003 Annual Report* at 5.

[^7]: This approximate percentage is calculated based on 2,097,473,050
    ordinary shares outstanding on Sep. 30, 2003, and includes ordinary
    shares owned by: (1) K. Rupert Murdoch; (2) Cruden Investments,
    Limited, a private Australian investment company owned by K. Rupert
    Murdoch, members of his family and various corporations and trusts,
    the beneficiaries of which include K. Rupert Murdoch, members of his
    family and certain charities; and (3) corporations which are
    controlled by trustees of settlements and trusts established for the
    benefit of the Murdoch family, certain charities, and other persons.
    In addition, K. Rupert Murdoch, Cruden Investments, Limited and such
    other entities beneficially own 217,126,040 preferred limited voting
    ordinary shares. *See* *News Corp.20-F 2003 Annual Report* at 5, 70.

[^8]: A holder of News Corp. preferred limited voting ordinary shares is
    entitled to vote on: a proposal to reduce the share of capital of
    the company; on a proposal to wind up or during the winding-up of a
    company; a proposal for the disposal of the whole of the property,
    business, and undertaking of the company; a proposal that affects
    rights attached to such preferred shares; a resolution to approve
    the terms of a buy-back agreement; and during a period in which a
    dividend (or part of a dividend) in respect of the preferred shares
    is in arrears. *See* *News Corp.20-F 2032 Annual Report* at p. F-39;
    s*ee also* Liberty Media Corporation, SEC Form 10-K, Annual Report
    for the fiscal year ended Dec. 31, 2002 at p. I-6 ("*Liberty 10-K
    2002 Annual Report*"). On October 6, 2003, the News Corp. notified
    the Commission that Liberty had exercised its right to purchase
    \$500 million in News Corp. preferred limited voting ordinary
    American Depository Receipts ("ADRs"), increasing Liberty's passive
    interest in News Corp. from approximately 17.6% to approximately 19%
    of the company's issued and outstanding stock. If News Corp. were to
    exercise its right to offer ADRs as consideration in connection with
    its acquisition of an interest in Hughes to the maximum extent
    permissible under the documents governing the proposed transaction,
    Liberty's ownership interest in News Corp. would be diluted to
    approximately 17.3%, based on current stock prices. *See* Letter
    from William M. Wiltshire, Harris, Wiltshire & Grannis, LLP to
    Marlene H. Dortch, Secretary, FCC (Oct. 6, 2003).

[^9]: *See Liberty 10-K 2002 Annual Report* at p. I-1. On May 12, 2003,
    EchoStar Satellite Corporation ("EchoStar") filed a Petition to
    Require Additional Information requesting that the Commission
    require the Applicants to submit information concerning the planned
    involvement of Liberty in the financing of the proposed purchase by
    News Corp. in Hughes. *See* EchoStar Petition to Require Additional
    Information, May 12, 2003 at 2-5. EchoStar also requested the
    Commission to require Applicants to provide expert testimony in
    support of their key economic assertions, including information
    about assertions concerning the relevant product and geographic
    markets and the Applicants' market power in these markets. *Id*. at
    5-6. On May 13, 2003, the Applicants filed a Decl. of Lawrence A.
    Jacobs, Executive Vice President and Deputy Counsel to News Corp.,
    to expand and reiterate on Liberty's interest in News Corp. and the
    proposed transaction. *See* Letter from William M. Wiltshire,
    Harris, Wiltshire & Grannis, LLP to Marlene H. Dortch, Secretary,
    FCC (May 13, 2003), forwarding the Decl. of Lawrence A. Jacobs
    ("*News Corp. Decl.*"). Both the EchoStar Petition to Require
    Additional Information and the *News Corp. Decl.* were made part of
    the record of this proceeding.

[^10]: Companies in which Liberty holds a minority interest include
    Discovery Communications (50%), OpenTV Corp. (46%), QVC (42%),
    Sprint PCS Group (19%), and USA Interactive (20%). Liberty also
    holds less than a one percent interest in the GMH tracking stock
    issued by GM. *See Liberty 10-K 2002 Annual Report* at I-5, I-21.

[^11]: *Id.* at I-21.

[^12]: *See* *News Corp.20-F 2003 Annual Report* at 6; *see also* Fox
    Entertainment Group, Inc., SEC Form 10-K, Annual Report for the
    fiscal year ended June 30, 2003 at 1 ("*FEG 10-K 2003 Annual
    Report*").

[^13]: *See FEG 10-K 2003 Annual Report* at 20.

[^14]: *Id.* at 1-10.

[^15]: *See* Application, Volume I, F for a list of News Corp.'s
    national and regional cable programming interests in the United
    States.

[^16]: *See* *News Corp.20-F 2003 Annual Report* at 18.

[^17]: *Id.* at 17.

[^18]: *Id.* at 19; Application at 10.

[^19]: GM has issued a publicly traded tracking common stock (GM Class H
    common stock) designed to provide shareholders with financial
    returns based on the economic performance of the business and assets
    of GM's wholly-owned Hughes subsidiary. *See* General Motors Corp.,
    SEC Form 10-K, Annual Report for the fiscal year ended Dec. 31, 2002
    ("*GM 10-K 2002 Annual Report*"); *see also* Hughes Electronic
    Corp., SEC Form 10-K, Annual Report for the fiscal year ended Dec.
    31, 2002 ("*Hughes 10-K 2002 Annual Report*").

[^20]: A complete list of licenses and authorizations held by Hughes and
    subject to this transfer of control Application is set forth in the
    Application*,* Volume I, A.

[^21]: *See Hughes 10-K 2002 Annual Report* at 3, 85.

[^22]: See *Tempo Satellite Inc. and Hello Enterprises, Inc*., 14 FCC
    Rcd 7946 (IB 1999) ("*Tempo-Hello Order*"); *see also Hello
    Enterprises, Inc.,* 7 FCC Rcd 2728 (IB 1992) and 7 FCC Rcd 6597 (IB
    1992).

[^23]: Of these, approximately 10.3 million subscribe directly to
    DirecTV, while the remainder subscribe through the National Rural
    Telecommunications Cooperative ("NRTC"). *See* Hughes Electronic
    Corp., SEC Form 10-Q, Quarterly Report for the period ending Sep.
    30, 2003 at 32, 37 ("*Hughes 10-Q September 2003 Report*"). Hughes
    also has an interest in direct-to-home ("DTH") and other satellite
    services in several foreign countries. *See Hughes 10-K 2002 Annual
    Report* at 3-4. Licenses for the services provided in foreign
    countries, however, are not part of the proposed transaction. *See*
    Application at 6, n.12.

[^24]: *See Hughes 10-K 2002 Annual Report* at 4.

[^25]: *See* PanAmSat Corp., SEC Form 10-K, Annual Report for the fiscal
    year ended Dec. 31, 2002 at 2 ("*PanAmSat 10-K 2002 Annual
    Report*"); *see also Hughes 10-K 2002 Annual Report* at 4. *See
    Hughes Communications, Inc*., 12 FCC Rcd 7534 (1997). With the
    exception of six satellite earth station licenses held by PanAmSat,
    none of the licenses controlled by Hughes is a common carrier or
    broadcast radio license. *See* Application at 5, n.7. The Commission
    granted PanAmSat's applications to remove the common carrier
    designation from its earth station licenses earlier this year. *See*
    FCC Public Notice, Report No. SES-00506 (rel. Jun. 11, 2003) (notice
    of grant of applications SES-MOD-20030425-00533;
    SES-MOD-20030425-00534; SES-MOD-20030425-00537); FCC Public Notice,
    Report No. SES-00510 (rel. Jun. 25, 2003) (notice of grant of
    applications SES-MOD-20030425-00535 and SES-MOD-20030425-00536; FCC
    Public Notice, Report No. SES-00514 (rel. Jul. 9, 2003) (notice of
    grant of SES-MOD-20030425-00532). PanAmSat also has notified the
    Commission of discontinuance of service under its inactive section
    214 authorizations. *See* Application at 5, n.7; FCC Public Notice,
    18 FCC Rcd 10552 (2003) (public notice of PanAmSat's intent to
    surrender authorizations ITC-214-19980102-00004, ITC-93-236,
    ITC-95-579, ITC-85-221 and ITC-85-069).

[^26]: For details of the proposed transaction, *see* Application,
    Volume II, which includes the Separation Agreement, Merger
    Agreement, and Stock Purchase Agreement; *see also* Application at
    10.

[^27]: *See* Application, Volume II, Separation Agreement.

[^28]: *See* Application at 11.

[^29]: *Id.*

[^30]: *Id.*

[^31]: *Id.*

[^32]: *See* Application, Volume II, Stock Purchase Agreement.

[^33]: This will amount to approximately \$3.8 billion, subject to
    adjustments as described in the Application.

[^34]: *See* Application at 11.

[^35]: *See* Application, Volume II, Merger Agreement.

[^36]: *See* Application at 12.

[^37]: *Id.*

[^38]: *Id.*

[^39]: *Id.*

[^40]: *Id.*

[^41]: *See* Application, Volume I, D, Hughes Simplified Ownership
    Structure of FCC Licenses (Post-Transaction), Principal Ownership
    List, Officers and Board of Directors.

[^42]: *See* Application at 12.

[^43]: *Id.* at 13.

[^44]: *Id.*

[^45]: There is no corporate governance mechanism that ensures that News
    Corp. will continue to have four representatives on the board, or
    that Mr. Murdoch and Mr. Carey will continue to hold the position of
    chairman and CEO, respectively. *See* Application at 13, n.23.

[^46]: *Id.* at 13.

[^47]: 47 U.S.C. § 310(d).

[^48]: *See, e.g., Applications for Consent to the Transfer of Control
    of Licenses from Comcast Corporation and AT&T Corp. (Transferors) to
    AT&T Comcast Corp. (Transferee)*, 17 FCC Rcd 23246, 23255 (2002)
    ("*Comcast-AT&T Order*"); *see also* *EchoStar Communications
    Corporation, General Motors Corporation, Hughes Electronics
    Corporation (Transferors) and EchoStar Communications Corporation
    (Transferees)*, 17 FCC Rcd 20559, 20574 ("*EchoStar-DirecTV HDO*").

[^49]: *See, e.g., Comcast-AT&T Order,* 17 FCC Rcd at 23255;
    *EchoStar-DirecTV HDO*, 17 FCC Rcd at 20574. If we are unable to
    find that the proposed transaction serves the public interest for
    any reason, or if the record presents a substantial and material
    question of fact, Section 309(e) of the Act requires that we
    designate the application for hearing. 47 U.S.C. § 309(e).

[^50]: *Comcast-AT&T Order,* 17 FCC Rcd at 23255; *EchoStar-DirecTV
    HDO*, 17 FCC Rcd at 20575.

[^51]: *See* 47 U.S.C. §§ 157 nt, 254, 332(c)(7), Telecommunications Act
    of 1996, Preamble; *Comcast-AT&T Order,* 17 FCC Rcd at 23255;
    *EchoStar-DirecTV HDO*, 17 FCC Rcd at 20575; *AT&T-MediaOne Order*,
    15 FCC Rcd at 9821; *cf*. 47 U.S.C. §§ 521(4), 532(a).

[^52]: *See, e.g.,* *MCI Telecommunications Corporation and EchoStar 110
    Corporation*, Order and Authorization, 16 FCC Rcd 21608 (1999)
    (quoting *Applications for Consent to the Transfer of Control of
    Licenses and Section 214 Authorizations from Tele-Communications,
    Inc., Transferor, to AT&T Corp.*, *Transferee*, 14 FCC Rcd 3160 at ¶
    14 (1999) ("*AT&T-TCI Order*")).

[^53]: *See EchoStar-DirecTV HDO*, 17 FCC Rcd at 20575 (citing
    *Satellite Business Systems,* 62 F.C.C.2d 997, 1088 (1977) *aff'd
    sub nom United States v. FCC*, 652 F.2d 72 (DC Cir., 1980) (*en
    banc*); *Northern Utilities Service Co. v. FERC*, 993 F.2d 937,
    947-48 (1^st^ Cir. 1993) (public interest standard does not require
    agencies "to analyze proposed mergers under the same standards that
    the Department of Justice . . . must apply")).

[^54]: *See* *EchoStar-DirecTV HDO*, 17 FCC Rcd at 20575; *AT&T-TCI
    Order*, 14 FCC Rcd at 3168-69.

[^55]: 15 U.S.C. § 18.

[^56]: For example, under our Section 310(d) public interest analysis,
    we consider whether the transaction is consistent with the
    Commission's policies to advance diversity. It has long been a basic
    tenet of national communications policy that "the widest possible
    dissemination of information from diverse and antagonistic sources
    is essential to the welfare of the public." *See, e.g.,* *Turner
    Broadcasting System, Inc. v. FCC*, 512 U.S. 622, 663 (1994) quoting
    *United States v. Midwest Video Corp.*, 406 U.S. 649, 668 n.27
    (1972). Our public interest analysis may also consider whether the
    proposed transfer of control will affect the quality of
    communications services or will result in the provision of new or
    additional services to consumers (*see* *EchoStar-DirecTV HDO*, 17
    FCC Rcd at 20575; *AT&T-MediaOne Order*, 15 FCC Rcd at 9821);
    whether the applicant has the requisite "citizenship, character,
    financial, technical, and other qualifications" to hold a Commission
    license (*see, e.g.,* 47 U.S.C. §§ 310(d) and 308(b)); and we may,
    in appropriate cases, take foreign ownership into account to
    determine whether there are public interest harms resulting from
    foreign investment in Title III licensees. This consideration is in
    addition to our review of foreign ownership that may otherwise be
    required under Section 310(a) and (b) of the Act. *See, e.g*.,
    *Orbital Communications Corporation and ORBCOMM Global, L.P.
    (Assignors) and ORBCOMM License Corp. and ORBCOMM LLC (Assignees)*,
    17 FCC Rcd 4496, 4506-07 (IB 2002) ("*Orbcomm Order*"). Finally,
    where necessary, we may also consider whether the transaction raises
    issues of national security, law enforcement, foreign policy and
    trade policy, including any such concerns that may be raised by the
    Executive Branch. *See Amendment of the Commission\'s Regulatory
    Policies to Allow Non-U.S. Licensed Space Stations to Provide
    Domestic and International Service in the United States*, 12 FCC Rcd
    24094, 24170 (1997) ("*DISCO II Order*").

[^57]: 47 U.S.C. § 310(d).

[^58]: *See* 47 U.S.C. §§ 310(d) and 308.

[^59]: *See* 47 U.S.C. § 308.

[^60]: News Corp., through its subsidiaries, already holds Commission
    licenses under Title III. *See, e.g., Applications of UTV of San
    Francisco, Inc., et al., (Assignors) and Fox Television Stations,
    Inc. (Assignee) For Consent to the Assignment of Licenses for
    Stations KBHK-TV, San Francisco, CA, et al.*, 16 FCC Rcd 14975
    (2001) ("*UTV of San Francisco Order")*.

[^61]: EchoStar Petition at 50-57. *See also* ¶ 7, *supra*.

[^62]: EchoStar Petition at 50-52. EchoStar asserts that the Attorney
    General's investigation involves criminal and civil liability under
    the Digital Millennium Copyright Act and related statutes.

[^63]: *Id*.

[^64]: EchoStar Petition at 50, 51, 54. EchoStar notes that Canal +
    (Vivendi Universal) recently settled its lawsuit against NDS for
    willful hacking of its encryption software, unfair competition, and
    violations of the Communications Act of 1934.  *Id.* at 55.

[^65]: *Id*.

[^66]: EchoStar Petition at 51.

[^67]: *Id*. at 52.

[^68]: *Id*. at 56-57.

[^69]: EchoStar contends that the Commission has repeatedly stayed its
    hand to await the result of proceedings that implicate issues key to
    the assessment of an applicant's character. *Id*.

[^70]: *Id*. at 56.

[^71]: *Id*. at 57 (citing FCC Form 312, Questions 39, 37).

[^72]: Applicants' Reply at 77.

[^73]: *Id*. (citing *EchoStar-DirecTV HDO,* 17 FCC Rcd at 20579).

[^74]: *Policy Regarding Character Qualifications in Broadcast
    Licensing*, 102 F.C.C.2d 1179, 1209-10 (1986) ("*Character Policy
    Statement 1986")*, *modified*, 5 FCC Rcd 3252 (1990), *recon.
    granted in part*, 6 FCC Rcd 3448 (1991), *modified in part*, 7 FCC
    Rcd 6564 (1992) (collectively "*Broadcast Licensing Character
    Qualifications")*.

[^75]: *See, e.g*., *Broadcast Licensing Character Qualifications,* 7
    FCC Rcd at 6567, ¶ 16. As a general matter, non-FCC misconduct by
    parent or related subsidiary is reportable if (a) there is a close
    ongoing relationship between the parent (or related subsidiary) and
    the licensee; (b) the two have common principals; and (c) the common
    principals are actively involved in the operations of the licensee.
    *Id*. Misconduct directly involving common principals is reportable
    where the common principal of the licensee or applicant was in
    control of the other entity or was adjudicated to be directly
    involved in the other entity's misconduct. *Id*. n.51.

[^76]: *See* *Broadcast Licensing Character Qualifications,* 7 FCC Rcd
    at 6567; *see also* *MCI Telecommunications Corp*., 3 FCC Rcd 509,
    515 n.14 (1988).

[^77]: *See Character Policy Statement 1986*, 102 F.C.C.2d at 1205.

[^78]: *Id.*

[^79]: *See* EchoStar Petition at 56-57.

[^80]: *See* EchoStar Petition at 51, 56-57 (citing *Continental
    Satellite Corporation*, 4 FCC Rcd 6292, 6299 (1989) ("*Continental
    Order*"); *RKO General, Inc*., 3 FCC Rcd 5057, 5058 (1988) ("*RKO
    Order*"), appeal dismissed sub nom. *Los Angeles Television v. FCC*,
    No. 88-1693 (D.C. Cir. Aug. 4, 1989)).

[^81]: *See* *Continental Order,* 4 FCC Rcd at 6298 (citing *Central
    Telecommunications, Inc. v TCI Cablevision*, 610 F. Supp. 891 (W.D.
    Mo. 1985), *aff'd*, 800 F.2d 711 (8^th^ Cir. 1986), *cert. denied*
    480 U.S. 910 (1987); and *RKO Order,* 3 FCC Rcd 5057, 5058).

[^82]: *See Character Policy Statement 1986*, 102 F.C.C.2d 1205.

[^83]: *See* 47 C.F.R. § 1.65.

[^84]: *See Lockheed Martin Corp., et al.,* 17 FCC Rcd 13160, 13166 ¶ 16
    (2002). *See also* Application for Space and Earth Station
    Authorizations For Transfer of Control or Assignment, FCC 312 Main
    Form ("FCC Form 312"), which requires that an applicant or any party
    directly or indirectly controlling the applicant inform the
    Commission of a conviction of a felony in any state or federal court
    (question 37) or a court's final adjudication of unlawful
    monopolization or unfair methods of competition (question 38). *See*
    FCC Form 312, Questions 37, 38.

[^85]: *See Lockheed Martin Corp., et al*, 17 FCC Rcd 13160, 13166 ¶ 16
    (2002). Question 39 of FCC Form 312 asks whether the applicant, or
    any person directly or indirectly controlling the applicant, is
    currently a party in any pending matter referred to in the preceding
    two items (*i.e*., questions 37 and 38). *See* FCC Form 312,
    Question 39.

[^86]: 47 U.S.C. § 310(a) and (b).

[^87]: *See DISCO II Order*, 12 FCC Rcd at 24097.

[^88]: *See Rules and Policies on Foreign Participation in the U.S.
    Telecommunications Market*, 12 FCC Rcd 23891, 23894 (1997) (*Foreign
    Participation Order*); *Order on Reconsideration*, 15 FCC Rcd 18158
    (2000).

[^89]: This agreement, which became effective on January 1, 1998, is
    centered on the principles of open markets, private investment, and
    competition. *See DISCO II Order*, 12 FCC Rcd at 24096.

[^90]: *See DISCO II Order*, 12 FCC Rcd at 24098. Opposing parties have
    the burden to rebut the presumption by showing that granting the
    application would cause competitive harm in the U.S. satellite
    market. *Id.*

[^91]: *Id.*

[^92]: *Id.*

[^93]: *See* EchoStar Petition at 46-50. EchoStar submits Australia is
    one of News Corp.'s home markets because it is incorporated in
    Australia and is a 25% owner of FOXTEL, Australia's leading
    subscription television provider. *Id*. at 47.

[^94]: *Id*. at 47, quoting *DISCO II Order*, 12 FCC Rcd at 24137, ¶ 98.

[^95]: *Id*. EchoStar argues that News Corp. would fail both the *de
    jure* and *de facto* components of the ECO-Sat test with respect to
    Australia. EchoStar claims *de jure* barriers exist due to statutory
    limits on U.S. investments for subscription television broadcasting
    licenses and programming expenditure requirements. EchoStar claims
    *de facto* barriers exist due to a content-sharing agreement between
    an Australian News Corp. affiliate and a major Australian
    subscription television company. *Id.* at 47-50.

[^96]: Applicants' Reply at 68 (citing 47 C.F.R. § 25.137(a); and *DISCO
    II*, 12 FCC Rcd at 24136). *See also* Letter from William M.
    Wiltshire, Harris, Wiltshire & Grannis, LLP to Marlene H. Dortch,
    Secretary, FCC (Sept. 5, 2003) ("Applicants' Sept. 5, 2003 Ex
    Parte") at 1-2.

[^97]: *See SES AMERICOM, Inc. Applications for Modification of
    Fixed-Satellite Service Space Station Licenses and Columbia
    Communications Corp.,* 18 FCC Rcd 18598 (IB 2003) ("*SES-DTH
    Order*"); s*ee also* Applicants' Sept. 5, 2003 Ex Parte at 1-2.

[^98]: *See Policies and Rules for the Direct* Broadcast *Satellite
    Service*, 17 FCC Rcd 11311, 11348 (2002) ("*2002 DBS Report and
    Order*").

[^99]: Applicants' Reply at 68, citing *2002 DBS Report and Order*, 17
    FCC Rcd at 11348.

[^100]: *See* Applicants' Sept. 5, 2003 Ex Parte at 2-4.

[^101]: News Corp. is incorporated under the laws of South Australia
    with securities that are publicly traded on both the New York Stock
    Exchange and the Australian Stock Exchange. *See* Application at 7.

[^102]: *See* 47 U.S.C. § 310(a) and (b).

[^103]: *See* 47 U.S.C. § 310(a).

[^104]: *See* Application at 5 n.7 & 16 n.30. Subscription DBS service
    is a "non-broadcast" service and where subscription DBS service is
    provided on a non-common carrier basis Section 310(b) of the Act
    does not apply. *See Subscription Video Order*, 2 F.C.C.2d 1001,
    1007 (1987), *aff\'d., National Association for Better Broadcasting
    v. FCC*, 849 F.2d 665 (D.C. Cir. 1988); *Subscription Video Order*
    *Services,* 4 FCC Rcd 4948 (1989); *MCI Telecommunications Corp.*,
    11 FCC Rcd 16275 (IB 1996); *Application of MCI Telecommunications
    Corp., et. al.,* 14 FCC Rcd 11077 (IB 1999).

[^105]: Because section 310(b) does not apply to the proposed
    transaction, we need not consider whether News Corp.'s acquisition
    of a controlling interest in the subject licenses is consistent with
    the Commission's decision in *Fox Television Stations* or is
    otherwise consistent with the public interest under section
    301(b)(4) of the Act. *See* *Fox Television Stations, Inc*., Second
    Memorandum Opinion and Order, 11 FCC Rcd 5714 (1995) (*Fox II*)
    (subject to certain limitations, allowing FTS, as presently
    structured, to make future indirect investments in broadcast
    licensees notwithstanding News Corp.'s ownership of FTS in excess of
    the 25 percent benchmark for indirect foreign ownership set by
    section 310(b)(4)). *See also UTV of San Francisco Order*, 16 FCC
    Rcd at 14977-80.

[^106]: *2002 DBS Report and Order*, 17 FCC Rcd at 11346-48.

[^107]: *See 2002 DBS Report and Order,* 17 FCC Rcd at 11349.

[^108]: *See DISCO II Order*, 12 FCC Rcd at 24135.

[^109]: *See DISCO II Order*, 12 FCC Rcd at 24136. *See also Digital
    Broadband Applications Corp., Consolidated Application for Authority
    to Operate U.S. Earth Stations with a U.S.- Licensed Ku-Band FSS
    Satellite and Canadian-Licensed Nimiq and Nimiq 2 Satellites to
    Offer Integrated Two-Way Broadband Video and Data Service Throughout
    the United States*, 18 FCC Rcd 9455 (2003)("*DBAC Order*").

[^110]: In addition, we note that the Commission has concluded that
    there is no public policy justification for imposing foreign
    ownership restrictions on DBS providers that are not subject to such
    restrictions under Section 310(b) of the Act. *See 2002 DBS Report
    and Order,* 17 FCC Rcd at 11348. Licensees using FSS satellites to
    provide subscription DTH service, an almost identical service to
    DBS, are not subject to foreign ownership restrictions. In addition,
    because cable operators also are not subject to foreign ownership
    restrictions, eliminating additional foreign ownership-licensing
    restrictions not otherwise required under the Act, allows DBS to
    compete on a more equal regulatory basis with cable operators. *Id*.

[^111]: 47 U.S.C. § 310(d).

[^112]: *See, e.g*., *Orbcomm Order*, 17 FCC Rcd 4507 ¶ 18; *SES-DTH
    Order*, ¶ 10.

[^113]: *See* Section IX, *infra*.

[^114]: EchoStar Petition at 47.

[^115]: *Id*. at 46-50.

[^116]: *Id*. at 48-50. In response to EchoStar's arguments, the
    Applicants submit that the Australian foreign ownership provisions
    are similar to the U.S. limitations imposed on direct foreign
    investment in U.S.-licensed broadcast and common carrier licensees
    under Section 310(b)(3) of the Act, and that under Australian law,
    there is no limit on or prohibition against foreign control of a
    subscription DTH licensee company. By contrast, the Applicants
    contend that under U.S. law, even indirect ownership in a broadcast
    or common carrier licensee is presumptively limited to no more than
    a non-controlling 25% interest absent authorization from the
    Commission to exceed that benchmark. Thus, Applicants state, that
    taken as a whole, the Australian subscription DTH market is at least
    as open to foreign investors as is the U.S. market. *See*
    Applicants' Sept. 5 Ex Parte at 5, 6.

[^117]: According to the Applicants, News Corp. conducts its business
    activities principally in the United States, Continental Europe, the
    United Kingdom, Australia, Asia and the Pacific Basin. In addition,
    News Corp. states that it derives 7% of its operating income and 8%
    of its revenues from a combined Australian/Asian market, and has
    three members on its Board of Directors who are citizens of
    Australia and one member on the Executive Management Committee who
    is a citizen of Australia. *See* Applicants' Sept. 5 Ex Parte at
    2-4; *see also* Application, Attachment C.

[^118]: *See DISCO II Order*, 12 FCC Rcd at 24170-72. *See also, e.g.,
    Lockheed Martin Global Telecommunications, Inc., et al*., 16 FCC Rcd
    20502, 20508-20510 ¶¶ 12, 16 (2001); *Orion*, 5 FCC Rcd at 4939 ¶
    20; *Application of General Electric Capital Corporation and SES
    Global S.A. for Consent to Transfer Control of Licenses and
    Authorizations Pursuant to Section 214(a) and 310(d) of the
    Communications Act*, 16 FCC Rcd 17575, n.78 (2001); *TMI
    Communications and Company, L.P. and SatCom Systems Inc., File No.
    647-DSE-P/L-98 et al*, 14 FCC Rcd 20798 at 20824 ¶ 57 (1999).

[^119]: *See Foreign Participation Order*, 12 FCC Rcd at 23918-21.

[^120]: *See* Petition to Adopt Conditions to Authorizations and
    Licenses, MB Docket No. 03-124 (filed Nov. 25, 2003).

[^121]: The attachments include Exhibit 1, Hughes Electronics
    Corporation, Amended and Restated By-laws ("Hughes By-law
    Amendment"); Exhibit 2, Proposed Resolution of the Board of
    Directors of The News Corporation Limited ("Proposed Resolutions");
    and Exhibit 3, Letter Agreement, dated November 3, 2003, reached
    between Hughes and the Executive Agencies ("Letter Agreement").
    *See* Petition to Adopt Conditions at 2. These exhibits are set
    forth in Appendix E of this Order and Authorization.

[^122]: *See* Petition to Adopt Conditions at 4.

[^123]: The Executive Agencies also note that K. Rupert Murdoch, a
    United States citizen, directly and indirectly controls
    approximately a 16% equity/30% voting interest in News Corp. and
    that apart from Liberty Media Corporation, a Delaware corporation
    which according to the Applicants holds a purely passive interest in
    News Corp., there is no other shareholder with a greater than 10%
    interest in News Corp. *Id*. at 4-5.

[^124]: Appendix E to this Order and Authorization attaches the three
    exhibits as Exhibit 1(Hughes By-laws Amendment); Exhibit 2 (Proposed
    Resolutions); and Exhibit 3 (Letter Agreement).

[^125]: *See* Petition to Adopt Conditions at 5-6. *See also* Appendix
    E.

[^126]: *See Foreign Participation Order,* 12 FCC Rcd at 23919-21 ¶¶
    61-66.

[^127]: *See Foreign Participation Order,* 12 FCC Rcd at 23919 ¶ 62.

[^128]: *See* Appendix E. A complete list of all the conditions imposed
    on the Applicants is contained in Appendix F.

[^129]: Although Hughes does not supply programming content, it is
    involved in the provision of fixed satellite services ("FSS") though
    PanAmSat. Most distribution of video programming to MVPD service
    providers (and to over-the-air television broadcasters) is carried
    over FSS. PanAmSat is a significant provider of FSS services and is
    81% owned by Hughes. The impact of the transaction on FSS is
    discussed at Section VI.C.4.e below.

[^130]: Hughes' only programming interest is a 5% passive equity
    interest in the Hallmark Channel. *See* Application at 46.

[^131]: Application at 47-48; Applicants' Reply at iii-iv.

[^132]: *See, e.g.,* ACA Comments at 7-23; Cablevision Comments at 8-30;
    CDD Comments; CFA Reply Comments at 3-12; Consumers Union Sept . 23,
    2003 Ex Parte; EchoStar Petition at 11-39, 58-67; JCC Comments at
    13-65; NAB Comments at 5-9, 15-26; NRTC Petition at 7-15; RCN
    Comments at 4-11; Pegasus Comments.

[^133]: Pub. L. No. 102-385, 106 Stat. 1460 (1992) ("1992 Cable Act").

[^134]: H.R. Conf. Rep. No. 102-862, at 93 (1992).

[^135]: 1992 Cable Act § 2(a)(5).

[^136]: H.R. Rep. No. 102-628, at 165-66 (1992) (additional views of
    Messrs. Tauzin, Harris, Cooper, Synar, Eckart, Bruce, Slattery,
    Boucher, Hall, Holloway, Upton and Hastert).

[^137]: "Satellite cable programming" is video programming which is
    transmitted via satellite to cable operators for retransmission to
    cable subscribers. 47 C.F.R. § 76.1000(h). A "satellite cable
    programming vendor" is an entity engaged in the production, creation
    or wholesale distribution for sale of satellite cable programming.
    47 C.F.R. § 76.1000(i).

[^138]: Communications Act § 628(b); 47 U.S.C. § 548(b).

[^139]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992*, 17 FCC Rcd 12123 (2002) (*"Program Access
    Order"*).

[^140]: *Program Access Order*, 17 FCC Rcd at 12153.

[^141]: 47 C.F.R § 76.1001.

[^142]: 47 C.F.R. § 76.1002(b).

[^143]: 47 C.F.R. § 1002(b)(4). The exclusivity prohibition sunsets on
    October 5, 2007, unless extended by the Commission. 47 C.F.R. §
    1002(c)(6).

[^144]: 47 C.F.R. § 76.1003.

[^145]: 47 C.F.R. §76.1003(g) and (h).

[^146]: *Program Access Order*, 17 FCC Rcd at 12130 ¶15.

[^147]: *Id*. at 12138 ¶ 32.

[^148]: *Id.* at 12125 ¶ 4.

[^149]: *Id.* at 12143 ¶ 45.

[^150]: *Id.* at 12125 ¶ 4.

[^151]: *Id*.

[^152]: *Id*. at 12124 ¶ 1.

[^153]: *See* 47 U.S.C. § 536(a). Congress enacted section 616 based on
    findings that some cable operators had required certain
    non-affiliated program vendors to grant exclusive rights to
    programming, a financial interest in the programming, or some other
    additional consideration as a condition of carriage on the cable
    system. *Implementation of Sections 12 and 19 of the Cable
    Television Consumer Protection and Competition Act of 1992,* 9 FCC
    Rcd 2642 ¶ 1 (1993).

[^154]: *See* 47 C.F.R. § 76.1301; *see also Implementation of Sections
    12 and 19 of the Cable Television Consumer Protection and
    Competition Act of 1992,* 9 FCC Rcd 2642 (1993).

[^155]: Section 76.1302 authorizes video programming vendors and MVPDs
    to file program carriage complaints with the Commission. 47 C.F.R. §
    76.1302; *see also Implementation of Sections 12 and 19 of the Cable
    Television Consumer Protection and Competition Act of 1992,* 9 FCC
    Rcd 2642 ¶ 1 (1993). On reconsideration, the Commission amended 47
    C.F.R. § 76.1302 to specifically afford standing to MVPDs aggrieved
    by carriage agreements between other MVPDs and programming vendors
    that violate section 616 of the 1992 Cable Act or the Commission's
    rules. *Implementation of the Cable Television Consumer Protection
    and Competition Act of 1992*, 9 FCC Rcd 4415, 4418-19 ¶ 24 (1994).

[^156]: House Committee on Energy and Commerce, H.R.Conf.Rep. No.
    102-862 (\"Conference Report\"), 102d Cong., 2d Sess. (1992),
    reprinted at 138 Cong. Rec. H8308 (Sept. 14, 1992) at 2.

[^157]: Conference Report at 3.

[^158]: Conference Report at 3.

[^159]: Noncommercial television stations do not have retransmission
    consent rights.

[^160]: 47 C.F.R. § 76.56.

[^161]: 47 C.F.R. § 76.60.

[^162]: 47 C.F.R. § 76.64.

[^163]: 47 C.F.R. § 76.66.

[^164]: *See* 47 U.S.C. § 325(b)(3)(C); 47 C.F.R. § 76.65;
    *Implementation of Satellite Home Viewer Improvement Act of 1999*,
    *Retransmission Consent Issues: Good Faith Negotiation and
    Exclusivity* 15 FCC Rcd 5445, 5463 ¶ 45 ("*Good Faith Negotiation
    Order*").

[^165]: *See* 47 U.S.C. § 325(b)(3)(C). *See also,* 47 C.F.R. §
    76.65(f)(good faith negotiation requirement sunsets at midnight on
    Dec. 31, 2005).

[^166]: *See* H.R. Rep. No. 106-79 at 11-15 (1999); Satellite Home
    Viewer Improvement Act, Pub.L. No. 106-113, 113 Stat.1501, at App. I
    at 1501A-523 & 544.

[^167]: 47 U.S.C. §325(b)(3)(C)(ii) (stating that "it shall not be a
    failure to negotiate in good faith if the television broadcast
    station enters into retransmission consent agreements containing
    different terms and conditions, including price terms, with
    different multichannel video programming distributors if such
    different terms and conditions are based on competitive marketplace
    considerations").

[^168]: As of the end of the third quarter, DirecTV had 11.85 million
    subscribers. *See* *Hughes Announces Third Quarter Growth of 17% in
    Revenues and 33% in Operating Profit Before D&A; Operating Profit
    Quadruples; DirecTV Adds 326,000 Owned and Operated Subscribers in
    the Quarter, a 58% Increase Over Last Year*, Oct. 14, 2003,
    available at:
    http://www.hughes.com/ir/releases/2003_results/q3_2003/default.asp
    (viewed Nov. 14, 2003). DirecTV has surpassed the total subscribers
    of Time Warner Cable, Inc., which had 11.4 million subscribers as of
    September 30, 2003. *See* *Time Warner Inc. Consolidated Balance
    Sheet*, available at:
    http://www.timewarner.com/investors/quarterly_earnings/2003_3q/pdf/3q2003charts.pdf
    (viewed Nov. 14, 2003). Thus, DirecTV is now second only to Comcast
    in terms of subscribership.

[^169]: Hughes Electronics Corporation, *General Overview* at
    http://www.hughes.com/ir/general/default.asp (visited Nov. 5, 2003).

[^170]: Since filing the application for transfer of control, News Corp.
    has launched an additional network, Fuel, which brings the number of
    nationally distributed channels to 11.

[^171]: *FEG 10-K 2003 Annual Report* at 7.

[^172]: News Corp.'s sports networks include Fox Sports World, Fox
    Sports en Espanol, Fox Sports Digital Networks, and 12 RSNs---Fox
    Sports Net Arizona, Fox Sports Net Detroit, Fox Sports Net Midwest,
    Fox Sports Net North, Fox Sports Net Northwest, Fox Sports Net
    Pittsburgh, Fox Sports Net Rocky Mountain, Fox Sports Net Southwest,
    Fox Sports Net West, Fox Sports Net West 2, and the Sunshine
    Network. *See* Application at Attachment F.

[^173]: Application at 47; *FEG 10-K 2003 Annual Report* at 7, 27. *See
    also* *FEG Presentation, Bear Stearns Media, Entertainment, and
    Information Conference,* slide 19 (Mar. 4, 2003), available at:
    http://www.newscorp.com/investor/download/bearstearns03/sld019.gif
    (visited on Dec. 12, 2003).

[^174]: JCC Comments at 38.

[^175]: *EchoStar-DirecTV HDO,* 17 FCC Rcd at 20605-06 ¶ 106;
    *Comcast-AT&T Order*, 17 FCC Rcd 23260-61 ¶ 42.

[^176]: *DOJ/FTC Guidelines* § 1.0.

[^177]: Application at 47 (citing *2002 Annual Video Competition
    Report*, 17 FCC Rcd. at 26910 (distribution market); *id.* at 26953
    (programming market); *MCIT*, 16 FCC Rcd. at 21613-14 (1999)
    (finding that DBS operators "compete in two product markets").

[^178]: Application at 44.

[^179]: Application at 44-45.

[^180]: Intelsat Comments at 2-5.

[^181]: Intelsat Comments at 6.

[^182]: NRTC Petition at 2. NRTC states that we should consider whether
    the "relevant geographic market" should be divided into three
    categories---markets not served by any cable system; markets served
    by low capacity cable systems; and markets served by high-capacity
    cable systems. *Id.* NRTC states that this determination also should
    factor in the number of households and subscribers in each market.
    *Id.* Although NRTC characterizes its concern as a definition of the
    relevant geographic market, it actually proposes that we consider
    whether to vary our analysis according to the types of products
    available in different markets, which concerns product markets,
    rather than geographic markets.

[^183]: CFA Reply Comments at 6-8. CFA asserts that DBS is more
    expensive than cable, and that customers often subscribe in order to
    receive high-end services not provided (until the recent advent of
    digital cable) on cable systems, such as high-end sports packages,
    out of region programming, and foreign language channels. *Id.*

[^184]: CFA Reply Comments at 7-8.

[^185]: CFA Reply Comments at 2, 4-5, Attachment at 2.

[^186]: *EchoStar-DirecTV HDO*, 17 FCC Rcd at 20609 ¶ 115. The United
    States Department of Justice ("DOJ") identified this same MVPD
    product market in its complaint against the proposed merger of
    EchoStar and DIRECTV. *DOJ/EchoStar Complaint* ¶ 24.

[^187]: *Comcast-AT&T Order*, 17 FCC Rcd 23258 ¶ 34.

[^188]: *Review Of The Commission\'s Regulations Governing Television
    Broadcasting,* 10 FCC Rcd 3524 at 3545 ¶ 48 (1995).

[^189]: We have described the must-carry/retransmission consent
    provisions of the Act and our rules at Section V.B., *supra.*

[^190]: *Comcast-AT&T Order*, 17 FCC Rcd at 23258 ¶ 34;
    *EchoStar-DirecTV HDO*, 17 FCC Rcd 20653 ¶ 248.

[^191]: *EchoStar-DirecTV HDO*, 17 FCC Rcd 20654 ¶ 249 (citing
    *Implementation of Section 11 of the Cable Television Consumer
    Protection and Competition Act of 1992*, 16 FCC Rcd 17312, 17321-22
    (2001) ("*Ownership Further Notice*")).

[^192]: Such rate cards are not publicly available.

[^193]: *EchoStar-DirecTV HDO,* 17 FCC Rcd 20654 17 FCC Rcd 20654 ¶ 249
    (citing *Ownership Further Notice*, 16 FCC Rcd at 17322).

[^194]: *EchoStar-DirecTV HDO*, 17 FCC Rcd 20654 ¶ 249 (citing
    *Ownership Further Notice*, 16 FCC Rcd at 17322).

[^195]: Broadcasters must elect either must-carry or retransmission
    consent every three years (except for the very first DBS carriage
    election cycle, which commenced in 2001 and ends on Dec. 31, 2005).
    *See* 47 C.F.R. §§ 76.64(f), 76.66(c). The most recent cable
    carriage election was made on Oct. 1, 2002, became effective on Jan.
    1, 2003, and the election cycle will end on Dec. 31, 2005. 47 C.F.R.
    § 76.64(f).

[^196]: *Carriage of the Transmissions of Digital Television Broadcast
    Stations*, 13 FCC Rcd 15092 at 15110 (1998) ("*DTV Must-Carry
    Notice*"). As we explain above, electing must-carry entitles a
    station to carriage but not compensation. *See* Section V.B.3.,
    *supra*.

[^197]: FCC, OPP Working Paper #37, *Broadcast Television: Survivor in a
    Sea of Competition* at 29.

[^198]: FCC, OPP Working Paper #37, *Broadcast Television: Survivor in a
    Sea of Competition* at 29.

[^199]: FCC, OPP Working Paper #37, *Broadcast Television: Survivor in a
    Sea of Competition* at 11 (broadcast networks, broadcast stations,
    and syndicators sell time to national advertisers; broadcast
    stations also sell time to local advertisers).

[^200]: *EchoStar-DirecTV HDO,* 17 FCC Rcd 20654 ¶ 250 (citing
    *Ownership Further Notice,* 16 FCC Rcd at 17322-23. Examples of the
    first type of programming include TNT and USA; examples of the
    second type include ESPN for sports and CNN for news; and examples
    of this third type of programming include Discovery Health, the Golf
    Network, and Home and Garden. *Id.*

[^201]: *EchoStar-DirecTV HDO,* 17 FCC Rcd 20654 ¶ 250 (citing
    *Ownership Further Notice*, 16 FCC Rcd at 17323); *Comcast-AT&T
    Order*, 17 FCC Rcd at 23258 ¶ 35.

[^202]: Application at 45.

[^203]: EchoStar Petition at 31.

[^204]: *See, e.g.,* EchoStar Petition at 31 (News Corp. has market
    power in "a number of relevant segments of the programming market,
    including regional sports and \[broadcast\] network programming");
    CFA at 4-5 ("One of News Corp./Fox's most important weapons is
    significant control over regional and national sports
    programming."); Cablevision Comments at 12-17 (discussing News
    Corp.'s market power in the broadcast network programming segment).

[^205]: *See, e.g.,* JCC Comments at 20, 36 (discussing lack of
    substitutes for Fox broadcast programming and sports programming).

[^206]: Differentiated products are products whose characteristics
    differ and which are viewed as imperfect substitutes by consumers.
    *See* Dennis W. Carlton & Jeffrey M. Perloff, MODERN INDUSTRIAL
    ORGANIZATION 281 (2d ed. 1991).

[^207]: **\[REDACTED\]** Technical Appendix Sections A.3 and B.3,
    **\[REDACTED\]**.

[^208]: The national and non-sports regional cable programming network
    category includes 11 nationally distributed networks owned and
    managed by News Corp. These networks are Fox News Channel, FX,
    National Geographic Channel, Speed Channel, Fox Movie Channel, Fox
    Sports World, Fox Sports en Espanol, Fox Sports Digital Networks, TV
    Guide Channel, TV Games Channel, and Fuel.

[^209]: The regional sports cable networks category includes the 12 RSNs
    owned and managed by News Corp. These networks are Fox Sports Net
    Arizona, Fox Sports Net Detroit, Fox Sports Net Midwest, Fox Sports
    Net North, Fox Sports Net Northwest, Fox Sports Net Pittsburgh, Fox
    Sports Net Rocky Mountain, Fox Sports Net Southwest, Fox Sports Net
    West, Fox Sports Net West 2, and the Sunshine Network.

[^210]: The broadcast television programming category includes the 35
    O&Os and the 171 Fox affiliates. *See supra* n.171.

[^211]: Application at 44 (citing *2002 Video Competition Report,* 17
    FCC Rcd at 26852-55; *Comcast-AT&T Order*, 17 FCC Rcd at 23282;
    *MCIT*, 16 FCC Rcd at 21613-14).

[^212]: Cablevision Comments at 12, n.22; EchoStar Petition at 12.

[^213]: *EchoStar-DirecTV HDO*, 17 FCC Rcd 20610 ¶ 119; *Comcast-AT&T
    Order*, 17 FCC Rcd at 23282 ¶ 90.

[^214]: EchoStar Petition at 31.

[^215]: *See, e.g.,* JCC at 41-43 (discussing the effects of temporary
    withholding of RSN programming from cable operators on the relevant
    system and competitors serving the same region); EchoStar at 15
    (discussing the effects on EchoStar's penetration rates in DMAs
    where it lacked access to the signals of all four major network
    affiliated stations).

[^216]: A good is said to be \"non-rival\" if one individual\'s
    consumption of the good does not diminish the supply of the good to
    other individuals. *See* [The MIT Dictionary of Modern
    Economics]{.smallcaps} 308 (David W. Pearce, ed., 4^th^ ed. 1999).

[^217]: Broadcasters have the right to prevent cable operators from
    carrying certain programming from the signals of broadcast stations
    from other markets. *See* 47 C.F.R. §§76.92-76.95 (network
    non-duplication rule); 47 C.F.R. §§ 76.101-76.110 (syndicated
    exclusivity rule).

[^218]: *Comcast-AT&T Order*, 17 FCC Rcd at 23267 ¶ 59.

[^219]: DirecTV, *Blackout Information* at
    http://www.directvsports.com/Blackout_Info/ (visited Oct. 3, 2003).

[^220]: 4 [Areeda & Hovemkamp 5-6;]{.smallcaps} *see also* [1 ABA
    Antitrust Section, Antitrust Law Developments]{.smallcaps} 317
    (4^th^ ed. 1997) (hereinafter [Antitrust Law Developments); Kip
    Viscusi, John M. Vernon & Joseph E. Harrington, Jr., Economics of
    Regulation and Antitrust]{.smallcaps} 192 (3d ed. 2000) ( "[Viscusi
    et al.")]{.smallcaps}.

[^221]: In the simple case where there are two levels of production, an
    upstream market is a market for inputs, while a downstream market is
    a market for end-user outputs. We will sometimes refer to the
    upstream and downstream markets as the input and output markets.

[^222]: [Viscusi et al.]{.smallcaps} at 219-221; Michael H. Riordan and
    Steven Salop, *Evaluating Vertical Mergers: A Post-Chicago
    Approach*, 63 [Antitrust L. J]{.smallcaps}. 513, 523-26 (1995)
    ("Riordan & Salop").

[^223]: Double marginalization occurs when an upstream firm sells an
    input to a downstream firm at a price that exceeds marginal cost,
    and the downstream firm then sells its product in the downstream
    market at a price that exceeds its marginal cost. The margin charged
    by the upstream firm increases the marginal cost of the downstream
    firm, which results in a higher end-user price than would occur if
    the input had been priced at marginal cost. Vertical integration in
    theory reduces the problem of double marginalization because the
    integrated firm, in determining the uniform price at which it will
    sell the downstream product, will consider the real economic cost of
    producing the input. Because vertical integration effectively
    reduces the marginal cost of the input, it is likely to result in
    the integrated firm\'s setting a lower price for the downstream
    product, which will benefit consumers. The extent of this benefit,
    however, will depend crucially on the elasticity of demand for the
    downstream product. The less elastic is the demand, the greater is
    the benefit. [Jean Tirole, The Theory of Industrial
    Organization]{.smallcaps} (MIT Press 1988) at 174-75; Riordan &
    Salop, 63 [ANTITRUST L. J.]{.smallcaps} at 526-27.

[^224]: Application at 45.

[^225]: Application at 45.

[^226]: Application at 46.

[^227]: Application at 46.

[^228]: Application at 46.

[^229]: Applicants note that Liberty indirectly holds a controlling
    interest in one Ka-band satellite system. Liberty will not, however,
    have control over any Commission license held by any Hughes
    subsidiary following the transaction. Application at 46.

[^230]: Cablevision Comments at 12, 18-19.

[^231]: Cablevision Comments at 18-19.

[^232]: Cablevision Comments at 18-19.

[^233]: *See Competition, Rate Deregulation, and the Commission's
    Policies Relating to the Provision of Cable Television Services,* 5
    FCC Rcd 4962 ¶ 69 (1990); *EchoStar-DirecTV HDO* ¶¶ 109-115.

[^234]: The vertical nature of the proposed transaction distinguishes it
    from the proposed merger of EchoStar-DirecTV. The proposed
    acquisition of DirecTV by EchoStar presented a classic example of a
    horizontal merger, in which the only two existing providers of
    high-powered, full-CONUS DBS service sought to merge. After careful
    analysis of the record, we declined to approve the requested license
    transfers and designated the proposed transaction for hearing on
    analysis of the record indicating that the likelihood of the merger
    significantly harming competition in the MVPD market outweighed any
    potential merger-specific benefits alleged by the applicants. In
    that case, we found that such loss of competition in the MPVD market
    would be likely to harm consumers by: (1) eliminating an existing
    viable competitor in every market; (2) creating the potential for
    higher prices and lower service quality; and (3) negatively
    impacting future innovation. *EchoStar-DirecTV HDO,* 17 FCC Rcd
    20615-16 *¶* 138.

[^235]: Application at 47-48; Applicants' Reply at iii-iv.

[^236]: *See, e.g.,* ACA Comments at 7-23; Cablevision Comments at 8-30;
    CDD Comments; CFA Reply Comments at 3-12; Consumers Union Sept . 23,
    2003 Ex Parte; EchoStar Petition at 11-39, 58-67; JCC Comments at
    13-65; NAB Comments at 5-9, 15-26; NRTC Petition at 7-15; RCN
    Comments at 4-11; Pegasus Comments.

[^237]: *See, e.g.,* ACA Comments at 7-23; Cablevision Comments at 8-30;
    CDD Comments; CFA Reply Comments at 3-12; Consumers Union Sept . 23,
    2003 Ex Parte; EchoStar Petition at 11-39, 58-67; JCC Comments at
    13-65; NAB Comments at 5-9, 15-26; NRTC Petition at 7-15; RCN
    Comments at 4-11; Pegasus Comments.

[^238]: *See, e.g.* EchoStar Petition at 22-24, 30-32; JCC Comments at
    15-44; Pegasus Dec.16, 2003 Ex Parte; RCN Dec. 18, 2003 Ex Parte.

[^239]: A vertically integrated firm also may attempt to foreclose
    upstream competitors from the vertically integrated firm\'s
    downstream affiliate in order to reduce the competitors\' customer
    base. If the downstream affiliate had previously purchased
    significant amounts of inputs from other independent suppliers, this
    foreclosure could raise the costs of upstream rivals and possibly
    cause them to exit the market. *See, e.g.,* Riordan & Salop, 63
    ANTITRUST L. J. at 519.

[^240]: *See, e.g.,* Riordan & Salop, 63 ANTITRUST L. J. at 527-38. *See
    also* Thomas G. Krattenmaker & Steven C. Salop, *Anticompetitive
    Exclusion: Raising Rivals\' Costs to Achieve Power over Price,* 96
    [Yale L. J.]{.smallcaps} 209, 234-38 (1986).

[^241]: *See, e.g.,* Riordan & Salop, [63 ANTITRUST L. J]{.smallcaps}.
    at 528-31 (1995).

[^242]: More specifically, the market must be one where consumer choice
    is subject to some inertia and \"lock-in.\" *Cf.* Roy Radner,
    *Viscous Demand,* 112 J. [Econ. Theory]{.smallcaps} 189 (2003).

[^243]: In contrast, temporary foreclosure would not be profitable in a
    market in which consumers made frequent and repeated purchases of a
    product and could change providers each time they made a purchase.
    Finally, we note that, where customers make a one-time, long-term
    commitment, such as by purchasing a long-lived durable good,
    temporary foreclosure resembles permanent foreclosure. A second
    requirement for temporary foreclosure to be profitable is that the
    withdrawal of the input (subject to foreclosure) must cause a change
    in the characteristics of the downstream product, such that some
    customers will shift to competing downstream products.

[^244]: Where downstream competitors have incomplete information about
    the integrated firm\'s revenues and costs, the integrated firm may
    have an incentive to engage in temporary foreclosure even where it
    is not profitable, because it will send a signal to downstream
    purchasers of the input. *See generally* Janusz A. Ordover & Garth
    Saloner, *Predation, Monopolization, and Antitrust* in 1 [Handbook
    of Industrial Organization 556-61 (]{.smallcaps}Richard Schmalensee
    & Robert Willig, eds. 1989).

[^245]: The analysis of the incentives to engage in temporary
    foreclosure is similar to the incentive for union to engage in the
    temporary withholding of labor in the economic analysis of strikes.
    *See, e.g.,* Peter Cramton and Joe Tracy *Strikes and Holdouts in
    Wage Bargaining: Theory and Data* , [American Economic
    Review]{.smallcaps} Vol. 82 at 100-121 (Mar. 1992).

[^246]: *Cf.* Riordan & Salop, 63 ANTITRUST L. J. at 535-38 (discussing
    the incentive of an integrated firm to discriminate and charge
    higher prices to its direct rivals).

[^247]: We ignore for purposes of this discussion other regulations that
    may constrain the setting of transfer prices.

[^248]: In Section VI.C.2. we analyze the likelihood that internal
    controls and corporate law will limit the ability of News Corp. to
    set transfer prices that disadvantage the remaining Hughes
    shareholders.

[^249]: *See* Daniel P. O'Brien and Steven C. Salop, *Competitive
    Effects of Partial Ownership: Financial Interest and Corporate
    Control*, 67 ANTITRUST L. J. 581-582 (2000).

[^250]: *EchoStar-DirecTV HDO,* 17 FCC Rcd 20616 ¶ 139*.*

[^251]: We analyze the incentive and ability of the Applicants to engage
    in a temporary or permanent foreclosure strategy using the following
    methodology, described in detail in the Technical Appendix: (1)
    estimate the incentives to engage in foreclosure by calculating the
    number of consumers that must shift to the Applicants' downstream
    product in order to compensate for the revenues that would be lost
    due to foreclosure; (2) consider whether the necessary numbers of
    consumers are likely to switch to the Applicants' downstream product
    in the event of foreclosure.

[^252]: Application at 58, Applicants' Reply at 53.

[^253]: Application at 58.

[^254]: Application at 59.

[^255]: 17 C.F.R. § 240.10A-3, New York Stock Exchange Rules (the "NYSE
    Rules") §§ 303A.06 & 07.

[^256]: Proposed Hughes Amended and Restated By-Laws, Article III, §3(d)
    filed with the SEC on June 5, 2003. A "Related Party Transaction" is
    defined as one that encompasses transactions between Hughes, on the
    one hand, and News Corp. or its subsidiaries, on the other hand.

[^257]: CDD Petition at item #5.

[^258]: Sarbanes-Oxley Act of 2002, 107 Pub. L. No. 204, 116 Stat. 745,
    is a wide ranging corporate governance and accounting reform law.

[^259]: JCC at 59.

[^260]: JCC at 62.

[^261]: JCC at 62-3 (citing to Stout Aff.).

[^262]: Applicants' Reply at 55.

[^263]: Applicants' Reply at 56.

[^264]: Applicants' Reply at 56.

[^265]: Applicants' Reply at 57-58.

[^266]: Application at 58-59. It should be noted that Hughes is a
    Delaware corporation and is therefore subject to the General
    Corporation Law of the State, 56 Del. Laws, c. 50 ("DGCL"). Under
    section 144 of the DGCL, a contract between a corporation and
    another corporation that share one or more officers or directors in
    common is not void or voidable solely due to that fact, provided
    that the contract is fair as to the corporation as of the time it is
    authorized, approved or ratified by the board of directors, a
    committee or the shareholders (§ 144(a) DGCL) Thus, while the DGCL
    does not require a contract between related-parties to be approved,
    it would be a reasonable thing for a corporation to do as it
    provides a level of protection for the corporation should the
    contract be challenged. In a similar fashion, the Applicants have
    stated that the Audit Committee will have the sole power to pass on
    a related-party contract. As with the DCGL, the Audit Committee may
    give its approval either before or after the fact (By‑Laws, Article
    III 3 (d)). At bottom, therefore, it appears that the Applicants are
    offering only to comply with a discretionary provision of the DGCL
    that would be prudent for them to follow in any event.

[^267]: To be "independent," *inter alia*, the board of directors must
    affirmatively determine that the director has no material
    relationship with the listed company (either directly or as a
    partner, shareholder or officer of an organization that has a
    relationship with the company). NYSE Rules § 303A.02.

[^268]: NYSE Rules § 303A.07.

[^269]: The Applicants point out that covenants in a loan agreement and
    public debt documents require a "fairness opinion" to be obtained
    concerning related-party contracts in excess of \$100 million. See
    Applicants' Reply at 58. Accordingly, the Applicants assert that the
    Commission should rely on these checks to assuage any concerns that
    it may have. If the Applicants had included such provisions in the
    proposed By-Laws we might have more confidence in their assertions.
    The credit facility, on the other hand, could be repaid the day
    after closing and public debt is regularly retired. If this were to
    happen, these checks on the Applicants behavior would be removed,
    rendering the value of such protections somewhat uncertain.

[^270]: *See generally*, JCC Comments at Affidavit of Lynn A. Stout
    ("Stout Aff."); Applicants' Reply, Exhibit C, Affidavit of Lawrence
    A. Hamermesh ("Hamermesh Aff."); Letter from Christopher J. Harvie,
    Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC, to Marlene H.
    Dortch, Secretary, FCC (Aug. 20, 2003) ("Joint Cable Commenters Aug.
    20 Ex Parte"), Attachment, Reply Affidavit of Lynn A. Stout ("Stout
    Reply"); Letter from William m. Wiltshire, Harris, Wiltshire &
    Grannis, LLP, Gary M. Epstein, Latham & Watkins, and Richard E.
    Wiley, Wiley Rein & Fielding, to Marlene H. Dortch, Secretary, FCC
    (Sept. 10, 2003), Reply Declaration of Lawrence A. Hamermesh
    ("Hamermesh Reply Decl.").

[^271]: Hamermesh Aff. ¶¶ 6-11.

[^272]: Stout Aff. ¶ 23.

[^273]: Hamermesh Aff. ¶ 11.

[^274]: Stout Aff. ¶ 15.

[^275]: *See* note 266*, supra.*

[^276]: Hamermesh Aff. ¶ 11.

[^277]: Applicants' Jul. 28 Response at I.6.

[^278]: *See* note 267*, supra.*

[^279]: Stout Reply Aff. ¶ 3.

[^280]: Hamermesh Aff. ¶ 8(b); Hamermesh Reply Decl. ¶¶ 3-5.

[^281]: *Id.*

[^282]: Hamermesh Reply Decl. ¶ 5.

[^283]: In addition, C. Carey on behalf of News Corp., at a press
    conference on April 9, 2003 at 5:00 p.m., stated that by obtaining
    34% of Hughes' shares it will obtain effective control of Hughes.
    *See* Letter from William M. Wiltshire, Harris, Wiltshire & Grannis,
    LLP to Marlene H. Dortch, Secretary, FCC (Nov. 19, 2003), Transcript
    at 29.

[^284]: Application at 13.

[^285]: Stout Aff.; Hamermesh Aff..

[^286]: Clarke, *Corporate Law* § 5.4 at 183.

[^287]: *Id.*

[^288]: CDD Petition at Issue #5.

[^289]: Consumers Union Comments at 5, and Stout Reply Aff. ¶ 16.

[^290]: Application at 49.

[^291]: Application at 48-52.

[^292]: Application at 49.

[^293]: Application at 49.

[^294]: Application at 53, Attachment G.

[^295]: Applicants' Reply at 63.

[^296]: NAB Comments at 20-21; CFA Reply Comments at 3, 5; NRTC Petition
    at 14-15; EchoStar Petition at 39-40; CDD Petition at 3.

[^297]: CFA Reply Comments at 3.

[^298]: CFA Reply Comments at 3, 5.

[^299]: CDD Petition at 4.

[^300]: EchoStar Petition at 39.

[^301]: EchoStar Petition at 39-40. *See also* NRTC Petition at 14
    (asserting that competing content developers may need access to the
    DirecTV platform to reach enough people to make distribution
    economically feasible).

[^302]: CDD Petition at 3.

[^303]: *See* Letter from Kathleen M.H. Wallman, counsel to Victory
    Sports, LLC, to Marlene H. Dortch, Secretary, FCC (Oct. 17, 2003).

[^304]: *See* Letter from Ciro Rodriguez, Chairman, Congressional
    Hispanic Caucus to John Ashcroft, U.S. Attorney General, U.S.
    Department of Justice, Michael K. Powell, Chairman, FCC and
    Commissioners (Dec. 9, 2003) at 2.

[^305]: NRTC Petition at 14.

[^306]: NRTC Petition at 14.

[^307]: CDD Nov. 7, 2003 Ex Parte at 3. *See also* 47 CFR § 100.5.

[^308]: NAB Comments at 20-24. NAB asserts that News Corp. will have the
    ability and incentive to act as a gatekeeper to the detriment of
    unaffiliated content providers, including broadcast stations. *Id.*

[^309]: NRTC Petition at 15.

[^310]: NAB Comments at 20-24; NRTC Petition at 15.

[^311]: NAB Comments at 26.

[^312]: NAB Comments at 26.

[^313]: Applicants' Reply at 49.

[^314]: Applicants' Reply at 49 (citing *EchoStar-DirecTV HDO,* 17 FCC
    at 20655).

[^315]: *Id.*

[^316]: *See* Appendix F.

[^317]: We note that Applicants' proposed condition is not unlike the
    nondiscrimination requirement in the Act and our program carriage
    rules. *See* 47 U.S.C. § 536(a)(3); 47 C.F.R. § 76.1301(c).

[^318]: *See* 47 C.F.R. § 76.1003.

[^319]: *See, e.g.,* Satellite Home Viewer Improvement Act of 1999, PL
    106-113, 113 Stat. 1501, Appendix I (1999).

[^320]: 47 C.F.R. § 76.66(b)(1).

[^321]: *See* 47 C.F.R. § 76.66(i) (channel position); 47 C.F.R. §
    76.66(j) (manner of carriage) 47 C.F.R. § 76.66(m) (remedies).

[^322]: 47 C.F.R. § 76.65.

[^323]: *Implementation of the Satellite Home Viewer Improvement Act of
    1999: Retransmission Consent Issues*, 16 FCC Rcd 1918, 1928 (2000).
    In addition, as discussed in Section VI.C.4.c., below, we extend the
    good faith and non-exclusivity provisions of SHVIA as a condition of
    license transfer approval for so long as the program access rules
    are also in effect.

[^324]: The following is a list of national programming networks
    affiliated with News Corp. (News Corp.'s ownership share appears in
    parentheses only if it is less than 100%): Fox News Channel; FX;
    National Geographic Channel (66 2/3%; remaining 33 1/3% National
    Geographic Society); Speed Channel; Fox Movie Channel; Fox Sports
    World; Fox Sports en Espanol (37.8%; remaining 62% Liberty (10.6%)
    and Hicks Muse (51.6%)); Fox Sports Digital Networks; TV Guide
    Channel (42.9% indirectly owned through Gemstar, which owns 100%);
    TV Games Network (42.9% indirectly owned through Gemstar, which owns
    100%). *See* Application at Attachment F.

[^325]: The following is a list of non-sports regional programming
    networks affiliated with News Corp. News Corp. holds a 40% interest
    in each network, while the remaining interest is held by Rainbow:
    MSG Metro Guide; MSG Metro Learning; MSG Traffic and Weather. *See*
    Application at Attachment F.

[^326]: Application at 54; Reply at 59.

[^327]: Application at 54, (citing *Cable Horizontal Order,* 14 FCC Rcd
    at 19104).

[^328]: Application at 55.

[^329]: *Id*. at 57.

[^330]: *Id*. at 57; citing 47 C.F.R. §76.1000-76.1003.

[^331]: *Id*. at 58.

[^332]: *Id*. An attributable ownership by a cable operator is the
    triggering point for application of the program access rules to
    satellite cable programming vendors.

[^333]: *Id*.

[^334]: Applicants define affiliated programming rights holder as either
    (1) a satellite cable programming vendor in which either Applicant
    holds a non-controlling attributable interest (*i.e*. 5% or
    greater), or (2) a satellite cable programming vendor holding a
    non-controlling, attributable interest in either Applicants. *Id*.
    at 61.

[^335]: Application at Attachment G.

[^336]: ACA Comments at 16, 20, 23; JCC Comments at 55-63; Cablevision
    Comments at 27-30; EchoStar Petition at 58-62; NRTC Petition at
    20-22.

[^337]: EchoStar Petition at 22.

[^338]: EchoStar Petition at 22; ACA Comments at 16.

[^339]: EchoStar Petition at 22, 35, 71. *See also* CDD Petition at 4
    (describing investments by Liberty in News Corp.).

[^340]: *See* Letter from Christopher C. Cinnamon and Emily A. Denney,
    Cinnamon Mueller, to Marlene H. Dortch, Secretary, FCC (Oct. 17,
    2003) ("ACA Oct. 17, 2003 Ex Parte") at 7.

[^341]: EchoStar Petition at 59.

[^342]: Cablevision Comments at 29-30.; JCC Comments at 59-63; Letter
    from Consumers Union to Marlene H. Dortch, Secretary, FCC (Sept. 23,
    2003) at 5-6 ("Consumers Union Sept. 23, 2003 Ex Parte").

[^343]: ACA Comments at 19; EchoStar Petition at 65; NRTC Petition at
    21.

[^344]: ACA Comments at 16, 20, 23; JCC Comments at 55-63; Cablevision
    Comments at 27-30; EchoStar Petition at 58-62; NRTC Petition at
    20-22.

[^345]: Cablevision comments at 27-28; EchoStar Petition at 23-24; NRTC
    Petition at 21; JCC Comments at 59-63; CFA Reply Comments at 5-6.

[^346]: Cablevision comments at 27-28; EchoStar Petition at 23-24; NRTC
    Petition at 21; JCC Comments at 59-63; CFA Reply Comments at 5.

[^347]: Cablevision Comments at 29-30.; JCC Comments at 59-63; Letter
    from Consumers Union to Marlene H. Dortch, Secretary, FCC (Sept. 23,
    2003) ("Consumers Union Sept. 23, 2003 Ex Parte") at 5-6.

[^348]: ACA Comments at 19.

[^349]: ACA Comments at 20-21; ACA Oct. 17, 2003 Ex Parte at Exhibit A,
    Page 2.

[^350]: Cablevision Comments at 2, 30; *See also* NRTC Petition at 21;
    Consumers Union Sept. 23, 2003 Ex Parte at 4-5.

[^351]: RCN Comments at 9; RCN Oct. 24, 2003 Ex Parte at 7.

[^352]: RCN Comments at 9-10. NRTC also urges the Commission to adopt
    enforcement mechanisms. NRTC Petition at 21.

[^353]: Consumers Union Sept. 23 Ex Parte at 5.

[^354]: Consumers Union Sept. 23 Ex Parte at 5.

[^355]: CU Sept. 23 Ex Parte at 5-6 (citing Agreement Containing Consent
    Order, In the Matter of Time Warner Inc., Turner Broadcasting System
    Inc., Tele-Communications, Inc., and Liberty Media Corporation, File
    No. 961-004, Before the Federal Trade Commission (Sept. 12, 1996) at
    http://www.ftc.gov/os/1996/09/timewar.pdf).

[^356]: *See* Letter from Kathleen M.H. Wallman, counsel to Pegasus
    Communications, to W. Kenneth Ferree, Chief, Media Bureau, FCC and
    Barbara S. Esbin, Associate Chief, Media Bureau, FCC at 2-3,
    transmitted by letter from Kathleen M.H. Wallman to Marlene H.
    Dortch, Secretary, FCC (Sept. 30, 2003) ("Pegasus Sept. 30, 2003 Ex
    Parte"); Letter from Kathleen M.H. Wallman, counsel to Pegasus
    Communications, to Marlene H. Dortch, Secretary, FCC (Dec. 10, 2003)
    (Pegasus Dec. 10, 2003 Ex Parte).

[^357]: EchoStar Petition at 62-63.

[^358]: EchoStar Petition at 63.

[^359]: *Id.* at 64-66. ACA, JCC and NRTC also support a program access
    condition that does not sunset with the program access rules. ACA
    Comments at 19; JCC Comments at 65; NRTC Petition at 20-21.

[^360]: EchoStar Petition at 63-64.

[^361]: Reply at 48.

[^362]: *Id.* at 61.

[^363]: *Id*. at 61.

[^364]: 1992 Cable Act § 2(a)(2).

[^365]: *Id*.

[^366]: 1992 Cable Act § 2(a)(5).

[^367]: *See* 47 U.S.C. § 548.

[^368]: *Program Access Order*, 17 FCC Rcd at 12138 ¶ 32.

[^369]: *Program Access Order*, 17 FCC Rcd at 12139 ¶ 33.

[^370]: *Program Access Order*, 17 FCC Rcd at 12139 ¶ 33.

[^371]: *Program Access Order*, 17 FCC Rcd at 12139 ¶ 33.

[^372]: *Program Access Order*, 17 FCC Rcd at 12156 ¶ 69.

[^373]: This includes News Corp.'s satellite-delivered regional sports
    networks. We address those programming assets separately because, as
    described in the next section, in contrast to our findings here with
    respect to national and non-sports regional programming, we find
    that News Corp. has significant market power with respect to
    regional sports programming the will be increased by the
    transaction, requiring remedies in addition to those provided by the
    program access rules and the Applicants' offered commitments.

[^374]: Under the program access attribution rules, an ownership
    interest greater than 5% is cognizable. *See* 47 C.F.R. § 501, note
    2(a). Liberty Media owns 17.6% of News Corp and 100% of Liberty
    Cablevision of Puerto Rico which has 119,000 subscribers.

[^375]: For example, Comcast has a 50% ownership interest in Fox Sports
    Net New England.

[^376]: *Program Access Order*, 17 FCC Rcd at 12135 ¶ 25.

[^377]: In committing not to offer its programming services on an
    exclusive basis, News Corp. voluntarily foregoes the right enjoyed
    by all other vertically integrated programmers to seek approval of
    an exclusive programming contract under the public interest standard
    established in 47 U.S.C. § 548(c)(4).

[^378]: "Affiliated Program Rights Holder" includes (i) a program rights
    holder in which News Corp. or DirecTV holds a non-controlling
    "Attributable Interest" (as determined by the FCC's program access
    attribution rules); and (ii) a program rights holder in which an
    entity holding an non-controlling Attributable Interest in News
    Corp. or DirecTV holds an Attributable Interest, provided that News
    Corp. or DirecTV has actual knowledge of such entity's Attributable
    Interest in such program rights holder. Liberty Media is the only
    entity currently covered by this definition. Nonetheless this
    commitment goes beyond the program access rules as DBS operators are
    not included within the exclusivity prohibition. *See* 47 C.F.R. §
    1002(c).

[^379]: This condition would only be of significance in the event either
    Applicant or Liberty Media otherwise ceases to be subject to the
    Commission's program access jurisdiction.

[^380]: *See* Discussion *infra* at Section VII.D. concerning exclusive
    arrangements with unaffiliated programmers.

[^381]: Although *most* of the program access rules will remain
    applicable unless terminated by Congress, Section 76.1002(c), the
    prohibition on exclusive contracts, sunsets on October 5, 2007
    unless the Commission finds that the prohibition continues to be
    necessary to protect competition in the distribution of video
    programming. *See* 47 C.F.R. § 76.1002(c)(2). In the year prior to
    the sunset, the Commission will conduct a proceeding to evaluate the
    circumstances in the video programming marketplace.

[^382]: ACA Comments at 19; EchoStar Petition at 65.

[^383]: See 47 U.S.C. 548(c)(5).

[^384]: NRTC Petition at 21; RCN Comments at 9-10; See also 47 C.F.R.
    76.1003.

[^385]: See supra at para 59; See also *Program Access Order*, 17 FCC
    Rcd 12138 ¶ 33.

[^386]: As discussed below, we reach a different conclusion regarding
    the amount of market power News Corp. possess regarding its RSNs.

[^387]: The *2002 Video Competition Report* reported 208 satellite
    delivered national programming networks. *2002 Video Competition
    Report*, 17 FCC Rcd at 26960 ¶ 59. The success of the Fox News
    Channel demonstrates the competitiveness of the general cable
    programming segment. Launched in 1996, the network was able to
    overtake long standing ratings leader CNN, and since 2002 has since
    consistently finished first among cable news channels in total day
    ratings. *See* Statement of Rupert Murdoch, Chairman and CEO, News
    Corp. Before Senate Commerce Comm. (May 22, 2003).

[^388]: Indeed, the record indicates that News Corp. has achieved
    unparalleled levels of distribution for some of its cable networks
    as a direct result of its ability to require carriage of these
    networks as a condition of access to its regional sports and
    broadcast television signals. *See* JCC Comments at 21-29. *See
    also* ACA Comments in MB Docket No. 03-172 (*Video Competition
    Report)* at 6.

[^389]: **\[REDACTED\]**.

[^390]: For example, EchoStar proposes that the Applicants be prevented
    from sharing information internally; that program access
    requirements be extended to apply to Liberty Media's programming
    assets and to programming that Congress did not choose to subject to
    the rules and that News Corp. be limited to offering programming at
    published rates that are preapproved by the Commission. *See*
    EchoStar Petition at 64. Pegasus suggests that we impose specialized
    corporate governance rules and FCC filing requirements on all
    contracts between Fox and DirecTV for a period of five years. *See*
    Pegasus Sept. 30, 2003 Ex Parte. Cablevision asks that we revise the
    program access commitments to prevent News Corp. from using
    "sweetheart deals" with DirecTV to force higher prices on all other
    MVPDs. Cablevision Comments at 2, 30.

[^391]: *Annual Assessment of the Status of Competition in the Market
    for the Delivery of Video Programming,* 13 FCC Rcd 24284) (1998)
    ("*1998 Video Competition Report*").

[^392]: *Annual Assessment of the Status of Competition in the Market
    for the Delivery of Video Programming*, 17 FCC Rcd 1244, 1314 ¶ 171
    (2002) ("*2001 Video Competition Report*") (finding that "regional
    sports programming continues to be an important segment of
    programming for all MVPDs"); *Program Access Order,* 17 FCC Rcd at
    12138 ¶ 32 (finding no readily acceptable substitute for RSN
    programming).

[^393]: *Program Access Order*, 17 FCC Rcd at 12148-49 ¶ 54 ("the
    incentive for the vertically integrated regional programmer to
    foreclose programming, is further increased in situations in which
    there is no readily acceptable substitute for the programming, such
    as regional sports programming").

[^394]: "Regional sports programming in particular, has been and
    continues to be, an important segment of programming for all video
    programming providers. According to a 2000 survey, between 40 and 48
    percent of cable subscribers would be less likely to subscribe to
    cable service if it lacked local sports. Cable overbuilders have
    frequently noted that access to sports programming is so essential
    to the success of a cable system that many operators will pay
    exorbitant prices and agree to entertain other less attractive
    business arrangements just to obtain it." FCC, OPP Working Paper
    #37, *Broadcast Television: Survivor in a Sea of Competition* at 124
    (citing *2000 Video Competition Report*, 17 FCC Rcd at 1354-1356;
    *1998 Video Competition Report*, 13 FCC Rcd at 24298-99 and
    24380-81).

[^395]: *Program Access Order,* 17 FCC Rcd at 12147-49 ¶¶ 52-55 (finding
    that vertically integrated MSOs continue to have an incentive and
    ability to withhold access to their affiliated RSNs).

[^396]: *E.g., Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, 17 FCC Rcd 1252 ¶ 14
    (2002) ("*2002 Video Competition Report*"); *2001 Video Competition
    Report,* 17 FCC Rcd at 1252 ¶ 14; *2000 Video Competition Report*,
    16 FCC Rcd at 6013 ¶ 15 (2001); *Annual Assessment of the Status of
    Competition in the Market for the Delivery of Video Programming*, 15
    FCC Rcd 978, 986 ¶ 16 (2000) ("*1999 Video Competition Report*");
    *Program Access Order*, 17 FCC Rcd at 12139 n.107 (citing data
    provided by DirecTV and EchoStar indicating that they have
    significantly lower subscribership in Philadelphia as compared to
    other large cities and noting that DirecTV's and EchoStar's claim
    that "this is directly attributable to their inability to access
    Comcast SportsNet").

[^397]: *See* Application at 26.

[^398]: NCTA, *Cable Developments 2003* at 83.

[^399]: JCC Comments at 38 (citing
    www.newscorp.com/management/fsn.html).

[^400]: Applicants' Reply, CRA Analysis ¶ 46.

[^401]: *Id.*

[^402]: Applicants' Reply, Lexecon Analysis ¶ 62.

[^403]: See Application at 54.

[^404]: JCC Comments at 34-44; ACA Comments at 16, 18-21; EchoStar
    Petition at 22-24, 31; RCN Comments at 3-4.

[^405]: EchoStar Petition at 22-23; ACA Comments at 18; JCC Comments at
    55.

[^406]: *Id*. (citing *Program Access Exclusivity Report and Order*, 17
    FCC Rcd at 12145 ¶ 47).

[^407]: JCC Comments at 34 (citing David D. Kilpatrick*, Murdoch's First
    Step: Make Sports Fans Pay*, N.Y. Times, Apr. 14, 2003, at C1).

[^408]: JCC Comments at 39-42 (noting three disputes in which a Fox RSN
    was withdrawn form cable subscribers homes: 1) Fox Sports North to
    150,000 Time Warner customers, 2) Fox Sports' Sunshine Network to
    almost 2 million Time Warner customers, and 3) certain sporting
    events on Fox Sports Net West).

[^409]: *See* Letter from Kathy L. Cooper and L. Elise Dieterich,
    Swidler, Berlin, Shereff, Friedman, LLP, to Marlene H. Dortch,
    Secretary, FCC (Oct. 24, 2003) ("RCN Oct. 24, 2003 Ex Parte),
    Attachment at 2-3.

[^410]: *See* RCN Oct. 24, 2003 Ex Parte Attachment at 3.

[^411]: JCC Comments at 40; EchoStar at 22-24.

[^412]: JCC Comments at 40. *See also* Letter from Pantelis
    Michaelopoulous, Steptoe & Johnson, to Marlene H. Dortch, Secretary,
    FCC (Dec. 15, 2003) at 4-5 ("EchoStar Dec. 15 Ex Parte") (describing
    increased churn among its New York DMA subscribers after it failed
    to reach a carriage agreement with YES Network).

[^413]: JCC Comments at 42-43.

[^414]: *Id.*

[^415]: JCC Comments at 4, 42-43 and Exhibit A, William P. Rogerson, *An
    Economic Analysis of Competitive Effects of the Takeover of DirecTV
    by News Corp.* ("Rogerson Analysis") at 4, 27; Letter from Chris
    Murray, Legislative Counsel, Consumers Union to Marlene H. Dortch,
    Secretary, FCC (Sept. 23, 2003) ("Consumers Union Sept. 23, 2003 Ex
    Parte") at 3-5; ACA Reply Comments at 5-7.

[^416]: JCC Comments at 34; ACA Comments at 18.

[^417]: JCC Comments at 40.

[^418]: JCC Comments at 42-43.

[^419]: JCC Comments, Rogerson Analysis at 13-16. JCC submitted a total
    three exhibits prepared by William P. Rogerson. *See* Letter from
    Bruce D. Sokler, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC,
    to Marlene H. Dortch, Secretary, FCC (Aug. 4, 2003) ("JCC Aug. 4 Ex
    Parte") Attachment, William P. Rogerson, *A Further Economic
    Analysis of The News Corp. Takeover of DirecTV* ("Rogerson Analysis
    II"); Letter from Fernando Laguarda, Mintz, Levin, Cohn, Ferris,
    Glovsky and Popeo, PC, to Marlene H. Dortch, Secretary, FCC (Sept.
    23, 2003), ("JCC Sept. 23, 2003 Ex Parte), William P. Rogerson,
    *Economic Analysis of The Takeover of DirecTV by News Corp. --
    Presentation to the FCC* (Sept. 23, 2003) ("Rogerson Analysis III").

[^420]: JCC Comments, Rogerson Analysis at 12-13.

[^421]: *Id*. at 15-16.

[^422]: Applicants' Reply, Exhibit B Steven C. Salop *et al* of Charles
    River Associates, Inc., *News Corporation's Partial Acquisition of
    DirecTV: Economic Analysis of Vertical Foreclosure Claims*. *See
    also* Applicants' Reply, Exhibit A, Lexecon, Inc., *Economic
    Analysis of the News Corp./DirecTV Transaction* ("Lexecon Analysis")

[^423]: Applicants' Reply, CRA Analysis at ¶¶ 44-67.

[^424]: Applicants' Reply at 28 (citing CRA Analysis at ¶¶44-51).

[^425]: Applicants' Reply at 28-29.

[^426]: YES entered into carriage agreements with DirecTV, Time Warner,
    and a number of other MSOs prior to the start of the 2002 baseball
    season. John Brennan, *New Jersey Official Raise Stakes in Battle
    with Cable-Television Firm,* [The Record]{.smallcaps} (Apr. 30,
    2002). EchoStar and Cablevision, which had both carried MSGN
    programming in 2001, did not reach agreements with YES, however, and
    thus could no longer offer New York Yankees games in 2002. *See*
    *RSNs: Keeping it Local*, [The BRIDGE (]{.smallcaps}Aug. 2003),
    available at:
    http://www.cabletoday.com/pubs/bridge/the_bridge_archive/bridge082003.pdf
    (visited Sep. 11, 2003). YES and Cablevision later reached a
    carriage agreement. Harry Berkowitz and Dan Janison, *Victory for
    Yanks Fans: Cablevision Agrees to Carry YES Network in Time for
    Opener,* [Newsday]{.smallcaps} (Mar. 13, 2003).

[^427]: Applicants' Reply at 29.

[^428]: Applicants' Reply at 29 (citing Judd Zulgad, *FSN, Time Warner
    Struggled to Agreement*, [Star Tribune]{.smallcaps} at 6C (Mar. 14,
    2003)).

[^429]: Applicants' Reply at 30. In response to claims that Applicants
    would have a greater incentive and ability to withhold programming
    from smaller cable operators, Applicants state that although
    subscriber losses to the RSN would be small, so would subscriber
    gains to DirecTV. Applicants\' Reply at 31.

[^430]: Applicants' Reply at 32.

[^431]: Applicants' Reply at 32.

[^432]: Applicants' Reply at 33 (citing CRA Analysis at ¶¶ 92-94).

[^433]: Applicants\' Reply at 33 (citing CRA Analysis at ¶¶ 95-100).

[^434]: Applicants\' Reply at 34.

[^435]: Applicants' Reply at 24; *see also* Letter from William M.
    Wiltshire, Harris, Wiltshire & Grannis, LLP, Gary M. Epstein, Latham
    & Watkins, and Richard E. Wiley, Wiley Rein & Fielding, to Marlene
    H. Dortch, Secretary, FCC (Sept. 8, 2003) ("Applicants' Sept. 8,
    2003 Ex Parte"), Exhibit 2, Lexecon, Inc., *Response to William P.
    Rogerson and Daniel L. Rubinfeld* ("Lexecon Analysis II") at 66.
    Opponents counter that it would be difficult for independently owned
    and controlled firms to negotiate, exchange necessary information,
    and monitor compliance with the complex contracts that would be
    required to efficiently apportion the benefits of temporary
    foreclosure. Rogerson Analysis II at 22-23.

[^436]: JCC Aug. 4, 2003 Ex Parte at Rogerson Analysis II.

[^437]: JCC Aug. 4, 2003 Ex Parte at 15, Rogerson Analysis II at 43-44.

[^438]: JCC Aug. 4, 2003 Ex Parte at 15, Rogerson Analysis II at 4.

[^439]: ACA Comments at 5-7; ACA Oct. 17, 2003 Ex Parte at 1, 10.

[^440]: JCC Aug. 4, 2003 Ex Parte at 15, Rogerson Analysis II at 43-44.

[^441]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 11.

[^442]: JCC Sept. 23 Ex Parte; Rogerson Analysis III at 2.

[^443]: Letter from Bruce Sokler, Mintz, Levin, et al. to Marlene
    Dortch, Secretary, FCC (Nov. 5, 2003) ("JCC Nov. 5, 2003 Ex Parte").

[^444]: *Id*.

[^445]: JCC reiterate their claim that News Corp. will use DirecTV as a
    negotiating weapon. *Id*. *See also* ACA Comments at 18.

[^446]: *Id*. Similarly NRTC notes that News Corp. could threaten cable
    operators by using DirecTV to acquire market share. NRTC Petition at
    14.

[^447]: *Id*. at 2; See also Consumers Union Sept. 23, 2003 Ex Parte at
    3.

[^448]: Letter from William Wiltshire, Harris, Wiltshire & Grannis, LLP
    to Marlene Dortch, Federal Communications Commission (Nov. 13, 2003)
    ("Applicants' Nov. 13, 2003 Ex Parte").

[^449]: *Id*. at 2.

[^450]: *Id*. at 2.

[^451]: *Id*. at 4.

[^452]: Letter from William M. Wiltshire, Harris, Wiltshire & Grannis,
    LLP, Gary M. Epstein, Latham & Watkins, and Richard E. Wiley, Wiley
    Rein & Fielding, to Marlene H. Dortch, Secretary, FCC (Dec. 11,
    2003) ("Applicants' Dec. 11 Ex Parte"), Attachment at 1; Letter from
    William M. Wiltshire, Harris, Wiltshire & Grannis, LLP, Gary M.
    Epstein, Latham & Watkins, and Richard E. Wiley, Wiley Rein &
    Fielding, to Marlene H. Dortch, Secretary, FCC (Dec. 12, 2003)
    ("Applicants' Dec. 12 Ex Parte"), Attachment at 1.

[^453]: Applicants' Dec. 11 Ex Parte, Attachment at 1.

[^454]: EchoStar Dec. 15 Ex Parte at 2.

[^455]: *See* **\[REDACTED\]**.

[^456]: *See Program Access Order*, 17 FCC Rcd at 121489 ¶ 54; FCC, OPP
    Working Paper #37, *Broadcast Television: Survivor in a Sea of
    Competition* at 124 (citing *2000 Video Competition Report*, 17 FCC
    Rcd at 1354-1356; *1998 Video Competition Report*, 13 FCC Rcd at
    24298-99 and 24380-81).

[^457]: Applicants' Reply at 24-26.

[^458]: JCC Aug. 4, 2003 Ex Parte at 10-11; Rogerson Analysis II at
    22-25.

[^459]: *See* Applicants' Reply, CRA Analysis; JCC Comments, Rogerson
    Analysis I; JCC Aug. 4 Ex Parte, Rogerson Analysis II; JCC Sept. 23,
    2003 Ex Parte, Rogerson Analysis III; Applicants' Sept. 8 Ex Parte,
    Exhibit 1, Charles River Associates, Inc., *News Corp.'s Partial
    Acquisition of DirecTV: A Further Economic Analysi*s ("CRA Analysis
    II").

[^460]: Applicants' Reply, CRA Analysis at ¶¶ 44-67; Applicants' Sept. 8
    Ex Parte, CRA Analysis II at ¶¶ 4-29.

[^461]: JCC Comments, Rogerson Analysis at 12-24; JCC Aug. 4, Ex Parte
    at Rogerson Analysis II; JCC Sept. 23 Ex Parte at Rogerson Analysis
    III.

[^462]: Applicants\' Sept. 22 Ex Parte at 12. *See also* Applicants\'
    Reply, Lexecon Analysis at 6; Applicants' Reply, CRA Analysis at
    10-12 & Appendix B.

[^463]: We define double marginalization at para. 70, supra.

[^464]: Appendix D at 36.

[^465]: As discussed in the technical appendix, staff analyzed the
    incentives to withhold an RSN from a cable operator but not from
    EchoStar for two reasons. **\[REDACTED\]**. In addition, staff did
    not examine the incentive to temporarily withhold a RSN from
    EchoStar because, unlike the cable companies carrying a RSN, not all
    of EchoStar's competitors carry the RSN. Some cable companies would
    not carry the RSN and subscriber switching would heavily favor
    DirecTV in those areas if the RSN were withdrawn for EchoStar. In
    areas where the cable firm does carry the RSN, subscriber switching
    would not be as favorable for DirecTV, and the record was
    insufficient to permit staff to distinguish between these two areas
    to calculate News Corp.'s incentive to temporarily withhold a RSN
    from EchoStar.

[^466]: *See* Appendix D at ¶ 38.

[^467]: *EchoStar-DirecTV HDO*, 17 FCC Rcd 20622-23 ¶¶ 162-164.

[^468]: *See* Appendix D at ¶ 47.

[^469]: Applicants' Sept. 8 Ex Parte, Lexecon Analysis at ¶ 25.

[^470]: Even for analysis in the context of an alleged unfair practice,
    the Commission will focus on whether the purpose or effect of the
    practice was to hinder or harm the complainant relative to its
    competitors. *Program Access First Report and Order*, 8 FCC Rcd at
    3375 n.26.

[^471]: The Commission attempts to resolve denial of programming case
    (unreasonable refusals to sell, petitions for exclusivity, and
    exclusivity complaints) within five months of submission of the
    complaint. All other program access complaints, including price
    discrimination cases, should be resolved within nine months of the
    submission of the complaint*. Implementation of the Cable Television
    Consumer Protection and Competition Act of 1992*, 13 FCC Rcd 15822,
    15842 ¶ 41(1998).

[^472]: Application at 44.

[^473]: ACA Comments at 16, 20, 23; JCC Comments at 55-63; EchoStar
    Petition at 58-62; NRTC Petition at 20-22. Letter from Jeffrey A.
    Chester, Executive Director, Center for Digital Democracy, to
    Marlene H. Dortch, Secretary, FCC (Dec. 3, 2003); Letter from
    Jeffrey A. Chester, Executive Director, Center for Digital
    Democracy, to Marlene H. Dortch, Secretary, FCC (Dec. 9, 2003);
    Letter from Jeffrey A. Chester, Executive Director, Center for
    Digital Democracy, to Marlene H. Dortch, Secretary, FCC (Dec. 11,
    2003).

[^474]: EchoStar Petition at 23-24; NRTC Petition at 21; JCC Comments at
    59-63; CFA Reply Comments at 5-6.

[^475]: EchoStar Petition at 23-24; NRTC Petition at 21; JCC Comments at
    59-63; CFA Reply Comments at 5.

[^476]: JCC Comments at 59-63; Letter from Consumers Union to Marlene H.
    Dortch, Secretary, FCC (Sept. 23, 2003) ("Consumers Union Sept. 23,
    2003 Ex Parte") at 5-6.

[^477]: ACA Comments at 19.

[^478]: ACA Comments at 20-21; ACA Oct. 17, 2003 Ex Parte at Exhibit A,
    Page 2.

[^479]: ACA Oct. 17, 2003 Ex Parte at Exhibit A, Page 2.

[^480]: ACA Oct. 17, 2003 Ex Parte at Exhibit A, Page 2.

[^481]: EchoStar Petition at 66. EchoStar notes that News Corp.'s
    affiliate BSkyB has agreed to such conditions in the United Kingdom.
    *Id.*

[^482]: *See* Pegasus Sept. 30, 2003 Ex Parte; Pegasus Dec. 10, 2003 Ex
    Parte.

[^483]: EchoStar Petition at 64-66. JCC and NRTC also support a program
    access condition that does not sunset with the program access rules.
    JCC Comments at 65; NRTC Petition at 20-21.

[^484]: JCC Reply Comments at 18-19; Letter from Christopher J. Harvie,
    Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC, to Marlene H.
    Dortch, Secretary, FCC (Aug. 18, 2003) ("JCC Aug. 18, 2003 Ex
    Parte") Attachment at 4.

[^485]: *See* JCC Aug. 18, 2003 Ex Parte Attachment at 4.

[^486]: RCN Oct. 24, 2003 Ex Parte at 7-8.

[^487]: JCC Aug. 18, 2003 Ex Parte Attachment at 6.

[^488]: *Id*.

[^489]: For example, EchoStar proposes that program access requirements
    be extended to apply to Liberty Media's programming assets and to
    programming that Congress did not choose to subject to the rules and
    that News Corp. be limited to offering programming at published
    rates that are preapproved by the Commission. *See* EchoStar
    Petition at 64-66. Pegasus suggests that we impose specialized
    corporate governance rules and FCC filing requirements on all
    contracts between Fox and DirecTV for a period of five years. *See*
    Pegasus Sept. 30, 2003 Ex Parte.

[^490]: Steven J. Brams, *Negotiation Games: Applying Game Theory to
    Negotiation and Arbitration*, Routledge, 2003 at 264.

[^491]: The Commission has previously defined small cable companies as
    those with 400,000 or fewer subscribers. We adopt that definition
    for the purposes of this condition. *See Implementation of Sections
    of the Cable Television Consumer Protection and Competition Act of
    1992*, 10 FCC Rcd 7393, 7394-95 (1995).

[^492]: We clarify that, by "possession," we mean actual possession or
    control.

[^493]: The Commission has the authority to award attorney fees and
    costs. *See* 47 C.F.R. §1.6009(b)(3).

[^494]: The six-year period is parallel to that for the analogous
    condition on retransmission consent.

[^495]: Application at 63.

[^496]: Twenty-five of these stations are affiliated with the Fox
    network, nine are affiliated with the United Paramount network, and
    one station, KDFI, Dallas, Texas, is not affiliated with any
    network. Application at 63.

[^497]: *See FEG 10-K 2003 Annual Report* at 7.

[^498]: Applicants' Reply at 46-47; July 28 Response at 23. Applicants
    report that KTXH elected must-carry on all cable systems. July 28
    Response at 23. WUTB, WDCA, and WPWR elected must-carry with respect
    to some MVPDs, including DirecTV in one case. *Id.*

[^499]: Application at 63.

[^500]: The Fox Network delivers 15 hours of prime-time programming per
    week and one hour of late-night programming on Saturday to its
    affiliates. *FEG 10-K 2003 Annual Report*. The Fox Network's has
    developed a reputation for originating popular shows, and in
    particular reality shows. For example, the season finales of Fox's
    reality shows *Joe Millionaire* and *American Idol* were the two
    most popular entertainment programs during the last television
    season, drawing 40 million and 38.1 million viewers respectively.
    Cablevision Comments at 13. Fox programming is especially appealing
    to adults aged to 18 to 49, an age group that commenters contend is
    most often targeted by advertisers. *Id.* at 14. According to one
    News Corp. investor presentation, prime time ratings for viewing of
    Fox Network programming by adults aged 18-49 increased by 14% from
    May 2002 to May 2003, while the ratings of competing broadcast
    networks declined or remained static. *See* News Corp., Merrill
    Lynch Media and Entertainment Conference, Investor Presentation*,*
    at
    http://www.newscorp.com/investor/download/MerrillLynch2003/sld0023.htm
    (visited Dec. 19, 2003).

[^501]: *See* Application at 63. This is also true for Fox affiliates.
    *See* NAB Comments at 19.

[^502]: *See*, *e.g.*, *Implementation of Sections of the Cable
    Television Consumer Protection and Competition Act of 1992*, 9 FCC
    Rcd 1164, 1212-14 ¶¶ 91-93 (1993); JCC Comments at 18.

[^503]: *See Good Faith Negotiations Order*, 15 FCC Rcd at 5462 ¶ 38.

[^504]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992; Broadcast Signal Carriage Issues*, 9 FCC
    Rcd 6723 ¶ 115 (1994).

[^505]: *See* Applicants' Reply at 44; *Good Faith Negotiations Order*,
    15 FCC Rcd at 5448 ¶ 8.

[^506]: *See* Applicants' Reply at 44-45.

[^507]: JCC Comments at 19 and n.34 (citing 47 U.S.C. 534(b)(9); 47
    C.F.R. § 76.1601, Note 1 (2002) (prohibiting deletion or
    repositioning of a local commercial television station during the
    four national four-week ratings periods or audience "sweeps"); *In
    the Matter of Time Warner Cable; Emergency Petition of ABC, Inc. for
    Declaratory Ruling and Enforcement Order for Violation of Section
    76.58 of the Commission's Rules, or in the Alternative for Immediate
    Injunctive Relief*, 15 FCC Rcd 7882 (2002)).

[^508]: 47 C.F.R. § 76.92.

[^509]: 47 C.F.R. § 76.101.

[^510]: JCC Comments at 20 (citing *Implementation of the Cable
    Television Consumer Protection and Competition Act of 1992;
    Broadcast Signal Carriage Issues*, 9 FCC Rcd 6723 at ¶ 114 (1994)).

[^511]: Applicants' Reply at 45; 47 C.F.R. § 76.64(l).

[^512]: Applicants' Reply at 45; 47 C.F.R. § 76.65.

[^513]: Applicants' Reply at 45 (citing *Good Faith Negotiations Order*,
    15 FCC Rcd at 5470 ¶ 58).

[^514]: Applicants' Reply at 45; 47 C.F.R. § 76.65(b).

[^515]: Application at 63.

[^516]: Application at 64. Applicants note that, because 15 of the 35
    O&Os are UHF stations, which receive less over-the-air coverage,
    distribution of its signals on all MVPD platforms is particularly
    important. *Id.* at n.105. Applicants assert that, if News Corp.
    lost carriage of Fox network programming on even a small number of
    systems, it would risk being perceived by advertisers as a
    second-class outlet compared to ABC, CBS or NBC, and would no longer
    be able to command comparable advertising rates. Applicants' Reply
    at 40.

[^517]: Application at 64.

[^518]: Application at 64.

[^519]: Application at 64-65; Applicants' Reply at 44-47.

[^520]: Applicants' Reply at 41.

[^521]: NAB Comments at i-ii; EchoStar Petition at 1-2; Cablevision
    Comments at 11-18; NRTC Petition at 11-17; JCC Comments at 15-33;
    CFA Reply Comments at 4, 11-12.

[^522]: EchoStar Petition at 14; Cablevision Comments at 12; JCC
    Comments at 46.

[^523]: *See, e.g.,* EchoStar Petition at 12-13; ACA Comments 8-16;
    Cablevision Comments at 12-16; JCC Comments at 15-33.

[^524]: JCC Comments at 54-55; Cablevision Comments at 15.

[^525]: EchoStar Petition at 22; Cablevision Comments at 13; JCC
    Comments, Rogerson Analysis at 9-12. Rogerson states that the
    closest substitute for a local television broadcast station would be
    an out-of-market station affiliated with the same network, but notes
    that such substitution is not possible because of the network
    non-duplication and syndicated exclusivity rules. *Id.*

[^526]: EchoStar Petition at 13-18; ACA Comments at 9. As an example,
    EchoStar notes that because it must obtain retransmission consent
    from Fox before entering a new local market, DirecTV will know what
    markets EchoStar plans to enter in advance, and can act
    strategically to minimize the benefits to EchoStar of entering a new
    market. EchoStar Petition at 17-18.

[^527]: JCC Comments at 21, n. 39, 65; EchoStar Petition at 15-16, 18.

[^528]: JCC Comments at 21, 25-26.

[^529]: ACA Comments at 8-15; ACA Reply Comments at 4; JCC Comments at
    30. ACA claims that smaller cable operators will be especially
    vulnerable to Fox network abuses because the incentive to
    disadvantage smaller competitors in favor of DirecTV will likely
    outweigh any temporary marginal advertising revenue decrease. ACA
    Comments at 13.

[^530]: ACA Comments at 13-15.

[^531]: ACA Comments at 13-15; ACA Oct. 17 Ex Parte.

[^532]: ACA Oct. 17 Ex Parte at 4-5.

[^533]: Cablevision Comments at 28 (citing *Program Access Order*, 17
    FCC Rcd at 12125 ¶ 3); *see also* JCC Aug. 4 Ex Parte at 6-7.

[^534]: Cablevision Comments at 28 (citing *Program Access Order*, 17
    FCC Rcd at 12125 ¶ 3).

[^535]: Cablevision Comments at 28.

[^536]: Cablevision Comments at 28.

[^537]: Cablevision Comments at 28-29. Cablevision contends that News
    Corp.'s ability to withhold broadcast programming is even greater
    than that of a vertically integrated MSO, because "local broadcast
    signals win a substantially greater share of the viewing audience
    and represent "must have" programming far more than any cable
    programmer could." *Id*. at 29.

[^538]: EchoStar Petition at 15-16, 19-21; ACA Comments at 11-12; JCC
    Comments at 31-34; Cablevision Comments at 11, 26.

[^539]: EchoStar Petition at 14. This prohibition was subsequently
    vacated by the U.S. Court of Appeals for the D.C. Circuit. *See Fox
    Television Stations v. FCC*, 280 F.3d 1027 (D.C. Cir. 2002); *reh'g
    granted in part*, 293 F.3d 537 (D.C. Cir. 2002).

[^540]: JCC Comments at 17-18. CFA agrees and has urged Congress to
    "revisit the necessity of retransmission consent at is pertains to
    stations owned and operated by News Corp./Fox" in testimony before
    the Senate Commerce Committee. CFA Reply at 12.

[^541]: JCC Comments at 17-18.

[^542]: Cablevision at 11; *see also* JCC Comments at 28 n.61(discussing
    News Corp.'s ability to use its television duopolies and RSNs to
    cross-promote the outlets, bundle sales of advertising time, and
    gain leverage in retransmission consent negotiations).

[^543]: EchoStar Petition at 19. EchoStar contends that the good faith
    requirement, as interpreted by the Commission, applies to the
    process of negotiations, not the substantive terms. *Id.*

[^544]: JCC Comments at 31 (citing 47 C.F.R. §§ 76.65(c), 76.7).

[^545]: ACA Comments at 11-12.

[^546]: ACA Comments at 11-12; JCC Comments at 34; JCC Aug. 4 Ex Parte,
    Rogerson Analysis II at 39.

[^547]: Cablevision Comments at 19-20.

[^548]: Cablevision Comments at 19.

[^549]: Cablevision Comments at 19-20.

[^550]: Cablevision Comments at 20.

[^551]: Applicants' Reply, Exhibit B, CRA Analysis at 43-46. CRA also
    considers whether the transaction would enhance News Corp.'s
    incentive and ability to withhold its broadcast station signals only
    from small cable operators and finds that signal withholding would
    still be unprofitable. *Id.* at 47-49.

[^552]: Applicants' Reply at 41 (citing CRA Analysis at 44, 52).

[^553]: Applicants' Reply at 42.

[^554]: Applicants' Reply at 44.

[^555]: Applicants' Reply at 44.

[^556]: Applicants' Reply at 24.

[^557]: Applicants' Sep. 8 Ex Parte at 3; Lexecon Analysis II ¶ 66.

[^558]: JCC Aug. 4 Ex Parte; Cablevision Aug. 20 Ex Parte.

[^559]: JCC Aug. 4 Ex Parte at 2; *see also* Cablevision Aug. 20 Ex
    Parte at 1, Rubinfeld Analysis at 2.

[^560]: JCC Aug. 4 Ex Parte at 2; Cablevision Ex Parte at 1.

[^561]: JCC Aug. 4 Ex Parte at 2, Rogerson Analysis II at 2.

[^562]: Rogerson states that "In large part, the studies of News Corp.'s
    economists are focused upon demonstrating that it is not
    economically rational for News Corp. to withhold programming
    permanently from rival MVPDs to increase DirecTV's attractiveness
    and market share. Lexecon and CRA ignore and do not account for the
    more likely scenario---that News Corp., armed with increased
    bargaining power, has increased ability to raise prices to all
    distributors, and therefore to consumers, through the actual or
    threatened withholding of programming." JCC Aug. 4 Ex Parte,
    Rogerson Analysis II at 2. *See also* Rubinfeld at 1, 10.

[^563]: JCC Nov. 5 Ex Parte at 2-3; Cablevision Aug. 20 Ex Parte at 2.
    In support of this, JCC cite documents **\[REDACTED\]**. JCC also
    cites News Corp. documents **\[REDACTED\]**. Similarly, Cablevision
    asserts **\[REDACTED\]**. Cablevision Aug. 20 Ex Parte at 2
    **\[REDACTED\]**. Applicants disagree with JCC's interpretation of
    their documents. *See* Letter from William M. Wiltshire, Harris,
    Wiltshire & Grannis, LLP, Gary M. Epstein, Latham & Watkins, and
    Richard E. Wiley, Wiley Rein & Fielding, to Marlene H. Dortch,
    Secretary, FCC (Nov. 13, 2003) ("Applicants' Nov. 13 Ex Parte").

[^564]: JCC Aug. 4 Ex Parte at 3 and Rogerson Analysis II; Cablevision
    Aug. 20 Ex Parte at 1 and Rubinfeld Analysis.

[^565]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 2-3.

[^566]: Cablevision Aug. 20 Ex Parte at 2 and Rubinfeld Analysis at 10.

[^567]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 3.

[^568]: JCC assert that, for this reason, the Commission should not
    focus on DirecTV's share of the MVPD market, as the Applicants have
    done in their Reply. JCC Aug. 4 Ex Parte at 4-6.

[^569]: JCC Aug. 4 Ex Parte at 8 and Rogerson Analysis II at 40-42.

[^570]: JCC Aug. 4 Ex Parte at 9-10.

[^571]: JCC Aug. 4 Ex Parte at 9.

[^572]: *Id.* at 9-10 and Rogerson Analysis II at 29-33; Cablevision
    Aug. 20 Ex Parte, Rubinfeld Analysis at 21-22.

[^573]: Cablevision Aug. 20 Ex Parte at 2 and Rubinfeld Analysis at 5-9,
    11-14, 19-20.

[^574]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 22-23; Cablevision
    Aug. 20 Ex Parte at 24.

[^575]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 23; Cablevision
    Aug. 20 Ex Parte at 24.

[^576]: Applicants' Sept. 8 Ex Parte at 2.

[^577]: Our conclusions apply to any O&O station as well as any local
    broadcast station affiliate on whose behalf News Corp. negotiates
    retransmission consent agreements.

[^578]: *See* H.R. Rep. No. 106-79 at 11-15 (1999); Satellite Home
    Viewer Improvement Act, Pub.L. No. 106-113, 113 Stat.1501, at App. I
    at 1501A-523 & 544.

[^579]: DBS operators report that the ability to carry local television
    broadcast signals has made their service more attractive to
    consumers. *See* *2002 Video Competition Report*, 17 FCC Rcd 26901,
    26931-32 ¶ 61 (2002); *see also* U.S. Government Accounting Office
    (GAO) Report to the Subcommittee on Antitrust, Competition, and
    Business and Consumer Rights, Committee on the Judiciary, U.S.
    Senate, *Telecommunications Issues in Providing Cable and Satellite
    Television Services*, GAO-03-130, October 2002 at i, 9-12.

[^580]: *See* Applicants' Reply, CRA Analysis; JCC Comments, Rogerson
    Analysis; JCC Aug. 4, 2003 Ex Parte, Rogerson Analysis II; JCC Aug.
    4, 2003 Ex Parte, *Economic* *Analysis of the Competitive Effects of
    the Takeover of DirecTV by News Corp*., William P. Rogerson
    ("Rogerson Analysis III"); Cablevision Aug. 20 Ex Parte, Rubinfeld
    Analysis; Cablevision Sept. 25 Ex Parte, Rubinfeld Analysis II.

[^581]: Applicants' Reply, CRA Analysis.

[^582]: JCC Reply, Rogerson Analysis; JCC Aug. 4 Ex Parte, Rogerson
    Analysis II; Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis.

[^583]: JCC Aug. 4, 2003 Ex Parte.

[^584]: The details of the staff's analysis of foreclosure strategies
    with respect to local broadcast signals are described in the
    technical appendix, Appendix D at 1-13. As explained in greater
    detail in the next section, we conclude that News Corp. has the
    ability to influence the terms of their affiliates' retransmission
    consent agreements. To the extent that News Corp. is involved in
    negotiating the terms of retransmission consent for its affiliates,
    the potential harms relating to foreclosure of broadcast programming
    extend to a much broader geographic area.

[^585]: *See* Appendix D, Technical Appendix*.*

[^586]: Our analysis assumes that no customers will leave DirecTV for
    the first 12 months following their switch, **\[REDACTED\]** will
    leave once their equipment contracts expire, and in all following
    months, **\[REDACTED\]** of the remaining customers will revert to
    their original MVPD. *See* Appendix D, Technical Appendix.

[^587]: We adopt a discounted cash flow approach to allow us to compare
    the benefits and costs of that occur over time. The discounted cash
    flow analysis is the technique used by both commenters and
    Applicants and is the standard method for comparing flows of costs
    and benefits that vary temporally. *See* Applicants' Sept. 8 Ex
    Parte; Cablevision Aug. 20 Ex Parte, Rubinfield Analysis.

[^588]: *See* Appendix D, Technical Appendix.

[^589]: JCC Sept. 23 Ex Parte at 18; Cablevision August 19 Ex Parte at
    3-5.

[^590]: Applicants' Sept. 8 Ex Parte at 25-27.

[^591]: Cablevision Aug. 19 Ex Parte at 4.

[^592]: Furthermore, we note that Time Warner offered to accept the
    rebate coupons and issue credits for digital cable and Internet
    service. *See* Mike McDaniel, *TV Spat Turns into Game of Give and
    Let-Give, Cable Firms to Honor Ch. 13 Satellite Vouchers*, [Houston
    Chronicle]{.smallcaps}, Mar. 8, 2000.

[^593]: Applicants' Response to Second Information and Document Request
    at 3; Applicants' Response to Third Information and Document Request
    at 3-4.

[^594]: Mike McDaniel, *TV Spat Turns into Game of Give and Let-Give,
    Cable Firms to Honor Ch. 13 Satellite Vouchers*, [Houston
    Chronicle]{.smallcaps}, Mar. 8, 2000.

[^595]: Letter from Tara Corvo , Mintz, Levin, Cohn, Ferris, Glovsky and
    Popeo, PC, to Marlene H. Dortch, Secretary, FCC (Nov. 20, 2003)
    ("Cablevision Nov. 20 Ex Parte"), Daniel L. Rubinfeld and Duncan
    Cameron, Estimating the Effect on MVPD Subscribership of the May
    2000 Withholding of ABC Network Retransmissions from Time Warner
    Houston Cable Subscribers at 11.

[^596]: *See* Appendix D, Technical Appendix at para. 23.

[^597]: *See*, *e.g.*, *2002 Biennial Regulatory Review -- Review of the
    Commission's Broadcast Ownership Rules and Other Rules Adopted
    Pursuant to Section 202 of the Telecommunications Act of 1996*, 18
    FCC Rcd 13620, 13623-24 ¶¶ 7-8, 13627 ¶ 17, 13643-44, ¶¶ 73-76
    ("*2002 Biennial Review Order*"), *recon. pending*; *Rules and
    Regulations Relating to Multiple Ownership*, 18 F.C.C. 288 (1953).

[^598]: Applicants' Reply at 44-46.

[^599]: We also disagree with the contention that the alleged harm of
    the transaction could occur through contracting. **\[REDACTED\]**

[^600]: JCC Comments at 64-65; Consumers Union Sept. 23 Ex Parte at 5.

[^601]: Consumers Union Sept. 23 Ex Parte at 5.

[^602]: Consumers Union Sept. 23 Ex Parte at 5-6 (citing Agreement
    Containing Consent Order, In the Matter of Time Warner Inc., Turner
    Broadcasting System Inc., Tele-Communications, Inc., and Liberty
    Media Corporation, File No. 961-004, Before the Federal Trade
    Commission (Sept. 12, 1996) at
    http://www.ftc.gov/os/1996/09/timewar.pdf).

[^603]: ACA Oct. 17 Ex Parte at Exhibit A, Page 1.

[^604]: *Id.*

[^605]: ACA Oct. 17 Ex Parte at 6.

[^606]: ACA Oct. 17 Ex Parte at Exhibit A, Page 1.

[^607]: ACA Oct. 17 Ex Parte at 6.

[^608]: ACA Oct. 17 Ex Parte at Exhibit A, Page 2.

[^609]: Cablevision Comments at 32. Cablevision also urges the
    Commission to prohibit Applicants from excluding Rainbow DBS from
    any agreement to share backhaul it makes with EchoStar "in the
    course of this merger." Cablevision has not demonstrated that any
    such agreement has been reached, or that negotiations concerning
    backhaul are in progress.

[^610]: Cablevision Comments at 27.

[^611]: JCC Aug. 18 Ex Parte., Attachment at 7-8

[^612]: JCC Aug. 18 Ex Parte, Attachment at 7-8.

[^613]: JCC Aug. 18 Ex Parte at 2.

[^614]: RCN Oct. 24 Ex Parte, Attachment at 7.

[^615]: JCC Comments at 65-66.

[^616]: *See Implementation of the Satellite Home Viewer Improvement Act
    of 1999, Retransmission Consent Issues: Good Faith Negotiation and
    Exclusivity*, CS Docket No. 99-363, DirecTV Comments (filed Jan. 12,
    2000). *See also* *Good Faith Negotiation Order*.

[^617]: EchoStar Petition at 67; *see also* JCC Reply Comments at 15-16.

[^618]: ACA Oct. 17 Ex Parte at 11-12.

[^619]: EchoStar Petition at 17-18.

[^620]: **\[REDACTED\]**.

[^621]: Applicants' Response to Third Information and Document Request
    at 1-3.

[^622]: We clarify that, by "possession," we mean actual possession or
    control.

[^623]: **\[REDACTED\]**.

[^624]: **\[REDACTED\]**.

[^625]: The Commission has the authority to award attorney fees and
    costs. *See* 47 C.F.R. § 1.6009(b)(3).

[^626]: The Commission has previously defined small cable companies as
    those with 400,000 or fewer subscribers. We adopt that definition
    for the purposes of this condition. *Implementation of Sections of
    the Cable Television Consumer Protection and Competition Act of
    1992*, 10 FCC Rcd 7393 (1995).

[^627]: Applicants' Reply at 46.

[^628]: The six-year period is intended to cover the next two
    retransmission consent negotiation cycles.

[^629]: *See Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, 17 FCC Rcd 26901
    (2002).

[^630]: The majority of the comments focused on EPGs.

[^631]: Application at 65.

[^632]: Gemstar July 31 Response at 7.

[^633]: News Corp. July 28 Response at 27-29. According to News Corp.,
    "\[t\]o date, NDS has entered into agreements to provide its IPG
    product to only two MVPDs: (1) a single RCN system in the Chicago
    area; and (2) the DBS system planned by a Cablevision subsidiary,
    R/L DBS." *Id.* at 27.

[^634]: *Id.* at 27. News Corp. also states that NDS has "received no
    revenue in exchange for distribution of its IPG product" and that
    the IPG will not carry advertising. *Id.* at 28.

[^635]: Cablevision Comments at 20-22; CDD Petition at 3-4; EchoStar
    Petition at 24-25; JCC Comments at 48-49; NAB Comments at 20; NRTC
    Petition at 14-15; ACA Reply at 9; JCC Reply at 8-9.

[^636]: Cablevision Comments at 21.

[^637]: Cablevision Comments at 3.

[^638]: JCC Comments at 48.

[^639]: *Id.* at 49 n.120 (citing *U.S. v. Gemstar and TV Guide*, CV No.
    1:03CV00198, (D.D.C., filed Feb. 6, 2003)).

[^640]: *Id.* at 49.

[^641]: JCC Comments at 49; ACA Reply at 9.

[^642]: JCC Aug. 4 Ex Parte at 14-15.

[^643]: Application at 66-67.

[^644]: *Id.* at 65-67 (citing *Applications for Consent to the Transfer
    of Control of Licenses and Section 214 Authorizations from MediaOne
    Grop, Inc., Transferor, to AT&T Corp., Transferee*, 15 FCC Rcd 9816,
    9856-58 (2000) ("*AT&T-MediaOne*")).

[^645]: *AT&T-MediaOne*, 15 FCC Rcd at 9857 ¶ 89.

[^646]: *AT&T-MediaOne*, 15 FCC Rcd at 9857-58 ¶ 90.

[^647]: Application at 66. *See also* Applicants' Nov. 14 Ex Parte at 2.

[^648]: NRTC Petition at 14-15.

[^649]: CDD Petition at 3-4.

[^650]: Cablevision Comments at 21; EchoStar Petition at 24.

[^651]: EchoStar Petition at 25. On June 19, 2003, the U.S. District
    Court in Atlanta granted EchoStar\'s motion for summary judgment
    against Gemstar concerning issues involving a patent for electronic
    program guide technology. EchoStar filed suit against Gemstar in
    December 2000, accusing the company of violating federal and state
    antitrust laws. Gemstar counterclaimed, accusing EchoStar of
    infringing on two patents. Gemstar is expected to reinstate it
    patent claims and seek a new court decision sometime in 2004. *See*
    SkyReport, Jun. 20, 2003, *DISH Wins Patent Case Vs. Gemstar*, at
    http://www.skyreport.com/viewskyreport.cfm?ReleaseID=1148.

[^652]: EchoStar Petition at 25.

[^653]: EchoStar Petition at 61, 65-66; JCC Reply at 8-9.

[^654]: CDD Petition at 4.

[^655]: *Id.*

[^656]: *Id.* at 50-51.

[^657]: *Id.* at 52.

[^658]: *Id.* at 51.

[^659]: *Id.*

[^660]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices*, 13 FCC Rcd
    14775, 14820 ¶ 116 (1998). We are also exploring EPG-related issues
    in other pending rulemaking proceedings. *See Compatibility Between
    Cable Systems and Consumer Electronics Equipment*, 15 FCC Rcd 17568
    (2000); *Nondiscrimination in the Distribution of Interactive
    Television Services Over Cable*, 16 FCC Rcd 1321 (2001); *Carriage
    of Digital Television Broadcast Signals*, 16 FCC Rcd 2598 (2001).

[^661]: We have also sought comment on the development and deployment of
    EPGs and the technologies used to provide them to consumers. *See
    Annual Assessment of the Status of Competition in the Market for the
    Delivery of Video Programming*, 18 FCC Rcd 16042, 16049 (2003).

[^662]: Tribune Media Services provides listings of program information
    to competing EPG/IPGs, as well as newspapers, magazines, and other
    media. In addition, we note that since the original information on
    programming is supplied by programmers themselves, an MVPD could
    collect this data on its own.

[^663]: **\[REDACTED\]**.

[^664]: *See* Gemstar-TV Guide, TV Guide Interactive, at
    http://www.gemstartvguide.com/whatwedo/ipgproducts.asp (visited Nov.
    6, 2003).

[^665]: In addition, **\[REDACTED\]**.

[^666]: **\[REDACTED\]**.

[^667]: Pioneer and Scientific Atlanta accounted for nearly 43% of
    digital set-top boxes shipped in 2001 according to *Kagan Media
    Trends 2003*.

[^668]: **\[REDACTED\]**.

[^669]: *See* Section VI.C.4.b and c, *supra*, and Section IX, *infra*.

[^670]: **\[REDACTED\]**

[^671]: *See Nondiscrimination in the Distribution of Interactive
    Television Services Over Cable*, 16 FCC Rcd 1321, 1323 (2001) ("*ITV
    NOI*"). In the *ITV NOI*, the Commission noted that ITV was rapidly
    developing, thus making it difficult to define with specificity the
    precise universe of services that might be encompassed within the
    term. For purposes of discussion, the *ITV NOI* instead attempted to
    identify the major technical resources or "building blocks"
    necessary for the provision of what it understood to be likely ITV
    services. *Id.*, 16 FCC Rcd at 1329. The identified components were:
    (1) a video transmission capacity associated with interactive
    content (*e.g.,* the digital video stream), (2) a two-way connection
    (*e.g.*, via the Internet), and (3) specialized customer premises
    equipment (*e.g*., the interactive television set-top box). *Id.*,
    16 FCC Rcd at 1324-25.

[^672]: *See Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, 17 FCC Rcd 26901,
    26971 (2002) ("*2002 Video Competition Report*").

[^673]: Major ITV middleware and content providers include Liberty's
    OpenTV, ACTV, and Wink; Liberate, Worldgate; and GoldPocket
    Interactive. *See 2002 Video Competition Report*, 17 FCC Rcd at
    26972. News Corp.-controlled NDS recently announced its acquisition
    of Thomson's *MEDIA*HIGHWAY, another ITV middleware provider. *See
    NDS Acquires Thomson's MEDIAHIGHWAY and Enters into Strategic
    Alliance with Thomson on Provision of Middleware* (press release),
    Sept. 13, 2003. NDS has also entered into an agreement with itaas,
    Inc. to provide "support services to NDS for the development of
    interactive applications for Scientific-Atlanta's Explorer set-top
    boxes." *See NDS Selects itaas Program to Support Development of
    Advanced Interactive TV Applications,* (press release), July 28,
    2003.

[^674]: *See ITV NOI*.

[^675]: *See* *Applications for Consent to the Transfer of Control of
    Licenses and Section 214 Authorization by Time Warner, Inc. and
    America Online, Inc. to AOL Time Warner, Inc.*, 16 FCC Rcd 6547
    (2001) ("*AOL-Time Warner*").

[^676]: *Id.* at 6646. The FTC ordered AOL-Time Warner not to
    discriminate in the transmission and carriage of interactive content
    and forbade AOL-Time Warner from blocking or otherwise interfering
    with interactive content transmitted by an unaffiliated ISP. The FTC
    Consent Agreement also prohibited AOL-Time Warner from blocking
    subscribers' access to any interactive content that is carried on
    the AOL-Time Warner facilities and thus enabled subscribers to
    access such content as part of an ITV service provided by an
    unaffiliated entity. *Id.*

[^677]: NAB Comments at 20; CDD Nov. 3 Ex Parte at 1-2.

[^678]: *Id.*

[^679]: *See* CDD Petition at 4; CDD Nov. 3 Ex Parte at 1-2; CDD Nov. 17
    Ex Parte at 3-4. CDD refers to Liberty's present and potential
    future investment in News Corp. (citing SEC 10Q filing, 5/14/03).
    OpenTV provides interactive television technology and content for
    the cable, satellite and terrestrial broadband industries. *See*
    OpenTV Homepage at http://www.opentv.com (visited Sept. 11, 2003).
    Wink is a free interactive television service, distributed through
    partnership agreements with cable and satellite operators,
    broadcasters, advertisers, and equipment manufacturers, that
    provides viewers with the ability to access enhanced programs or
    advertisements via the remote control while continuing to watch
    television. *See* Wink Homepage at http://www.wink.com (visited
    Sept. 11, 2003). On July 1, 2003, ACTV was acquired by OpenTV. *See
    OpenTV Completes the Acquisition of ACTV* (press release), Jul. 1,
    2003.

[^680]: Applicants' Reply at 12-23.

[^681]: *Id.* at 50-51.

[^682]: News Corp. July 28 Response at 25.

[^683]: Applicants' Nov. 14 Ex Parte at 4 (citing Application at 61-63).

[^684]: *2002 Video Competition Report,* 17 FCC Rcd at 26972 ¶ 170.

[^685]: *2002 Video Competition Report,* 17 FCC Rcd at 26972.

[^686]: *Id.*

[^687]: We note that NAB raised similar concerns regarding a cable
    operator's ability to dominate the ITV market in the *ITV NOI*
    proceeding. As we reported in the *2002 Video Competition Report*,
    we have seen no evidence of such domination in the current
    marketplace.

[^688]: The Commission recently issued the *2003 Video Competition
    Notice* in which we sought comment on the development and deployment
    of ITV services and the technologies used to provide them. *See
    Annual Assessment of the Status of Competition in the Market for the
    Delivery of Video Programming*, 18 FCC Rcd 16042, 16049 (2003)
    ("*2003 Video Competition Notice*").

[^689]: Application, Attachments - Volume I at C-3 and Liberty Media
    Corp., *Notice of Annual Meeting of Shareholders*, at
    http://www.libertymedia.com/investor_relations/pdfs/annualmeeting_2003.pdf
    (visited Oct. 2, 2003).

[^690]: Cablevision Comments at 22; CDD Petition at 4; EchoStar Petition
    at 38, 60; CDD Nov. 3 Ex Parte at 1-2; CDD Nov. 17 Ex Parte at 2.

[^691]: Sun July 30 Ex Parte at 1-2. MHP is an open standard created in
    Europe establishing a common framework for content, application, and
    service delivery over different transmission systems. It is based on
    DVB-J, which relies on Sun Microsystem\'s Java Virtual Machine
    specification. *See DVB-MHP - What is MHP?* at
    http://www.mhp.org/what_is_mhp/index.html (visited Nov. 18, 2003)*.*

[^692]: See Letter from Jeffrey Chester, Center for Digital Democracy,
    to Marlene H. Dortch, Secretary, FCC (Nov. 7, 2003) at 3 ("CDD Nov.
    7 Ex Parte").

[^693]: Applicants' Reply at 50-51; Applicants' Nov. 14 Ex Parte at 2-3.

[^694]: News Corp. Aug. 28 Ex Parte at 5 (citing *Deployment of Wireline
    Services Offering Advanced Telecommunications Capability*, 13 FCC
    Rcd 24011, 24014 (1998); *Policies and Rules for the Direct
    Broadcast Satellite Service*, 17 FCC Rcd 11331, 11376 (2002)).

[^695]: *Kagan Media Trends 2003* at 110 and NE Asia Online, *Sony
    Pushes New Conditional Access Technology*, May 2003 at
    http://neasia.nikkeibp.com/nea/200305/cojp_244652.html (visited Oct.
    2, 2003).

[^696]: *See* Application, Volume I, A for a list of all satellite space
    station authorizations controlled by Hughes; *see also* Application,
    Volume I, B for a chart depicting a simplified ownership structure
    of GM/Hughes' pre-transaction FCC licenses; *see also* Application,
    Volume I, D for a chart depicting a simplified ownership structure
    of Hughes' post-transaction FCC licenses.

[^697]: FSS is defined as satellite service between fixed, as opposed to
    mobile, points, and excludes broadcast satellite service such as
    DBS.

[^698]: *See* Application, Volume I, B.

[^699]: Non-geostationary FSS also exist, but because of cost and other
    considerations, video distribution is carried primarily by GSO
    satellites operating in the C- and Ku-bands. In the rest of this
    Order, when we refer to FSS satellites, we mean GSO FSS satellites
    exclusively.

[^700]: The footprint of a satellite at a CONUS location will include
    the 48 contiguous states.

[^701]: *See* ING Barings' *Satellite Communications Industry*, March
    2000 at 149.

[^702]: *See* [Space News]{.smallcaps}, Jun. 23, 2003, at 18.

[^703]: Application at 6.

[^704]: *See* Comments of SES AMERICOM, Inc., In the Matter of Loral
    Satellite, Inc. (Debtor in Possession) and Loral SpaceCom
    Corporation (Debtor-in-Possession), Assignors, and Intelsat North
    America LLC, Assignee, Applications for Consent to Assignments of
    Space Station Authorizations, September 15, 2003, at 2.

[^705]: *See* Application at 44.

[^706]: *Id.*

[^707]: *Id.*

[^708]: *Id*. at 67.

[^709]: NRTC Petition at 14.

[^710]: *See* Applicants' Reply at 53 (citing *EchoStar-DirecTV* *HDO*,
    17 FCC Rcd at 20659).

[^711]: *See EchoStar-DirecTV* *HDO*, 17 FCC Rcd at 20660.

[^712]: *See* Section VI.C.1, *supra*.

[^713]: *See* Section III, *supra*; *see also EchoStar-DirecTV HDO*, 17
    FCC Rcd at 20759-85 ¶¶ 37-52 (analyzing the impact of the proposed
    transaction on viewpoint and program diversity).

[^714]: Applicants' Reply at 65-67.

[^715]: Application at 39-43; Applicants' Sept. 11 Ex Parte at 3-4.

[^716]: ACA Comments at 28; JCC Comments at 72.

[^717]: *2002 Biennial Review Order*, 18 FCC Rcd at 13631-32 ¶ 36.

[^718]: EchoStar Petition at 39-40; *see also* NRTC Petition at 14; CFA
    Reply Comments at 9-12.

[^719]: EchoStar Petition at 39-40; *see also* CFA Reply Comments at
    9-12 (asserting that "the diversity of program sources has eroded to
    the point of extinction")

[^720]: Cablevision Comments at 23-24.

[^721]: Cablevision Comments at 14-15; *see also* NRTC Petition at 13.

[^722]: Cablevision Comments at 14-15.

[^723]: Cablevision Comments at 24.

[^724]: Cablevision Comments at 28-29; ACA Comments at 3, 7, 16; NRTC
    Petition at 14; JCC Comments at 54.

[^725]: Applicants contend that one of the public interest benefits of
    the transaction will be DirecTV's carriage of more programming
    targeted at culturally, ethnically, and linguistically diverse
    audiences. Application at 42. Applicants' contentions relating to
    this benefit are discussed at Section VIII.B.8.

[^726]: *See, e.g.*, *F.C.C. v. N.C.C.B.*, 436 U.S. 775 (1978).

[^727]: CDD Petition at 2. CFA Reply Comments at 4-5; NRTC Petition at
    9-15.

[^728]: CDD Petition at 3; CFA Reply Comments at 4-5.

[^729]: CFA Reply Comments at 1.

[^730]: NRTC Petition at 10-11. According to NRTC, the Commission
    determined that DBS should be considered a voice for purposes of
    analyzing viewpoint diversity in the *EchoStar-DirecTV HDO*. *Id.*
    (citing *EchoStar-DirecTV HDO*, 18 FCC Rcd at 20583-85 ¶¶ 49-52).

[^731]: NRTC Petition at 11.

[^732]: NRTC Petition at 13.

[^733]: NAB Ex Parte at 2; NAB Comments at 11, 21-24.

[^734]: NAB Comments at 15-19.

[^735]: NAB Comments at 19; *see also* NRTC Petition at 16.

[^736]: NAB Comments at 20-21.

[^737]: NAB Comments at 26-27.

[^738]: NAB Comments at 25-27.

[^739]: NAB Comments at 27.

[^740]: APTS/PBS Comments at 6.

[^741]: APTS/PBS Comments at 9-10.

[^742]: Maranatha Comments at 1-2; Reply at 4.

[^743]: Applicants' Reply at 62-64.

[^744]: Applicants' Reply at 65-66.

[^745]: Applicants' Reply at 65 (citing *Policies and Rules for the
    Direct Broadcast Satellite Service*, 17 FCC Rcd 11331, 11394-95
    (2002)).

[^746]: Applicants' Reply at 65-66 (citing *Fox Television Stations,
    Inc. v. FCC*, 280 F.3d 1027 (D.C. Cir. 2002) ("*Fox Television*"),
    *rehearing granted*, 293 F.3d 537 (D.C. Cir. 2002) (vacating
    cable-broadcast cross-ownership rule); *1998 Biennial Regulatory
    Review---Review of the Commission's Broadcast Ownership Rules and
    Other Rules Adopted Pursuant to Section 202 of the
    Telecommunications Act of 1996,* 18 FCC Rcd 3002 (2003) (repealing
    cable-broadcast cross-ownership rule)).

[^747]: Applicants' Reply at 65-66.

[^748]: Applicants' Reply at 66.

[^749]: Applicants' Reply at 65-66.

[^750]: Indeed, it is not clear that a bypass strategy, if successful,
    would not actually promote viewpoint diversity because, while Fox
    programming would remain available in the market on DirecTV, the
    television broadcast stations formerly affiliated with Fox would
    remain in existence, and the licensees of these stations would
    remain obligated to offer programming relevant to the needs and
    interests of their communities---presumably adding a voice to the
    market. *See* Section VI.C.3, *supra*.

[^751]: *See id.*

[^752]: *See* Section VI.C.4 and IX, *supra*.

[^753]: *See id.*

[^754]: Questions concerning the carriage of the digital signals of
    television broadcast stations are the subject of a pending
    rulemaking proceeding*. Carriage of the Transmissions of Digital
    Television Broadcast Stations*, 13 FCC Rcd 15092 (1998).

[^755]: NAB Comments at 11, 15; NAB Comments, Exhibit 1, Decl. of J.
    Gregory Sidak (Jun. 16, 2003) ("Sidak Decl.").

[^756]: NAB Comments at 11; Sidak Decl. at ¶¶ 14-19.

[^757]: NAB Comments, Sidak Decl. at ¶¶ 20-23.

[^758]: NAB Comments at 21-24. Sidak argues that the harm to Fox
    affiliates will have a ripple effect across the broadcast landscape
    to other affiliates. For example, Fox affiliates might be then
    willing to accept inferior terms from other broadcast network,
    diminishing the bargaining power of other local broadcasters in the
    same local area in their affiliation negotiations with their
    respective networks. NAB Comments at 22, Sidak Decl. ¶ 28.

[^759]: NAB Comments at 21-24.

[^760]: NAB Comments at 25-28.

[^761]: Applicants' Reply at 63.

[^762]: **\[REDACTED\]**.

[^763]: EchoStar Petition at 32.

[^764]: *Id.* at 33.

[^765]: *Id.* at 33 citing DOJ/FTC Guidelines § 2.1.

[^766]: EchoStar Petition at 33-34.

[^767]: *Id.* at 34-36.

[^768]: EchoStar Petition at 32 (citing *See United States v. Primestar,
    Inc. et al.*, No. 1:98CV01193 (D.D.C.) (filed May 12, 1998) ("DOJ
    Primestar Complaint"), available at
    http://www.usdoj.gov/atr/cases/f1700/1757.pdf).

[^769]: EchoStar Petition at 36.

[^770]: *Id.* at 36.

[^771]: *Id.* at 36.

[^772]: *Id.* at 37.

[^773]: *Id.* at 38.

[^774]: *Id.* at 38-39.

[^775]: *Id.* at 39.

[^776]: Applicants' Reply at 73-74.

[^777]: *Id.* at 74.

[^778]: *Id.*

[^779]: *2002 Video Competition Report*, 17 FCC Rcd at 26980-88, Tables
    C-1 and C-2.

[^780]: *See United States v. Primestar Partners, L.P.*, 1994 WL 196800
    (S.D.N.Y.); *State of New York v. Primestar Partners, L.P.*, 1993 WL
    720677 (S.D.N.Y.).

[^781]: *See* DOJ Primestar Complaint.

[^782]: **\[REDACTED\]**.

[^783]: *2002 Video Competition Report*, 17 FCC Rcd at 26980-88, Tables
    C-1 and C-2.

[^784]: EchoStar Petition at 38.

[^785]: The leading set-top box manufacturers are Motorola,
    Scientific-Atlanta, Pioneer, Sony, and Pace. *Kagan Media Trends
    2003* at 110-113.

[^786]: Vince Vittore, *Bellsouth Samples Satellite with DirecTV Resale
    Setup*, [Telephony]{.smallcaps}, Sept. 8, 2003 (reporting on
    BellSouth's agreement to resell DirecTV service); Kris Hudson,
    *Qwest Might Tell You How to Pay Less*, [Denver Post]{.smallcaps},
    Nov. 3, 2003 (reporting that "Qwest now offers DirecTV\'s satellite
    service in Arizona and Washington state."); [Satellite
    Week]{.smallcaps}, November 24, 2003 (reporting that "a DirecTV
    spokesman confirmed reports that a strategic marketing agreement
    with Verizon was in the works but declined to give details. Reports
    have said Verizon would offer DirecTV service as part of its product
    mix. 'Both companies expect to bring their products to market after
    the first of the year. We\'ll announce details at that time,' the
    DirecTV spokesman said.").

[^787]: EchoStar Petition at 25-26, 64; ACA Comments at 21-23; ACA Reply
    Comments at 7-8, CFA Reply, Attachment at 3.

[^788]: EchoStar Petition at 64.

[^789]: EchoStar Petition at 25-26.

[^790]: EchoStar Petition at 25-26.

[^791]: EchoStar Petition at 25-26.

[^792]: ACA Comments at 21-23; ACA Reply Comments at 7-8.

[^793]: ACA Comments at 23.

[^794]: CFA Reply, Attachment at 3.

[^795]: *See, e.g.*, *Comcast-AT&T Order*, 17 FCC Rcd at 23290; *AT&T
    MediaOne Order*, 15 FCC Rcd at 9854-55.

[^796]: *Program AccessOrder*, 17 FCC Rcd at 12158.

[^797]: As stated previously, we have accepted without change
    Applicants' additional program access commitments, described in
    Section VI.C.4.a, *supra*, which specify that DirecTV may continue
    to compete for programming that is lawfully offered on an exclusive
    basis by an unaffiliated program rights holder (e.g., NFL Sunday
    Ticket).

[^798]: According to the ITU, 8% of television households in the world
    subscribe to satellite delivered programming services, while 29%
    subscribe to programming services delivered via cable. The remaining
    households, over 600 million, receive their programming from
    over-the-air broadcasts. *See* International Telecommunication
    Union, World Telecommunication Indicators, Mar. 2001 at 71. We do
    not know News Corp.'s share of the worldwide DBS market, but the
    entire market represents only small percentage of the world's
    television viewers.

[^799]: *Id.*

[^800]: EchoStar's concern that News Corp. would "outbid" other MVPDs
    also is misplaced---the possession of market power by a buyer of
    programming confers the benefit of paying *lower* prices, not higher
    prices.

[^801]: FIFA owns the television and radio rights to World Cup soccer
    matches.

[^802]: "The IOC has often declined higher offers for broadcast on a
    pay-per-view basis or because a broadcaster could reach only a
    limited part of the population, as this is against Olympic Broadcast
    Policy. This fundamental IOC Policy, set forth in the Olympic
    Charter, ensures the maximum presentation of the Olympic Games by
    broadcasters around the world to everyone who has access to
    television. Rights are only sold to broadcasters who can guarantee
    the broadest coverage throughout their respective countries free of
    charge." *International Olympic Committee - Organisation - Facts And
    Figures* at
    http://www.olympic.org/uk/organisation/facts/broadcasting/index_uk.asp
    (visited Oct. 9 2003).

[^803]: *See* JCC Comments at 49-54; EchoStar Petition at 26-30; *see
    also* CDD Petition at 6 (calling the Commission's attention to the
    MVPD market in Italy).

[^804]: EchoStar Petition at 26; JCC Comments at 49-50.

[^805]: JCC Comments at 54.

[^806]: EchoStar Petition at 30.

[^807]: Applicants' Reply at 70.

[^808]: *Id.* (citing *Application of* *MCI Telecommunications
    Corporation*, 16 FCC Rcd 21608, 21621 (1999) (*MCIT/EchoStar*)).

[^809]: *Id.* at 70-71.

[^810]: *Id.* at 71.

[^811]: *MCIT/EchoStar*, 16 FCC Rcd at 21621 ¶ 25.

[^812]: *MCIT/EchoStar*, 16 FCC Rcd at 21620 ¶ 23.

[^813]: *MCIT/EchoStar*, 16 FCC Rcd at 21621-22 ¶¶ 25-27.

[^814]: *See, e.g.*, *General Electric Capital Corp. and SES Global,
    S.A.*, 16 FCC Rcd 17575, 17594 (2001).

[^815]: Office of Fair Trading, *The Director General's Review of
    BSkyB's Position in the Wholesale Pay TV Market (1996 Review)*, Dec.
    1996.

[^816]: *Id*. at 9 and Appendix A, at 117.

[^817]: *Id.* at 10-18, 115-116.

[^818]: *Id*. at 17.

[^819]: Office of Fair Trading, *BSkyB Investigation: Alleged
    Infringement of the Chapter II Prohibition ("2002 Review")*, Dec.
    17, 2002.

[^820]: *Id.* at 4.

[^821]: *Id.* at 14-43; 44-63. With respect to sports channels, OFT
    focused only on channels showing content available strictly via pay
    TV, specifically the UK Football Association Premier League football
    matches and those films that had exceeded \$50 million in ticket
    sales in the U.S. BSkyB had secured exclusive license to the
    broadcast rights of 66 Premier League live matches, or 100% of the
    market. Under European Commission precedent, market shares
    significantly exceeding 70% are by themselves an indication of
    dominance. With respect to films, BSkyB has exclusive contracts with
    seven major Hollywood studios, which together supplied more than 70%
    of the films sold in the European Economic Area. These rights were
    distributed across only two BSkyB channels: Sky MovieMax and Sky
    Premier.

[^822]: *Id.* at 135.

[^823]: *Id.* at 151.

[^824]: *Id.* at 165.

[^825]: We note that it was announced on December 17, 2003 that the
    European Union and UK Soccer League had agreed to air some games on
    free television, thus forcing BSkyB to sell some rights of live
    soccer games to free-to-air broadcasters. Reportedly, the settlement
    means that BSkyB must lift its control over exclusive rights to as
    many as eight live games a season as early as next year. *See* [Wall
    St. J.]{.smallcaps}, December 17, 2003 at D4; Associated Press, *EU
    Settles Antritrust Dispute Over Soccer Game Broadcasts*, Dec. 16,
    2003.

[^826]: EchoStar Petition at 58.

[^827]: EchoStar Petition at 58.

[^828]: EchoStar Petition at 58 (citing *Hughes Communications, Inc.*,
    12 FCC Rcd 7534, 7542 (1997).)

[^829]: Letter from John F. McNaughton and Peter D.P. Vint, Marcondes
    Advogados Associados, Counsel to Tecsat, to Marlene H. Dortch,
    Secretary, FCC, Dec. 12, 2003.

[^830]: Applicants' Reply at 75 (citing *General Electric Capital Corp.
    and SES Global, S.A.*, 16 FCC Rcd 17575, 17594 (2001) ("We need not
    analyze the impact of the proposed transaction on competition in the
    provision of satellite services to foreign countries that do not
    involve service to or from the United States.").

[^831]: *Id.* at 75-76.

[^832]: *Id*.

[^833]: *See supra* note 105.

[^834]: Microcom Comments at 1.

[^835]: *Id.* at 1-2.

[^836]: *Id.* at 2. To address these alleged public interest harms
    facing Alaska consumers, Microcom requests that the Commission
    impose the following conditions on its approval of the proposed
    transaction: (1) within one year of completion of the transfer,
    DirecTV must start offering small dish service to Alaska and Hawaii
    that provides all programming from its core slot at 101º (small dish
    coverage is defined as anything under on meter in the Anchorage,
    Fairbanks, and Juneau DMAs and the Honolulu DMA); (2) PanAmSat will
    make a good faith effort to ensure that all future satellites
    provide coverage equal to the CONUS over all of Alaska where the
    elevation angle is 5º or greater consistent with international
    agreements (including the Aleutian islands); (3) failing condition 1
    above, News Corp. should be required to subsidize DirecTV equipment
    prices and installations to keep the overall cost for consumer
    services consistent with the CONUS pricing or their nearest
    competitor in Alaska (alternatively, they should make available for
    sale on Dish Network's Alaska and Hawaii 110º spot beams their
    exclusive sports programming packages); (4) immediately make all
    DirecTV and Fox Networks promotions applicable to all 50 states
    without exception; and (5) Fox Networks immediately allow reception
    of distant Fox affiliates in commercial establishment outside the
    grade B contour of a local Fox affiliate, and Fox Networks should
    immediately make available other Fox sports and entertainment
    programming from DBS satellites to commercial operators when there
    is no other alternative to receive that programming. *Id.* at 2-3.

[^837]: Applicants' Reply at 71-72 n.200.

[^838]: *Id.*

[^839]: *See* 47 C.F.R. §25.148(c); *Policies and Rules for Direct
    Broadcast Satellite Service*, 17 FCC Rcd 11331, 11364 ¶ 65 (2002).

[^840]: *See* *Petitions Regarding DirecTV's DBS Service to the States
    of Alaska and Hawaii*, MB 03-82, Public Notice, DA 03-862 (rel. Mar.
    25, 2003).

[^841]: *See* 17 U.S.C. § 119.

[^842]: Johnson Broadcasting Comments at 1.

[^843]: *Id.* at 2.

[^844]: *See Johnson Broadcasting, Inc. v. DirecTV, Inc.*, 16 FCC Rcd
    21329 (2001); *Johnson Broadcasting of Dallas, Inc. v. DirecTV,
    Inc.*, 17 FCC Rcd 886 (2002*)*

[^845]: Johnson Broadcasting Comments at 2.

[^846]: *Id.* at 3.

[^847]: Applicants' Reply at 73 (citing *Johnson Broadcasting, Inc. v.
    DirecTV, Inc.*, 16 FCC Rcd 21329 (2001); *Johnson Broadcasting of
    Dallas, Inc. v. DirecTV, Inc.*, 17 FCC Rcd 886 (2002*); Johnson
    Broadcasting, Inc. and Johnson Broadcasting of Dallas, Inc. v.
    DirecTV, Inc.*, Civil Action No. H-02-0136, Opinion (S.D. Tex.,
    Houston Div.) (Jul. 15, 2002) (granting motion to dismiss of
    DirecTV).

[^848]: NHMC Petition at 2-4.

[^849]: NHMC Reply at 2.

[^850]: NHMC Petition at 5.

[^851]: NHMC Reply at 3.

[^852]: Applicants' Aug. 28 *Ex Parte*.

[^853]: *See 2002 Biennial ReviewOrder*.

[^854]: Applicants' Aug. 28 *Ex Parte*.

[^855]: *See 2002 Biennial Review Order*.

[^856]: *See Prometheus Radio Project v. FCC*, No. 03-3388, rel. Sept.
    3, 2003 (3rd Cir. 2003).

[^857]: GMH is a tracking stock of GM designed to provide its holders
    with financial returns based on the financial performance of Hughes,
    a wholly owned subsidiary of GM. *See* Wyser-Pratte Management Co.
    Petition at 7.

[^858]: Wyser-Pratte Management Co. Petition at 1.

[^859]: Wyser-Pratte Management Co. Petition at 11.

[^860]: Wyser-Pratte Management Co. Petition at 2-3

[^861]: *Id.* at 15 (citing *Illinois Public Telecommunications Assoc.
    v. FCC*, 117 F.3d 555, 569 (D.C. Cir. 1997)).

[^862]: *See* Applicants' Aug. 28 *Ex Parte*.

[^863]: *See id.* (citing *A.L.Z. Broadcasting, Inc.*, 15 FCC Rcd 23200,
    23201 (2000); *Loral Corp.*, 12 FCC Rcd 24325, 24322 (1997)).

[^864]: *See EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630, ¶ 188;
    Applications of NYNEX Corporation, Transferor, and Bell Atlantic
    Corporation, Transferee, for Consent to Transfer Control, 12 FCC Rcd
    19885, 20063 ¶ 158 (1997) ("*Bell Atlantic-NYNEX Order*"); s*ee also
    DOJ/FTC Guidelines* § 4

[^865]: *See, e.g., EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630, ¶ 188;
    *see also Bell Atlantic-NYNEX Order*, 12 FCC Rcd at 20063 ¶ 157;
    Applications of Ameritech Corp., Transferor, and SBC Communications
    Inc., Transferee, For Consent to Transfer of Control, 14 FCC Rcd
    14712, 14825 ¶ 256 (1999) ("*SBC-Ameritech Order*").

[^866]: *EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630 ¶ 189; *see also
    Bell Atlantic-NYNEX Order*, 12 FCC Rcd at 20063 ¶ 158
    ("Pro-competitive efficiencies include only those efficiencies that
    are merger-specific, *i.e.,* that would not be achievable but for
    the proposed merger. Efficiencies that can be achieved through means
    less harmful to competition than the proposed merger . . . cannot be
    considered to be true pro-competitive benefits of the merger.");
    *SBC-Ameritech Order*, 14 FCC Rcd at 14825 ¶ 255("Public interest
    benefits also include any cost saving efficiencies arising from the
    merger if such efficiencies are achievable only as a result of the
    merger. . . "); *Comcast-AT&T Order*, 17 FCC Rcd 23246, 23313 ¶ 173
    (Commission considers whether benefits are \"merger-specific\").
    *Cf.* *DOJ/FTC Guidelines* § 4 .

[^867]: *EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630 ¶ 190; *see also,
    Bell Atlantic-NYNEX Order,* 12 FCC Rcd at 20063 ¶ 157 ("These
    pro-competitive benefits include any efficiencies arising from the
    transaction if such efficiencies . . . are sufficiently likely and
    verifiable. . . "); *Comcast-AT&T Order,* 17 FCC Rcd at 23313 ¶ 173
    (Commission considers whether benefits are \"verifiable\");
    *SBC-Ameritech Order*, 14 FCC Rcd at 14825 ¶ 255; *DOJ/FTC
    Guidelines* § 4 ("\[T\]he merging firms must substantiate efficiency
    claims so that the Agency can verify by reasonable means the
    likelihood and magnitude of each asserted efficiency, how and when
    each would be achieved (and any costs of doing so), \[and\] how each
    would enhance the merged firm's ability to compete. . . \").

[^868]: *EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630 ¶ 190.

[^869]: *EchoStar-DirecTV HDO*, 17 FCC Rcd at 20630 ¶ 190.

[^870]: *See EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630 ¶ 191; *see also
    DOJ/FTC Guidelines* § 4.

[^871]: *See EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630 ¶ 191; *see also
    DOJ/FTC Guidelines* § 4.

[^872]: *EchoStar-DirecTV HDO,* 17 FCC Rcd at 20630 ¶ 192 (citing
    *SBC-Ameritech Order*, 14 FCC Rcd at 14825). *Cf. DOJ/FTC
    Guidelines* § 4 ("The greater the potential adverse competitive
    effect of a merger . . . the greater must be cognizable efficiencies
    in order for the Agency to conclude that the merger will not have an
    anticompetitive effect in the relevant market. When the potential
    adverse competitive effect of a merger is likely to be particularly
    large, extraordinarily great cognizable efficiencies would be
    necessary to prevent the merger from being anticompetitive.").

[^873]: As examples of innovations News Corp. introduced into DTH
    services, the Applicants cite: (1) BSkyB\'s conversion to digital
    technology in 1998 and its decision to provide free set-top-boxes
    and dishes in 1999; (2) BSkyB\'s introduction of an interactive news
    service in 2000, which offered multiple segments broadcast
    simultaneously; (3) BSkyB\'s subsequent introduction of additional
    interactive services, such as \"shopping, banking, games, e-mail,
    travel, tourism and information services;\" and (4) BSkyB\'s
    introduction of \"Europe\'s first fully integrated DVR.\" As
    examples of News Corp.\'s innovations in programming, the
    Applicants, among other things, point to: (1) News Corp.\'s
    introduction of the Fox Network in 1986; (2) its launch of Fox News
    Channel in 1996; (3) its innovations in the news and informational
    programming offered by Fox Television Stations; and (4) its founding
    of Fox Sports Net in 1997. Application at 21-27.

[^874]: Application at 22; Giacalone Decl. ¶¶ 19-20.

[^875]: *Id.*; *see also* News Corp. July 28 Response at 41.

[^876]: *Id.*

[^877]: Application at 23; *see also* News Corp. Sept. 10 Ex Parte at 2
    and Attachment 2.

[^878]: Applicants' Sept. 22 Ex Parte at 4.

[^879]: Applicants' Sept. 22 Ex Parte at 4. To facilitate implementation
    of its ITV plans, News Corp. entered into two agreements with
    Thomson on September 13, 2003. Under the first agreement, News Corp.
    purchased the *MEDIA*HIGHWAY middleware business from Thomson. The
    Applicants claim the *MEDIA*HIGHWAY product line will enable
    set-top-boxes to better interpret and execute interactive
    applications. Under the terms of the second agreement, News Corp.
    and Thomson will enter into a non-exclusive preferred supplier
    relationship, which the Applicants claim will enable News Corp. to
    capture economies of scale and scope. *Id.* at 5-6.

[^880]: *See* CDD Petition at 4; NAB Comments at 20. For example, NAB
    argues generally that beyond simple blatant denials of access to
    DirecTV, the post-transaction entity could discriminate against
    content owners in such technology-related areas as interactivity,
    channel assignment and positioning, use of navigation devices and
    electronic program guides, date transfer speed and downstream and
    upstream return path traffic. Id.

[^881]: Application at 23.

[^882]: Applicants' Sept. 22 Ex Parte at 5.

[^883]: Application at 29-30. The Applicants contend that, "\[b\]y
    mounting a small antenna for receiving broadcast signals at the same
    point where the satellite dish is located, most subscribers would be
    able to receive digital television broadcast signals from their
    local stations over-the-air." *Id.*

[^884]: *Id.* at 30.

[^885]: Application at 37. NDS is also "a leading supplier of open
    end-to-end digital systems and solutions for the secure delivery of
    entertainment and information to televisions and IP devices. NDS
    enables broadcasters, network operators and content providers to
    profit from the deployment of digital TV technologies including
    innovative interactive applications and personal TV, secure
    broadband and datacasting solutions." *See* NDS, About NDS, at
    http://www.nds.com/about_nds/about_nds.html (visited Sept. 11,
    2003).

[^886]: *See, e.g.,* Dan Milmo, *BSkyB Does Digital Dash to 7 m
    Subscribers Mark,* [The Guardian]{.smallcaps} (Sep. 29, 2003) (\"Sky
    Digital\'s growth was backed by a high-risk strategy . . . of giving
    away set-top boxes to customers for free.\"); Paul Davies, *BSkyB
    Makes Bid for Mass-Market with £ 6.99 Entry-Level Digital Tier,*
    [New Media Markets]{.smallcaps} 1 (Aug. 13, 1998)(BSkyB offers
    cheaper than expected entry-level digital tier). .

[^887]: Letter from Gary M. Epstein, Counsel for General Motors Corp.
    and Hughes Electronics Corp., *et al.* to Marlene H. Dortch (Sept.
    10, 2003) ("Applicants\' Sept. 10 Ex Parte") at Attachment 2. *See
    also* Applicants' Sept. 22 Ex Parte at 8.

[^888]: Applicants' Sept. 10 Ex Parte, Attachment 2.

[^889]: *Id.*

[^890]: *Id*.; Gagliardi Aff. at 2.

[^891]: News Corp. 2003 Annual Report at 17.

[^892]: News Corp. 2002 Annual Report at 21.

[^893]: *See, e.g.,* [Wall St. J.]{.smallcaps} May 17, 1985; [Washington
    Post,]{.smallcaps} May 19, 1985; [Business Week,]{.smallcaps} May
    20, 1985; Application at 24.

[^894]: *See, e.g.,* [Wall St. J.,]{.smallcaps} May 27, 1987; [Los
    Angeles Daily News,]{.smallcaps} Jan. 1, 1990; [Wall St.
    J.]{.smallcaps} Dec. 20, 1993; [Portland Oregonian,]{.smallcaps} May
    15, 1994; [St. Louis Dispatch,]{.smallcaps} October 31, 1996;
    Application at 24.

[^895]: *See, e.g.,* [Rocky Mountain News,]{.smallcaps} Mar. 3, 1996;
    Application at ii-iii, 23-24; Applicants' Reply at 78.

[^896]: [Fortune,]{.smallcaps} Oct. 26, 1998, at 92 *et seq.*; Fox
    Entertainment Group, Form 10-K (for the year ending Jun. 30, 2000);
    Application at 26.

[^897]: News Corp. 2003 Annual Report at 17 & 21; Application, Gagliardi
    Decl. ¶ 12; Applicants\' Sept. 22, 2003 ex parte at 10.

[^898]: *See* [Multichannel News,]{.smallcaps} December 1, 2003.

[^899]: *Id.* at 5; *see also* Applicants' Sept. 22, 2003 Ex Parte at 5.

[^900]: Certain parties, including CDD, contend that the transaction
    will give News Corp. a "stranglehold" over ITV technologies and
    products, including conditional access technologies. These comments
    are addressed in section VI.C.4.d.ii, *supra.*

[^901]: Application at 27.

[^902]: NRTC Petition at 17-18; ACA Comments at 25-26.

[^903]: NRTC Petition at 19. NRTC urges that we require Applicants to
    make specific commitments to deploy broadband services to rural
    America. *Id.* at 19-20.

[^904]: ACA Comments at 26-27.

[^905]: JCC Comments at 68.

[^906]: EchoStar Petition at 40-43.

[^907]: Applicants\' Reply at n. 224; Applicants' July 28 Response at
    35.

[^908]: *See* Letter from William M. Wiltshire, Counsel for The News
    Corporation, *et al*., to Marlene H. Dortch, Secretary, FCC,
    (September 22, 2003) (\"Applicants\' Sept. 22 Ex Parte\") at 3.

[^909]: *Id.* at 2, 4.

[^910]: *Id.* at 4.

[^911]: *See*, e.g., *2002 Biennial Review Order*, 18 FCC Rcd at
    13643-45 ¶¶ 73-79.

[^912]: Applicants\' Sept. 22 Ex Parte at 2.

[^913]: See 47 C.F.R. § 1.925.

[^914]: Application at 31-33, Giacalone Decl. ¶¶ 9-14.

[^915]: ACA Comments at 26.

[^916]: EchoStar Petition at 43-44; JCC Comments at 69-70.

[^917]: It appears that these claimed savings were not included in the
    estimate of the total savings that would result from the merger.
    *See* Application, Giacalone Decl. ¶ 7.

[^918]: In this regard, we note that the Applicants attempt to rebut
    claims that News Corp. and DirecTV will engage in temporary
    foreclosure on the ground that News Corp. will possess only a
    minority interest in DirecTV and that consequently joint profit
    maximization is not feasible. The logic of this argument also
    suggests that News Corp.\'s minority interest should also limit the
    ability of the Applicants to jointly achieve operating efficiencies.

[^919]: We use the 34% ownership stake in evaluating this claimed
    benefit because this is the ownership stake that News Corp. will
    possess immediately after consummation of the transaction, and there
    is no certainty that News Corp. will increase that stake. In
    analyzing potential harms, however, we use higher ownership stakes
    because News Corp. may increase its ownership interest without
    further Commission review, and this may affect its incentive to
    engage in temporary foreclosure.

[^920]: Application at 34.

[^921]: Application at 34.

[^922]: *Id.* at 35.

[^923]: The Applicants\' claims concerning economies of scale in set-top
    boxes are discussed in greater detail in section VI.C.3.d *infra.*

[^924]: Application at 33-35; News Corp. July 28 Response at 39.

[^925]: *Id.*

[^926]: *Id.*

[^927]: *Id.,* at 35; Giacalone Decl. ¶ 22.

[^928]: News Corp. July 28 Response at 39.

[^929]: *Id.* at 39 n.30.

[^930]: JCC Comments at 70-71.

[^931]: EchoStar Comment at 45.

[^932]: Application at 36.

[^933]: *Id.* at 37.

[^934]: *Id.* at 36-37.

[^935]: JCC Comments at 70-71.

[^936]: EchoStar Petition at 44-45.

[^937]: ACA Comments at 27-28.

[^938]: Applicants\' Sept. 22, 2003 Ex Parte at 12. *See also*
    Applicants\' Reply, Lexecon Report at 6; Applicants\' Reply, CRA
    Analysis at 10-12 & Appendix B.

[^939]: *See* Section VI.C.4.b.iii, *s*u*pra.*

[^940]: Application at 39-43.

[^941]: Application at 42.

[^942]: *Id*.; Applicants' Sept. 11 Ex Parte at 3-4.

[^943]: ACA Comments at 28; JCC Comments at 72.

[^944]: ACA Comments at 3, 7, 16, 29; Cablevision Comments at 23-29; CDD
    Petition at 2-3; CFA Reply Comments at 9-12; EchoStar Petition at
    39-40; NRTC Petition at 9-16. Commenters' concerns about potential
    harms to program diversity are discussed at section VII.A.2 above.
    There, we conclude that the transaction is unlikely to reduce
    program diversity.

[^945]: *See* 47 CFR §73.2080 (Broadcast EEO Rule); 47 CFR §76.75 (Cable
    EEO Rule).

[^946]: In 2000, the Commission adopted EEO rules subsequently
    invalidated by the US Court of Appeals for the District of Columbia
    Circuit. *MD/DC/DE Broadcasters Association v. FCC,* 236 F.3d 13
    (D.C. Cir. 2001), *rehearing denied* 253 F.3d 732 (D.C. Cir. 2001),
    *cert. denied,* 122 S.Ct. 920 (2002). The Commission adopted its
    current broadcast and MVPD EEO rules pursuant to a further
    rulemaking proceeding. *Review of the Commission's Broadcast and
    Cable Equal Employment Opportunity Rules and Policies,* 17 FCC Rcd
    24018 (2002) (*"EEO Second Report and Order").*

[^947]: Application at 39-43.

[^948]: Application at 39.

[^949]: Application at 40.

[^950]: Application at 40-41.

[^951]: *Id.* at 41; Applicants' Sept. 11 Ex Parte at 4-7.

[^952]: Application at 42.

[^953]: Application at 42; Applicants' Sept. 11 Ex Parte at 7-9.

[^954]: Application at 42-43.

[^955]: ACA Comments at 28; JCC Comments at 72.

[^956]: We note also the presentation at the inaugural meeting on
    September 29, 2003, of the Advisory Committee on Diversity for
    Communications in the Digital Age of Mitsy Wilson, Senior Vice
    President, Fox Entertainment Group, News Corp. Ms. Wilson described
    diversity initiatives at Fox. The Federal Advisory Committee on
    Diversity was established by Chairman Powell in May 2003 to bring
    together experts from the communications, financial, and technology
    communities to develop recommendations to identify potential
    regulatory actions and education initiatives that can promote and
    enhance opportunities for minorities and women.

[^957]: *See* 47 U.S.C. §§ 310(d), 309(a)&(d).

[^958]: *See*, *e.g.*, *AT&T-Comcast Order*, 17 FCC Rcd at 23255 ¶ 26;
    *EchoStar-DirecTV Order*, 17 FCC Rcd at 205784 ¶ 25.

[^959]: See *id*.

[^960]: If we are unable to find that the proposed transaction serves
    the public interest for any reason, or if the record presents a
    substantial and material question of fact, Section 309(e) of the Act
    requires that we designate the application for hearing. 47 U.S.C.
    §309(e).

[^961]: *See*, *e.g.*, Section 628 of the Communications Act of 1934, as
    amended, 47 U.S.C. § 548.

[^962]: *See*, *e.g.*, 47 C.F.R. § 76.100, *et seq.*; *Implementation of
    the Cable Television Consumer Protection and Competition Act of
    1992, Development of Competition and Diversity in Video Programming
    Distribution: Section 628(c)(5) of the Communications Act*, 17 FCC
    Rcd 12124 (2002).

[^963]: *See* para. 155, note 458, and para. 353, *supra*.

[^964]: *See 2002 Video Competition Report*, 17 FCC Rcd at 26903 ¶¶ 4-7,
    26929-31 ¶ 58-60.

[^965]: *See* Sections VI.C.4.d (Electronic Programming Guides and
    Interactive Television Markets) and VI.C.4.e (Fixed Satellite
    Services), *supra*.

[^966]: *EchoStar-DirecTV HDO*, 17 FCC Rcd at 20616 ¶ 139*.*

[^967]: See 47 U.S.C. §§ 309(a) and 310(d).

[^968]: On December 19, 2003, the Commission released a public notice
    announcing the Commission's adoption of this *Order*. Public Notice,
    "Subject to Conditions, Commission Approves Transaction Between
    General Motors Corporation, Hughes Electronics Corporation and The
    News Corporation Limited," FCC 03-328 (rel. Dec. 19, 2003).

[^969]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 15; Cablevision
    Aug. 20 Ex Parte, Rubinfeld Analysis at 6.

[^970]: EchoStar Petition at 14-15; ACA Comments at 10-11.

[^971]: *Id.*

[^972]: Applicants' Reply at 39.

[^973]: Applicant's Reply, CRA Analysis, ¶ 71 and ¶ 73.

[^974]: Many of the values used in analyzing the situation of temporary
    withdrawal are also used in analyzing a situation of permanent
    withdrawal, we will discuss some of the values proposed by the
    parties for use in the analysis of temporary withdrawal as they
    arise in our analysis of permanent withdrawal.

[^975]: **\[REDACTED\]**.

[^976]: Mathematically, the critical value is
    ![](media/image3.wmf){width="3.079861111111111in"
    height="0.5229166666666667in"} , where 'a' represents the fraction
    of rival MVPD subscribers that obtain the News Corp. broadcast
    programming off of the air and 's' represents the share of DirecTV
    profits that will accrue to News Corp.

[^977]: News Corp. July 28, 2003 Response **\[REDACTED\]** and
    Applicants' Reply, CRA Analysis ¶ 70.

[^978]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 23 and DirecTV
    July 30, 2003 Response **\[REDACTED\]**.

[^979]: Cablevision Sept. 25 Ex Parte, Rubinfeld Analysis II at 11-12.

[^980]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 23; Cablevision
    Aug. 20 Ex Parte, Rubinfeld Analysis at 29.

[^981]: Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis at 16, citing
    SG Cowen, *DBS Sector Upgrade*.

[^982]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 23.

[^983]: *Id.*

[^984]: Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis at 13.
    Estimates of Fox Entertainment Group's weighted average cost of
    capital range between 8.8% and 9.7%. JP Morgan Securities, *Media &
    Entertainment: December 2002Quarterly Review and Outlook*, Feb. 24,
    2003 at 28; Bank of America Securities, *Entertainment Industry
    Overview,* July 2003 at 163.

[^985]: *A Dictionary of Finance and Banking 2^nd^ Edition*, Oxford
    University Press, 1997 at 167.

[^986]: *Id.*

[^987]: "The WACC is a company cost of capital. Strictly speaking, it
    works only for projects that are carbon copies of the firm's
    existing assets, in both business risk and financing. Often it is
    used as a companywide benchmark discount rate; the benchmark is
    adjusted upward for unusually risky projects and downward for
    unusually safe ones." Richard A. Brealey and Stewart C. Myers,
    *Principles of Corporate Finance, 5^th^ Edition,* McGraw-Hill, 1996
    at 523.

[^988]: See for example Morgan Stanley, *The Copernicus Theorem*, July
    2, 2003 which reports weighted average costs of capital for the
    major firms in the MVPD industry ranging from 10.0% to 11.25%.

[^989]: Applicants' Reply, CRA Analysis at fn. 39.

[^990]: Applicants' Reply, CRA Analysis ¶ 73.

[^991]: Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis at 13; JCC Aug.
    4 Ex Parte, Rogerson Analysis II at 54.

[^992]: *2002 Annual Video Competition Report* ¶ 4.

[^993]: Applicants' Reply, CRA Analysis at 52.

[^994]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 11; Cablevision
    Aug. 20 Ex Parte, Rubinfeld Analysis at 18.

[^995]: Applicants' Reply, CRA Analysis at 53.

[^996]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 11.

[^997]: Hughes Electronics Corporation, SEC Form S-4, June 5, 2003 at
    26.

[^998]: *See* Section IV.C.2.

[^999]: Applicants' Reply, CRA Analysis ¶ 73.

[^1000]: The "fallacy of division" occurs when one argues that what is
    true for the whole is also true for the parts. In this context, News
    Corp. argues that since it would not be profitable to permanently
    withhold retransmission consent of all of its owned and operated
    stations, it would also be true that it is not profitable to
    withhold consent for any single station.

[^1001]: DirecTV July 30, 2003 Response **\[REDACTED\]**; BIA
    MasterAccess Database of Television Stations. We assume that the
    number of subscribers to EchoStar is proportional to DirecTV's share
    in the DMA in the same proportion as the two firms' market shares
    nationally.

[^1002]: News Corp. July 28, 2003 Response **\[REDACTED\]**.

[^1003]: Cablevision Sept. 25 Ex Parte, Rubinfeld Analysis II at 13.

[^1004]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 24.

[^1005]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 2.

[^1006]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 7-9.

[^1007]: The discounted cash flow analysis is the method used by both
    Cablevision (Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis) and
    Applicants (Applicants' Sept. 8 Ex Parte, CRA Analysis II) when
    examining the incentives to engage in temporary withholding of
    programming. It is the standard method for comparing flows of costs
    and benefits that vary over time. See for example Richard A. Brealey
    and Stewart C. Myers, *Principles of Corporate Finance, 5^th^
    Edition,* McGraw-Hill, 1996, Chapter 3.

[^1008]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 12.

[^1009]: DirecTV July 30, 2003 Response **\[REDACTED\]**.

[^1010]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 15

[^1011]: *Id.*

[^1012]: *Id.*

[^1013]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 14; Cablevision
    Sept. 25 Ex Parte, Rubinfeld Analysis II at 9.

[^1014]: Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis at 14.

[^1015]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 23; Cablevision
    Aug. 20 Ex Parte, Rubinfeld Analysis at 6.

[^1016]: Cablevision Aug. 20 Ex Parte, Rubinfeld Analysis at 3-5.

[^1017]: Letter from Tara Corvo, , Mintz, Levin, Cohn, Ferris, Glovsky
    and Popeo, PC, to Marlene H. Dortch, Secretary, FCC (Nov. 20, 2003),
    Daniel L. Rubinfeld and Duncan Cameron, Estimating the Effect on
    MVPD Subscribership of the May 2000 Withholding of ABC Network
    Retransmissions from Time Warner Houston Cable Subscribers at 11.

[^1018]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 21-22.

[^1019]: To make a determination of which ZIP codes and the fraction of
    households that fall within the service areas of the firms we use
    the May 2003 GDT Dynamap 2000 ZIP code boundaries, 3^rd^ Quarter
    2002 incumbent cable operator service territories from MediaPrints™,
    ©Warren Communications News Inc. and The Janus Group, and 2000
    Census Summary File 1.

[^1020]: See Jeffrey Wooldridge, *Econometric Analysis of Cross Section
    and Panel Data*, The MIT Press, 2002, Chapter 10.

[^1021]: See for example, Mike McDaniel, *Picture Looking Dark in TV
    Feud, Channel 13 May Go Off Cable Tonight*, [Houston
    Chronicle]{.smallcaps}, March 9, 2000.

[^1022]: This estimate is based upon DirecTV October 24, 2003 Response
    to the Commission's Second Information and Document Request
    **\[REDACTED\]** as well as GDT ZIP code boundaries and MediaPrints™
    cable system boundaries.

[^1023]: Applicants' Reply at 27-36.

[^1024]: Applicants' Reply, CRA Analysis at 51.

[^1025]: News Corp. July 28, 2003 Response **\[REDACTED\]**.

[^1026]: See News Corp. July 28, 2003 Response **\[REDACTED\]**.

[^1027]: Applicants' Reply, CRA Analysis ¶ 32.

[^1028]: The critical value is

    ![](media/image4.wmf){width="5.930555555555555in"
    height="0.5229166666666667in"} , where 's' represents the share of
    the joint profits that will accrue to News Corp. and 'α' is the
    fraction of subscribers leaving cable that shift to DirecTV.

[^1029]: We do not perform this calculation for Fox Sports Net Rocky
    Mountain because it has only recently merged with Fox Sports Net
    Utah and the exact status of carriage and revenue amounts are
    unclear.

[^1030]: ACA Comments at 18.

[^1031]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 2.

[^1032]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 11.

[^1033]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 16.

[^1034]: *Id.*

[^1035]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 10.

[^1036]: Applicants' Reply, CRA Analysis ¶ 32.

[^1037]: Christopher Schultz, *The Starting Lineup*, Cable World, March
    18, 2002.

[^1038]: Steve Zipay, *Nets Latest Victim of Cablevision Greed*,
    Newsday, November 13, 2002.

[^1039]: Erin McClam, *Opening Day Deal for Cablevision, YES Network,*
    Associated Press, April 1, 2003.

[^1040]: *Id.*

[^1041]: *Id.*

[^1042]: JCC Sept. 23 Ex Parte, Rogerson Analysis III at 16; Applicants'
    Sept. 8 Ex Parte, CRA Analysis II at 10-11; Letter from Pantelis
    Michalopoulos, Steptoe and Johnson, L.L.P., to Marlene H. Dortch,
    Secretary, FCC (Dec. 15, 2003) ("EchoStar Dec. 15 Ex Parte") at 4-5.

[^1043]: Some press reports put this figure as high as 39,400. See for
    example Erin McClam, *Opening Day Deal for Cablevision, YES
    Network,* Associated Press, April 1, 2003.

[^1044]: EchoStar did perform an analysis of its loss in customers due
    to its lack of the YES network. However, the additional incentive to
    engage in temporary foreclosure that this transaction creates is
    derived from the customers that shift to DirecTV. EchoStar's
    analysis only examines an unknown fraction of that shift. EchoStar
    Dec. 15 Ex Parte, Exhibit 1.

[^1045]: To make a determination of which ZIP codes fall within the
    service areas of the two firms we use the May 2003 GDT Dynamap 2000
    ZIP code boundaries and the 3^rd^ Quarter 2002 incumbent cable
    operator service territories from MediaPrints™.

[^1046]: This estimate is based upon DirecTV July 30, 2003 Response
    **\[REDACTED\]** as well as GDT ZIP code boundaries and MediaPrints™
    cable system boundaries.

[^1047]: CSC HOLDINGS INC 8-k, May 15, 2003.

[^1048]: Applicants' Sept. 8 Ex Parte, CRA Analysis II ¶ 12

[^1049]: JCC Aug. 4 Ex Parte, Rogerson Analysis II at 17; Cablevision
    Sept. 25 Ex Parte, Rubinfeld Analysis II at 9.

[^1050]: "Affiliated Program Rights Holder" includes (i) a program
    rights holder in which News Corp. or DirecTV holds a non-controlling
    "Attributable Interest" (as determined by the FCC's program access
    attribution rules); and (ii) a program rights holder in which an
    entity holding an non-controlling Attributable Interest in News
    Corp. or DirecTV holds an Attributable Interest, provided that News
    Corp. or DirecTV has actual knowledge of such entity's Attributable
    Interest in such program rights holder. At the present time Liberty
    Media is the only entity covered by this definition. Nonetheless
    this commitment goes beyond the program access rules as DBS
    operators are not included within the exclusivity prohibition. *See*
    47 C.F.R. § 1002(c).

[^1051]: Although *most* of the program access rules will remain
    applicable unless terminated by Congress, Section 76.1002(c), the
    prohibition on exclusive contracts, sunsets in October 2007 unless
    the Commission finds that the prohibition continues to be necessary
    to protect competition in the distribution of video programming.
    *See* 47 C.F.R. § 76.1002(c)(2). In the year prior to the sunset,
    the Commission will conduct a proceeding to evaluate the
    circumstances in the video programming marketplace.

[^1052]: We clarify that, by "possession," we mean actual possession or
    control.

[^1053]: The Commission has previously defined small cable companies as
    those with 400,000 or fewer subscribers. We adopt that definition
    for the purposes of this condition. *See* *Implementation of
    Sections of the Cable Television Consumer Protection and Competition
    Act of 1992,* 10 FCC Rcd 7393 (1995) ("*Sixth Report and Order"*).

[^1054]: We clarify that, by "possession," we mean actual possession or
    control.

[^1055]: *See* *Sixth Report and Order*, 10 FCC Rcd 7393 (1995).

[^1056]: *See* Petition to Adopt Conditions to Authorizations and
    Licenses (filed Nov. 25, 2003) ("Petition to Adopt Conditions");
    Appendix E.

[^1057]: *See* *Application of EchoStar Communications Corporation,
    General Motors Corporation, Hughes Electronics Corporation
    (Transferors) and EchoStar Communications Corporation
    (Transferees)*, 17 FCC Rcd 20559 (2002).

[^1058]: One should not view our conditions regarding retransmission
    agreements or regional sports networks as anything other than a
    condition to mitigate a merger-specific harm identified in the
    record of this proceeding. It, especially, should not be interpreted
    as an industry-wide declaration of the Commission concerning the
    ongoing commercial disputes between MVPDs and broadcasters or
    regional and national sports programming networks. The broadcast
    industry and the sports programming market continue to evolve on all
    fronts. In the case of sports, for instance, increased channel
    capacity on MVPD systems and advances in broadband Internet access
    are providing leagues, teams, MVPD providers and sports programming
    networks with new opportunities for sports distribution. In
    addition, there are signs in the marketplace to suggest that the
    extraordinary increases in license fees paid by sports networks to
    teams over the past year---which then get passed on to MVPDs, then
    on to consumers---is stabilizing. I continue to believe these issues
    are best resolved in the marketplace.

[^1059]: With regard to APTS/PBS's proposed condition to restrict
    DirecTV from segregating local broadcast stations to wing
    satellites, I do not believe there is sufficient record evidence to
    suggest that there was a merger-specific public interest harm that
    called for the proposed condition. To the extent APTS/PBS advocated
    a further clarification of an interpretation of the
    nondiscriminatory local broadcast carriage provisions of SHVIA, I do
    not believe this question is best resolved in this license-transfer
    proceeding, but is better suited for a separate Commission review.
    As noted by APTS/PBS in their comments to this proceeding, the
    Commission will have this opportunity in considering the APTS/PBS
    Application for Review (*see* Application for Review of the
    Association of Public Television Stations and the Public
    Broadcasting Service, CSR-5865-Z (May 6, 2002)) of a previous Media
    Bureau interpretation of SHVIA. *See National Association of
    Broadcasters and Association of Local Television Stations Request
    for Modification or Clarification of Broadcast Carriage Rules for
    Satellite Carriers*, Declaratory Ruling and Order, DA 02-765 (Apr.
    4, 2002). Until that time, DBS providers using a two-dish solution
    must do so consistent with Section 76.66 of our rules and Section
    338(d) of the Communications Act.

[^1060]: *See National Association of Broadcasters and Association of
    Local Television Stations, Request for Modification or Clarification
    of Broadcast Carriage Rules for Satellite Carriers*, 17 FCC Rcd 6065
    (MD, 2002).

[^1061]: "\[T\]he satellite carrier shall retransmit the signal of the
    local television broadcast stations to subscribers in the station's
    local market on contiguous channels and provide access to such
    station's signals at a nondiscriminatory price and in a
    nondiscriminatory manner on any navigational device, on-screen
    program guide or menu. 47 U.S.C. Section 338(d).

[^1062]: *See* Comments of the Association of Public Television Stations
    and the Public Broadcasting Service at 1 (June 16, 2003).

[^1063]: *See, e.g.*, Statement of Commissioner Kevin J. Martin and
    Commissioner Michael J. Copps Re: National Association of
    Broadcasters and Association of Local Television Stations Request
    for Modification or Clarification of Broadcast Carriage Rules for
    Satellite Carriers, Declaratory Ruling and Order, April 10, 2002
    ("*Two-Dish Statement*"). *See also* 47 U.S.C. § 338(a)(1).

[^1064]: *See* 47 U.S.C. § 338(d).

[^1065]: *See* *Two-Dish Statement*. To the extent any Media Bureau
    decisions have been inconsistent with this interpretation of the
    statute, they have not been affirmed by the Commission and I believe
    they are in error.

[^1066]: *See* Association of Public Television Stations and the Public
    Broadcasting Service, *Application for Review,* CSR 5865-Z (May
    2002); *National Association of Broadcasters and Association of
    Local Television Stations Request for Modification or Clarification
    of Broadcast Carriage Rules for Satellite Carriers, Declaratory
    Ruling and Order*, 17 FCC Rcd 6065 (MB 2002).

[^1067]: Order at para. 273.