FCC Memorandum Opinion and Order 03-330 of 12/9/2003
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Federal Communications Commission FCC 03-330 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) General Motors Corporation and ) Hughes Electronics Corporation, Transferors ) MB Docket No. 03-124 ) And ) ) The News Corporation Limited, Transferee, ) ) For Authority to Transfer Control ) 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. 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 Federal Communications Commission FCC 03-330 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 2 Federal Communications Commission FCC 03-330 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